-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FNiwfFvG/hXm5zEe6gnMo39GDaFWUDFyZZ17GDfvEKdb0brlvRYLLvEfMuOWOvFV id3h+vwIOOScuBWYbEgc8w== /in/edgar/work/20000823/0000950123-00-007962/0000950123-00-007962.txt : 20000922 0000950123-00-007962.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950123-00-007962 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 20000823 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRENWICK GROUP LTD CENTRAL INDEX KEY: 0001122211 STANDARD INDUSTRIAL CLASSIFICATION: [ ] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-44290 FILM NUMBER: 707955 BUSINESS ADDRESS: STREET 1: CONTINENTAL BUILDING STREET 2: 25 CHURCH ST CITY: HAMILTON STATE: D0 ZIP: 00000 S-4 1 s-4.txt TRENWICK GROUP LTD 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 2000 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ TRENWICK GROUP LTD. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) BERMUDA 6719 NOT APPLICABLE (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ CONTINENTAL BUILDING 25 CHURCH STREET HAMILTON HM 12 BERMUDA (441) 292-3339 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) COLEMAN D. ROSS EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER TRENWICK GROUP LTD. CONTINENTAL BUILDING 25 CHURCH STREET HAMILTON HM 12 BERMUDA (441) 292-3339 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: JAMES R. CAMERON, ESQ. RICHARD W. SHEPRO, ESQ. BAKER & MCKENZIE MAYER, BROWN & PLATT 805 THIRD AVENUE 190 SOUTH LASALLE STREET NEW YORK, NEW YORK 10022 CHICAGO, ILLINOIS 60603
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement is declared effective and all other conditions of the business combination of Trenwick Group Inc. and LaSalle Re Holdings Limited under the Registrant pursuant to the Agreement, Schemes of Arrangement and Plan of Reorganization described in the enclosed joint proxy statement/prospectus have been satisfied or waived. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED(1) REGISTERED(2) OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE(3) - ----------------------------------------------------------------------------------------------------------------------------- Common Shares, par value $.10 per share (including associated Rights)(5)... 36,743,467 (3) $708,045,467.80 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------- ------------------- - ----------------------------------------------------- ------------------- AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED(1) REGISTRATION FEE(4) - ----------------------------------------------------- ------------------- Common Shares, par value $.10 per share (including associated Rights)(5)... $186,924.00 - ---------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------
(1) This Registration Statement relates to the common shares, par value $.10 per share, of the Registrant estimated to be issuable in connection with the business combination. (2) The number of Trenwick Group Ltd. common shares to be registered pursuant to this Registration Statement is based on the maximum number of Trenwick Group Ltd. common shares estimated to be issuable to holders of Trenwick common stock, LaSalle Re Holdings Limited common shares and LaSalle Re Limited exchangeable non-voting common shares upon the effectiveness of the business combination under the terms of the business combination agreement which represents that number of shares of Trenwick common stock, LaSalle common shares and LaSalle Re exchangeable non-voting common shares (other than those owned by LaSalle), expected to be outstanding immediately prior to the effective time of the business combination, multiplied by the exchange ratio of one Trenwick Group Ltd. common share for each share of Trenwick common stock, LaSalle common share and LaSalle Re exchangeable non-voting common share. (3) The estimated registration fees have been computed pursuant to Rule 457(f)(1) and 457(c) under the Securities Act and estimated solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to the sum of (a) the product of (x) $19.6875, the average of the high and low sales prices per share of Trenwick common stock on the New York Stock Exchange, Inc. Composite Transaction Tape on August 17, 2000, multiplied by (y) 16,288,082, the total number of shares of Trenwick common stock to be exchanged pursuant to the terms of the business combination agreement and (b) the product of (x) $18.9375, the average of the high and low sales prices per share of LaSalle common shares on the New York Stock Exchange, Inc. Composite Transaction Tape on August 17, 2000, multiplied by (y) 20,455,385, the total number of LaSalle common shares and LaSalle Re exchangeable non-voting common shares to be exchanged pursuant to the terms of the business combination agreement. (4) This fee has been calculated pursuant to Rule 457(f) under the Securities Act as .0264 of one percent of $708,045,467.80, the proposed maximum aggregate offering price. Pursuant to Rule 457(b) under the Securities Act, the amount of the registration fee has been reduced by $103,787.51, the amounts paid to the Securities and Exchange Commission on July 5, 2000 ($6,545.92), May 17, 2000 ($9,456.25) and March 20, 2000 ($87,785.34) with respect to this transaction. The difference of $83,136.49 is being paid herewith. (5) Includes associated Rights to purchase one one-hundredth of a share of Trenwick Group Ltd. Series A First Preference Shares, par value $.10 per share. Until the occurrence of certain prescribed events, the Rights are not exercisable. The Rights are evidenced by the certificates representing Trenwick Group Ltd. common shares and will be transferred only with such shares. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 [TRENWICK LOGO] [LASALLE RE HOLDINGS LIMITED LOGO] JOINT PROXY STATEMENT/PROSPECTUS Dear Fellow Shareholders: The boards of directors of Trenwick Group Inc., LaSalle Re Holdings Limited and LaSalle Re Limited have each unanimously approved a series of transactions that will combine their operations under a new Bermuda holding company, Trenwick Group Ltd. YOUR VOTE IS VERY IMPORTANT. We cannot complete the proposed transactions unless you approve and adopt them at the shareholders meetings. Whether or not you plan to attend your shareholders meeting, please take the time to vote by completing and mailing the enclosed proxy card to us. The dates, times and places of the special meetings are as follows: FOR TRENWICK STOCKHOLDERS: September 25, 2000 9:00 a.m., local time Hyatt Regency Greenwich 1800 East Putnam Avenue Old Greenwich, Connecticut 06870 FOR LASALLE AND LASALLE RE SHAREHOLDERS: September 25, 2000 2:15 p.m. (LaSalle) and 2:45 p.m. (LaSalle Re), local time Sheraton Gateway Hotel Lester B. Pearson International Airport Toronto, Ontario Canada L5P 1C4 This document gives you detailed information about the proposed transactions and it includes important documents as Appendices. You can also obtain information about our companies from publicly available documents that we have each filed with the Securities and Exchange Commission. We encourage you to read this entire document carefully. PLEASE SEE PAGES 13 AND 14 FOR RISK FACTORS RELATING TO THE PROPOSED TRANSACTIONS WHICH YOU SHOULD CONSIDER. We support this combination of our companies and endorse the recommendation of our boards of directors that you vote in favor of the proposed transactions. /s/ James F. Billett, Jr. James F. Billett, Jr. Chairman, President and Chief Executive Officer Trenwick Group Inc. /s/ Guy D. Hengesbaugh Guy D. Hengesbaugh President and Chief Executive Officer LaSalle Re Holdings Limited NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This joint proxy statement/prospectus is dated August 23, 2000 and is first being mailed to shareholders on or about August 25, 2000. 3 [TRENWICK LOGO] TRENWICK GROUP INC. ONE CANTERBURY GREEN, STAMFORD, CONNECTICUT 06901 ------------------------ NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 25, 2000 ------------------------ To the holders of common stock: We will hold a special meeting of common stockholders of Trenwick Group Inc., a Delaware corporation, on September 25, 2000, at 9:00 a.m., local time, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870. The purpose of the meeting is to consider and to vote upon the following matters: 1. A proposal to approve and adopt the Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of December 19, 1999, amended and restated as of March 20, 2000 and amended as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc., and Gowin Holdings International Limited. Gowin is a newly formed Bermuda holding company which has changed its name to Trenwick Group Ltd. Trenwick and LaSalle will combine their operations under Trenwick Group Ltd. upon the terms and subject to the conditions set forth in the agreement. At the effective time of the combination of Trenwick and LaSalle, each holder of a share of Trenwick common stock will be entitled to receive one Trenwick Group Ltd. common share in accordance with, and subject to the adjustments set forth in, the agreement. 2. A proposal to approve and adopt the related plan of reorganization in accordance with the agreement. Under the plan of reorganization, Trenwick will transfer all of its assets to Trenwick Group Ltd. in exchange for Trenwick Group Ltd.'s common shares. Trenwick will then distribute the shares of Trenwick Group Ltd. to Trenwick common stockholders in complete liquidation of Trenwick. The plan of reorganization will be upon the terms and subject to the conditions set forth in the agreement. 3. Any other matters properly brought before the stockholders at the meeting or any adjournment of those meetings. A form of proxy and a joint proxy statement/prospectus containing more detailed information on the matters to be considered at the Trenwick stockholders meeting, including copies of the agreement and the amendment to the agreement attached as Appendices A and B to that document, accompany and form a part of this notice. Only stockholders of record at the close of business on August 21, 2000 are entitled to notice of, and to vote at, the meeting. The affirmative vote of the holders of a majority of the outstanding shares of Trenwick common stock is necessary to approve and adopt the agreement and the related plan of reorganization. 4 MANAGEMENT HOPES EVERY STOCKHOLDER WILL BE ABLE TO ATTEND THE MEETING. WE RECOGNIZE, HOWEVER, THAT SOME STOCKHOLDERS WILL BE UNABLE TO ATTEND. TO ACHIEVE A QUORUM REQUIRED TO CONDUCT BUSINESS AT THE MEETING, WE ASK THAT YOU VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED, STAMPED ENVELOPE. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ARE LATER ABLE TO ATTEND. A list of Trenwick stockholders entitled to vote at the meeting will be available for examination at Trenwick, One Canterbury Green, Stamford, Connecticut, 06901 for 10 days prior to the meeting, between the hours of 9:00 a.m. and 5:00 p.m., and during the meeting. By Order of the Board of Directors /s/ JOHN V. DEL COL John V. Del Col Secretary Stamford, Connecticut August 23, 2000 YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATES UNTIL INSTRUCTED TO DO SO AFTER WE COMPLETE THE TRANSACTIONS. 5 [LASALLE RE HOLDINGS LIMITED LOGO] LASALLE RE HOLDINGS LIMITED LASALLE RE LIMITED CONTINENTAL BUILDING, 25 CHURCH STREET, HAMILTON HM 12, BERMUDA ------------------------ NOTICE OF SPECIAL GENERAL MEETINGS OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 25, 2000 ------------------------ To the holders of LaSalle Re Holdings Limited common shares and LaSalle Re Limited exchangeable non-voting common shares: We will hold a special general meeting of common shareholders of LaSalle Re Holdings Limited, a company organized under the laws of Bermuda, and a special general meeting of the exchangeable non-voting common shareholders of LaSalle Re, a company organized under the laws of Bermuda, on September 25, 2000, at 2:15 p.m. and 2:45 p.m., local time, respectively at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4. The purpose of the meetings is to consider and to vote upon the following matters: 1. A proposal to approve and adopt the Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of December 19, 1999, amended and restated as of March 20, 2000 and amended as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc., and Gowin Holdings International Limited. Gowin is a newly formed Bermuda holding company which has changed its name to Trenwick Group Ltd. Trenwick and LaSalle will combine their operations under Trenwick Group Ltd. upon the terms and subject to the conditions set forth in the agreement. At the effective time of the combination of Trenwick and LaSalle, each holder of a LaSalle common share and each holder of a LaSalle Re exchangeable non-voting common share will be entitled to receive one Trenwick Group Ltd. common share in accordance with, and subject to the adjustments set forth in, the agreement. 2. Any other matters properly brought before the shareholders at the meetings or any adjournment of those meetings. A form of proxy and a joint proxy statement/prospectus containing more detailed information on the matters to be considered at the LaSalle and LaSalle Re shareholder meetings, including copies of the agreement, the amendment to the agreement and the schemes of arrangement attached as Appendices A, B and C to that document, accompany and form a part of this notice. Only shareholders of record at the close of business on August 21, 2000 are entitled to vote at the meetings. Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares present and voting at each meeting is necessary to approve and adopt the agreement. As you will read in the notice following this page, immediately before the meetings to approve and adopt the agreement, the holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares will have their court meetings, as required by Bermuda law, to approve the schemes of arrangement contemplated by the business combination agreement. 6 WE HOPE EVERY SHAREHOLDER WILL BE ABLE TO ATTEND THE MEETINGS. WE RECOGNIZE, HOWEVER, THAT SOME SHAREHOLDERS WILL BE UNABLE TO ATTEND. TO ACHIEVE A QUORUM REQUIRED TO CONDUCT BUSINESS AT EACH MEETING, WE ASK THAT YOU VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE SELF-ADDRESSED, STAMPED ENVELOPE. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU ARE LATER ABLE TO ATTEND. By Order of the Board of Directors /s/ Guy D. Hengesbaugh -------------------------------------- Guy D. Hengesbaugh President and Chief Executive Officer Hamilton, Bermuda August 23, 2000 YOU SHOULD NOT SEND IN YOUR SHARE CERTIFICATES UNTIL INSTRUCTED TO DO SO AFTER WE COMPLETE THE TRANSACTIONS. 7 NOTICE OF COURT MEETINGS OF SHAREHOLDERS IN THE SUPREME COURT OF BERMUDA CIVIL JURISDICTION IN THE MATTER OF LASALLE RE HOLDINGS LIMITED AND IN THE MATTER OF LASALLE RE LIMITED AND IN THE MATTER OF SECTION 99 OF THE COMPANIES ACT 1981 ------------------------ NOTICE OF COURT MEETINGS ------------------------ By Orders dated the 17th day of August, 2000, made in the above matters, the Supreme Court of Bermuda has directed separate court meetings to be convened of the holders of LaSalle Re Holdings Limited Scheme Shares, as defined in the Scheme of Arrangement, and LaSalle Re Limited Scheme Shares, as defined in the Scheme of Arrangement, for the purpose of considering and, if thought fit, approving, with or without modification, a Scheme of Arrangement proposed to be made between LaSalle and the holders of its Scheme Shares, and a Scheme of Arrangement proposed to be made between LaSalle Re and the holders of its Scheme Shares. The court meetings will be held at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4 on the 25th day of September, 2000 at 2:00 p.m., local time, for LaSalle Scheme Shares and 2:30 p.m., local time, or as soon thereafter as the meeting convened for the same day and place shall have been concluded and adjourned, for LaSalle Re Scheme Shares, at which place and time the holders of LaSalle Scheme Shares and LaSalle Re Scheme Shares are requested to attend. Copies of the Schemes of Arrangement and the explanatory statement required by Section 100 of the Companies Act 1981 are incorporated as Appendix C to the joint proxy statement/prospectus of which this notice is a part. Holders of LaSalle Scheme Shares or LaSalle Re Scheme Shares may vote in person at the relevant court meeting or they may appoint another person, whether a member of LaSalle or LaSalle Re or not, as their proxy to attend and vote in their stead. Forms of proxy for use at the court meetings are enclosed. Shareholders may attend and vote at the court meetings if they wish, even if they have completed and returned a proxy. In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy will be accepted to the exclusion of the vote(s) of the other joint holder(s), and for this purpose seniority will be determined by the order in which the names stand in the Register of Members of LaSalle or LaSalle Re, as the case may be, in respect of the relevant joint holding. The accompanying forms of proxy should be signed, dated and returned in the postage prepaid envelope before the time appointed for the meetings, but if the form is not so lodged it may be handed to the Chairman at the relevant meetings. By its Orders, the Court has appointed Victor H. Blake, OBE or failing him, Clement S. Dwyer, Jr., to act as Chairman of each of the court meetings and has directed the Chairman to report the result of the court meetings to the Court. The Schemes of Arrangement will be subject to the subsequent approval of the Court. 8 The Schedule Particulars of Court Meetings ordered to Time appointed for Meetings on the 25th day of be convened: September, 2000: (1) Holders of LaSalle Scheme Shares 2:00 p.m. (2) Holders of LaSalle Re Scheme Shares 2:30 p.m. or so soon thereafter as the preceding meeting convened for the same day and place shall have been concluded or adjourned
Dated the 23nd day of August, 2000 Conyers Dill & Pearman Attorneys for LaSalle Re Holdings Limited and LaSalle Re Limited By Order of the Supreme Court of Bermuda 9 TABLE OF CONTENTS
PAGE ---- Questions and Answers About the Proposed Transactions....... 1 Summary..................................................... 2 The Transactions.......................................... 2 What You Will Receive..................................... 2 Appraisal Rights.......................................... 3 Ownership of Trenwick Group Ltd. Following the Transactions........................................... 3 Listing of Trenwick Group Ltd. Common Shares.............. 3 Reasons for the Transactions; Recommendation.............. 3 Material Income Tax Consequences of the Transactions...... 4 Treatment of Outstanding Employee and Director Stock Options; Warrants...................................... 4 Interests of Officers and Directors that are Different from Yours............................................. 5 Accounting Treatment of the Proposed Transactions......... 5 Opinions of Financial Advisors............................ 5 Comparison of Rights of Shareholders...................... 6 Shareholder Approvals..................................... 6 Governmental and Regulatory Approvals..................... 6 Stock Option Agreements................................... 7 Shareholders Agreement.................................... 7 Terminating the Agreement................................. 7 Who Pays for What......................................... 7 What We Need to Do to Complete the Transactions........... 7 The Companies............................................. 8 Unaudited Comparative Per Share Data...................... 9 Selected Consolidated Historical Financial Data........... 10 Selected Unaudited Pro Forma Combined Consolidated Financial Information.................................. 12 Risk Factors................................................ 13 Cautionary Statement Regarding Forward-Looking Statements... 15 Market Price and Dividend Information....................... 16 Dividend Information...................................... 16 Recent Closing Prices..................................... 16 References to Additional Information........................ 17 The Trenwick Special Meeting................................ 18 The LaSalle and LaSalle Re Special General and Court Meetings.................................................. 20 The Transactions............................................ 22 Background of the Agreement............................... 22 Reasons for the Transactions; Recommendations of the Boards of Directors.................................... 25 The Plan of Reorganization................................ 29 Schemes of Arrangement.................................... 30 Ownership of Trenwick Group Ltd. Following the Transactions........................................... 32 Exchange of Certificates.................................. 32 Fractional Shares......................................... 32 Stock Exchange Listing.................................... 33 Opinion of Trenwick's Financial Advisor................... 33 Trenwick Projections...................................... 40 Opinions of LaSalle's Financial Advisors.................. 41 LaSalle Projections....................................... 49
i 10
PAGE ---- Material Income Tax Consequences of the Transactions...... 51 Taxation of the Transactions.............................. 52 Taxation of Trenwick Group Ltd. and its Subsidiaries after the Transactions....................................... 53 Taxation of Shareholders of Trenwick Group Ltd. .......... 56 Accounting Treatment...................................... 62 Required Regulatory Filings and Approvals................. 62 Supreme Court of Bermuda Approval......................... 63 Absence of Appraisal Rights............................... 63 Interests of Directors and Officers in the Transactions... 64 Existing Business Relationships between Trenwick and LaSalle................................................ 64 Restrictions on Resales by Affiliates..................... 64 Employment and Severance Arrangements..................... 65 Other Arrangements with Employees......................... 67 Security Ownership of Principal Shareholders and Management................................................ 69 The Agreement............................................... 76 General................................................... 76 Representations and Warranties............................ 76 Covenants and Agreements.................................. 78 Conditions................................................ 80 No Solicitation........................................... 82 Termination............................................... 84 Expenses and Termination Fees............................. 85 Indemnification and Insurance............................. 86 Amendment and Waiver...................................... 87 Access to Information..................................... 87 Related Agreements and Transactions......................... 88 Stock Option Agreements................................... 88 Shareholders Agreement.................................... 89 The Closing................................................. 90 Effective Time.............................................. 90 Trenwick Group Ltd. After Completion of the Transactions.... 90 Information Regarding Trenwick.............................. 91 Information Regarding Trenwick Group Ltd.................... 92 Information Regarding LaSalle............................... 92 Unaudited Pro Forma Combined Consolidated Financial Information............................................... 94 Description of Trenwick Group Ltd. Share Capital............ 109 General................................................... 109 Trenwick Group Ltd. Common Shares......................... 109 Trenwick Group Ltd. Preferred Shares...................... 109 Comparison of Rights of Trenwick Stockholders, Trenwick Group Ltd. Shareholders and LaSalle Shareholders.......... 109 Capital Stock............................................. 110 Board of Directors........................................ 112 Shareholders.............................................. 114 Limitation on Business Combination Transactions........... 121 Stockholder Rights Plans.................................. 122 Inspection of Books and Records........................... 124 Indemnification of Officers and Directors and Limitation of Liability........................................... 125
ii 11
PAGE ---- Limited Liability of Directors............................ 125 Amendment of Governing Documents.......................... 126 Shareholder Rights Plans.................................... 128 Before the Completion of the Transactions................. 128 After the Completion of the Transactions.................. 128 Other Considerations........................................ 128 Legal Matters............................................... 128 Experts..................................................... 129 Future Shareholder Proposals................................ 129 Where You Can Find More Information......................... 129
APPENDIX A -- Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of March 20, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. APPENDIX B -- Amendment No. 1 to Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. APPENDIX C -- Schemes of Arrangement between LaSalle Re Holdings Limited and the holders of its Scheme Shares and between LaSalle Re Limited and the holders of its Scheme Shares, and the explanatory statement required by Section 100 of the Companies Act 1981 APPENDIX D -- Trenwick Stock Option Agreement dated as of December 19, 1999, by and between Trenwick Group Inc. and LaSalle Re Holdings Limited APPENDIX E -- LaSalle Stock Option Agreement, dated as of December 19, 1999, by and between Trenwick Group Inc. and LaSalle Re Holdings Limited APPENDIX F -- Shareholders Agreement, dated as of December 19, 1999, by and among Trenwick Group Inc., Combined Insurance Company of America, Virginia Surety Company, Inc., Aon Risk Consultants (Bermuda) Ltd., Continental Casualty Company and CNA (Bermuda) Services Limited APPENDIX G -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation, dated December 16, 1999 APPENDIX H -- Opinion of Lazard Freres & Co. LLC, dated December 19, 1999 APPENDIX I -- Opinion of Salomon Smith Barney Inc., dated December 19, 1999
iii 12 QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTIONS Q.: HOW DO I VOTE? A.: After you read this document, sign and mail your proxy card in the enclosed prepaid return envelope marked "Proxy" as soon as possible, so that your shares may be represented and voted at the applicable meeting. To assure that your vote is obtained, please sign and mail your proxy as instructed on your proxy card even if you currently plan to attend the applicable meeting or meetings in person. Q.: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES FOR ME? A.: If you do not provide your broker with instructions on how to vote your "street name" shares, your broker will not be permitted to vote them. You should be sure to provide your broker with instructions on how to vote your shares by completing and returning the enclosed form. Q.: WHAT DO I DO IF I WANT TO CHANGE MY VOTE? A.: Just send in a later-dated, signed proxy card to your company's corporate secretary. Or you can attend the applicable meeting and vote in person. You may also revoke your proxy by sending a notice of revocation to your company's corporate secretary at the appropriate address set forth in the notices of the meetings of shareholders. Q.: SHOULD I SEND IN MY STOCK AND SHARE CERTIFICATES NOW? A.: No. You will receive separate instructions on surrendering share certificates after the transactions are completed. You should not send your share certificates until you receive those instructions. Q.: WHEN DO YOU EXPECT THE TRANSACTIONS TO BE COMPLETED? A.: We are working to complete the transactions as quickly as possible. We intend to complete the transactions shortly after the special meetings, assuming the required shareholder approvals are obtained and the schemes of arrangement are approved by the Supreme Court of Bermuda. Q.: WHOM SHOULD I CALL WITH QUESTIONS AND TO OBTAIN ADDITIONAL COPIES OF THE JOINT PROXY STATEMENT/ PROSPECTUS? A.: Trenwick stockholders should call D.F. King & Co. toll-free at 1-800-488-8075. LaSalle common shareholders and holders of LaSalle Re exchangeable non-voting common shares should call Corporate Investor Communications, Inc. toll-free at 1-888-682-7217. 1 13 SUMMARY This summary highlights information from this document which we believe is the most important information about the transactions. We urge you to read this entire document carefully and the documents to which we refer you for a complete description of the transactions and our business. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary. THE TRANSACTIONS (PAGES 22 THROUGH 68) The transactions consist of the following distinct plans: - a scheme of arrangement between LaSalle Re Holdings Limited, which we call LaSalle, and its common shareholders and a scheme of arrangement between LaSalle Re Limited, which we call LaSalle Re, and the holders of its exchangeable non-voting common shares; and - a plan of reorganization which provides that Trenwick Group Ltd. will acquire all of the assets and will assume all of the liabilities of Trenwick in exchange for Trenwick Group Ltd. common shares which will be distributed to Trenwick stockholders in complete liquidation of Trenwick. Upon completion of the transactions: - common shareholders of LaSalle and holders of LaSalle Re exchangeable non-voting common shares will become shareholders of Trenwick Group Ltd.; - stockholders of Trenwick will become shareholders of Trenwick Group Ltd.; and - LaSalle and LaSalle Re will become subsidiaries of Trenwick Group Ltd. Bermuda law permits a company to reorganize its share capital in a scheme of arrangement between a company and its shareholders, if the shareholders approve the scheme by the requisite majority at a specially convened meeting and the Supreme Court of Bermuda sanctions the scheme following a court hearing. A copy of the Schemes of Arrangement presented to the court on August 17, 2000, and an explanatory statement in compliance with Section 100 of the Bermuda Companies Act are included as Appendix C to this document. We encourage you to read these materials. The agreement between Trenwick and LaSalle is the legal document that governs the transactions. Copies of the agreement and the amendment to the agreement are included as Appendices A and B to this document. We encourage you to read the agreement and the amendment to the agreement. WHAT YOU WILL RECEIVE (PAGES 29 THROUGH 31) You will receive one Trenwick Group Ltd. common share in exchange for each share of Trenwick common stock, each LaSalle common share and each LaSalle Re exchangeable non-voting common share you own in accordance with, and subject to the adjustments set forth in, the agreement. We have fixed the exchange ratio and will not adjust it based on market prices. We will adjust the exchange ratio, however, if your company experiences a sufficiently large natural catastrophe as set forth in the agreement. The prices of Trenwick common stock and LaSalle common shares at the effective time of the transactions may be different from their prices on the date the agreement was signed, the date of this document and the date of the special meetings. At the time of the special meetings, you will not know the exact value of the Trenwick Group Ltd. common shares that you will receive when the transactions are completed. Because we cannot predict the market price of Trenwick Group Ltd. common shares immediately after the effective time of the transactions, we cannot predict the value of the Trenwick Group Ltd. common shares you will receive. The value of the consideration received for each of your shares at that time, based on reported market prices, may be significantly higher or lower than the value of the consideration on the date of this document. We urge you to obtain current market prices for Trenwick 2 14 common stock and LaSalle common shares. Trenwick Group Ltd. will not issue fractional shares. Instead, you will receive the value of any fractional interest in cash. APPRAISAL RIGHTS (PAGE 63) You do not have appraisal rights in connection with the transactions. Appraisal rights involve a court determination of the value of your shares. OWNERSHIP OF TRENWICK GROUP LTD. FOLLOWING THE TRANSACTIONS (PAGE 32) Trenwick Group Ltd. will issue approximately 16,288,082 common shares to Trenwick common stockholders and approximately 20,359,940 common shares to LaSalle common shareholders and holders of LaSalle Re exchangeable non-voting common shares when we complete the transactions. These shares will represent approximately 44.4% and 55.6%, respectively, of the issued and outstanding common shares of Trenwick Group Ltd. when we complete the transactions. LISTING OF TRENWICK GROUP LTD. COMMON SHARES (PAGE 33) When we complete the transactions, Trenwick Group Ltd. common shareholders will be able to trade Trenwick Group Ltd. common shares on the NYSE. Trenwick stockholders and LaSalle shareholders, however, will no longer be able to trade Trenwick common stock or LaSalle common shares on any exchange because Trenwick common stock will no longer exist and all of the issued LaSalle common shares will be owned by Trenwick Group Ltd. LaSalle Series A preferred shares will be unaffected by the transactions and will continue to be traded on the NYSE. REASONS FOR THE TRANSACTIONS; RECOMMENDATION (PAGES 25 THROUGH 29) We believe the combination of our two companies will create an organization able to compete more effectively in the international insurance markets. The transactions should also provide opportunities to achieve benefits that would not be available to either company alone, such as: - the ability of Trenwick to expand into property catastrophe reinsurance, which is consistent with one of its long-term business strategies of profitable premium growth through geographic and product line diversification; - the creation of a larger, more competitive company with assets in excess of $4 billion, shareholders' equity in excess of $600 million as of June 30, 2000 and total capitalization of approximately $1.0 billion; - the significant benefit of scale that would result from the business combination, which could enhance the position of the combined companies both with respect to customers and rating agencies, in an increasingly competitive market place; - the possible synergies and cost savings resulting from the elimination of duplicative administrative and capital management expenses; - the benefits of the business diversification presented by the business combination, noting particularly the differences in frequency, severity and duration of risks in the books of business of Trenwick and LaSalle Re, respectively; and - revenue enhancements through the combined company's ability to offer larger reinsurance limits, additional products and stronger security for reinsurance brokers, cedents and insureds. The Trenwick board and the LaSalle board have each unanimously concluded that the transactions are in the best interests of their respective shareholders, and each unanimously recommends that its shareholders vote for approval and adoption of the agreement and the transactions contemplated by the agreement. 3 15 MATERIAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS (PAGES 51 AND 52) TAXATION OF TRENWICK, LASALLE AND LASALLE RE SHAREHOLDERS (PAGES 52 AND 53) You will not recognize any gain or loss for U.S. federal income tax purposes as a result of the transactions, and your tax basis and holding period for your Trenwick Group Ltd. common shares will be the same as your tax basis and holding period for the stock you now own. If you are a shareholder of LaSalle or LaSalle Re and you own 5% or more of the vote or value of Trenwick Group Ltd. after the transactions, you must enter into a gain recognition agreement with the IRS in order to not recognize any gain as a result of the transactions. TAXATION OF TRENWICK (PAGE 52) As a result of the transactions, Trenwick will recognize gain on each asset that it directly owns whose fair market value exceeds its basis. Based on our current estimates of the fair market values of Trenwick's assets and Trenwick's tax attributes, including net operating loss carryforwards, we expect that Trenwick will not incur a material U.S. federal income tax liability at the time of the transactions. However, the IRS may not agree with our calculation of the gain or the methodology used by our advisors to calculate these fair market values. TAXATION OF LASALLE AND LASALLE RE (PAGE 53) LaSalle and LaSalle Re will not recognize any gain or loss for U.S. federal income tax purposes as a result of the transactions. TAXATION OF TRENWICK GROUP LTD. (PAGES 53 THROUGH 56) After the transactions, the U.S. will tax Trenwick Group Ltd. and its non-U.S. subsidiaries on their U.S. source income that is subject to withholding tax, and Trenwick Group Ltd.'s U.S. subsidiaries will be subject to U.S. tax on their worldwide income. We urge you to consult your own tax advisors regarding your particular tax consequences. TREATMENT OF OUTSTANDING EMPLOYEE AND DIRECTOR STOCK OPTIONS; WARRANTS (PAGE 67) When we complete the transactions, all outstanding employee and director options to purchase Trenwick common stock or LaSalle common shares, as the case may be, will be replaced by options to acquire Trenwick Group Ltd. common shares. The number of Trenwick Group Ltd. common shares subject to and the exercise price of each replaced option will reflect the LaSalle exchange ratio or the Trenwick exchange ratio, as applicable. In addition, when we complete the transactions each holder of an outstanding option to acquire exchangeable non-voting common shares of LaSalle Re is entitled to either: - the number of exchangeable non-voting common shares covered by such option, or - the number of Trenwick Group Ltd. common shares equal to the LaSalle exchange ratio if such holder would have exercised the option immediately before the schemes of arrangement were completed. When we complete the transactions, all outstanding warrants to purchase Trenwick common stock will also be assumed by Trenwick Group Ltd. in accordance with their terms. 4 16 INTERESTS OF OFFICERS AND DIRECTORS THAT ARE DIFFERENT FROM YOURS (PAGE 64) In considering the recommendations of your board that you approve the agreement and related transactions, you should be aware of the interests which a number of directors and executive officers of Trenwick and LaSalle have in the transactions that are different from your interest. These interests include the following: - Robert V. Deutsch, Clement S. Dwyer, Jr., Peter J. Rackley, and Guy D. Hengesbaugh, all of whom are directors or members of the existing senior management of LaSalle, and all of the current directors and members of existing senior management of Trenwick will become directors or members of senior management of Trenwick Group Ltd. or its subsidiaries when the transactions are completed; - Trenwick's and LaSalle's directors, officers or their affiliates hold options to purchase Trenwick common stock or LaSalle or LaSalle Re common shares, which will be replaced by options to acquire common shares of Trenwick Group Ltd., adjusted to account for the applicable exchange ratio; - The completion of the proposed transactions may entitle Mr. Hengesbaugh to receive greater severance benefits under his employment and option agreements than he would have received prior to the proposed transactions; and - Trenwick Group Ltd. will continue to indemnify and procure directors' and officers' liability insurance for existing directors and officers of Trenwick and LaSalle after the transactions are completed. ACCOUNTING TREATMENT OF THE PROPOSED TRANSACTIONS (PAGE 62) Trenwick Group Ltd. will treat the business combination as a "purchase." This means that for accounting and financial reporting purposes, we expect to treat our companies as one company beginning as of the date we complete the transactions. OPINIONS OF FINANCIAL ADVISORS OPINION OF TRENWICK'S FINANCIAL ADVISOR (PAGES 33 THROUGH 40) The fairness opinion of Trenwick's financial advisor, Donaldson, Lufkin & Jenrette Securities Corporation, dated December 16, 1999, is attached as Appendix G to this document. The opinion sets forth the procedures followed, assumptions made, other matters considered and limits of the review by DLJ in connection with its opinion. We encourage you to read the entire opinion carefully and completely for a description of the assumptions made, matters considered and limitations on the review intended. The opinion of DLJ does not constitute a recommendation to you as to how you should vote in connection with the agreement or any of the transactions proposed to be voted upon. OPINIONS OF LASALLE'S FINANCIAL ADVISORS (PAGES 41 THROUGH 49) In connection with the business combination, the LaSalle board received separate written opinions from Lazard Freres & Co. LLC and Salomon Smith Barney Inc. as to the fairness, from a financial point of view, of the LaSalle exchange ratio to the holders of LaSalle common shares. The full text of Lazard's written opinion dated December 19, 1999 is attached to this document as Appendix H and the full text of Salomon Smith Barney's written opinion dated December 19, 1999 is attached to this document as Appendix I. We encourage you to read these opinions carefully and completely for a description of the assumptions made, matters considered and limitations on the review undertaken. The opinions of Lazard and Salomon Smith Barney addressed to the LaSalle board do not constitute recommendations to you as to how you should vote in connection with the agreement or any other matters proposed to be voted upon. 5 17 COMPARISON OF RIGHTS OF SHAREHOLDERS (PAGES 109 THROUGH 127) When we complete the transactions, you will become shareholders of Trenwick Group Ltd. As shareholders of Trenwick Group Ltd., your rights will be governed by the memorandum of association and bye-laws of Trenwick Group Ltd. and the Companies Act 1981 of Bermuda. The rights of shareholders of Trenwick Group Ltd. will differ from your current rights as shareholders. SHAREHOLDER APPROVALS (PAGES 18 THROUGH 21) TRENWICK STOCKHOLDER APPROVAL (PAGES 18 AND 19) As of the record date, 16,288,082 shares of Trenwick common stock were outstanding and entitled to vote at the Trenwick special meeting. Assuming a quorum is present, holders of a majority of the shares of Trenwick common stock outstanding and entitled to vote at the Trenwick special meeting must approve and adopt the agreement and the related plan of reorganization. Trenwick executive officers and directors and their affiliates held 7.90% of the outstanding shares of Trenwick common stock on the record date. These officers and directors have indicated to Trenwick that they intend to vote in favor of the agreement and the related plan of reorganization. LASALLE AND LASALLE RE SHAREHOLDER APPROVAL (PAGES 20 AND 21) As of the record date, 15,634,394 LaSalle common shares were outstanding and entitled to vote at the LaSalle special general and court meetings, 6,165,430 LaSalle Re exchangeable non-voting shares were outstanding and entitled to vote at the LaSalle Re special general meeting, and 4,725,546 LaSalle exchangeable non-voting common shares not owned by LaSalle were entitled to vote at the LaSalle Re court meeting. Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares present and voting at each special general meeting is necessary to approve and adopt the agreement. Approval and adoption of the schemes of arrangement will require the affirmative vote of: - A majority in number of LaSalle common shareholders who represent at least 75% in value of the LaSalle common shares present and voting at the LaSalle court meeting; and - A majority in number of LaSalle Re exchangeable non-voting common shareholders who represent at least 75% in value of the LaSalle Re exchangeable non-voting common shares present and voting at the LaSalle Re court meeting. On the record date, LaSalle executive officers and directors and their affiliates held 20.56% of the outstanding LaSalle common shares and LaSalle Re executive officers and directors and their affiliates held 79.62% of the outstanding LaSalle Re exchangeable non-voting common shares entitled to vote at the LaSalle Re special general meeting and 73.41% of the LaSalle Re exchangeable non-voting common shares entitled to vote at the LaSalle Re court meeting. These executive officers and directors have indicated to LaSalle that they and their affiliates intend to vote in favor of the agreement and the schemes of arrangement. GOVERNMENTAL AND REGULATORY APPROVALS (PAGES 62 AND 63) We have applied for the required governmental consents and approvals of regulatory authorities in connection with the business combination, including the approvals of the Bermuda, Connecticut, North Dakota and New York state insurance regulatory authorities, Lloyd's, the United Kingdom Treasury and at the appropriate time will apply for approval of the schemes of arrangement by the Supreme Court of Bermuda. We have received early termination from the Antitrust Division of the Department of Justice and the Federal Trade Commission of the waiting period that is required before consummating the transactions. In addition, Connecticut, New York and North Dakota have granted waivers exempting us from the customary change of control process. 6 18 STOCK OPTION AGREEMENTS (PAGES 88 AND 89) LaSalle granted Trenwick an irrevocable option to purchase 3,105,110 LaSalle common shares, which is equal to approximately 19.9% of the outstanding LaSalle common shares, at a per share price of $12.81. Trenwick granted LaSalle an irrevocable option to purchase 3,462,164 shares of Trenwick common stock, which is equal to approximately 19.9% of the outstanding Trenwick common stock, at a per share price of $18.04. In each case, the price equals the average of the last sale prices of the stock on the 10 trading days immediately prior to the date of the public announcement of the agreement. We granted these stock options to each other to increase the likelihood that we will complete the business combination by discouraging third parties from seeking to acquire either of us. SHAREHOLDERS AGREEMENT (PAGES 89 AND 90) To induce Trenwick to enter into the agreement, shareholders who together hold approximately 16.9% of the LaSalle common shares and all of the LaSalle Re exchangeable non-voting common shares that were not owned by LaSalle entered into a shareholders agreement with Trenwick. The shareholders signing the agreement agreed to vote their shares in favor of the adoption of the agreement and against any actions that are inconsistent with the agreement. The shareholders agreement terminates upon the earlier of the completion of 180 days following the termination of the agreement and the consummation of the schemes of arrangement. TERMINATING THE AGREEMENT (PAGES 84 AND 85) Either Trenwick or LaSalle may terminate the agreement at any time before we complete the proposed transactions, either before or after shareholders approval, if one of the termination conditions in the agreement, described on pages 83 and 84, occurs. WHO PAYS FOR WHAT (PAGES 85 AND 86) Based upon the circumstances of the termination, Trenwick or LaSalle may be obligated to pay a $12 million termination fee and/or the other party's expenses associated with the transactions up to $2 million. If Trenwick or LaSalle has to pay a termination fee, the 19.9% stock options granted to the other party become exercisable. The company exercising the option may require the party that granted the options to repurchase them. The maximum profit either company can receive from the stock option and termination fee is $15 million. Whether or not we complete the proposed transactions, Trenwick and LaSalle will each pay their own fees and expenses and share equally the cost and expenses incurred in connection with joint filings, such as with the SEC and the federal antitrust authorities. WHAT WE NEED TO DO TO COMPLETE THE TRANSACTIONS (PAGES 80 THROUGH 82) To complete the transactions: - the shareholders of Trenwick, LaSalle and LaSalle Re must approve the transactions; - we must receive all required regulatory consents and approvals; - no temporary restraining order, injunction or other legal restraint may prohibit any of the proposed transactions; - Trenwick and LaSalle must each obtain tax and legal opinions from their lawyers addressing the consequences of the proposed transactions; - the NYSE must authorize the listing of Trenwick Group Ltd. common shares; and - Trenwick and LaSalle must perform obligations and satisfy conditions described on pages 80 through 82. 7 19 Unless prohibited by law, either Trenwick or LaSalle may extend the time for the performance of any obligation of the other party or waive a condition that has not been satisfied by the other party and complete the transactions anyway. THE COMPANIES TRENWICK GROUP INC. (PAGES 91 AND 92) Trenwick is a holding company with four principal operating units: - Trenwick America Reinsurance Corporation; - Trenwick International Limited; - Chartwell Managing Agents Limited; and - Canterbury Financial Group Inc. Trenwick underwrites specialty insurance and reinsurance. Trenwick's financial goals are to earn consistent underwriting profits and superior investment returns to build shareholder value. TRENWICK GROUP LTD. (FORMERLY KNOWN AS GOWIN HOLDINGS INTERNATIONAL LIMITED) (PAGE 92) Trenwick Group Ltd. is a Bermuda holding company formed for the purpose of the business combination. Trenwick Group Ltd. has no significant assets or capitalization and has not engaged in any business or prior activities other than in connection with the business combination. When we complete the proposed transactions, you will become shareholders of Trenwick Group Ltd. and Trenwick Group Ltd. will be the parent corporation of LaSalle, LaSalle Re and Trenwick's subsidiaries. LASALLE RE HOLDINGS LIMITED (PAGES 92 AND 93) LaSalle is a Bermuda holding company that writes property and casualty reinsurance on a worldwide basis through its operating subsidiary, LaSalle Re. LaSalle Re's primary focus is property catastrophe reinsurance but it also writes other lines of business that have a catastrophe orientation. In addition, LaSalle Re provides capital support to selected Lloyd's syndicates. 8 20 UNAUDITED COMPARATIVE PER SHARE DATA The following table sets forth selected information regarding earnings, dividends and book value per share for Trenwick common stock and LaSalle common shares on an historical and pro forma basis. You should read this information in conjunction with the historical consolidated financial statements of Trenwick and LaSalle, including the related notes, which are incorporated by reference in this document. You should also read the selected consolidated financial data appearing elsewhere in this document. See "Where You Can Find More Information."
AT OR FOR THE AT OR FOR THE SIX MONTHS TWELVE MONTHS ENDED ENDED JUNE 30, 2000 DECEMBER 31, 1999 -------------- ----------------- TRENWICK COMMON STOCK Net income (loss) per share -- Basic and Diluted: Historical.................................. $ 0.18 $(0.94) Pro Forma Equivalent........................ $ 0.12 $(3.89) Cash dividends per share: Historical.................................. $ 0.52 $ 1.04 Pro Forma Equivalent........................ $ 0.27 $ 0.88 Book value per share: Historical.................................. $26.98 $27.37 Pro Forma Equivalent........................ $17.07 $16.95 LASALLE COMMON SHARES Net income (loss) per share -- Basic and Diluted: Historical.................................. $(0.27) $(1.91) Pro Forma................................... $ 0.12 $(3.89) Cash dividends per share: Historical.................................. $ -- $ 0.75 Pro Forma................................... $ 0.27 $ 0.88 Book value per share: Historical.................................. $18.02 $18.39 Pro Forma................................... $117.07 $16.95
9 21 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA The following tables set forth selected consolidated financial data of Trenwick for the five years ended December 31, 1999 and for the six months ended June 30, 2000 and 1999, and LaSalle for the five years ended September 30, 1999 and for the six months ended June 30, 2000 and 1999. Trenwick and LaSalle derived the selected consolidated financial data from their consolidated financial statements, including the notes. The financial data presented below for unaudited interim periods are not necessarily indicative of results which may be expected for any other interim or annual period. The unaudited consolidated financial statements include, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation for the results for the interim periods. You should read the following information along with the consolidated financial statements and related notes incorporated by reference in this joint proxy statement/prospectus. See "Where You Can Find More Information." SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF TRENWICK
AT OR FOR THE SIX MONTHS AT OR FOR THE ENDED JUNE 30, YEARS ENDED DECEMBER 31, ----------------------- ---------------------------------------------------------- 2000 1999 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net premiums written.............. $ 342,087 $ 158,130 $ 354,610 $ 250,219 $ 195,230 $226,364 $197,162 ========== ========== ========== ========== ========== ======== ======== Net premiums earned............... $ 288,264 $ 125,039 $ 325,114 $ 245,561 $ 190,156 $211,069 $177,394 Net investment income............. 54,018 27,140 66,394 56,316 48,402 41,226 36,828 Net realized investment gains (losses)........................ (375) 3,029 1,916 9,016 2,304 299 368 Other income...................... 8,945 113 861 421 10 -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- Total revenues.................... $ 350,852 $ 155,321 $ 394,285 $ 311,314 $ 240,872 $252,594 $214,590 ========== ========== ========== ========== ========== ======== ======== Income (loss) before extraordinary item............................ $ 3,689 $ 13,770 $ (11,048) $ 34,792 $ 36,289 $ 33,848 $ 29,841 Extraordinary loss on debt redemption, net of $445 and $558 income tax benefit.............. (825) -- -- -- (1,037) -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- Net income (loss)................. $ 2,864 $ 13,770 $ (11,048) $ 34,792 $ 35,252 $ 33,848 $ 29,841 ========== ========== ========== ========== ========== ======== ======== PER SHARE DATA Basic earnings per share: Income (loss) before extraordinary item............ $ 0.23 $ 1.30 $ (0.94) $ 2.99 $ 3.12 $ 3.40 $ 3.09 Extraordinary loss.............. (0.05) -- -- -- (.09) -- -- Net income (loss)............... $ 0.18 $ 1.30 $ (0.94) $ 2.99 $ 3.03 $ 3.40 $ 3.09 Diluted earnings per share: Income (loss) before extraordinary item............ $ 0.23 $ 1.28 $ (0.94) $ 2.95 $ 3.01 $ 2.85 $ 2.59 Net income (loss)............... $ 0.18 $ 1.28 $ (0.94) $ 2.95 $ 3.01 $ 2.85 $ 2.59 Dividends per common share...... $ 0.52 $ 0.52 $ 1.04 $ 1.00 $ 0.97 $ 0.83 $ 0.75 BALANCE SHEET DATA Investments and cash.............. $1,677,400 $ 957,177 $1,749,859 $1,005,211 $ 864,324 $754,210 $653,704 Total assets...................... 3,491,181 1,385,057 3,240,599 1,392,261 1,085,956 920,804 820,930 Unpaid claims and claims expenses........................ 2,050,332 666,101 1,964,139 682,428 518,387 467,177 411,874 Indebtedness...................... 271,831 75,000 248,905 75,000 -- 103,500 103,500 Company-obligated mandatorily redeemable preferred capital securities of subsidiary trust holding solely junior subordinated debentures of Trenwick Group Inc. ............ 110,000 110,000 110,000 110,000 110,000 -- -- Total common stockholders' equity.......................... 439,472 322,588 462,249 348,029 357,649 265,753 240,776 Shares of common stock outstanding..................... 16,288 10,631 16,889 11,051 11,951 10,088 9,886 Book value per common share....... $ 26.98 $ 30.34 $ 27.37 $ 31.49 $ 29.93 $ 26.34 $ 24.36 SELECTED FINANCIAL RATIOS GAAP Combined ratio............... 111.8% 103.0% 119.4% 102.3% 96.5% 95.8% 95.6% Net premiums written to surplus ratio........................... n/a n/a 0.52:1 0.54:1 0.61:1 0.79:1 0.77:1
- --------------- Amounts for the year 1999 and periods subsequent reflect the results of Chartwell, accounted for as a purchase, from the October 27, 1999 date of acquisition. Amounts for 1998 and periods subsequent reflect the results of Trenwick International, accounted for as a purchase, from the February 27, 1998 date of acquisition. 10 22 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF LASALLE
AT OR FOR THE SIX MONTHS ENDED AT OR FOR THE JUNE 30, YEARS ENDED SEPTEMBER 30, ------------------- ---------------------------------------------------- 2000 1999 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net premiums written................. $ 75,859 $ 83,407 $110,819 $147,501 $163,693 $190,151 $201,916 ======== ======== ======== ======== ======== ======== ======== Net premiums earned.................. $ 55,988 $ 70,123 $126,615 $154,620 $163,933 $195,141 $170,370 Net investment income................ 18,187 17,363 33,847 34,288 33,109 26,846 25,091 Net realized investment gains (losses)........................... (2,186) (450) 615 5,575 555 (418) (25) Other income......................... 373 (553) 470 279 (2,808) (1,126) (240) -------- -------- -------- -------- -------- -------- -------- Total revenues................... $ 72,362 $ 86,483 $161,547 $194,762 $194,789 $220,443 $195,196 ======== ======== ======== ======== ======== ======== ======== Income (loss) before minority interest........................... $ (2,155) $ (8,269) $ (5,679) $ 65,232 $121,468 $129,451 $104,448 Minority interest(1)................. (1,258) (2,635) (2,845) 13,426 24,391 47,966 38,774 -------- -------- -------- -------- -------- -------- -------- Net income (loss).................... $ (897) $ (5,634) $ (2,834) $ 51,806 $ 97,077 $ 81,485 $ 65,674 ======== ======== ======== ======== ======== ======== ======== PER SHARE DATA Restated earnings (loss) per share(2): Basic................................ $ (0.27) $ (0.57) $ (0.60) $ 2.99 $ 6.02 $ 5.66 $ 4.56 ======== ======== ======== ======== ======== ======== ======== Diluted(3)........................... $ (0.27) $ (0.57) $ (0.60) $ 2.68 $ 5.14 $ 5.40 $ 4.51 ======== ======== ======== ======== ======== ======== ======== Common dividends per share........... $ -- $ 0.75 $ 1.13 $ 3.00 $ 2.84 $ 0.75 $ 5.72 ======== ======== ======== ======== ======== ======== ======== Preferred dividends per share........ $ 1.10 $ 1.10 $ 2.19 $ 2.19 $ 0.94 $ -- $ -- ======== ======== ======== ======== ======== ======== ======== BALANCE SHEET DATA Investments and cash................. $549,405 $556,335 $556,976 $606,757 $553,043 $537,504 $522,425 Total assets......................... 730,795 758,263 736,107 757,290 686,088 634,374 636,547 Unpaid claims and claims expenses.... 178,143 132,552 146,552 97,942 45,491 49,875 66,654 Minority interest(1)................. 85,161 95,309 93,055 105,569 93,355 179,470 147,389 Total common shareholders' equity.... 283,296 313,321 308,914 356,770 351,943 307,448 253,422 Common shares outstanding............ 15,625 15,594 15,600 15,179 15,074 14,398 14,398 Book value per common share.......... $ 18.02 $ 20.00 $ 19.69 $ 23.39 $ 23.23 $ 21.42 $ 17.64 Total preferred shareholders' equity............................. 73,283 73,283 73,283 73,283 73,283 -- -- Preferred shares outstanding......... 3,000 3,000 3,000 3,000 3,000 -- -- SELECTED FINANCIAL RATIOS GAAP combined ratio.................. 126.9% 133.5% 130.1% 82.2% 42.6% 46.0% 52.6% Net premiums written to surplus ratio.............................. n/a n/a 0.25:1 0.29:1 0.33:1 0.40:1 0.52:1
- --------------- (1) Minority interest represents shares in LaSalle Re that are held as exchangeable non-voting common shares. These shares are exchangeable, at the option of the issuer, for common shares of the LaSalle on a one-for-one basis. (2) Subsequent to the issuance of LaSalle's 1999 consolidated financial statements, LaSalle's management determined that for purposes of the calculation of earnings per common share, the exchangeable non-voting shares of LaSalle Re are not considered to be outstanding common shares of LaSalle. As a result, basic earnings per common share and diluted earnings per common share have been restated from the amounts previously reported. The LaSalle Re exchangeable non-voting shares have been removed from LaSalle's calculation of weighted average number of common shares, but the dilutive effect has been included in the adjusted weighted average number of common shares outstanding. (3) Diluted earnings (loss) per common share equals income before minority interest and after preferred dividends declared and in arrears divided by the adjusted weighted average number of common shares and exchangeable non-voting common shares outstanding. 11 23 SELECTED UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION The following selected unaudited pro forma combined consolidated financial information is intended to give you a better picture of what our businesses might have looked like if Trenwick and LaSalle had been combined for the periods, and as of the date, presented. The pro forma income statement data assumes completion of the transactions as of the beginning of each of the periods provided. The pro forma combined balance sheet information assumes completion of the transactions as of the date indicated. We derived this combined consolidated financial information from, or prepared it on a basis consistent with, the unaudited pro forma combined consolidated financial information included elsewhere in this document. We included this data for illustrative purposes only, and it does not necessarily indicate the results of operations or financial position of the combined companies that would have occurred if we had completed the transactions on the assumed dates, nor does it represent the future operating results or financial position of the combined companies.
AT OR FOR THE AT OR FOR THE SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, 2000 DECEMBER 31, 1999 ------------------ ------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net premiums earned..................................... $ 344,252 $ 600,102 Total revenues.......................................... 426,779 735,206 Net income (loss)....................................... 4,531 (150,700) Basic and diluted earnings per share.................... 0.12 (3.89) BALANCE SHEET DATA: Total assets............................................ 4,023,463 3,763,696 Indebtedness............................................ 268,328 252,792 Company-obligated mandatorily redeemable preferred capital securities of subsidiary trust holding solely junior subordinated debentures of Trenwick Group Inc................................................... 84,790 91,982 Minority interest in preferred and common stock of subsidiaries.......................................... 73,404 73,364 Common shareholders' equity............................. 620,947 630,797
12 24 RISK FACTORS THE REORGANIZATION COULD RESULT IN A LARGER THAN EXPECTED TAXABLE GAIN TO TRENWICK. As a result of the transactions, Trenwick will recognize gain for U.S. tax purposes on all of the assets that it directly owns whose fair market value exceeds their basis. Based on our current estimates of the fair market values of Trenwick's assets and Trenwick's tax attributes, we believe that Trenwick will not incur material U.S. federal income taxes as a result of the transaction. However, if the fair market value of Trenwick's assets at the time of the transactions were substantially in excess of current estimates, Trenwick's U.S. tax liability could increase materially. The IRS may disagree with our calculation of the gain or the methodologies our advisors used to calculate it. U.S. CORPORATE INCOME TAX MAY APPLY TO TRENWICK GROUP LTD. AND/OR ANY OF ITS NON-U.S. SUBSIDIARIES, WHICH WOULD REDUCE TRENWICK GROUP LTD.'S NET INCOME. Trenwick currently pays U.S. tax on its worldwide income. After the restructuring, Trenwick Group Ltd. and its subsidiaries will pay U.S. tax on their U.S. operations. We anticipate that Trenwick Group Ltd.'s non-U.S. subsidiaries, other than subsidiaries that are corporate members of Lloyd's, will pay U.S. tax only on their U.S. source dividend income, and then only at the applicable withholding tax rate. Trenwick Group Ltd.'s subsidiaries that are corporate members of Lloyd's will pay U.S. tax on their net income from U.S. business pursuant to a Closing Agreement between Lloyd's and the IRS. Trenwick Group Ltd.'s non-U.S. subsidiaries, other than corporate members of Lloyd's, intend to conduct their operations so that they will not have a business in the United States for U.S. tax purposes. However, there are no definitive standards provided by the Internal Revenue Code, existing or proposed Treasury Regulations or judicial precedent for determining whether a U.S. business exists. The IRS could argue that a U.S. business exists, and if the IRS succeeded these corporations would pay U.S. tax on their net income from their U.S. business, unless a U.S. income tax treaty applies. If a U.S. income tax treaty applies, the IRS may tax only the business income from a permanent establishment located in the United States, a more difficult standard for the IRS to meet. If a non-U.S. subsidiary were subject to corporate income tax, the U.S. branch profit tax would also apply. If Trenwick Group Ltd. or our non-U.S. subsidiaries, other than corporate members of Lloyd's, were subject to U.S. income tax, our profitability would be reduced. THE ENFORCEMENT OF CIVIL LIABILITIES AGAINST TRENWICK MAY BE MORE DIFFICULT. If the transactions are completed, Trenwick Group Ltd. will be a Bermuda company and in the future some of the officers and directors of Trenwick Group Ltd. may be residents of various jurisdictions outside the United States. A substantial portion of the assets of Trenwick Group Ltd. and of those persons may be located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon those persons or to enforce judgments obtained against those persons in United States courts. Trenwick Group Ltd. will irrevocably agree that it may be served with process with respect to actions based on offers and sales of securities made in the United States by having CSC United States Corporation Company, 1013 Centre Road, Wilmington, Delaware 19805, be its United States agent appointed for that purpose. Appleby Spurling & Kempe, Trenwick's special Bermuda counsel, has advised Trenwick that there is doubt as to whether Bermuda courts would enforce judgments of United States courts obtained in: - actions against those persons or Trenwick Group Ltd. that are predicated upon the civil liability provisions of the Securities Act; or - original actions brought in Bermuda against Trenwick Group Ltd. or those persons predicated upon the Securities Act. 13 25 There is no treaty in effect between the United States and Bermuda providing for this enforcement. In addition, there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Some remedies available under the U.S. federal securities laws may not be allowed in Bermuda courts. ANTI-TAKEOVER PROVISIONS IN TRENWICK GROUP LTD.'S BYE-LAWS AND THE SHAREHOLDERS RIGHTS PLAN MAY MAKE IT MORE UNLIKELY THAT SOMEONE WILL ATTEMPT TO ACQUIRE THE COMPANY AT A PREMIUM IN A HOSTILE OFFER. Provisions in Trenwick Group Ltd.'s bye-laws and shareholders rights plan could discourage unsolicited takeover bids from third parties or the removal of incumbent management. As a result, it may be less likely that you will receive premium prices for your shares in an unsolicited takeover of our company by another party. These provisions include: - voting cut-back and repurchase provisions; - a staggered board of directors; and - the possible dilution of a potential acquiror's interest in Trenwick Group Ltd. as a result of the shareholders rights plan. The board of directors of Trenwick Group Ltd. also may issue preferred shares and determine their rights and qualifications. The issuance of preferred shares may delay, defer or prevent a merger, amalgamation, tender offer or proxy contest involving Trenwick Group Ltd. This may cause the market price of Trenwick Group Ltd. shares to fall, and may further dilute your voting rights. Under Bermuda law and Trenwick Group Ltd.'s bye-laws, no bye-law may be amended by shareholder action without prior approval of the board of directors. 14 26 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This document contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of each of Trenwick and LaSalle. This act protects public companies from liability for forward-looking statements in private securities actions if the forward-looking statement is identified and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially. These safe harbor provisions only apply to companies that have previously offered securities to the public. Because Trenwick Group Ltd.'s offer of its common shares in the business combination constitutes its initial public offering of securities, the safe harbor provisions of the U.S. federal securities laws do not apply to it. All projections and statements regarding the expected benefit of the business combination, plan of reorganization or schemes of arrangement are forward-looking statements. The forward-looking statements may include statements for the period following completion of the business combination. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "continues," "may," "intends," "plans" or similar expressions in this document or in the documents incorporated by reference. You should be aware that any forward-looking statements in this document only reflect current expectations and are not guarantees of performance. We have identified factors that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include, but are not limited to: - competitive pressures in the reinsurance and insurance industries; - an inability to realize expected benefits of the business combination within the anticipated time frame, or at all; - costs or difficulties related to the business combination and related transactions, which could be greater than expected; - losses due to foreign currency exchange rate fluctuations or changes in interest rates; - changes in capital needs; - changing rates of inflation and other economic or business conditions; - legislative or regulatory changes, which could increase Trenwick's or LaSalle's overhead costs, increase federal and state tax assessments, restrict access to capital markets or force participation in unprofitable markets; - changes in loss payment patterns; - uncertainties in the reserving process; - ability to collect reinsurance recoverables; - the occurrence of man-made or natural catastrophic events with a frequency or severity exceeding the estimates of the companies; - changes in the availability, cost or quality of reinsurance; - necessary technological changes, which may be more difficult or expensive to make than anticipated; - developments in global financial markets that could affect the companies' investment portfolios; - loss of the services of any of the companies' key management personnel; and - adverse publicity or news coverage. Actual results may differ materially from those expressed or implied by forward-looking statements. As you make your decision how to vote, please take into account that forward-looking statements speak only as of the date of this document or, in the case of Trenwick or LaSalle documents incorporated by reference, the date of such documents. 15 27 MARKET PRICE AND DIVIDEND INFORMATION Shares of Trenwick common stock are traded on the NYSE under the symbol "TWK", and LaSalle common shares are traded on the NYSE under the symbol "LSH." The following table sets forth the range of high and low sale prices for Trenwick common stock and LaSalle common shares for the periods indicated, as reported on the NYSE stock market and the dividends per share declared on Trenwick common stock and LaSalle common shares.
TRENWICK LASALLE COMMON STOCK COMMON SHARES ---------------------------- ---------------------------- HIGH LOW DIVIDEND HIGH LOW DIVIDEND ------ ------ -------- ------ ------ -------- Year ended December 31, 1997: First Quarter..................... $34.00 $30.67 $0.24 $29.25 $26.50 $0.71 Second Quarter.................... 38.38 31.83 0.24 30.13 27.50 0.71 Third Quarter..................... 39.50 35.25 0.24 35.50 29.75 0.71 Fourth Quarter.................... 38.75 34.38 0.24 35.62 32.00 0.75 Year ended December 31, 1998: First Quarter..................... $38.00 $33.75 $0.25 $42.00 $31.13 $0.75 Second Quarter.................... 41.75 35.50 0.25 42.25 34.88 0.75 Third Quarter..................... 39.50 28.00 0.25 39.06 26.63 0.75 Fourth Quarter.................... 34.50 27.31 0.25 25.88 19.50 0.38 Year ended December 31, 1999: First Quarter..................... $35.00 $25.50 $0.26 $22.25 $14.75 $0.38 Second Quarter.................... 31.94 24.66 0.26 18.25 12.12 0.38 Third Quarter..................... 25.06 16.56 0.26 18.38 13.63 0.00 Fourth Quarter.................... 21.25 14.75 0.26 16.75 10.94 0.00 Year ended December 31, 2000: First Quarter..................... $16.69 $12.06 $0.26 $15.69 $11.50 $0.00 Second Quarter.................... 16.06 13.06 0.26 15.25 12.56 0.00 Third Quarter (through August 22, 2000).......................... 19.88 14.38 0.26 19.38 13.69 0.00
- --------------- All Trenwick information reflects a 3 for 2 stock split paid on April 15, 1997. DIVIDEND INFORMATION When we complete the transactions, you will be entitled to receive any dividends declared by the Trenwick Group Ltd. board of directors. Trenwick Group Ltd.'s board must approve and declare all dividends, including the amount of each dividend. Upon completion of the transactions, the Trenwick Group Ltd. board will be reviewing Trenwick Group Ltd.'s dividend policy in light of the disparate dividend practices of Trenwick and LaSalle. The payment of any future cash dividends to the Trenwick Group Ltd. common shareholders will depend upon the earnings and financial needs of Trenwick Group Ltd., along with applicable legal and contractual restrictions. RECENT CLOSING PRICES The following table sets forth the closing sale prices per share of Trenwick common stock and LaSalle common shares on the NYSE on December 17, 1999, the last full trading day before announcement of the execution of the agreement and on August 22, 2000, the last full trading day prior to the date of this document.
TRENWICK LASALLE COMMON STOCK COMMON SHARES ------------ ------------- December 17, 1999............................... $17.19 $12.38 August 22, 2000................................. $19.50 $19.00
16 28 REFERENCES TO ADDITIONAL INFORMATION This document incorporates by reference important business and financial information about Trenwick and LaSalle from other documents that are not included in or delivered with this document. This information is available to you without charge upon your written or oral request. "Incorporation by reference" means that we are providing information that is contained in a separate document by referring you to that separate document. The information in that separate document is deemed to be part of this document, except for any information that is superseded by information in this document. The documents that are incorporated by reference may be amended, supplemented or modified from time to time, and whenever they are amended, supplemented or modified, this document will also be amended, supplemented or modified in the same way. You can obtain documents incorporated by reference in this document, other than exhibits to those documents that are not incorporated by reference, by requesting them in writing or by telephone from the appropriate company at the following addresses: - ------------------------------------------------------------------------------ TRENWICK GROUP INC. LASALLE RE HOLDINGS LIMITED One Canterbury Green Continental Building Stamford, Connecticut 06901 25 Church Street (203) 353-5500 Hamilton HM 12, Bermuda Attention: John V. Del Col (441) 292-3339 Senior Vice President, Attention: Diane H. Newman General Counsel and Investor Relations Manager Secretary - ------------------------------------------------------------------------------
If you would like to request documents, please do so by September 11, 2000 to receive them before the special meetings. See "Where You Can Find More Information" on pages 129 through 131. 17 29 THE TRENWICK SPECIAL MEETING DATE, TIME AND PLACE The Trenwick special meeting will be convened and held on September 25, 2000, at 9:00 a.m., local time, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870. MATTERS TO BE CONSIDERED AT THE TRENWICK SPECIAL MEETING At the Trenwick special meeting, Trenwick stockholders will be asked to vote on a proposal to approve and adopt the agreement and the related plan of reorganization. Trenwick stockholders also will be asked to vote on any other matters properly presented at the meeting or any adjournment of the meeting. VOTING AND PROXIES The Trenwick board has fixed the close of business on August 21, 2000 as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Trenwick special meeting. At that date, 16,288,082 Trenwick common shares were outstanding. No other voting securities of Trenwick are outstanding. The Trenwick by-laws provide that holders of a majority of the outstanding shares of Trenwick common stock entitled to vote on the record date must be present, in person or by proxy, at the Trenwick special meeting to constitute a quorum. If a quorum is not present, the Trenwick special meeting may be adjourned from time to time until Trenwick obtains a quorum. Assuming a quorum is present, approval and adoption of the agreement and the related plan of reorganization requires the vote of at least a majority of the outstanding Trenwick common shares entitled to be cast at the Trenwick special meeting. At the close of business on the record date, there were 16,288,082 Trenwick common shares outstanding and entitled to vote at the Trenwick special meeting, of which the directors and executive officers of Trenwick and their affiliates held approximately 1,296,650 shares, representing approximately 7.90% of the outstanding shares. These executive officers and directors have indicated to Trenwick that they intend to vote in favor of the transactions. Trenwick common stockholders will be entitled to one vote per share on each matter submitted to the Trenwick special meeting. Any proxy may be revoked by the stockholder giving it, at any time prior to its being voted, by filing a notice of revocation or a duly executed proxy bearing a later date with the Secretary of Trenwick at One Canterbury Green, Stamford, Connecticut 06901, Attention: John V. Del Col. Any proxy may also be revoked by the shareholder's attendance at the Trenwick special meeting and voting in person. A notice of revocation need not be on any specific form. Any proxy may also be revoked by attending the special meeting and voting in person. Attendance at the special meeting will not by itself constitute revocation of a proxy. Under the NYSE rules, brokers and nominees may not exercise their voting discretion on the matters proposed to be voted upon at the special meeting. For this reason, absent specific instructions from the beneficial owner of shares, brokers and nominees may not vote on the proposals. Abstentions may be specified with respect to the approval of the agreement by properly marking the "ABSTAIN" box on the proxy, and will be counted as present for the purpose of determining the existence of a quorum. Broker non-votes will also be counted as present for the purposes of determining the existence of a quorum. Abstentions and broker non-votes will have the same effect as a vote against the approval of the agreement. As of the date of this document, LaSalle beneficially owns no shares of Trenwick common stock. LaSalle has entered into the LaSalle stock option agreement. See "Related Agreements and Transactions -- Stock Option Agreements." 18 30 SOLICITATION OF PROXIES The Trenwick board through its agents is soliciting proxies in connection with the transaction. Trenwick will pay the expenses of the solicitation of proxies with respect to the Trenwick special meeting. Trenwick and LaSalle will share equally the expenses related to printing this joint proxy statement/prospectus as well as all mailing and SEC filing fees incurred in connection with this joint proxy statement/prospectus. Trenwick will make arrangements with brokers and other custodians, nominees and fiduciaries to send proxy materials to their principals and will, upon request, reimburse them for reasonable expenses of so doing. In addition to soliciting proxies by mail, Trenwick's directors, officers, consultants and employees may solicit proxies from some Trenwick stockholders by telephone, facsimile, or in person after the initial solicitation. Trenwick has also retained D.F. King & Co., Inc. to assist Trenwick in the solicitation of proxies. D.F. King may contact Trenwick stockholders by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials to the beneficial owners of shares of Trenwick common stock. D.F. King will receive reasonable and customary compensation for its services, which is anticipated to be approximately $7,000. Trenwick will reimburse D.F. King for reasonable out-of-pocket expenses and will indemnify D.F. King against liabilities and expenses in connection with its solicitation activities on behalf of Trenwick, including liabilities under the federal securities laws. 19 31 THE LASALLE AND LASALLE RE SPECIAL GENERAL AND COURT MEETINGS DATES, TIMES AND PLACES The LaSalle court meeting, the LaSalle special general meeting, the LaSalle Re court meeting and the LaSalle Re special general meeting will be convened and held on September 25th, 2000, at 2:00, 2:15, 2:30 and 2:45 p.m., respectively, local time, at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4. MATTERS TO BE CONSIDERED AT THE SPECIAL GENERAL AND COURT MEETINGS At the special general meetings, holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares will be asked to consider and vote upon a proposal to approve and adopt the agreement. At the court meetings, holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares will be asked to consider and vote upon a proposal to approve and adopt the related schemes of arrangement. Holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares also will be asked to consider any other matters properly presented at the special general meetings or any adjournment of those meetings. VOTING AND PROXIES The LaSalle bye-laws provide that two or more holders of record, representing in person or by proxy a majority of the total issued and outstanding common shares on the record date, must be present in person at the LaSalle special general and court meeting to constitute a quorum. The LaSalle Re bye-laws provide that two or more holders of record, representing in person or by proxy a majority of the total issued and outstanding exchangeable non-voting common shares on the record date, must be present in person at the LaSalle Re special general and court meeting to constitute a quorum. If a quorum is not present at the LaSalle special general meeting, we expect to adjourn or postpone that meeting to solicit additional proxies. Assuming a quorum is present, the affirmative vote of the holders of a majority of the shares present and voting at each special general meeting is necessary to approve and adopt the agreement. Approval and adoption of the schemes of arrangement will require the affirmative vote of: - A majority in number of LaSalle common shareholders who represent at least 75% in value of the LaSalle common shares present and voting at the LaSalle court meeting; and - A majority in number of LaSalle Re exchangeable non-voting common shareholders who represent at least 75% in value of the LaSalle Re exchangeable non-voting common shares present and voting at the LaSalle Re court meeting. The LaSalle and LaSalle Re boards have fixed the close of business on August 21, 2000 as the record date for the determination of the shareholders entitled to notice of, and to vote at, the LaSalle and LaSalle Re special general meetings. At that date, there were 15,634,394 LaSalle common shares outstanding and entitled to vote at the LaSalle special general and court meetings and 6,165,430 LaSalle Re exchangeable non-voting common shares outstanding and entitled to vote at the LaSalle Re special general meeting. Because the exchangeable non-voting common shares owned by LaSalle will not be affected by the scheme of arrangement, only the 4,725,546 exchangeable non-voting common shares that are not owned by LaSalle will be entitled to vote at the LaSalle Re court meeting. At the close of business on the record date, directors and executive officers of LaSalle and LaSalle Re and their affiliates held approximately 3,213,812 LaSalle common shares, 4,909,064 LaSalle Re exchangeable non-voting common shares entitled to vote at the LaSalle Re special general meeting and 3,469,180 LaSalle Re exchangeable non-voting common shares entitled to vote at the LaSalle Re court meeting, representing approximately 20.56%, 79.62% and 73.41%, respectively, of the shares entitled to vote at those meetings. These executive officers and directors have indicated to LaSalle that they and their affiliates intend to vote in favor of the transactions. Holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares 20 32 will be entitled to one vote per share on each matter submitted to the LaSalle and LaSalle Re special general meetings and court meetings. Under NYSE rules, brokers and nominees may not exercise their voting discretion on the proposals. For this reason, without specific instructions from the beneficial owner of LaSalle common shares, brokers and nominees may not vote such shares on the proposal. You may abstain from approving the agreement or the schemes of arrangement by marking the "ABSTAIN" box on the proxy. "Broker non-votes" and any other LaSalle common shares and LaSalle Re exchangeable non-voting common shares owned by shareholders who are present at the meetings, either in person or by proxy, but who abstain from voting will be counted toward the presence of a quorum. However, these shares, and any outstanding LaSalle common shares and LaSalle Re exchangeable non-voting common shares that are not represented, either in person or by proxy, at the meetings, will not otherwise be counted in the voting at the meetings and thus will have no effect on the outcome of the votes. Shares represented by properly executed proxies received in time for the court meetings and the special general meeting will be, unless the proxies have been properly revoked, voted at such meetings in the manner specified by such proxies. LaSalle shareholders should be aware that, if your proxy is properly executed but does not contain voting instructions, your proxy for the special general meeting will be voted FOR approval of the agreement and the transactions contemplated by the agreement and your proxy for the court meetings will be voted FOR the scheme of arrangement. The grant of the proxy on the enclosed special general meeting proxy card and court meeting proxy card does not preclude you from voting in person. You may revoke a proxy at any time prior to its exercise by filing a written notice of revocation or a duly executed proxy bearing a later date with the secretary of LaSalle at the address given on the notice of special general meeting or notice of court meetings accompanying this joint proxy statement/prospectus. You may also revoke your proxy by attending the special general meeting or the relevant court meeting, as the case may be, and voting in person. Attendance at the special general meeting or court meeting will not by itself constitute revocation of a proxy. LaSalle does not expect to adjourn the special general meetings or the court meetings for a period of time long enough to require the setting of a new record date for such meetings. If an adjournment occurs, it will have no effect on the ability of LaSalle's or LaSalle Re's shareholders of record as of the record date to exercise their voting rights or to revoke any previously delivered proxies. As of the date of this document, Trenwick owns one LaSalle common share and Trenwick has entered into the Trenwick stock option agreement. See "Related Agreements and Transactions -- Stock Option Agreements." SOLICITATION OF PROXIES The LaSalle board through its agents is soliciting proxies in connection with the transaction. LaSalle will pay the expenses of the solicitation of proxies with respect to the LaSalle and LaSalle Re special general and court meetings. Trenwick and LaSalle will share equally the expenses related to printing this joint proxy statement/prospectus as well as all mailing and SEC filing fees incurred in connection with this joint proxy statement/prospectus. In addition to solicitation by mail, LaSalle will make arrangements with brokers and other custodians, nominees and fiduciaries to send proxy materials to their principals and will, upon request, reimburse them for reasonable expenses of so doing. In addition to soliciting proxies by mail, LaSalle's officers and regular employees may solicit proxies from some LaSalle and LaSalle Re shareholders by telephone, facsimile, or in person after the initial solicitation. In addition, LaSalle has retained Corporate Investor Communications, Inc. to assist LaSalle in the solicitation of proxies. Corporate Investor Communications may contact LaSalle shareholders by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials to the beneficial owners of LaSalle common shares. Corporate Investor Communications will receive reasonable and customary compensation for its services which are estimated to be $5,500. LaSalle will also reimburse Corporate Investor Communications for reasonable out-of-pocket expenses and will indemnify Corporate Investor Communications against liabilities and expenses in connection with its solicitation activities on behalf of LaSalle, including liabilities under the federal securities laws. 21 33 THE TRANSACTIONS BACKGROUND OF THE AGREEMENT Trenwick has a history of growth through acquisitions. Senior management of Trenwick has felt that an acquisition that expands Trenwick's base of profitably underwritten business and also provides for the creation of a larger, more competitive company would be very beneficial. Senior management of LaSalle believed that an appropriate acquisition or combination providing business diversification would be beneficial to LaSalle. In April 1998, Victor Blake, Chairman and, at that time, President and Chief Executive Officer of LaSalle, and James Billett, Chairman, President and Chief Executive Officer of Trenwick, met to discuss the possibility of combining LaSalle and Trenwick, and the related structural and strategic implications of such a combination. On May 14, 1998, Trenwick and LaSalle executed a mutual confidentiality and standstill agreement. Trenwick and LaSalle exchanged non-public information and began preliminary discussions. Through May and June of 1998, LaSalle and Trenwick and their respective representatives continued to discuss a possible merger of equals between the parties. These discussions were discontinued in June of 1998 because the parties could not agree on the terms of the transaction. In response to consolidation in the reinsurance industry and perceived strategic pressures for scale and business diversification, on May 26, 1999, the LaSalle board appointed Michael A. Conway, Clement S. Dwyer, Jr., and Paul J. Zepf to an Ad Hoc Committee on Strategic Alternatives, which we call the LaSalle committee. The LaSalle board empowered the LaSalle committee to investigate potential alternative strategies for the future of LaSalle, including the consideration of a strategic alliance or business combination between LaSalle and one or more other entities. The LaSalle board appointed Mr. Dwyer the chairman of the LaSalle committee and subsequently appointed Robert V. Deutsch as an additional member of the LaSalle committee. LaSalle engaged Lazard, Salomon Smith Barney and Aon Capital Markets to assist the LaSalle committee and LaSalle in connection with the exploration of potential strategic transactions. During the following six months, the LaSalle committee and LaSalle's financial advisors held discussions with a number of parties concerning the possibility of mergers, joint ventures or acquisitions of LaSalle or acquisitions by LaSalle. As part of this process, LaSalle executed confidentiality agreements with a number of companies, including Trenwick, and conducted limited due diligence with several of those parties. LaSalle discussed general terms of potential transactions with three parties other than Trenwick. These companies, which we call Company A, Company B and Company C, proposed terms under which shares of LaSalle would be exchanged in full or in part for newly created securities. The LaSalle committee believed that these special classes of securities would have limited liquidity even if a transaction could be arranged on otherwise favorable terms. In a letter dated September 28, 1999, Company C, which was the only company to ultimately propose an all cash offer, first proposed a preliminary purchase price, to be reduced following adjustments, equal to June 30, 1999 book value. Company C estimated this book value as $19.50 per share but it was actually $19.39. Company C proposed to adjust this preliminary price for third quarter earnings and reduce it for transaction costs, including severance. Company C proposed to pay this per share consideration with a newly created series of contingent preferred stock having a face value of $5.00, with the remainder payable in cash. The amount of the preferred stock would have been reduced by any amounts that Company C viewed as inadequate reserves, uncollectable reinsurance recoverables, costs of commuting any outstanding treaties with related parties, and other assets or liabilities for which adequate provision had not been made that might result in a reduction in LaSalle book value. Company C proposed to assume LaSalle's series A preferred stock. Company C wanted to participate in LaSalle's decision about renewing business prior to closing and indicated that it wanted to purchase renewal rights to the more desirable parts of LaSalle's business. Based on discussions that members of the LaSalle committee and LaSalle's financial advisors had with Company C and its financial advisors, the LaSalle committee believed that Company C's offer following these reductions would result in an inadequate purchase price. The LaSalle committee also 22 34 believed that Company C's proposed involvement in the renewal process would interfere with LaSalle's conduct of business, to the detriment of LaSalle's shareholders, particularly if the transaction with Company C did not close, which the LaSalle committee believed was a strong possibility. In August 1999, Trenwick indicated that it was interested in renewing discussions regarding a possible business combination with LaSalle. On August 30, 1999, Trenwick executed a new confidentiality agreement with LaSalle and on November 19, 1999, LaSalle executed a new confidentiality agreement with Trenwick. On September 13, 1999, LaSalle management made a presentation to Trenwick management and Trenwick's financial advisor, DLJ. Based upon the information received and other publicly available information about LaSalle, Trenwick delivered to LaSalle a written preliminary indication of interest dated September 24, 1999. On September 30, 1999, the LaSalle committee met to consider, among other things, Trenwick's preliminary indication of interest. For various reasons, including valuation, the proposed transaction structure and the presence of other indications of interest from third parties at potentially higher prices, the LaSalle board of directors ceased to pursue a combination with Trenwick. At the meeting of the LaSalle committee on September 30, 1999, the committee directed LaSalle's financial advisors to pursue discussions with Company C in order to see if a more concrete proposal, including a specific proposed price, could be obtained and simultaneously to pursue a transaction with Company A. The LaSalle committee reviewed its discussions with other parties at this time. On November 13, 1999, following intermittent dialogue between LaSalle and Trenwick, LaSalle contacted Trenwick about the possibility of reopening the discussions that had been terminated one month previously. Trenwick indicated that it remained interested in completing a transaction with LaSalle on the terms set forth in its preliminary indication of interest, but only in an all-stock transaction that would permit a successor parent corporation to be established in Bermuda. On November 17, 1999, LaSalle's board approved the continuation of discussions with Trenwick. At its regular meeting on November 22, 1999, the Trenwick board also recommended that management continue its dialogue with LaSalle. Mr. Dwyer also held a discussion on November 17, 1999 with the chief executive officer of Company C to advise that executive that the conditions contained in his letter of September 28, 1999 were not acceptable to LaSalle for two principal reasons: the indications were that the potential price was inadequate, and the procedures proposed for transferring business to Company C would have left LaSalle without a viable business if the acquisition by Company C were not completed. On November 22, 1999, Trenwick, LaSalle, a number of LaSalle's directors and employees of certain of LaSalle's shareholders and their respective advisors commenced their due diligence investigations of LaSalle and Trenwick, which continued until December 10, 1999. From early December through the signing of the agreement, stock option agreements and the shareholders agreement on December 19, 1999, representatives of Trenwick, LaSalle and a number of LaSalle's directors negotiated the terms of the agreement, the stock option agreements and the shareholders agreement. Throughout this period, Trenwick and LaSalle negotiated with each other to determine an appropriate exchange ratio. Mr. Dwyer received a revised proposal letter dated December 1, 1999 from Company C, proposing an all cash purchase price, to be reduced as a result of a number of adjustments to be made by Company C after the completion of due diligence. In this letter, Company C proposed a preliminary price of 90% of adjusted fully diluted book value per share as of December 31, 1999, to be reduced following adjustments. At the time of this letter, the most recent publicly available fully diluted book value for LaSalle was $19.10, the value on September 30, 1999. Based on this amount, Company C's price, prior to adjustments, would have been $17.19. However, the offer specified that Company C's preliminary price was 90% of fully diluted book value as of December 31, 1999. LaSalle's fully diluted book value for that date was $18.00, which would have resulted in a preliminary price of $16.20, again subject to significant adjustments which the LaSalle committee believed would have materially lowered the price per share. Company C specified that it would adjust reported year end book value to reflect a reasonable estimate of the reductions in economic value arising from specific areas of concern, as identified in its due diligence review. Company C asserted many areas of concern for which it would require price adjustments including deficiencies in 23 35 reserves for recent catastrophes, deficiencies in non-catastrophe reserves and in-force non-catastrophe contracts, unprofitable multi-year contracts, related party transactions, and management severance packages. In its December 1, 1999 letter, Company C made clear that it would require effective participation in LaSalle's renewal process for catastrophe contracts prior to the closing of any transaction. Company C's letter stipulated that renewals which it found unacceptable would have to be reinsured with other reinsurers, with the cost of reinsurance as a further deduction from the purchase price. The LaSalle committee believed that this reinsurance would not necessarily be available. Based on discussions that members of the LaSalle committee and LaSalle's financial advisors had with Company C and Company C's financial advisors, the LaSalle committee believed that adjustments Company C described were likely to result in significant reductions to the purchase price. The LaSalle committee believed that Company C's insistence on involvement in the renewal process prior to closing would interfere with LaSalle's ability to conduct its business. This would be particularly harmful to LaSalle and its shareholders if the transaction did not close, which the LaSalle committee still believed was a strong possibility. Therefore, after discussing the letter with the other members of the LaSalle committee and LaSalle's financial and legal advisors, Mr. Dwyer informed Company C that its proposal still reflected an inadequate price and was impracticable in that it would have, in effect, ceded control of the existing business of LaSalle to Company C prior to closing. On December 15, 1999, Trenwick's board met via telephone to review the status of the transaction, including the proposed exchange ratio, the results of due diligence investigations conducted by Trenwick's management and representatives and the terms of the agreement, the stock option agreements, the shareholders agreement and the proposed transactions. On December 16, 1999, LaSalle's board met in Toronto to review the state of discussions with other interested parties and consider the terms that had been negotiated with Trenwick at that point. Mayer, Brown & Platt reviewed the fiduciary obligations of the LaSalle board and outlined the terms of the agreement, the stock option agreements and the shareholder agreements. Lazard and Salomon Smith Barney made a financial presentation and delivered separate oral opinions to the LaSalle board, subject to review of the final documentation for the transactions. These opinions were confirmed by delivery of written opinions dated December 19, 1999, the date on which the final documents were executed. During a recess in the LaSalle board meeting, the LaSalle committee and other directors spoke by conference telephone with the chief executive officer of Company C to determine whether Company C was prepared to consider pursuing a transaction more favorable to LaSalle and its shareholders than that outlined in the December 1, 1999 letter. After concluding that Company C was not, the LaSalle committee recommended to the full board at the reconvened meeting that it approve the combination with Trenwick, subject to the resolution of a number of non-economic points. The LaSalle board then approved the transaction with Trenwick subject to the resolution of these issues, recommended the Trenwick transaction to LaSalle and LaSalle Re shareholders and delegated authority to Mr. Dwyer and other members of the LaSalle committee to negotiate the open points in the proposed agreements with Trenwick. Trenwick's board also met on December 16, 1999 and received a briefing from Trenwick's senior management, representatives of DLJ and Baker & McKenzie, counsel to Trenwick, on the status of the proposed transactions. The Trenwick board considered the strategic benefits of the proposed business combination, the opportunities it presented for Trenwick and the potential value created for Trenwick's stockholders. DLJ made a financial presentation and delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, based upon and subject to the considerations set forth in such opinion, as of December 16, 1999, the exchange ratio was fair, from a financial point of view, to Trenwick. Baker & McKenzie reviewed for the Trenwick board its fiduciary obligations and the terms of the agreement, the stock option agreements and the shareholders agreement. After further discussion and deliberation, Trenwick's board unanimously declared advisable, authorized and approved the agreement, the stock option agreements, the shareholders agreement and the transactions contemplated by each agreement and resolved to recommend to the Trenwick stockholders to vote to adopt the agreement and approve the transactions, subject to the satisfactory resolution of several outstanding non-economic issues. 24 36 During the evening of December 16, 1999, LaSalle, Trenwick management and a number of LaSalle's directors, working with their counsel, negotiated a mutually satisfactory resolution of the outstanding non-economic issues. On December 17, 1999, the Trenwick board met telephonically and approved management's resolution of the outstanding issues. From December 17, 1999 through December 19, 1999, the parties finalized the definitive agreements. LaSalle, Trenwick and a number of LaSalle's shareholders signed the agreement, the stock option agreements and the shareholders agreement and issued a joint press release announcing the business combination on the afternoon of December 19, 1999. On March 20, 2000, the agreement was amended and restated to provide for a different structure, with the exchange ratio remaining the same. On June 28, 2000, the agreement was amended to extend the date before which the ability to terminate the agreement by Trenwick or LaSalle is restricted or limited. The date formerly was June 30, 2000 and has been extended to the first business day after September 30, 2000. REASONS FOR THE TRANSACTIONS; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS We believe the combination of our two companies will create an organization able to compete more effectively in the international insurance markets. The transactions would also provide opportunities to achieve benefits that would not be available to either company alone, such as: - the ability of Trenwick to expand into property catastrophe reinsurance which is consistent with one of its long-term business strategies of profitable premium growth through geographic and product line diversification; - the creation of a larger, more competitive company with assets of approximately $4 billion, shareholders' equity in excess of $600 million as of June 30, 2000 and total capitalization of approximately $1.0 billion; - the significant benefit of scale that would result from the business combination which would enhance the position of the combined companies both with respect to customers and rating agencies, in an increasingly competitive market place; - the possible synergies and cost savings resulting from the elimination of duplicative administrative and capital management expenses; - the benefits of the business diversification presented by the business combination, noting particularly the differences in frequency, severity and duration of risks in the books of business of Trenwick and LaSalle Re, respectively; and - revenue enhancements through the combined company's ability to offer larger reinsurance limits, additional products and stronger security for reinsurance brokers, cedents and insureds. The Trenwick and LaSalle boards also considered the following structural aspects of the transactions: - the relationship of the exchange ratio to historical market prices and then prevailing market prices of Trenwick common stock and LaSalle common shares; - the fact that the exchange ratio is fixed, except for adjustments relating to severe natural catastrophes, and will not be adjusted based on increases or decreases in the price of either Trenwick common stock or LaSalle common shares; - the fact that the transactions should be tax-free to shareholders, and we will receive opinions of counsel to that effect; - the purchase accounting and financial treatment of the transactions; 25 37 - the $12 million termination fee and expenses payable by LaSalle to Trenwick or by Trenwick to LaSalle under specific circumstances if the transactions are not consummated; and - the option granted by LaSalle to Trenwick to acquire 19.9% of the outstanding LaSalle common shares if a termination fee is payable by LaSalle to Trenwick and the option granted by Trenwick to LaSalle to acquire 19.9% of the outstanding Trenwick common stock if a termination fee is payable by Trenwick to LaSalle. TRENWICK REASONS; RECOMMENDATIONS In addition to the above factors applicable to both companies, the Trenwick board also considered a number of other items and factors, including the factors described below. STRATEGIC CONSIDERATIONS - Expected earnings accretion in 2000 and 2001 as a result of the business combination; and - Enhanced capital management flexibility as a result of a larger capital base. STRUCTURAL CONSIDERATIONS - Significant business and financial advantages that are not available under the current corporate structure, including: -- a more favorable Bermuda-based corporate structure for the formation and growth of non-U.S. based insurance and reinsurance operations; -- a potential reduction in Trenwick's overall corporate income tax rate; and -- an enhanced ability to compete and to pursue business combinations with non-U.S. insurance and reinsurance entities. FAIRNESS PRESENTATION AND OPINION - The financial analyses and presentation of DLJ to the Trenwick board on December 16, 1999 as well as the opinion of DLJ that, as of December 16, 1999, and subject to the assumptions, limitations and qualifications set forth in such opinion, the exchange ratio pursuant to the agreement was fair from a financial point of view to Trenwick. See "-- Opinion of Trenwick's Financial Advisor." A copy of DLJ's written opinion, dated December 16, 1999, which sets forth the assumptions made, matters considered and limitations on the review undertaken in connection with its opinion, is attached as Appendix G to this document. ADDITIONAL CONSIDERATIONS - The due diligence review of LaSalle by Trenwick's management. - The knowledge and experience of the management team at LaSalle. - The business, operations, financial condition, earnings and prospects of both Trenwick and LaSalle, as well as current industry, economic and market conditions. The Trenwick board also weighed the factors listed above against the following risks associated with the transactions: - The possibility of unexpected difficulties in integrating Trenwick's and LaSalle's operations or realizing the anticipated benefits of the business combination. - The risk that the business combination might not be completed as a result of the failure of any of the conditions to the closing contained in the agreement to be satisfied or waived. 26 38 - The possibility that the stock option agreements and termination fee provisions of the agreement might have the effect of discouraging other persons potentially interested in merging with or acquiring Trenwick. For a more detailed description of the risks associated with the business combination, see "Risk Factors." LASALLE REASONS; RECOMMENDATIONS In addition to the above factors applicable to both companies, the LaSalle board of directors reached its conclusion after careful consideration of, and based on, a number of factors including the material factors described below. COMPETITIVE CONDITIONS - the capital required to maintain or improve margins in the property and casualty reinsurance business generally, the growth prospects for LaSalle Re, the difficulty faced by smaller institutions in managing the operating risks inherent in the property and casualty reinsurance business generally and the enhanced flexibility of capital management and portfolio diversification that would result from the business combination; - the geographic diversity that would result from the business combination; and - the current industry, economic and market conditions, including in particular the intensification of competition in the property and casualty insurance and reinsurance business and the resulting downward pressure on pricing, together with the ongoing consolidation trend within the insurance and the reinsurance businesses. EXCHANGE RATIO The LaSalle board weighed the following factors relating to the exchange ratio: - the value of a LaSalle common share at the exchange ratio based on the closing price of $17.1875 for shares of Trenwick common stock on the NYSE on December 15, 1999, the last trading day prior to the date of the board meeting held to evaluate the business combination, which closing price represented: -- a premium of 27.3% over the $13.50 per share closing price of LaSalle common shares on the NYSE on December 15, 1999; and -- a premium of 27.0% over the $13.5257 average per share closing price of LaSalle common shares on the NYSE for the ninety trading day period ending on and including December 15, 1999. TRANSACTION STRUCTURE In its deliberations, the LaSalle board took into account the following attributes of the structure of the transactions: - the form of the transaction consideration and the structure of the transactions, which permits LaSalle common shareholders and LaSalle Re exchangeable non-voting common shareholders to receive, on a tax-free basis except with respect to cash paid instead of fractional shares, shares representing approximately 54% of the total outstanding equity of Trenwick Group Ltd. following the business combination, based on the number of LaSalle common shares outstanding as of December 15, 1999, providing LaSalle common shareholders and LaSalle Re exchangeable non- voting common shareholders with the ability to retain a significant aggregate equity interest in the combined enterprise and the related opportunity to share in its future growth prospects. 27 39 FINANCIAL PRESENTATION AND OPINIONS OF LAZARD AND SALOMON SMITH BARNEY The LaSalle board reviewed the financial presentation of Lazard and Salomon Smith Barney, its financial advisors, and the separate opinions of Lazard and Salomon Smith Barney as to the fairness, from a financial point of view and as of the dates of the opinions, of the LaSalle exchange ratio to LaSalle holders of LaSalle common shares as described under the caption "-- Opinions of LaSalle's Financial Advisors." MANAGEMENT OF TRENWICK The LaSalle board took note of the fact that three current directors of LaSalle will become Trenwick Group Ltd. directors upon consummation of the business combination and that Guy Hengesbaugh will remain president and chief executive officer of LaSalle Re. See "Trenwick Group Ltd. after Completion of the Transactions." ADDITIONAL FACTORS In addition to the reasons listed above, in reaching the determination that the terms of the transactions were fair to and in the best interests of LaSalle and its common shareholders, the LaSalle board of directors also evaluated a number of additional factors, including: - its knowledge and review of the financial condition, results of operation, business and prospects of LaSalle and Trenwick, as well as the results of LaSalle's due diligence review of Trenwick; - the management team of Trenwick; - the impact of the transactions on LaSalle's employees; - the terms of the agreement; - the relative dividend rates on LaSalle common shares and Trenwick common stock; and - the current and historical trading multiples of other comparable companies. The LaSalle board considered the following countervailing considerations with respect to the transactions: - the risk that the benefits sought in the business combination would not be obtained; - the risk that the business combination would not be consummated; - the possible negative effect of the public announcement of the business combination on sales, agent, broker, customer and supplier relationships, operating results and ability to retain employees, and the trading price of LaSalle common shares and Trenwick common stock; - the potentially substantial management time and effort that will be required to consummate the business combination and integrate the operations of LaSalle and Trenwick; and - the possibility that the stock option agreements and termination fee provisions of the agreement might have the effect of discouraging other persons potentially interested in merging with or acquiring LaSalle. In the judgment of the LaSalle board of directors, the potential benefits of the business combination outweighed these countervailing considerations. The LaSalle board also considered that members of LaSalle's management and some of the members of its board have interests in the transactions that are different from, or in addition to, the interests of LaSalle shareholders generally. These interests are discussed in detail under "-- Interests of Directors and Officers in the Transactions." Each company's board determined that the potential advantages of the transactions far outweigh the disadvantages. Each company's board believes that the transactions will result in its shareholders realizing 28 40 greater value than its company could deliver to them alone. Based on the consideration of these and other relevant matters, each company's board unanimously determined that the agreement and the transactions contemplated by the agreement are in the best interests of its company and its company's shareholders. The above discussion of the factors considered by each company's board is not intended to be exhaustive, but is believed to include all material factors considered by each company's board. In reaching its decision to approve the agreement and the transactions contemplated by the agreement, neither company's board quantified or assigned any relative weights to the factors considered, or considered any one factor to be determinative, and individual directors may have given different weight to different matters. The Trenwick board and the LaSalle board have each unanimously concluded that the agreement and transactions are in the best interests of their respective shareholders, and each unanimously recommends that its shareholders vote for approval and adoption of the agreement and the transactions. In light of the fact that each LaSalle Re exchangeable non-voting common share is economically equivalent to a LaSalle common share, the LaSalle Re board considered similar information and factors to those considered by the LaSalle board. The LaSalle Re board of directors has unanimously concluded that the agreement and the transactions are in the best interests of its shareholders, and unanimously recommends that its shareholders vote for approval and adoption of the agreement and the transactions. THE PLAN OF REORGANIZATION GENERAL The reorganization will be completed after Trenwick and its subsidiaries complete an internal corporate restructuring. The internal corporate restructuring is designed to organize Trenwick's subsidiaries into three separate groups of corporations under Trenwick -- a chain of U.S. corporations, a chain of U.K. corporations, and a chain of Bermuda corporations. Once the corporate restructuring is completed, Trenwick Group Ltd. will acquire all of the assets and will assume all of the liabilities of Trenwick in exchange for Trenwick Group Ltd. common shares which will be distributed to Trenwick stockholders in complete liquidation of Trenwick. The reorganization will become effective at the same time the schemes of arrangement become effective. CONSIDERATION TO BE RECEIVED IN THE REORGANIZATION Trenwick stockholders will receive one common share of Trenwick Group Ltd. in exchange for each share of Trenwick common stock, unless Trenwick incurs more than $40 million in net losses in connection with a single natural catastrophe that occurs between December 19, 1999 and the effective time of the plan of reorganization. If a net loss of that magnitude occurs, the number of Trenwick Group Ltd. common shares that Trenwick stockholders receive will be adjusted. This is how the Trenwick exchange ratio will be calculated: - The fair market value of a share of Trenwick common stock will be calculated by averaging the closing sale price as reported on the NYSE Composite Tape for the 30 trading days immediately preceding the effective date of the plan of reorganization. - The denominator of the Trenwick exchange ratio will be the fair market value of all of the shares of Trenwick common stock, calculated by multiplying the fair market value of a share of Trenwick common stock by the total number of outstanding shares of Trenwick common stock. - The numerator of the Trenwick exchange ratio will be an amount equal to the denominator less the following amounts: - 50% of the amount by which any Trenwick net loss exceeds $40 million but does not exceed $60 million; and 29 41 - 100% of the amount by which any Trenwick net loss exceeds $60 million but does not exceed $100 million. For example, assume that the fair market value of all of the shares of Trenwick common stock is $210 million and Trenwick incurs a $70 million net loss between December 19, 1999 and the effective time of the plan of reorganization. This is how the exchange ratio would be calculated: $210 million - 50% of $20 million - 100% of $10 million ------------------------------------------------------------ = .90 $210 million In this example, Trenwick stockholders would receive 0.90 of a common share of Trenwick Group Ltd. in exchange for each of their shares of Trenwick common stock. When we complete the transactions, each outstanding option, whether or not then vested or exercisable, to purchase Trenwick common stock will be replaced by a Trenwick Group Ltd. option. The number of Trenwick Group Ltd. common shares subject to, and the exercise price per share for, such option will be based upon the Trenwick exchange ratio. At that time, each outstanding warrant of Trenwick will be assumed by Trenwick Group Ltd. in accordance with its terms. When we complete the transactions, all shares of Trenwick common stock will automatically be cancelled and will cease to exist. Trenwick stockholders will cease to have any rights with respect to those shares, except the right to receive the reorganization consideration in accordance with the terms of the agreement. If prior to the effective time of the transactions any of Trenwick, LaSalle or LaSalle Re splits or combines the shares of Trenwick common stock, the LaSalle common shares or the LaSalle Re exchangeable non-voting common shares, as applicable, pays a stock dividend or otherwise changes the foregoing into any other securities, or makes any other dividend or distribution on the foregoing, the reorganization and scheme consideration and the disposition of the options and warrants as provided in the agreement will be appropriately adjusted. REQUIREMENT TO EXCHANGE STOCK CERTIFICATES If you own stock certificates representing shares of Trenwick common stock immediately prior to the effective time of the reorganization, you will, at the effective time of the reorganization, automatically be entitled to receive a number of Trenwick Group Ltd. common shares that is equal to the Trenwick exchange ratio. All common shares of Trenwick Group Ltd. to be issued will be deemed issued and outstanding when we complete the transactions. Once we complete the reorganization, shares of Trenwick common stock that were outstanding immediately prior to the effective time of the reorganization no longer will be transferred on the stock transfer books of Trenwick. You will be required to exchange your Trenwick common stock certificates as a result of the reorganization. See "-- Exchange of Certificates." SCHEMES OF ARRANGEMENT GENERAL The schemes of arrangement will involve Bermuda court proceedings that will transfer all of the common shares of LaSalle and all of the exchangeable non-voting common shares of LaSalle Re that are not owned by LaSalle to Trenwick Group Ltd. If approved, the schemes of arrangement will become effective at the same time the Trenwick reorganization becomes effective. CONSIDERATION TO BE RECEIVED IN THE SCHEMES OF ARRANGEMENT Shareholders of LaSalle and LaSalle Re will receive one common share of Trenwick Group Ltd. in exchange for each LaSalle or LaSalle Re share, unless LaSalle Re incurs more than $40 million in net losses in connection with a single natural catastrophe that occurs between December 19, 1999 and the effective time of the schemes of arrangement. If a net loss of that magnitude occurs, the number of 30 42 Trenwick Group Ltd. common shares that LaSalle and LaSalle Re shareholders receive will be adjusted. This is how the LaSalle exchange ratio will be calculated: - The fair market value of a LaSalle share will be calculated by averaging the closing sale price as reported on the NYSE Composite Tape for the 30 trading days immediately preceding the effective date of the schemes of arrangement. - The denominator of the LaSalle exchange ratio will be the fair market value of all of the LaSalle shares, calculated by multiplying the fair market value of a LaSalle share by the total number of outstanding LaSalle Re voting and non-voting common shares. - The numerator of the LaSalle exchange ratio will be an amount equal to the denominator less the following amounts: - 50% of the amount by which any LaSalle Re net loss exceeds $40 million but does not exceed $60 million; and - 100% of the amount by which any LaSalle Re net loss exceeds $60 million but does not exceed $100 million. For example, assume that the fair market value of all of the LaSalle shares is $210 million and LaSalle Re incurs a $70 million net loss between December 19, 1999 and the effective time of the schemes of arrangement. This is how the exchange ratio would be calculated: $210 million - 50% of $20 million - 100% of $10 million = 0.90 - --------------------------------------------------- $210 million
In this example, LaSalle and LaSalle Re shareholders would receive 0.90 of a common share of Trenwick Group Ltd. in exchange for each of their LaSalle or LaSalle Re shares. When we complete the transactions, each option, whether or not then vested or exercisable, to purchase LaSalle common shares will be replaced by a Trenwick Group Ltd. option. Each option, whether or not then vested or exercisable, to purchase LaSalle Re exchangeable non-voting common shares will be replaced by a Trenwick Group Ltd. option, unless the optionholder chooses to retain its original LaSalle Re option. The number of Trenwick Group Ltd. common shares subject to the Trenwick Group Ltd. options and the exercise price for those options will be based on the LaSalle exchange ratio. The Series A preferred shares of LaSalle and LaSalle Re that are issued and outstanding immediately prior to the completion of the plan of reorganization and the schemes of arrangement will remain unchanged. When we complete the transactions, each LaSalle common share owned by Trenwick, LaSalle or their respective subsidiaries will be cancelled and will cease to exist. LaSalle Re and LaSalle Re shareholders will cease to have any rights with respect to these shares, except the right to receive the schemes of arrangement consideration in accordance with the terms of the agreement. REQUIREMENT TO EXCHANGE SHARE CERTIFICATES If you own share certificates representing LaSalle common shares and LaSalle Re exchangeable non-voting common shares immediately prior to the effective time of the schemes of arrangement, you will, at the effective time of the schemes of arrangement, automatically be entitled to receive a number of Trenwick Group Ltd. common shares that is equal to the LaSalle exchange ratio. Once we complete the schemes of arrangement, the LaSalle common shares and LaSalle Re exchangeable non-voting common shares that were outstanding immediately prior to the effective time of the schemes of arrangement no longer will be transferred on the share transfer books of LaSalle and LaSalle Re. You will be required to exchange your LaSalle and LaSalle Re common share certificates as a result of the schemes of arrangement. See "-- Exchange of Certificates." 31 43 OWNERSHIP OF TRENWICK GROUP LTD. FOLLOWING THE TRANSACTIONS We estimate that Trenwick Group Ltd. will issue approximately 16,288,082 common shares to holders of Trenwick common stock and approximately 20,359,940, common shares to holders of LaSalle common shares and holders, other than LaSalle, of LaSalle Re exchangeable non-voting common shares upon completion of the transactions, unless there is an adjustment in the exchange ratios. These shares will represent approximately 44.4% and 55.6%, respectively, of the issued and outstanding common shares of Trenwick Group Ltd. when we complete the transactions. Because the market price of Trenwick common stock and LaSalle common shares may fluctuate, the market value of the Trenwick Group Ltd. common shares issued upon completion of the reorganization and schemes of arrangement may increase or decrease following the reorganization and schemes of arrangement. We urge you to obtain current market quotations for Trenwick common stock and LaSalle common shares. Future prices or markets for Trenwick common stock or LaSalle common shares may vary. EXCHANGE OF CERTIFICATES As soon as practicable after we complete the transactions, First Chicago Trust Company of New York, a division of EquiServe LP, in its capacity as exchange agent, will send a transmittal letter to each of you. The transmittal letter will contain instructions on how to obtain Trenwick Group Ltd. common shares in exchange for the shares of Trenwick common stock, LaSalle common shares and LaSalle Re exchangeable non-voting common shares. After we complete the transactions, each certificate for shares of Trenwick common stock, LaSalle common shares and LaSalle Re exchangeable non-voting common shares will represent the right to receive the Trenwick Group Ltd. common shares and the right to receive cash in lieu of fractional shares as described below. Until you surrender the certificates previously representing your shares to the exchange agent for exchange, you will not be paid dividends or distributions on the Trenwick Group Ltd. common shares into which your shares have been converted, and you will not be paid cash in lieu of fractional shares of Trenwick Group Ltd. common shares. When you surrender your certificates, you will receive any unpaid dividends and any cash in lieu of fractional shares of Trenwick Group Ltd. common shares payable as described below. If your shares are not registered in the share register of Trenwick, LaSalle or LaSalle Re, you may still receive shares of Trenwick Group Ltd. common shares plus cash in lieu of fractional shares and any dividends or distributions with a record date after the effective time of the business combination. However, the certificates must be properly endorsed or otherwise in proper form for transfer, and the person requesting the issuance of Trenwick Group Ltd. common shares must either pay any transfer or other tax that is due or establish to the satisfaction of Trenwick Group Ltd. that such tax has been paid or is not applicable. When Trenwick Group Ltd. common shares are issued and any cash in lieu of fractional shares is paid, all rights pertaining to the surrendered shares will be deemed to have been fully satisfied. However, if we declare any dividends or other distributions on those shares, and the dividends or distributions have not been paid before we complete the business combination, Trenwick Group Ltd. will pay such dividends or other distributions. The LaSalle Series A preferred shares will be unaffected by the schemes of arrangement and, therefore, no exchange of certificates will take place with respect to the Series A preferred shares. FRACTIONAL SHARES Trenwick Group Ltd. will not issue certificates or scrip representing fractional common shares of Trenwick Group Ltd. Fractional share interests of Trenwick Group Ltd. common shares will not entitle their owner to vote or to any rights as a shareholder of Trenwick Group Ltd. Shareholders who would otherwise receive fractional shares of Trenwick Group Ltd. common shares will receive cash instead of fractional shares, as described below. 32 44 The cash payment in lieu of fractional shares will be equal to the fraction multiplied by the product of the average per share closing price of a share of Trenwick common stock as reported on the NYSE for the 10 trading days immediately preceding the 3 trading days before we complete the transactions, and - the Trenwick exchange ratio, in the case of Trenwick stockholders; or - the LaSalle exchange ratio, in the case of LaSalle shareholders and holders of LaSalle Re exchangeable non-voting common shares. As soon as practicable after the determination of the amount of cash to be paid in lieu of fractional shares, the exchange agent will promptly pay, without interest, the cash payment. No one will be entitled to receive cash in an amount greater than the value of one full common share of Trenwick Group Ltd. or interest on any cash received instead of a fractional common share of Trenwick Group Ltd. STOCK EXCHANGE LISTING LaSalle common shares are currently listed on the NYSE under the symbol "LSH." Following completion of the transactions, LaSalle common shares will be delisted from the NYSE and deregistered under the Exchange Act. LaSalle Series A preferred shares will continue to be outstanding and to be listed on the NYSE. Accordingly, LaSalle will continue to be required to make separate periodic filings with the SEC under the Exchange Act. Trenwick common stock is currently listed on the NYSE under the symbol "TWK." Following completion of the transactions, Trenwick common stock will be delisted from the NYSE and deregistered under the Exchange Act. However, Trenwick Group Ltd. common shares will trade under the symbol "TWK" after the completion of the transactions. As a result, you will be able to trade Trenwick Group Ltd. common shares on the NYSE, but you will no longer be able to trade Trenwick common stock and LaSalle common shares on any exchange because Trenwick common stock will no longer exist and all of the issued LaSalle common shares will be owned by Trenwick Group Ltd. OPINION OF TRENWICK'S FINANCIAL ADVISOR Trenwick requested DLJ, in its role as financial advisor to Trenwick, to render an opinion to the Trenwick board of directors as to the fairness from a financial point of view to Trenwick of the exchange ratio provided in the agreement. DLJ delivered its oral opinion December 16, 1999, which was subsequently confirmed in writing, to the Trenwick board of directors that, as of such date, and based on and subject to the assumptions, limitations and qualifications set forth in such opinion, the exchange ratio was fair from a financial point of view to Trenwick. The full text of the DLJ opinion is attached to this document as Appendix G. The DLJ opinion only addresses the fairness of the exchange ratio to Trenwick from a financial point of view, as of the date of the opinion. The senior management teams of Trenwick and LaSalle negotiated the exchange ratio. The DLJ opinion was necessarily based on economic, market, financial and other conditions as they existed on, and on the information made available to DLJ as of, the date of the DLJ opinion. Although subsequent developments may affect the DLJ opinion, DLJ does not have any obligation to update, revise or reaffirm the DLJ opinion. DLJ expressed no opinion as to the prices at which Trenwick common stock or Trenwick Group Ltd. common shares would actually trade at any time. The DLJ opinion does not address the relative merits of the business combination and the other business strategies considered by the Trenwick board of directors nor does it address the Trenwick board of directors' decision to proceed with the business combination. The DLJ opinion does not constitute a recommendation to any Trenwick stockholder as to how such stockholder should vote on the business combination. 33 45 In arriving at its opinion, DLJ reviewed the agreement, the stock option agreements and the shareholders agreement. DLJ also reviewed financial and other information that was publicly available or that Trenwick and LaSalle furnished to DLJ, including information their respective managements provided during discussions with DLJ. Included in the information provided by the respective managements were financial projections of LaSalle for the period beginning October 1, 1999 and ending September 30, 2000 prepared by the management of LaSalle, financial projections of LaSalle for the period beginning October 1, 2000 and ending December 31, 2010 prepared by the management of Trenwick based in part on the financial forecasts prepared by the management of LaSalle and financial projections of Trenwick for the period beginning January 1, 2000 and ending December 31, 2010 prepared by the management of Trenwick. Trenwick's management also gave DLJ estimates of the operating synergies achievable as a result of the business combination which estimates Trenwick's management based in part on their discussion of such synergies with LaSalle's management. In addition, DLJ also: - compared financial and securities data of Trenwick and LaSalle with various other companies whose securities are traded in public markets; - reviewed the historical stock prices and trading volumes of Trenwick common stock and LaSalle common shares; - reviewed prices and premiums paid in other business combinations; and - conducted such other financial studies, analyses and investigations DLJ deemed appropriate for purposes of rendering the DLJ opinion. Trenwick did not impose any restrictions or limitations upon DLJ with respect to the investigations made or the procedures followed by DLJ in rendering the DLJ opinion. In rendering the DLJ opinion, DLJ relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to DLJ from public sources, that Trenwick and LaSalle or their respective representatives provided to DLJ, or that DLJ otherwise reviewed. In particular, DLJ relied upon the estimates of the operating synergies, achievable as a result of the business combination, provided by the management of Trenwick. With respect to the financial projections Trenwick and LaSalle supplied to DLJ, DLJ assumed that they were reasonably prepared on the basis reflecting the best currently available estimates and judgments of the managements of Trenwick and LaSalle as to the future operating and financial performance of Trenwick and LaSalle, as the case may be. DLJ did not assume any responsibility for making and did not make an independent evaluation of any assets or liabilities or any independent verification of any of the information reviewed by DLJ. DLJ assumed that the business combination will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 and that the business combination will not result in any material tax to Trenwick. The following is a summary of the presentation made by DLJ to the Trenwick board of directors at its December 16, 1999 meeting in connection with rendering the DLJ opinion. Unless otherwise specified, synergies as referred to below are revenue enhancements and expense savings resulting from the business combination, as estimated by the management of Trenwick and discussed with the management of LaSalle. Exchange Ratio Analysis Based on the Relative Contributions of Trenwick and LaSalle. DLJ compared the exchange ratio for the business combination to the range of exchange ratios implied by the relative contributions of Trenwick and LaSalle to the pro forma combined company. In this analysis, DLJ examined the relative contributions of Trenwick and LaSalle to the pro forma combined entity based on selected financial data, assuming no synergies. For balance sheet items, the analysis was based as of September 30, 1999 and for income statement items, the analysis was based for the projected twelve months ended December 31, 1999 for Trenwick and for the twelve months ended September 30, 1999 for 34 46 LaSalle. A summary of the relative contributions of Trenwick to the pro forma combined company and the corresponding implied exchange ratios is as follows: - 80.5% of the pro forma total assets, implying an exchange ratio of 0.20x; - 75.7% of the pro forma cash and invested assets, implying an exchange ratio of 0.27x; - 56.4% of the pro forma shareholders' equity, implying an exchange ratio of 0.65x; - 49.2% of the pro forma tangible shareholders' equity, implying an exchange ratio of 0.87x; - 83.8% of the pro forma net premiums written, implying an exchange ratio of 0.16x; - 74.2% of the pro forma investment income, implying an exchange ratio of 0.29x; - 53.2% of the pro forma combined market capitalization implying an exchange ratio of 0.77x, based on December 14, 1999 market prices. The analysis further compared Trenwick's and LaSalle's relative contributions to the 2000 and 2001 projected earnings of the pro forma combined company, based on Trenwick's and LaSalle's projected earnings as estimated by First Call Corporation and by Trenwick's management. DLJ also reviewed the relative contributions to 2000 earnings based on LaSalle's management estimates of LaSalle's 2000 earnings and First Call's estimates of Trenwick's 2000 earnings. A summary of Trenwick's contributions to the earnings of the pro forma combined company and the corresponding implied exchange ratios is as follows: Based on First Call mean earnings estimates: - 45.4% of the 2000 pro forma operating income, implying an exchange ratio of 1.00x; - 45.6% of the 2001 pro forma operating income, implying an exchange ratio of 1.00x; Based on Trenwick management's earnings estimates: - 54.5% of the 2000 pro forma operating income, implying an exchange ratio of 0.70x; - 57.5% of the 2001 pro forma operating income, implying an exchange ratio of 0.62x; Based on LaSalle management's earnings estimates: - 42.4% of the 2000 pro forma operating income, implying an exchange ratio of 1.14x. The range of exchange ratios resulting from the contribution analysis includes the exchange ratio for the business combination. Based on the exchange ratio for the business combination and the number of diluted shares outstanding of Trenwick, LaSalle and LaSalle Re on December 14, 1999, Trenwick stockholders will own in the aggregate 45.5% of the common stock of the combined company. Exchange Ratio Based on Comparable Company Valuation Statistics. DLJ reviewed the valuation statistics of ACE Limited, Everest Reinsurance Holdings, Inc. and XL Capital Ltd., which DLJ believed to be comparable to Trenwick and the valuation statistics of IPC Holdings Ltd., PartnerRe Ltd., PXRE Group Ltd. and RenaissanceRe Holdings Ltd., which DLJ believed to be comparable to LaSalle. For each of the comparable companies listed above, DLJ analyzed the ratio of common stock price per share, as of December 14, 1999, divided by selected financial data, including: (A) 1999, 2000 and 2001 estimated earnings per share and (B) book value per share as of September 30, 1999. The 1999 and 2000 estimated earnings per share for the comparable companies were based on First Call mean earnings per share estimates. The 2001 estimated earnings per share were based on the 2000 First Call mean earnings per share estimates and the First Call mean long-term earnings per share growth rates. DLJ analyzed the implied valuations per share of Trenwick and LaSalle that would be produced by applying the comparable companies' average ratios of common stock price divided by the selected financial data listed above to the respective Trenwick and LaSalle projected and actual balances. DLJ then compared the implied valuations 35 47 per share of Trenwick and LaSalle to each other to estimate the implied range of exchange ratios as follows:
DESCRIPTION LOW MEAN HIGH - ------------------------------------------------------------------------------------- Trenwick Implied Value per Share -- Comparable Analysis............................................... $13.60 $16.03 $19.14 LaSalle Implied Value per Share -- Comparable Analysis... 11.75 13.87 15.98 Implied Exchange Ratio................................... 0.86x 0.86x 0.83x - -------------------------------------------------------------------------------------
The range of exchange ratios resulting from the comparable company analysis was below the exchange ratio for the business combination. Exchange Ratio Based on Precedent Transactions. DLJ reviewed the following selected acquisitions of property-casualty catastrophe reinsurance companies, which DLJ believed included target companies that were comparable to LaSalle: -- ACE Limited/CAT Limited -- XL Capital Ltd./Mid Ocean Limited -- XL Capital Ltd./GCR Holdings -- PXRE Corporation/Transnational Re Corporation -- ACE Limited/Tempest Reinsurance Company Limited For each of the transactions listed above, DLJ analyzed the ratio of transaction price per share divided by selected financial data, including (A) earnings per share for the period twelve months prior to the transaction announcement date, (B) earnings per share for the period twelve months after the transaction announcement date, and (C) book value per share as of the transaction announcement date. DLJ also analyzed the implied valuation price per share of LaSalle that would be produced by applying the average ratios of transaction price per share divided by the selected financial data for the transactions listed above to LaSalle's respective projected and actual balances. DLJ then compared this implied LaSalle valuation per share to Trenwick's implied valuation per share as calculated by the comparable company valuation analysis above to estimate the implied range of exchange ratios as follows:
DESCRIPTION LOW MEAN HIGH - ------------------------------------------------------------------------------------- Trenwick Implied Value per Share -- Comparable Analysis............................................... $13.60 $16.03 $19.14 LaSalle Implied Value per Share -- Precedent Transaction Analysis............................................... 19.24 25.00 31.06 Implied Exchange Ratio................................... 1.41x 1.56x 1.62x - -------------------------------------------------------------------------------------
The range of exchange ratios resulting from the precedent transaction analysis was above the exchange ratio for the business combination. Exchange Ratio Based on Comparable Premiums Paid. DLJ reviewed the premiums paid to the Target Company's common stock price per share in the following selected acquisitions of public reinsurance companies, which DLJ believed were comparable to the Trenwick/LaSalle business combination (acquiror/target): - -- ACE Limited/CAT Limited - -- Trenwick Group Inc./Chartwell Re Corporation - -- Fairfax Financial Holdings Ltd./TIG Holdings, Inc. - -- Berkshire Hathaway Inc./General Re Corporation - -- Fairfax Financial/Sphere Drake Holdings Limited - -- Zurich Reinsurance Centre, Inc./Centre Reinsurance Co. of New York - -- Markel Corporation/Terra Nova (Bermuda) Holdings Ltd. - -- XL Capital Ltd./NAC RE Corp. - -- Swiss Reinsurance Co./Life Re Corporation - -- XL Capital Ltd./Mid Ocean Limited - -- XL Capital Ltd./GCR Holdings Ltd. - -- General Re Corporation/National Re Corporation 36 48 DLJ analyzed the premiums paid to the target company's common stock price per share for the target companies in each of the above acquisitions, measured as a premium to the target company's stock price 1 day, 5 days, 30 days, and 90 days prior to the announcement date of the respective transaction. DLJ also analyzed the implied LaSalle valuation price per share that would be produced by multiplying LaSalle's actual stock price 1 day, 5 days, 30 days and 90 days prior to the theoretical announcement date of the Trenwick/LaSalle business combination of December 14, 1999 and average premiums paid in the comparable transactions listed above. DLJ then compared this implied LaSalle valuation per share to Trenwick's implied valuation per share as calculated by the comparable company valuation analysis above to estimate the implied range of exchange ratios as follows:
DESCRIPTION LOW MEAN HIGH - ------------------------------------------------------------------------------------- Trenwick Implied Value per Share -- Comparable Analysis............................................... $13.60 $16.03 $19.14 LaSalle Implied Value per Share -- Premiums Paid Analysis............................................... 13.09 16.88 21.89 - -------------------------------------------------------------------------------------
DESCRIPTION LOW MEAN HIGH - ------------------------------------------------------------------------------------- Implied Exchange Ratio................................... 0.96x 1.05x 1.14x - -------------------------------------------------------------------------------------
The range of exchange ratios resulting from the premiums paid analysis included the exchange ratio for the business combination. Exchange Ratio Analysis Based on a Discounted Cash Flow Valuation. DLJ compared the exchange ratio for the business combination to the range of exchange ratios implied by comparing the estimated value per share of Trenwick with the estimated value per share of LaSalle based upon a discounted cash flow valuation analysis. For purposes of this analysis, DLJ assumed that both Trenwick and LaSalle paid the maximum allowable dividends to its stockholders over the course of a ten-year period. A terminal value was estimated at the end of the ten year period based on a range of forward earnings multiples of 8.0x to 9.0x and book value multiples of 0.70x to 0.90x and the respective company's estimated 2010 earnings and December 31, 2009 book value. The resulting cash flows were discounted using a range of discount rates equal to 10.6% to 12.6%. The analysis resulted in a range of implied exchange ratios of 0.75x to 0.92x excluding synergies and 1.15x to 1.71x including synergies, as compared to the exchange ratio in the business combination of 1.00x. Exchange Ratio Analysis Based on the Historical Stock Trading Relationship of Trenwick and LaSalle. DLJ compared the exchange ratio for the business combination to the range of implied exchange ratios resulting from Trenwick's and LaSalle's historical stock trading prices. DLJ examined the history of the trading prices and their relative relationships or exchange ratios for both Trenwick and LaSalle for the 52 weeks ended and the approximate three-year period ended December 14, 1999. The range of implied exchange ratios for the first period was 0.44x to 0.84x, with an average exchange ratio of 0.62x, while the range of implied exchange ratios for the second period was equal to 0.44x to 1.15x, with an average exchange ratio of 0.80x. The first period examined resulted in a range of implied exchange ratios that was below the exchange ratio for the business combination, while the second period examined resulted in a range of implied exchange ratios that includes the exchange ratio for the business combination. In addition, DLJ examined the historical trading price relationship of Trenwick common stock and LaSalle common shares over several additional periods and calculated the implied exchange ratio for each 37 49 period. DLJ also compared this implied exchange ratio with the exchange ratio for the business combination and calculated the implied premium or discount. The following is a summary of this analysis:
EXCHANGE RATIO PERIOD IMPLIED AVERAGE PREMIUM TO IMPLIED (AVERAGE TRADING DAYS) EXCHANGE RATIOS EXCHANGE RATIO - --------------------------------------------------------------- 12/14/99 0.76x 32.1% 10 days 0.67x 50.1% 20 days 0.66x 52.4% 30 days 0.67x 49.2% 60 days 0.65x 53.8% 90 days 0.67x 48.3% 125 days 0.68x 46.6% 250 days 0.62x 60.6% 500 days 0.76x 31.0% 750 days 0.81x 24.3% - ---------------------------------------------------------------
Finally, based on Trenwick's stock closing price for the twelve months ending December 14, 1999 and the exchange ratio for the business combination of 1.00x, DLJ calculated an implied average effective business combination price of $16.23, as compared to a business combination price of $17.75 based on the exchange ratio for the business combination and Trenwick's stock price as of December 14, 1999. Pro Forma Financial Analysis. DLJ analyzed the pro forma financial effects resulting from the business combination. In conducting its analysis, DLJ relied upon financial projections provided by the managements of Trenwick and LaSalle. DLJ analyzed the pro forma effect of the business combination on earnings per share, stockholders' equity per share, dividend yield and ownership of the pro forma combined company. Trenwick's and LaSalle's managements have indicated that they believe that the business combination will offer consolidation opportunities which will result in the synergies described above. DLJ incorporated estimates of such synergies provided by the management of Trenwick in its analysis, although DLJ did not express any opinion as to the likelihood of such synergies being realized. The results of the pro forma business combination analysis are not necessarily indicative of future operating results or financial position. DLJ compared the projected earnings per share, book value per share and dividend per share of Trenwick and LaSalle on a stand-alone basis to Trenwick and LaSalle stockholders' projected pro forma earnings per share, book value per share and dividend per share of the pro forma combined company. The analysis estimates that earnings per share to each Trenwick stockholder is 13.4% and 26.6% accretive in 2000 and 2001, respectively, while the earnings per share to each LaSalle common shareholder is 12.9% and 27.1% accretive in 2000 and 2001. The analysis also estimates that the tangible book value per share to each Trenwick stockholder will be 6.9% dilutive as of December 31, 1999, while the book value per share to each LaSalle common shareholder will be 5.0% accretive as of December 31, 1999. On a pro forma basis, each Trenwick stockholder will receive a dividend equal to approximately $1.04 per share. 38 50 The chart below summarizes the resulting ranges of implied exchange ratios based on DLJ's analysis. For a detailed description of each of DLJ's analyses see the analyses discussed above. [EXCHANGE RATIO CHART] Relative Contribution Analysis 1.14 0.62 Comparable Public Companies 0.86 0.83 M&A Transactions 1.62 1.41 Premiums Paid 1.14 0.96 Discounted Cash Flow Analysis w/o Synergies 0.92 0.75 Discounted Cash Flow Analysis w/Synergies 1.71 1.15 Historical Stock Trading Relationship 3 1.15 0.44
The summary set forth above is not intended to be a complete description of the analyses performed by DLJ but describes, in summary form, the material elements of the presentation made by DLJ to the Trenwick board of directors on December 16, 1999 in connection with preparation of the DLJ opinion. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. Each of the analyses DLJ conducted was carried out in order to provide a different perspective on the transaction and to add to the total mix of information available. DLJ did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to the fairness of the exchange ratios from a financial point of view. Rather, in reaching its conclusion, DLJ considered the results of the analyses in light of each other and ultimately reached its opinion based on the results of all analyses taken as a whole. DLJ did not place particular reliance or weight on any individual analysis, but instead concluded that its analyses, taken as a whole, supported its determination. Accordingly, notwithstanding the separate factors summarized above, DLJ has indicated to Trenwick that it believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the evaluation process underlying its opinion. DLJ's analyses are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Under the terms of an engagement agreement dated February 26, 1999 and updated in a separate letter agreement dated June 21, 1999, both between Trenwick and DLJ, Trenwick paid DLJ a retainer fee of $150,000, a fairness opinion fee of $750,000 and, upon completion of the business combination, will pay an additional amount of $3,500,000 less the fairness opinion fee. In addition, Trenwick agreed to reimburse DLJ, upon request by DLJ from time to time, for all out-of-pocket expenses, including the reasonable fees and expenses of counsel, incurred by DLJ in connection with its engagement and to indemnify DLJ and related persons against liabilities relating to or arising out of its engagement, including liabilities under U.S. federal securities laws. DLJ and Trenwick negotiated the terms of the fee arrangement, and the Trenwick board of directors was aware of such arrangement, including the fact that a significant portion of 39 51 the aggregate fee payable to DLJ is contingent upon completion of the business combination. DLJ believes that the terms of this fee arrangement are customary in transactions of this nature. DLJ is an internationally recognized investment banking firm and, as part of its investment banking business, DLJ is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of its business, DLJ or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or for the accounts of customers, in equity or debt securities of Trenwick or LaSalle. DLJ has recently advised Trenwick in its acquisition of Chartwell Re Corporation and has been compensated for such services. In addition, DLJ is currently working with CNA Financial Corporation, an affiliate of LaSalle, on various matters unrelated to the business combination. DLJ was selected by the Trenwick board of directors to act as Trenwick's financial advisor for this business combination on the basis of DLJ's experience and expertise relating to the reinsurance industry. TRENWICK PROJECTIONS In connection with LaSalle's review of Trenwick and in the course of negotiations between Trenwick and LaSalle described in "The Transactions -- Background of the Agreement," Trenwick provided LaSalle and its advisors with non-public business and financial information. The non-public information Trenwick provided to LaSalle and its advisors included projections of Trenwick's future operating performance. These projections did not give effect to the business combination or its related transactions. Trenwick does not, as a matter of course, publicly disclose projections of future revenues or earnings. The projections were not prepared with a view to public disclosure and are included in this document only because such information was made available to LaSalle and its advisors in connection with their due diligence investigation of Trenwick. Further, the projections were not prepared with a view to compliance with the published guidelines of the Securities and Exchange Commission regarding projections, nor were they prepared in accordance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. PricewaterhouseCoopers LLP has neither examined nor compiled the accompanying prospective financial information, and accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this document relates to Trenwick's historical financial information. It does not extend to the prospective financial information and should not be read to do so. While presented with numerical specificity, these projections reflect numerous assumptions made by Trenwick's management. In addition, factors such as industry performance and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of Trenwick's management, may cause the projections or the underlying assumptions to be inaccurate. Accordingly, you should not conclude that the projections definitely will be realized; actual results may be materially greater or less than the projections. Trenwick does not intend to update or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. The projections Trenwick provided to LaSalle and its advisors reflected the following forecasted information:
YEAR ENDED ($ IN MILLIONS) DECEMBER 31, 2000 --------------- ----------------- Gross premiums written...................................... $863.8 Net premiums written........................................ $668.8 Total revenue............................................... $795.0 Total expenses.............................................. $730.5 Net Income.................................................. $ 41.3
40 52 LaSalle and its advisors took this information, together with their own analyses, into account in determining whether to combine with Trenwick. OPINIONS OF LASALLE'S FINANCIAL ADVISORS OPINION OF LAZARD FRERES & CO. LLC On December 16, 1999, Lazard delivered its oral opinion to the board of directors of LaSalle that, as of the date of its opinion, the exchange ratio was fair from a financial point of view to LaSalle's common shareholders. Lazard subsequently confirmed its opinion in writing as of December 19, 1999. We have attached as Appendix H to this document the full text of the written opinion of Lazard dated December 19, 1999. This opinion sets forth the assumptions, scope and limitations of the review that Lazard undertook in connection with the opinion. We urge LaSalle's shareholders to read this opinion in its entirety. In connection with this opinion, Lazard: - reviewed the financial terms and conditions of the agreement; - analyzed historical business and financial information relating to LaSalle and Trenwick and its predecessor companies; - reviewed various internal financial analyses and forecasts for LaSalle and Trenwick prepared by their respective managements, as well as additional forecasts for LaSalle and Trenwick prepared by their respective managements, and consultants and advisors working under managements' supervision, based on management assumptions, including cost savings and operating synergies projected by the managements of LaSalle and Trenwick to result from the business combination; - held discussions with members of the senior managements of LaSalle and Trenwick with respect to the businesses and prospects of LaSalle and Trenwick, respectively, the strategic objectives of each, and possible benefits which might be realized following the business combination; - reviewed public information with respect to other companies in lines of businesses that Lazard believes to be generally comparable to the businesses of LaSalle and Trenwick; - reviewed the financial terms of business combinations involving companies in the reinsurance industry specifically and in other industries that Lazard believes are generally comparable to those of LaSalle and Trenwick; - reviewed the historical stock prices and trading volumes of LaSalle's common shares and Trenwick's common stock; and - conducted such other financial studies, analyses and investigations as Lazard deemed appropriate. Lazard relied upon the accuracy and completeness of the foregoing information, and has not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of LaSalle or Trenwick, or concerning the solvency or fair value of either of the foregoing entities. With respect to financial forecasts, Lazard assumed that their preparation was reasonable and reflected the best then-available estimates and judgments of management of LaSalle and Trenwick as to the future financial performance of LaSalle and Trenwick. Trenwick did not make available to Lazard forecasts of expected future performance beyond fiscal year 2003. Accordingly, Lazard's review with respect to such information was limited to information derivable from the year 2000- 2003 forecasts provided to Lazard. Lazard assumed no responsibility for and expressed no view as to the forecasts reviewed by Lazard or the assumptions on which they are based. As to forecasts in the preparation of which Lazard participated, the management of LaSalle and consultants working under management's supervision confirmed to Lazard their agreement with the underlying assumptions and methods of projection. Lazard is not an actuarial firm and Lazard's services did not include actuarial determinations or evaluations by Lazard or an attempt to evaluate actuarial assumptions, including those 41 53 used in developing the loss and loss adjustment appraisal of the assets and liabilities, including the loss and loss adjustment expense reserves, of LaSalle or Trenwick or any of their respective subsidiaries and Lazard has not been furnished with any such evaluation or appraisal. In that regard, Lazard expresses no opinion as to the adequacy of the loss and loss adjustment expense reserves of LaSalle or Trenwick or any of their respective subsidiaries. Lazard has assumed that the business combination qualifies as a tax-free reorganization, whereby the common shareholders of LaSalle will incur no immediate taxation as a result of the business combination. In rendering its opinion, Lazard has also assumed that the business combination will be consummated on the terms described in the agreement, without any waiver of any material terms or conditions by LaSalle. Lazard has also assumed that obtaining the necessary regulatory approvals for the business combination and the corporate reorganization of Trenwick contemplated in connection with the agreement will not have a material adverse effect on LaSalle, Trenwick or Trenwick Group Ltd. Lazard has expressed no opinion as to the prices at which Trenwick Group Ltd. common shares will actually trade at any time. Lazard's opinion does not address the relative merits of the business combination and any other business strategies being considered by LaSalle's board of directors, nor does it address the board's decision to proceed with the business combination. Lazard's opinion does not constitute a recommendation to any shareholder as to how such shareholder should vote on the proposed business combination. Further, Lazard's opinion necessarily reflects economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, December 19, 1999, the date its opinion was rendered. Lazard, as part of its investment banking business, continually engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. LaSalle selected Lazard as its financial advisor because it is a globally recognized investment banking firm that has substantial experience in transactions similar to the business combination. Lazard is familiar with LaSalle, having provided investment banking services to LaSalle from time to time. Lazard provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of LaSalle or Trenwick or their affiliates for its own account and for the accounts of customers. As of December 19, 1999, individual beneficial owners of Lazard owned in the aggregate 4.2% of the beneficial interests in Corporate Partners, L.P., which in turn owned 4.97% of the outstanding LaSalle common shares plus options to purchase LaSalle Re exchangeable non-voting common shares which, if exercised and exchanged, would increase its percentage ownership of LaSalle common shares to 7.27%, and 1.0% of the beneficial interests in Corporate Offshore Partners, L.P., which in turn owned 0.35% of the outstanding LaSalle common shares plus options to purchase LaSalle Re exchangeable non-voting common shares which, if exercised and exchanged, would increase its percentage ownership of LaSalle common shares to 0.53%. Since December 19, 1999, Corporate Partners, L.P. and Corporate Offshore Partners, L.P. have relinquished all of their LaSalle Re options for cancellation, reduced their holdings of LaSalle common shares by 17% and distributed their remaining holdings of LaSalle common shares to their partners, including two entities in which individual beneficial owners of Lazard own direct or indirect beneficial interests as described above. OPINION OF SALOMON SMITH BARNEY LaSalle retained Salomon Smith Barney as its co-financial advisor in connection with the proposed business combination. In connection with its engagement, LaSalle requested that Salomon Smith Barney evaluate the fairness, from a financial point of view, to the holders of LaSalle common shares of the LaSalle exchange ratio provided for in the business combination. On December 16, 1999, at a meeting of 42 54 the LaSalle board held to evaluate the proposed business combination, Salomon Smith Barney delivered to the LaSalle board an oral opinion, which opinion was confirmed by delivery of a written opinion dated December 19, 1999, the date of execution of the agreement, to the effect that, as of the date of the opinion and based on and subject to the matters described in the opinion, the LaSalle exchange ratio was fair, from a financial point of view, to the holders of LaSalle common shares. In arriving at its opinion, Salomon Smith Barney: - reviewed the agreement and related documents; - held discussions with LaSalle's senior officers, directors and other representatives and advisors and Trenwick's senior officers and other representatives and advisors concerning LaSalle's and Trenwick's businesses, operations and prospects; - examined publicly available business and financial information relating to LaSalle and Trenwick, as well as financial forecasts and other information and data for LaSalle and Trenwick which LaSalle's and Trenwick's managements provided to or otherwise discussed with Salomon Smith Barney, including information relating to strategic implications and operational benefits anticipated to result from the business combination and actuarial reserve analyses and valuations prepared by LaSalle's and Trenwick's independent and internal actuaries; - reviewed the financial terms of the business combination as described in the agreement in relation to, among other things, current and historical market prices and trading volumes of LaSalle common shares and Trenwick common stock, and LaSalle's and Trenwick's historical and projected earnings and other operating data, capitalization and financial condition; - considered, to the extent publicly available, the financial terms of other transactions recently effected which Salomon Smith Barney considered relevant in evaluating the business combination; - analyzed financial, stock market and other publicly available information relating to the businesses of other companies whose operations Salomon Smith Barney considered relevant in evaluating LaSalle's and Trenwick's operations; and - conducted other analyses and examinations and considered other financial, economic and market criteria as Salomon Smith Barney deemed appropriate in arriving at its opinion. In rendering its opinion, Salomon Smith Barney assumed and relied, without independent verification, on the accuracy and completeness of all financial and other information and data publicly available or that it reviewed or considered. With respect to financial forecasts and other information and data, LaSalle's and Trenwick's managements advised Salomon Smith Barney that they were reasonably prepared on bases reflecting their best currently available estimates and judgments as to LaSalle's and Trenwick's future financial performance and the strategic implications and operational benefits anticipated to result from the business combination. LaSalle's and Trenwick's managements also advised Salomon Smith Barney that the actuarial reserve analyses and valuations relating to LaSalle and Trenwick prepared by their independent and internal actuaries were reasonably prepared on bases reflecting the best currently available estimates and judgments of the actuaries as to LaSalle's and Trenwick's reserves. Salomon Smith Barney did not make and, except for actuarial reserve analyses and valuations prepared by LaSalle's and Trenwick's independent and internal actuaries, was not provided with an independent evaluation or appraisal of LaSalle's or Trenwick's assets, reserves or liabilities, contingent or otherwise. Salomon Smith Barney also did not make any physical inspection of LaSalle's or Trenwick's properties or assets. Salomon Smith Barney is not an actuary and its services did not include any actuarial determinations or evaluations by it or an attempt to evaluate actuarial assumptions. Salomon Smith Barney expressed no view as to matters relating to the reserves of LaSalle or Trenwick, including, without limitation, the adequacy of their reserves. 43 55 Salomon Smith Barney assumed, with LaSalle's consent, that the business combination will be treated as a tax-free reorganization for federal income tax purposes. Salomon Smith Barney also assumed that, in the course of obtaining the necessary regulatory or third party approvals for the business combination, no limitations, restrictions or conditions would be imposed that would have a material adverse effect on LaSalle or Trenwick or the contemplated benefits to LaSalle of the business combination. Salomon Smith Barney's opinion relates to the relative values of LaSalle and Trenwick. Salomon Smith Barney did not express any opinion as to what the value of the Trenwick Group Ltd. common shares actually will be when issued in the business combination or the prices at which the Trenwick Group Ltd. common shares will trade after the business combination. In connection with its engagement, Salomon Smith Barney, at LaSalle's request, approached and held discussions with third parties to solicit indications of interest in the possible acquisition of or investment in LaSalle. Salomon Smith Barney expressed no view as to, and its opinion did not address, the relative merits of the business combination as compared to any alternative business strategies that might exist for LaSalle or the effect of any other transaction in which LaSalle might engage. Salomon Smith Barney's opinion necessarily reflected information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Salomon Smith Barney as of the date of its opinion. Although Salomon Smith Barney evaluated the LaSalle exchange ratio from a financial point of view, LaSalle did not ask Salomon Smith Barney to, and Salomon Smith Barney did not, recommend the specific consideration payable in the business combination, which LaSalle and Trenwick determined through negotiation. LaSalle imposed no other instructions or limitations on Salomon Smith Barney with respect to the investigations made or procedures followed by Salomon Smith Barney in rendering its opinion. We have attached to this document as Appendix I the full text of Salomon Smith Barney's written opinion dated December 19, 1999, which describes the assumptions made, matters considered and limitations on the review undertaken. We encourage LaSalle shareholders to read this opinion carefully in its entirety. Salomon Smith Barney's opinion addressed to the LaSalle board relates only to the fairness of the LaSalle exchange ratio from a financial point of view, addresses no other aspect of the business combination and does not constitute a recommendation to any shareholder with respect to any matter relating to the proposed business combination. In the ordinary course of business, Salomon Smith Barney and its affiliates may actively trade or hold the securities of LaSalle and Trenwick for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in those securities. Salomon Smith Barney has in the past provided investment banking services to LaSalle unrelated to the proposed business combination, for which services Salomon Smith Barney received compensation. In addition, Salomon Smith Barney and its affiliates, including Citigroup Inc. and its affiliates, may maintain relationships with LaSalle, Trenwick and their respective affiliates. LaSalle selected Salomon Smith Barney based on its experience, expertise and familiarity with LaSalle and its business. Salomon Smith Barney is an internationally recognized investment banking firm which regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. JOINT FINANCIAL ANALYSES OF LASALLE'S FINANCIAL ADVISORS The following is a summary of the material financial analyses underlying the opinions of Lazard and Salomon Smith Barney, the LaSalle financial advisors, to LaSalle's board in connection with the business combination. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses of the LaSalle financial advisors, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial 44 56 analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses of the LaSalle financial advisors. SELECTED COMPANIES ANALYSIS. The LaSalle financial advisors reviewed and compared estimated 1999 earnings per share, book value per share and estimated five-year growth rates of LaSalle, Trenwick and other publicly traded companies in the reinsurance industry based in, or redomesticating to, Bermuda. The LaSalle financial advisors reviewed data for the following companies for comparison to Trenwick: - XL Capital Ltd.; - ACE Limited; - PartnerRe Ltd.; and - Everest Reinsurance Holdings, Inc. The LaSalle financial advisors reviewed data for the following companies for comparison to LaSalle: - RenaissanceRe Holdings Ltd.; - IPC Holdings Ltd.; and - PXRE Group Ltd. Using these selected company groups, the LaSalle financial advisors calculated and compared various financial multiples and ratios. The LaSalle financial advisors calculated LaSalle's and Trenwick's multiples, as applicable, using a per share price of $13.50 for LaSalle common shares and $17.19 for Trenwick common stock. These per share prices were the closing prices of LaSalle common shares and Trenwick common stock on the NYSE on December 15, 1999, the trading day prior to the date of the LaSalle board meeting held to evaluate the business combination. The multiples and ratios for each of the companies were based on publicly available information and recently published research analyst estimates. The LaSalle financial advisors considered each company's stock price on December 15, 1999 as a percent of its 52-week high and low. The LaSalle financial advisors then calculated the multiple of each company's stock price to its 1999 and 2000 estimated earnings based on reports published by Institutional Brokers Estimate Service, commonly referred to as IBES, as well as its book value. In the case of Trenwick, 1999 estimated earnings per share were less than zero and, therefore, were not meaningful. In the case of LaSalle, the LaSalle financial advisors adjusted LaSalle's 1999 estimated earnings per share to exclude a non-recurring reserve charge of $34 million which was related in large part to a change in reserving methodologies, as well as individual case losses which, due to their magnitude, were viewed as extraordinary. In addition, the LaSalle financial advisors considered each company's five-year IBES growth rate. The following is a summary of this analysis:
TRENWICK LASALLE TRENWICK SELECTED GROUP LASALLE SELECTED GROUP -------------- -------------- ------- -------------- % of 52 Week: High.............................. 49% 61% 59% 68% Low............................... 104 110 124 108 Multiple of Price to: 1999 Estimated Earnings Per Share.......................... Not Meaningful 9.7x 7.3x 7.6x 2000 Estimated Earnings Per Share.......................... 6.6x 6.7x 5.7x 6.2x Book Value Per Share.............. 0.59x 0.88x 0.71x 0.80x IBES 5-year Growth Rate........... 6.0% 11.8% 5.9% 12.0%
SELECTED TRANSACTIONS ANALYSIS. The LaSalle financial advisors reviewed and compared the aggregate consideration payable in the business combination based on the LaSalle exchange ratio and in four 45 57 selected transactions in the catastrophe reinsurance industry as a multiple of latest 12 months net income, next 12 months net income and book value. The four selected transactions were: - ACE Limited/CAT Limited; - XL Capital Ltd./Mid Ocean Limited; - XL Capital Ltd./GCR Holdings Limited; and - ACE Limited/Tempest Reinsurance Company Limited. The LaSalle financial advisors performed this analysis using closing prices of Trenwick common stock and LaSalle common shares on December 15, 1999. The "Net Income (latest twelve months)" figures in the columns captioned "Proposed Business Combination At December 15, 1999" and "Proposed Business Combination -- 30-Day Average" exclude a non-recurring $34 million reserve adjustment for LaSalle which was related in large part to a change in reserving methodologies, as well as individual case losses which, due to their magnitude, were viewed as extraordinary. The LaSalle financial advisors based the "Net Income (next twelve months)" figures in the columns captioned "Proposed Business Combination -- At December 15, 1999" and "Proposed Business Combination -- 30-Day Average" on IBES earnings estimates. The column captioned "Median of Market Adjusted Selected Transactions" in the table below reflects the median decline in the valuation multiples of the public companies which the LaSalle financial advisors reviewed in connection with their "Selected Companies Analysis" described above as a comparison to LaSalle -- RenaissanceRe Holdings Ltd., IPC Holdings Ltd. and PXRE Group Ltd. -- since public announcement of the four selected transactions described under the caption "Selected Transactions Analysis." The following is a summary of this analysis:
MEDIAN OF PROPOSED BUSINESS MEDIAN OF MARKET ADJUSTED COMBINATION SELECTED SELECTED SELECTED ---------------------------- TRANSACTIONS TRANSACTIONS TRANSACTIONS AT 12/15/99 30-DAY AVERAGE ------------- ------------ --------------- ----------- -------------- Aggregate Consideration ($ in millions)..... $687- $2,849 $ 844 N/A $ 357 $ 408 As a Multiple of: Net Income (latest twelve months)...... 6.7x- 12.1x 7.8x -- 12.7x 14.6x Net Income (next twelve months).......... 7.3x- 13.2x 10.2x 8.4x 7.4x 8.5x Book Value............ 1.32x- 2.02x 1.57x 0.89x 0.89x 1.02x
DISCOUNTED CASH FLOW ANALYSIS. The LaSalle financial advisors performed a discounted cash flow analysis of LaSalle using projections based on assumptions provided by LaSalle's management as to LaSalle's estimated earnings through 2005. The LaSalle financial advisors calculated a net present value, using discount rates ranging from 11% to 14%, of free cash flows for the years 2000 through 2004 and LaSalle's terminal value in 2004 based on multiples ranging from 6.0x to 7.0x 2005 estimated earnings. Based on these calculations, this analysis resulted in an implied equity reference range for LaSalle common shares of approximately $15.78 to $21.00 per share as compared to the equity value for LaSalle implied by the LaSalle exchange ratio in the business combination of approximately $17.19 per share. The LaSalle financial advisors also performed a discounted cash flow analysis for the common stock of the pro forma combined company using projections based on assumptions provided by LaSalle management as well as projections for Trenwick's estimated earnings and operating synergies through 2005 based on assumptions of LaSalle's and Trenwick's managements and outside consultants. The LaSalle financial advisors calculated a net present value, using discount rates ranging from 11% to 14%, of free cash flows for the years 2000 through 2004 and the terminal value of the combined company in 2004 based on multiples ranging from 6.0x to 7.0x relating to LaSalle's estimated 2005 earnings contribution and 8.0x to 9.0x relating to Trenwick's 2005 earnings contribution. Based on these calculations, this 46 58 analysis resulted in an implied equity reference range for the common stock of the pro forma combined company of approximately $17.04 to $23.17 per share excluding operating synergies and approximately $19.14 to $25.73 per share including operating synergies. HISTORICAL STOCK TRADING ANALYSIS. The LaSalle financial advisors reviewed the historical trading prices and volumes for LaSalle's common shares. The following table presents the LaSalle financial advisors' calculations of the premiums implied in the business combination based on the LaSalle exchange ratio as compared to the exchange ratios implied by LaSalle's and Trenwick's market prices on December 15, 1999 and over specified periods:
TIME PERIOD PREMIUM - ----------- ------- December 15, 1999......................................... 27% AVERAGE: 10-day.................................................. 47 30-day.................................................. 51 3 month................................................. 52 6 month................................................. 48 1 year.................................................. 62 3 year.................................................. 21 Since LaSalle's initial public offering (November 21, 1995)................................................ 28
CONTRIBUTION ANALYSIS. The LaSalle financial advisors compared LaSalle's and Trenwick's individual historical and projected contributions, on a percentage basis, to selected financial information of the combined company before taking into account purchase accounting adjustments relating to the business combination. The LaSalle financial advisors considered assets, insurance reserves and equity, both including and excluding the estimated effects of Trenwick's aggregate excess of loss reinsurance treaties. In cases where these estimated effects have been taken into account, figures are referenced as "Adjusted." The LaSalle financial advisors also considered the gross premiums written and net premiums written for the fiscal year ended or ending 1999. The LaSalle financial advisors further considered LaSalle's and Trenwick's estimated operating net income for 2000 based on IBES and management estimates and LaSalle's and Trenwick's market capitalization as of December 15, 1999. The following table presents the results of this analysis:
LASALLE TRENWICK ------- -------- Balance Sheet Items: Investments and Cash.................................... 24% 76% Total Assets............................................ 20 80 Loss Reserves........................................... 8 92 Common Equity........................................... 44 56 Adjusted Common Equity.................................. 47 53 Adjusted Tangible Common Equity......................... 56 44 Total Equity............................................ 43 57 2000 Estimated Premiums: Gross Premiums Written.................................. 14% 86% Net Premiums Written.................................... 16 84 2000 Estimated Earnings: IBES Estimates.......................................... 53% 47% Management Projections.................................. 60 40 Market Capitalization (as of December 15, 1999)........... 49% 51%
47 59 PRO FORMA ANALYSIS. The LaSalle financial advisors prepared a pro forma analysis of the potential financial impact of the business combination based on the December 15, 1999 closing price per share of Trenwick common stock of $17.19. The LaSalle financial advisors considered the potential pro forma impact of the business combination based on the LaSalle exchange ratio on the balance sheets of LaSalle and Trenwick, as of September 30, 1999 for LaSalle and as of December 31, 1999 for Trenwick based on Trenwick management estimates, and of the combined entity resulting from the business combination based on LaSalle and Trenwick management estimates. The LaSalle financial advisors also performed a pro forma sensitivity analysis to calculate the potential percentage impact of the business combination on the items of financial information listed in the table below for both LaSalle and Trenwick based on Trenwick stock prices ranging from $16.00 per share to $19.63 per share (30-day average), assuming earnings for LaSalle and Trenwick as estimated by LaSalle's and Trenwick's management as well as IBES earnings estimates. The LaSalle financial advisors performed this analysis both including and excluding the estimated effects of Trenwick's aggregate excess of loss reinsurance treaties to reflect the accounting impact of these treaties which are entered into by some, but not all, comparable reinsurers. In cases where those estimated effects have been taken into account, figures are referenced as "Adjusted." The LaSalle financial advisors also took into account operating synergies which reflect the full phase-in of cost savings and revenue enhancements expected by LaSalle's and Trenwick's managements to be achieved by year-end 2002 as a result of the business combination. The following table is a summary of the potential percentage pro forma effect of the business combination on the financial information analyzed based on the various stock price ranges noted above:
ACCRETION/(DILUTION) -------------------- LASALLE: 2000 Earnings Per Share: IBES Estimate.......................................... 4.0% - 9.7% Management Projections: Without Synergies...................................... (8.0)% - (3.0)% With Synergies......................................... 4.9 - 9.9 Adjusted............................................... (2.6) - 2.3 Adjusted Tangible...................................... 2.9 - 3.0 Book Value: Reported............................................... 14.2% - 24.4% Adjusted............................................... 6.0 - 16.2 Adjusted Tangible...................................... (11.7) - (1.5) TRENWICK: 2000 Earnings Per Share: IBES Estimate.......................................... (5.5)% - (0.3)% Management Projections: Without Synergies...................................... 10.9% - 16.9% With Synergies......................................... 26.4 - 32.4 Adjusted............................................... 2.5 - 7.7 Adjusted Tangible...................................... (3.4) - (3.5) Book Value: Reported............................................... (24.8)% - (18.1)% Adjusted............................................... (20.8) - (13.2) Adjusted Tangible...................................... (7.0) - 3.8
This analysis also indicated that LaSalle common shareholders and LaSalle Re exchangeable non-voting common shareholders would hold approximately 54% of the outstanding common equity of the combined company immediately after the closing of the business combination. 48 60 The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above or focusing on information presented in tabular format, without considering the analyses and other factors as a whole or the narrative description of the analyses, could create an incomplete view of the processes underlying the LaSalle financial advisors' opinions. In arriving at their fairness determinations, the LaSalle financial advisors considered the results of all of these analyses. No company or transaction used in the above analyses as a comparison is identical to LaSalle or Trenwick or the business combination. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. The LaSalle financial advisors prepared these analyses for the purpose of providing their opinions to LaSalle's board of directors as to the fairness from a financial point of view of the LaSalle exchange ratio to holders of LaSalle common shares. These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, as they are based upon numerous factors or events beyond the control of LaSalle, Trenwick and their advisors, none of LaSalle, Trenwick, the LaSalle financial advisors or any other person assumes responsibility if future results are materially different from those forecasted. As described above, the LaSalle financial advisors' opinions to LaSalle's board of directors were one of many factors taken into consideration by LaSalle's board of directors in making its determination to approve the agreement. You should not view the opinions as determinative of the views of the LaSalle board or management with respect to the exchange ratio or the proposed business combination. The above summary does not purport to be a complete description of the analysis performed by the LaSalle financial advisors. Under the terms of their engagement, LaSalle will pay each of Lazard and Salomon Smith Barney upon completion of the business combination an aggregate financial advisory fee equal to 0.40% of the aggregate consideration, including liabilities assumed, paid for the securities of LaSalle on a fully diluted basis up to the value of LaSalle's total shareholders' equity, plus 1.10% of the aggregate consideration, including liabilities assumed, paid for the securities of LaSalle on a fully diluted basis in excess of the value of LaSalle's total shareholders' equity. LaSalle also engaged Aon Capital Markets to act as co- financial advisor with Lazard and Salomon Smith Barney but did not engage it to render a fairness opinion in connection with the business combination. Under the terms of Aon Capital Markets' engagement, LaSalle will pay Aon Capital Markets upon completion of the business combination an aggregate financial advisory fee equal to 0.20% of the aggregate consideration, including liabilities assumed, paid for the securities of LaSalle on a fully diluted basis up to the value of LaSalle's total shareholders' equity, plus 0.55% of the aggregate consideration, including liabilities assumed, paid for the securities of LaSalle on a fully diluted basis in excess of the value of LaSalle's total shareholders' equity. The aggregate fee payable to Lazard, Salomon Smith Barney and Aon Capital Markets in connection with the business combination is currently estimated to be approximately $4.1 million, of which approximately $1.7 million is currently estimated to be payable to Lazard, approximately $1.7 million is currently estimated to be payable to Salomon Smith Barney and approximately $0.7 million is currently estimated to be payable to Aon Capital Markets. LaSalle also will reimburse the LaSalle financial advisors for their reasonable out-of-pocket expenses incurred in performing their services, including the fees of legal counsel, and will indemnify the LaSalle financial advisors and related parties against liabilities, including liabilities under the federal securities laws, arising out of their engagement. LASALLE PROJECTIONS LaSalle does not as a matter of policy make public forecasts or public projections as to future performance or earnings. However, in connection with the business combination, LaSalle provided Trenwick and its advisers with non-public business and financial information. The non-public information LaSalle provided to Trenwick and its advisers included projections of LaSalle's anticipated future operating 49 61 performance of the fiscal year ended September 30, 2000, which LaSalle shared with Trenwick and its financial advisors. The projections prepared and provided to Trenwick in November 1999 are set forth below. LaSalle prepared its projections assuming that the transactions contemplated by the agreement had not occurred. While presented with numerical specificity, these projections reflect numerous assumptions made by LaSalle's management. LaSalle relied upon estimates and assumptions, including with respect to industry performance, general economic and business conditions, taxes, pricing, loss experience, operating expenses, and other matters, that inherently are subject to material uncertainties and risk, all of which are difficult to quantify and many of which are beyond LaSalle's control. LaSalle prepared these projections solely for internal purposes. LaSalle did not prepare these projections with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. We have included these projections in this document only because LaSalle provided such information to Trenwick and its financial advisors. We cannot assure you that the assumptions made in preparing the projections will prove accurate, and actual results may be materially greater or less than those contained in the projections. Neither LaSalle's independent auditors, nor any other independent accountants or financial advisors, have compiled, examined, or performed any procedures with respect to the projections contained herein, nor have they expressed any opinion or any form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the projections. The projections below constitute forward-looking statements, involve numerous risks and uncertainties and reflect numerous assumptions made by LaSalle's management. LaSalle's actual results may differ materially from the results anticipated from the projections discussed herein as a result of various factors, including, but not limited to, the effect of changing economic or business conditions, competitive initiatives and pricing pressures, shifts in market demand, loss experience, actual future costs of operating expenses and other factors mentioned under the heading "Cautionary Statement Regarding Forward-Looking Statements." Accordingly, we cannot assure you that the projections will be realized, and actual results may be materially greater or less than those contained in the projections. For LaSalle's most current financial results, please see LaSalle's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, which has been filed with the SEC. You should not regard the inclusion of these projections as an indication that LaSalle or its financial advisors considered or consider these projections to be a reliable prediction of future events. You should not attribute undue certainty to these projections. LaSalle does not intend to update or otherwise revise the projections to reflect the circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. FINANCIAL PROJECTIONS
FISCAL YEAR ENDING SEPTEMBER 30, 2000 ------------------ ($ IN MILLIONS) Gross Premiums Written...................................... $139.6 Net Premiums Earned......................................... $123.6 Net Income(1)............................................... $ 56.0 GAAP Ratios: Loss Ratio................................................ 44.1% Expense Ratio............................................. 30.7% ------ Combined Ratio............................................ 74.8% ======
- --------------- (1) Before minority interest, after preferred dividends 50 62 MATERIAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS This discussion describes the material tax consequences of the transactions to shareholders of Trenwick, LaSalle and LaSalle Re and the material tax treatment of Trenwick, LaSalle, LaSalle Re and Trenwick Group Ltd. and shareholders of Trenwick Group Ltd. We based this discussion on current law and the opinions of Appleby Spurling & Kempe, Bermuda counsel to Trenwick Group Ltd., with respect to matters of Bermuda taxation, of Mayer, Brown & Platt, counsel to LaSalle and LaSalle Re, with respect to United States federal income tax consequences to LaSalle, LaSalle Re and their respective shareholders, and of Baker & McKenzie, counsel to Trenwick and Trenwick Group Ltd., with respect to United States federal income tax consequences to Trenwick, Trenwick Group Ltd. and their respective shareholders, and United Kingdom taxation to Trenwick, Trenwick Group Ltd., and Trenwick's United Kingdom resident subsidiaries. We expect to receive the following tax opinions: - The opinion of Baker & McKenzie that the transactions will qualify as a tax-free reorganization to shareholders of Trenwick for U.S. federal income tax purposes within the meaning of Section 368 of the Internal Revenue Code, and - The opinion of Mayer, Brown and Platt that the transactions will constitute a tax-free transaction to shareholders of LaSalle and LaSalle Re for U.S. federal income tax purposes within the meaning of Section 351 of the Internal Revenue Code. These opinions are filed as exhibits to the registration statement. Our counsel will base their opinions on representations of fact contained in certificates of officers of Trenwick and LaSalle and on conditions and assumptions set forth in the opinions. The parties will provide this information before closing, and the information must be correct as of the date it is provided and the time of the closing. We did not obtain any ruling from the Internal Revenue Service concerning the U.S. tax consequences of the transactions. Furthermore, opinions of counsel such as those to be provided do not bind the Internal Revenue Service or any court. The Internal Revenue Service may disagree with the opinions and contest our opinion of the tax treatment of the transactions and a court may sustain this contest. This discussion does not consider all possible tax considerations that may affect you, nor does it address U.S. state or local tax law, or the tax law of any jurisdiction outside Bermuda, the United Kingdom or the United States. The discussion of U.S. federal income tax consequences to shareholders, except where indicated, deals only with the stock which you hold, and Trenwick Group Ltd. common shares you will hold, as capital assets. This summary does not deal with the tax consequences applicable to shareholders subject to special rules such as: - broker-dealers; - banks; - insurance companies; - tax-exempt entities; - investors who hold common shares, or will hold common shares, as part of hedging or conversion transactions; and - investors whose functional currency is not the U.S. dollar. 51 63 This discussion applies only to a beneficial owner of shares of Trenwick common stock, LaSalle common shares, LaSalle Re exchangeable non-voting common shares and Trenwick Group Ltd. common shares that is: - an individual citizen or resident of the United States; - a corporation or partnership created or organized in or under the laws of the United States or any State thereof, unless, in the case of a partnership, future Treasury regulations presently authorized under the Internal Revenue Code provide otherwise; - an estate the income of which is subject to U.S. federal income taxation regardless of its source; or - a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. We refer to such owners as U.S. holders. We urge you to consult your tax advisors to determine the income, estate and gift tax consequences to you of the transactions. TAXATION OF THE TRANSACTIONS BERMUDA Under current Bermuda law, no income tax, capital gains tax or withholding tax will be payable by Trenwick, LaSalle, LaSalle Re, or Trenwick Group Ltd. or you, unless you are also a resident of Bermuda. UNITED KINGDOM Under current United Kingdom tax law and practice, there should be no United Kingdom direct or indirect corporation tax implications for Trenwick's United Kingdom resident subsidiaries in consequence of the transactions. If a "change in ownership" with respect to a U.K. resident company occurs and certain other conditions are or have been satisfied, restrictions will apply to specified types of U.K. tax relief for the company, such as carried forward trading losses and carried forward surplus advance corporation tax. It is possible that the distribution of the shares in Trenwick Group Ltd. to the shareholders of Trenwick Group, Inc. and/or the issue of shares by Trenwick Group Ltd. to LaSalle's shareholders will involve a change in the ownership for U.K. corporation tax purposes of some or all of the companies involved. If certain other conditions are satisfied, including, in particular, if there is a major change in the nature or conduct of the trade of any of the U.K. companies in the three year period before or after such a change in ownership, the rule described above may apply to restrict the use of these tax attributes for United Kingdom corporation tax purposes. The transfer of the shares of Trenwick's United Kingdom resident subsidiaries in the transactions will attract a liability on the part of Trenwick Group Ltd. to pay United Kingdom stamp duty and/or stamp duty reserve tax by reference to 0.5% of the value of the consideration shares issued. UNITED STATES TAXATION OF TRENWICK As a result of the transaction, Trenwick will be treated as if it sold all of its directly owned assets to Trenwick Group Ltd. in a fully taxable transaction in which Trenwick will recognize gains, if any, but not losses. We believe, based on current estimates of the fair market value of Trenwick's assets and its tax attributes including net operating loss carryforwards, that Trenwick will not incur a material U.S. federal income tax liability at the time of the transaction. However, if the fair market values of Trenwick's assets at the time of the closing were determined to be substantially in excess of our current estimates, Trenwick may have a materially larger tax liability. The IRS may not agree with our calculation of the gain or the methodologies used to calculate the fair market values. TAXATION OF LASALLE AND LASALLE RE LaSalle and LaSalle Re will not realize gain or loss for U.S. federal income tax purposes as a result of the transaction. 52 64 TAXATION OF SHAREHOLDERS OF TRENWICK, LASALLE AND LASALLE RE In general, you will not recognize gain or loss as a result of the surrender of your shares in return for shares of Trenwick Group Ltd. in the transaction, except as discussed below for cash received instead of fractional shares of Trenwick Group Ltd. The adjusted tax basis of the shares of Trenwick Group Ltd. you receive, including any fractional shares of Trenwick Group Ltd. deemed received, as discussed below, will equal your adjusted tax basis in the shares you surrendered in the transaction. The holding period of shares of Trenwick Group Ltd. you receive, including any fractional shares of Trenwick Group Ltd. deemed received, as described below, will equal the holding period of the shares you surrendered in the transaction. If you hold LaSalle common shares or LaSalle Re exchangeable non-voting common shares and will own 5% or more of the vote or value of Trenwick Group Ltd. after the transaction, you must enter into a gain recognition agreement with the IRS in order to have non-recognition tax treatment. If you do not enter into a gain recognition agreement, you must recognize gain but not loss to the extent that the fair market value of the Trenwick Group Ltd. shares you receive in the transaction exceeds the basis that you had in the LaSalle common shares or LaSalle Re exchangeable shares you surrendered in the transaction. Fractional Shares. If you receive cash for a fractional share in Trenwick Group Ltd., you will be treated as if you received the fractional share in the transaction and then exchanged the fractional share for cash in a redemption by Trenwick Group Ltd. In general, you will recognize gain or loss equal to the cash amount received for the fractional share reduced by the portion of your tax basis in the shares surrendered that is allocable to the fractional share. Your gain or loss from the fractional share will be long-term capital gain or loss if your holding period in the fractional share is more than one year. If you are not a corporation, the maximum tax rate on long-term capital gain is 20%. Withholding. The exchange agent must withhold 31% of any cash payments you receive in the transaction, unless either you provide your tax identification number, social security or employer identification number and certify that the number is correct, or an exemption applies. You must complete and sign the Form W-9 that you will receive with the transmittal letter to avoid backup withholding, unless you prove that an applicable exemption exists in a manner satisfactory to the exchange agent. Reporting. U.S. Treasury Regulations under section 368 and section 351 of the Internal Revenue Code require that you file with your U.S. income tax return for the year of the transaction a complete statement of all facts pertinent to the transaction, including: - a statement of your basis in the shares surrendered in the transactions, and - a statement of the amount of Trenwick Group Ltd. shares you received in the transactions based on the fair market value of the Trenwick Group Ltd. shares at the date of the transactions. TAXATION OF TRENWICK GROUP LTD. AND ITS SUBSIDIARIES AFTER THE TRANSACTIONS BERMUDA Under current Bermuda law, there is no Bermuda income tax or capital gains tax payable by Trenwick Group Ltd. or its subsidiaries. Trenwick Group Ltd., LaSalle and LaSalle Re have received from the Bermuda Minister of Finance an assurance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that if Bermuda enacts any legislation imposing tax on profits or income, or on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then such tax will not apply to Trenwick Group Ltd., LaSalle, LaSalle Re, or any of their operations or their shares, debt or other obligations until March 28, 2016. This assurance will not prevent the application of any tax or duty to persons that are ordinarily resident in Bermuda, which Trenwick Group Ltd. and its subsidiaries 53 65 will not be, or prevent the application of any tax payable under the Land Tax Act 1967 of Bermuda or otherwise payable on any property leased to Trenwick Group Ltd. or its subsidiaries. Trenwick Group Ltd. and LaSalle Re, under current rates, each pay annual Bermuda government fees of $9,345 and $16,695, respectively, and LaSalle Re currently pays annual insurance fees of $15,000. In addition, the Bermuda government requires all entities employing individuals in Bermuda to pay a payroll tax. Currently, no Bermuda withholding tax would apply to dividends paid by Trenwick Group Ltd. UNITED KINGDOM Trenwick Group Ltd.'s United Kingdom resident subsidiaries will continue, following the transactions, to be subject to United Kingdom tax. As such, these companies will pay, account for and report United Kingdom direct and indirect tax in the same way that they do at present. THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT AND THE EUROPEAN UNION The Organization for Economic Cooperation and Development and the European Union are considering measures to limit harmful tax competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax regimes in countries around the world. If these measures are adopted by a substantial number of member countries and if Bermuda is considered to be engaged in harmful tax competition, Trenwick Group Ltd. might be subject to additional taxes, which could reduce its net income. UNITED STATES U.S. SUBSIDIARIES The U.S. subsidiaries of Trenwick Group Ltd. will be subject to U.S. federal income tax on their worldwide income as they were before the transactions. A 30% U.S. withholding tax will apply to dividends, if any, paid by those subsidiaries to Trenwick Group Ltd. TRENWICK GROUP LTD. AND NON-U.S. SUBSIDIARIES Business Profits. In general, U.S. federal income tax applies to a foreign corporation's net taxable income from a business carried on within the United States In addition, the U.S. branch profits tax will apply to the foreign corporation's earnings and profits from such a business, with some adjustments, deemed repatriated out of the United States. The United States has entered into an income tax treaty with Bermuda, which we refer to as the Bermuda treaty. Under the Bermuda treaty, the United States may tax the business profits earned by a Bermuda insurance enterprise only if those profits are attributable to the conduct of a business carried on through a permanent establishment in the United States. The Bermuda treaty will apply to a Bermuda insurance enterprise only if: - Bermuda residents or U.S. citizens or residents own beneficially, directly or indirectly, 50% or more of its equity; and - its income is not used in substantial part, directly or indirectly, to make disproportionate distributions to, or to meet liabilities to, persons who are not Bermuda residents or U.S. citizens or residents. A permanent establishment in the United States under the Bermuda treaty generally means: - a branch, office or other fixed place of business in the United States through which the Bermuda enterprise carries on business; or - an agent, other than an agent of independent status acting in the ordinary course of its business, that has, and habitually exercises in the United States, authority to conclude contracts for the enterprise. 54 66 Trenwick Group Ltd. does not intend to conduct a U.S. business whose profits may be taxed by the United States. Similarly, Trenwick Group Ltd.'s non-U.S. subsidiaries, other than corporate members at Lloyd's, do not intend to conduct a U.S. business whose profits may be taxed by the United States or, in the case of subsidiaries covered by an income tax treaty with the United States, they do not intend to have a permanent establishment in the United States whose profits may be subject to U.S. tax. Trenwick Group Ltd.'s subsidiaries which are corporate members of Lloyd's will be taxed by the United States on a portion of their income derived from participation in Lloyd's syndicates, as determined under a closing agreement between Lloyd's and the IRS. Trenwick Group Ltd. expects those subsidiaries will in general be able to credit such U.S. tax against their United Kingdom tax liability, subject to the restrictions of United Kingdom law. There are no definitive standards provided by the Internal Revenue Code, regulations or court decision as to those activities that constitute the conduct of a business within the United States, and as the determination is essentially factual in nature, the IRS may contend successfully that Trenwick Group Ltd. or its non-U.S. subsidiaries, other than corporate members of Lloyd's, conduct a business in the United States. If Trenwick Group Ltd. or these non-U.S. subsidiaries have taxable income from a U.S. business, or, in the case of those non-U.S. subsidiaries that are covered by an income tax treaty with the United States, have taxable income attributable to a permanent establishment in the United States, the United States will tax that income in the same manner that generally applies to the income of a domestic corporation. Branch Profits Tax. If Trenwick Group Ltd. or any of its non-U.S. subsidiaries carries on a U.S. business, then the branch profits tax may also apply to the profits of that business. Generally, the branch profits tax is an additional 30% tax on the earnings of a foreign corporation's U.S. business when these earnings are deemed to have been removed from the U.S. business. In addition, any interest paid or deemed paid by such U.S. business would be treated as U.S. source income and subject to U.S. withholding tax. Because LaSalle Re should qualify for the benefits of the Bermuda treaty and should not have a permanent establishment in the U.S., the branch profits tax should not apply. However, the IRS may not agree with this conclusion. In addition, LaSalle Re may not qualify for the treaty in the future, or the Bermuda treaty may be terminated or revised to eliminate the benefits for LaSalle Re. If LaSalle Re is subject to the branch profits tax on deemed dividends for any taxable year, then no withholding tax will be imposed on any dividends actually paid by it out of its earnings and profits for that taxable year. Non-Business Profits. Foreign corporations are subject to U.S. income tax on some types of income, such as dividends and some types of interest on investments, from sources within the United States that is not taxable as business profits. Such income is taxed at a rate of 30%, but the rate may be reduced by an applicable income tax treaty, and eliminated for some types of U.S. source income, such as portfolio interest. Excise Tax. The United States also imposes an excise tax on insurance and reinsurance premiums paid to foreign insurers or reinsurers for risks located in the United States. In general, a 4% excise tax applies to property and casualty insurance premiums and a 1% excise tax applies to reinsurance premiums for U.S. risks. Some U.S. income tax treaties, including the income tax treaty between the United States and the United Kingdom, waive this excise tax. However, the Bermuda treaty does not. TRANSFER PRICING The Internal Revenue Code provides the IRS with the authority to reallocate income, deductions and other tax-related items among commonly controlled entities to prevent the evasion of taxes or to clearly reflect income and also to reallocate income and other items arising from reinsurance contracts between related persons to reflect the proper source and character of taxable income. The Internal Revenue Code also authorizes the IRS to adjust the tax treatment of parties who engage in reinsurance transactions which have a significant tax avoidance effect. Generally, inter-company transactions on arm's-length terms will be respected by the IRS. Trenwick Group Ltd. intends to conduct transactions between its non-U.S. subsidiaries and U.S. subsidiaries on arm's-length terms. However, the IRS may not agree that these 55 67 terms are arm's-length and could challenge the terms of these transactions and increase the U.S. tax liability of Trenwick Group Ltd.'s U.S. subsidiaries. PROPOSED LEGISLATION Legislation proposed in Congress in April 2000, if passed, would require that a U.S. insurer pay tax on an amount of imputed income, calculated at a prescribed rate, on reserves related to reinsurance of U.S. risks which are reinsured with a related reinsurer in an offshore jurisdiction with low or no tax. Alternatively, the related foreign reinsurer may elect to pay tax on the income attributable to the reinsurance of U.S. risks as if it were a U.S. corporation, or U.S. persons who are direct or indirect shareholders of the foreign reinsurer may elect to pay tax on the income. If such legislation were enacted, it would make reinsurance of Trenwick Group Ltd.'s U.S. subsidiaries by LaSalle Re more expensive. Trenwick Group Ltd. does not anticipate reinsuring substantial amounts of business from its U.S. subsidiaries with LaSalle Re. TAXATION OF SHAREHOLDERS OF TRENWICK GROUP LTD. BERMUDA Under current Bermuda law, no Bermuda income or withholding tax will apply to dividends paid by Trenwick Group Ltd. to you. Furthermore, no Bermuda tax or other levy is payable by you on the sale or other transfer, including by gift or on death, of Trenwick Group Ltd. common shares, except if you are a resident in Bermuda. The undertaking received by Trenwick Group Ltd. from Bermuda regarding the future imposition of taxes discussed above under "-- Taxation of Trenwick Group Ltd. and its Subsidiaries After the Transactions" also applies to the possible future imposition of such taxes on Trenwick Group Ltd. UNITED STATES DISTRIBUTIONS Subject to the discussion below on the potential application of the controlled foreign corporation and passive foreign investment company rules, you will be subject to U.S. federal income tax on the receipt of cash distributions made on Trenwick Group Ltd. common shares to the extent paid out of current or accumulated earnings and profits of Trenwick Group Ltd. Dividends paid by Trenwick Group Ltd. generally will not be eligible for the dividends received deduction. If a distribution exceeds earnings and profits, it will be treated first as a return of your tax basis in the shares to the extent of such basis, and then as gain from the sale of a capital asset. FOREIGN TAX CREDITS You generally will not be entitled to any foreign tax credits with respect to distributions on the Trenwick Group Ltd. common shares. Furthermore, it is likely that the dividends you receive and substantially all of the related person insurance income, if any, deemed distributed to you that are foreign- source income will constitute either "passive" or "financial services" income for foreign tax credit limitation purposes. Thus, you may not be able to utilize any other foreign tax credits you may have to reduce U.S. tax on such income. See "-- Related Person Insurance Income." CONTROLLED FOREIGN CORPORATIONS Special rules may apply to you if Trenwick Group Ltd. is considered a controlled foreign corporation. A controlled foreign corporation, or CFC, is a foreign corporation in which U.S. 10% shareholders -- persons who own directly or indirectly at least 10% of the voting power of the foreign corporation -- collectively own more than 50% of the total combined voting power or total value of the corporation. In general, a U.S. 10% shareholder of a CFC on the last day of the CFC's taxable year must include in income its pro rata share of the CFC's subpart F income. In addition, a U.S. 10% shareholder of a CFC 56 68 may be required to include in income its pro rata share of investments by the CFC in U.S. property. Subpart F income includes, among other things: - interest, dividends, and other types of passive investment income; and - insurance income, known as subpart F insurance income, which generally includes any income, including underwriting and investment income, that is attributable to the issuing or reinsuring of any insurance or annuity contract and which, subject to modifications, would be taxed under the insurance company provisions of the Internal Revenue Code if that income were the income of a domestic insurance company, unless the CFC insures sufficient risks in its home country. However, subpart F income does not include: - any income from sources within the U.S. that is effectively connected with the conduct of a business within the United States and not exempted or subject to a reduced rate of tax by on applicable tax treaty; and - some income subject to high foreign taxes. In the case of subpart F insurance income, a foreign corporation will be a CFC if U.S. 10% shareholders own more than 25% of the total combined voting power or total value of its stock. Immediately after the transactions, Trenwick Group Ltd. and its non-U.S. subsidiaries should have only one U.S. 10% shareholder as well as other U.S. shareholders that will hold slightly less than 10%. However, this U.S. 10% shareholder should not have sufficient ownership to satisfy either the 50% ownership test described above with respect to Trenwick Group Ltd. or the 25% ownership test with respect to the non-U.S. insurance company subsidiaries of Trenwick Group Ltd. Moreover, in order to reduce the risk that Trenwick Group Ltd. or one of the its non-U.S. subsidiaries will be a CFC, the bye-laws of Trenwick Group Ltd. will require prior board approval for any transfer of common shares that results in any shareholder, other than a mutual fund, beneficially owning at least 10% of the voting power of Trenwick Group Ltd. or any shareholder holding actually, indirectly through foreign entities or constructively more than 9.9% of the voting power of Trenwick Group Ltd. Nevertheless, Trenwick Group Ltd. or any of its non-U.S. subsidiaries may become a CFC. We urge you to consult your own tax advisor to determine whether your ownership interest in Trenwick Group Ltd. would cause you to become a U.S. 10% shareholder of Trenwick Group Ltd. or of any of its non-U.S. subsidiaries and to determine the impact to you of such a classification. RELATED PERSON INSURANCE INCOME A different definition of CFC applies to a foreign corporation that earns related person insurance income, often called RPII. For this purpose, a foreign corporation generally will be considered a CFC if U.S. persons collectively own, directly or indirectly, 25% or more of the total combined voting power or value of such corporation's stock on any day during a taxable year. RPII means any insurance income as defined above that is attributable to policies of insurance or reinsurance insuring U.S. shareholders of the foreign corporation or a related person to such shareholders. Such a shareholder, referred to as a RPII shareholder, includes any U.S. person who owns, directly or indirectly any amount of the shares of the foreign corporation. Generally, the term related person for the RPII rules means someone who controls or is controlled by the RPII shareholder or someone who is controlled by the same person or persons which control the RPII shareholder. Control means owning directly or indirectly more than 50% in value or more than 50% in voting power of stock. Unless an exception applies, if LaSalle Re or any other non-U.S. subsidiary of Trenwick Group Ltd. is a CFC for an uninterrupted period of at least 30 days during any taxable year under the special RPII rules, and you are a RPII shareholder of such company on the last day of such company's taxable year, you generally will be required to include in gross income your share of the RPII for the entire taxable year. Your share of RPII will be determined as if all such RPII were distributed proportionately only to 57 69 RPII shareholders at that date, but limited by the company's current-year earnings and profits and reduced by your share, if any, of prior-year deficits in earnings and profits. RPII Exceptions. The special RPII rules do not apply if: - direct and indirect insureds and persons related to such insureds, whether or not U.S. persons, are treated at all times during the taxable year as owning, directly or indirectly through entities, less than 20% of the voting power and less than 20% of the value of the stock of the foreign corporation; or - the RPII of the foreign corporation, determined on a gross basis, is less than 20% of such corporation's gross insurance income for the taxable year, or if other exceptions apply. LaSalle Re reinsures, and expects to continue reinsuring, the risks of an insurance company that is related to CNA, a RPII shareholder of LaSalle Re, and thus expects to generate RPII. In addition, LaSalle Re may be considered to reinsure directly or indirectly the risks of other RPII shareholders of LaSalle Re or parties related to such shareholders. LaSalle Re has in the past and intends in the future to monitor the reinsurance of related persons to limit the gross RPII from such reinsurance to less than 20% of LaSalle Re's gross insurance income. For LaSalle Re's most recent taxable year ended September 30, 1999, we believe that gross RPII of LaSalle Re was less than 20% of LaSalle Re's gross insurance income. Trenwick Group Ltd. will take such steps as it determines to be reasonable to cause LaSalle Re's gross RPII to remain below such level. We also believe that the gross RPII of Trenwick Group Ltd. and each of its other non-U.S. subsidiaries will be less than 20% of their respective gross insurance income for each taxable year. Trenwick Group Ltd. will take such steps as it determines to be reasonable to cause gross RPII of itself and these subsidiaries to remain below that level. Computation of RPII. In order to determine how much RPII its non-U.S. subsidiaries have earned in each fiscal year, Trenwick Group Ltd. intends to obtain and rely upon information from its insureds to determine whether any of the insureds or persons related to such insureds own shares of Trenwick Group Ltd. and are U.S. persons. Trenwick Group Ltd. may not be able to make this determination. Consequently, Trenwick Group Ltd. may not be able to determine accurately the gross amount of RPII earned in a given taxable year. Trenwick Group Ltd.'s non-U.S. subsidiaries will also take reasonable steps to secure such additional information relevant to determine the amount of each corporation's insurance income that is RPII, but such information may not be sufficient to enable them to establish clearly such amount. For any year in which Trenwick Group Ltd. determines that gross RPII is 20% or more of a non- U.S. subsidiary's gross insurance income, Trenwick Group Ltd. may also seek information from its shareholders as to whether direct or indirect owners of its shares at the end of the year are U.S. persons so that it can determine RPII and apportion the RPII among such persons. In any such year, Trenwick Group Ltd. will inform all shareholders of RPII per share and RPII shareholders will be obligated to file a return reporting such amounts. To the extent Trenwick Group Ltd. is unable to determine whether a direct or indirect owner of shares is a U.S. person, it may assume that such owner is not a U.S. person for the purpose of allocating RPII, thereby increasing the per share RPII amount for all RPII shareholders. Apportionment of RPII. The amount of RPII includible in the income of a RPII shareholder is based upon the net RPII income for the year after deducting related expenses such as losses, loss reserves and operating expenses. Every U.S. person who owns, directly or indirectly through foreign entities, shares of Trenwick Group Ltd. on the last day of any taxable year of a non-U.S. subsidiary of Trenwick Group Ltd. to which the RPII rules apply should expect that for such year it must include in gross income its share of that subsidiary's RPII for the entire year, whether or not distributed, even though it may not have owned the shares for the entire year. A U.S. person who owns shares of Trenwick Group Ltd. during such taxable year but not on the last day of the taxable year is not required to include in gross income any part of such subsidiary's RPII. The amount of RPII allocable to each U.S. holder of Trenwick Group Ltd. common shares who must include RPII of a non-U.S. subsidiary in income for a given taxable year normally will bear the same ratio to the total RPII of the non-U.S. subsidiary for that taxable year as the number of common shares owned by that U.S. holder bears to the aggregate number of common shares owned by all U.S. holders. If the non-U.S. subsidiary has RPII and Trenwick Group Ltd. makes a 58 70 distribution of such RPII to a U.S. holder with respect to the common shares, such distribution will not be taxable to the extent of any RPII that has been included in the gross income of that U.S. holder for the taxable year in which the distribution was paid or for any prior year. Basis Adjustments. A RPII shareholder's tax basis in its shares will be increased by the amount of any RPII that the shareholder includes in income. The shareholder may exclude from income the amount of any distributions by Trenwick Group Ltd. to the extent of the RPII included in income for the year in which the distribution was paid or for any prior year. A RPII shareholder will reduce its tax basis in its shares by the amount of such distributions that are excluded from income. In general, a RPII shareholder cannot exclude from income distributions with respect to RPII that a prior shareholder included in income. Uncertainty as to Application of RPII. The RPII provisions of the Internal Revenue Code have never been interpreted by the courts. On April 17, 1991, the IRS proposed regulations interpreting the RPII provisions of the Internal Revenue Code. It is not certain whether the IRS will adopt these regulations in their proposed form or what changes or clarifications it might make or whether any changes, as well as any interpretation or application of RPII rules by the IRS, the courts or otherwise, might have retroactive effect. Accordingly, the meaning of the RPII provisions and their application to Trenwick Group Ltd. and its subsidiaries is uncertain. These provisions include the grant of authority to the U.S. Treasury Department to prescribe such regulations as may be necessary to carry out the purpose of this subsection including regulations preventing the avoidance of this subsection through cross insurance arrangements or otherwise. In addition, any amount of RPII inclusions reported by the Trenwick Group Ltd. to RPII shareholders may be subject to adjustment based upon subsequent IRS examination. We urge you to consult your tax advisor as to the effects of these uncertainties. TAX-EXEMPT SHAREHOLDERS If you are a tax-exempt entity, you may be required to treat your share of any subpart F income that is insurance income as unrelated business taxable income, often called UBTI. Such income will not be UBTI if the income is attributable to a policy of insurance that, directly or indirectly, insures: - you; - an affiliated tax-exempt entity; or - in some cases, individuals who perform services for you or an affiliated tax-exempt entity. If you are a tax-exempt entity, we urge you to consult your tax advisor as to the potential impact of section 512(b)(17) of the Internal Revenue Code and the UBTI provisions of the Internal Revenue Code. INFORMATION REPORTING OF INTERESTS IN CFCS If you are a U.S. 10% shareholder or RPII shareholder as a result of owning Trenwick Group Ltd. shares and Trenwick Group Ltd. is a CFC, you must file a Form 5471 with your income tax return. For any taxable year in which Trenwick Group Ltd. determines that a non-U.S. subsidiary's gross RPII constitutes 20% or more of such subsidiary's gross insurance income, Trenwick Group Ltd. intends to mail to all shareholders of record, and will make available to the transfer agent with respect to its shares, Form 5471, complete with Trenwick Group Ltd. information, for attachment to the returns of shareholders. However, Trenwick Group Ltd.'s determination of the amount of gross RPII for a given fiscal year may not be accurate because of Trenwick Group Ltd.'s inability to gather the information necessary to make that determination. See "-- Related Person Insurance Income (Computation of RPII)." If you are a tax-exempt entity and also a U.S. 10% shareholder or RPII shareholder, you must also file a Form 5471. In addition, if you own 10% or more in value of the outstanding stock of Trenwick Group Ltd. at any time during a taxable year, you may have to file Form 5471 even if Trenwick Group Ltd. is not a CFC. Failure to file Form 5471 may result in penalties. 59 71 DISPOSITIONS General. Subject to the discussion elsewhere concerning the CFC and passive foreign investment company rules, your gain or loss recognized on the sale, exchange or other disposition of shares of Trenwick Group Ltd. will be capital gain or loss in an amount equal to the difference between your basis in your shares sold and the amount realized on the sale, exchange or other disposition. If your holding period for the shares is more than one year and you are not a corporation, any gain will be taxed at a current maximum marginal rate of 20%. If you own 10% or more of the voting shares of Trenwick Group Ltd., part or all of your gain from the sale or exchange of these shares may be ordinary income if Trenwick Group Ltd. was or had been a CFC. If you are a RPII shareholder with respect to Trenwick Group Ltd.'s non-U.S subsidiaries, similar rules could apply to your disposition of Trenwick Group Ltd. shares. Existing Treasury Department regulations, however, do not address whether these rules, which are contained in section 1248 of the Internal Revenue Code, would apply when a foreign corporation, such as Trenwick Group Ltd., is not a CFC but has an insurance company subsidiary that is a CFC for purposes of requiring U.S. shareholders to take into account RPII. We believe that section 1248 should not apply to your disposition of shares of Trenwick Group Ltd. because Trenwick Group Ltd. should not be a CFC and is not directly engaged in the insurance business. However, the IRS may not interpret proposed regulations under section 953 of the Internal Revenue Code in this manner and the Treasury Department may amend the proposed regulations under section 953 of the Internal Revenue Code or other regulations to provide that these rules will apply to dispositions of shares in a corporation such as Trenwick Group Ltd. which is engaged in the insurance business indirectly through its subsidiaries. If the IRS or Treasury Department were to take such action, Trenwick Group Ltd. would notify you that section 1248 may apply to dispositions of your shares. PASSIVE FOREIGN INVESTMENT COMPANIES Special rules would apply to shareholders of Trenwick Group Ltd. if it were a passive foreign investment company, often called a PFIC. In general, a foreign corporation will be a PFIC if 75% or more of its gross income constitutes passive income, or 50% or more of its assets produce, or are held for the production of, passive income. If Trenwick Group Ltd. were a PFIC, you would be subject to a special tax and an interest charge at the time of the sale of, or receipt of an excess distribution with respect to, your shares, and any gain would be recharacterized as ordinary income. In general, a distribution is an excess distribution if the amount of the distribution is more than 125% of the average distribution with respect to the stock during the three preceding taxable years, or shorter period during which the stock was held. In general, the special tax and interest charge are based on the value of the deferral of the taxes that are deemed due during the period you owned the shares, computed by assuming that the excess distribution, or gain in the case of a sale, with respect to the shares was taxed in equal portions throughout the holder's period of ownership at the highest marginal tax rate. The interest charge is computed using the applicable rate imposed on underpayments of U.S. federal income tax for such period. You may avoid these adverse consequences only if: - you may and do elect to mark-to-market the shares annually; or - Trenwick Group Ltd qualifies as a "qualified electing fund," or QEF, and you elect to include annually your pro rata share of income or gain of Trenwick Group Ltd. In general, if you own stock in Trenwick Group Ltd. during any taxable year in which it is a PFIC and you do not make a QEF election, the stock will be treated as stock in a PFIC for all subsequent years. If you make a mark-to-market election, the PFIC rules described above would not apply to you, but instead you would be required to include in each year as ordinary income any excess of the fair market value of your Trenwick Group Ltd. common shares at the end of the taxable year over their adjusted basis. You would be allowed an ordinary loss with respect to the excess of the adjusted basis in the shares over 60 72 their fair market value, but only to the extent of the net amount previously included in income as a result of this election. The mark-to-market election is available only for stock traded on some U.S. exchanges and other exchanges that satisfy certain conditions. We expect that this election will be available to owners of Trenwick Group Ltd. common shares. For PFIC purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC provisions contain a look-through rule stating that, for purposes of determining whether a foreign corporation is a PFIC, such foreign corporation is treated as if it received directly its proportionate share of the income and as if it held its proportionate of the assets of any other corporation in which it owns at least 25% of the value of the stock. The PFIC provisions also contain an express exception for income derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business. Under this exception income derived by a bona fide insurance company is not treated as passive income. To the extent income derived by a foreign insurance company is attributable to financial reserves in excess of the reasonable needs of the insurance business, it may be treated as passive income for purposes of the PFIC rules. We anticipate that Trenwick Group Ltd.'s non-U.S. insurance subsidiaries will be entitled to the insurance company exception and that none of these subsidiaries will have financial reserves in excess of the reasonable needs of its insurance business. As a result, none of their income or assets should be considered to be passive. Under the look-through rule Trenwick Group Ltd. would be deemed to own its proportionate share of the assets and to have received its proportionate share of the income of its non-U.S. insurance subsidiaries for purposes of the PFIC 75% income and 50% asset tests. As a result, Trenwick Group Ltd. should not be considered a PFIC. However, there are no final regulations interpreting the substantive PFIC provisions. Therefore, substantial uncertainty exists with respect to their application or their possible retroactivity. We urge you to consult your tax advisor as to the effects of these rules on owning shares in Trenwick Group Ltd. INFORMATION REPORTING AND BACKUP WITHHOLDING Information Reporting. Paying agents and custodians located in the U.S. will be required to report to the IRS with respect to payments of dividends, if any, on the Trenwick Group Ltd. shares to you or to paying agents or custodians located in the United States. Backup Withholding. You may be subject to backup withholding at the rate of 31% with respect to dividends paid by Trenwick Group Ltd., unless you: - are a corporation or come within other exempt categories and, when required, demonstrate this fact; or - provide a taxpayer identification number, certify as to no loss of exemption from backup withholding and otherwise comply with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax and may be credited against your regular federal income tax liability. Sales of shares of Trenwick Group Ltd. through brokers also may be subject to back-up withholding. Sales by corporations, some tax-exempt entities, individual retirement plans, REITs, some financial institutions, and other exempt recipients as defined in applicable Treasury regulations currently are not subject to back-up withholding. We urge you to consult your tax advisor regarding the possible applicability of the back-up withholding provisions to sales of your shares. THE FOREGOING DISCUSSION IS BASED UPON CURRENT LAW. THE TREATMENT OF HOLDING TRENWICK GROUP LTD. COMMON SHARES, DIRECTLY OR INDIRECTLY, FOR U.S. FEDERAL INCOME, STATE, LOCAL OR NON-U.S. TAX PURPOSES MAY VARY DEPENDING ON YOUR PARTICULAR TAX SITUATION. LEGISLATIVE, JUDICIAL OR ADMINISTRATIVE CHANGES OR INTERPRETATIONS MAY BE FORTHCOMING THAT COULD BE RETROACTIVE AND COULD AFFECT YOUR TAX CONSEQUENCES OF HOLDING TRENWICK GROUP LTD. COMMON SHARES. WE URGE YOU TO CONSULT YOUR TAX ADVISOR CONCERNING THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF OWNING THE TRENWICK GROUP LTD. COMMON SHARES. 61 73 ACCOUNTING TREATMENT We intend that Trenwick Group Ltd. treat the business combination as a "purchase" for accounting and financial reporting purposes. REQUIRED REGULATORY FILINGS AND APPROVALS Antitrust. Under the Hart-Scott-Rodino Act and related Federal Trade Commission rules, we may not complete the transactions until notifications have been given and specific information has been furnished to the FTC and the Antitrust Division of the Department of Justice and specified waiting period requirements have been satisfied. Trenwick, LaSalle and the three largest shareholders in LaSalle and LaSalle Re have filed the necessary notification and report forms and the FTC has advised us that the waiting period requirements have been satisfied. At any time before or after we complete the transactions, the Antitrust Division or the FTC or any state could take whatever action under the antitrust laws it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the transactions or seeking divestiture of Trenwick or LaSalle or substantial assets of Trenwick or LaSalle by Trenwick Group Ltd. Private parties may also seek to take legal action under the antitrust laws under some circumstances. U.S. Insurance. Trenwick's United States reinsurance and insurance subsidiaries are subject to the insurance statutes of the jurisdictions in which they are domiciled and the jurisdictions in which they are licensed, including the insurance holding company acts in those jurisdictions. These statutes generally require prior approval for persons acquiring control of insurance companies domiciled or commercially domiciled in the state, whether directly or indirectly, through reorganization, acquisition or otherwise. Connecticut, New York and North Dakota have granted Trenwick Group Ltd.'s request for an exemption from the approval process, finding that the business combination does not have the effect of changing or influencing the control of a domestic insurance company. In addition to the request for exemption and the Form A filings, Trenwick Group Ltd. has submitted required notifications and other filings to applicable state insurance departments in other states in which Trenwick's insurance and reinsurance subsidiaries conduct business. Approval of the transactions is not required in these states, but the insurance departments of these states could determine to take action to impose conditions on the transactions. U.K. Financial Services Authority. As a United Kingdom-regulated insurance company, Trenwick International must obtain the consent of the Financial Services Authority in the United Kingdom before any changes may occur in its directors, managers or controllers. Accordingly, Trenwick International has notified the Financial Services Authority of the business combination detailing the changes to be made. The Financial Services Authority must indicate whether or not it consents to the changes within the period of three months following that notice. If that period elapses without the Financial Services Authority objecting, consent is deemed to be given. Lloyd's Consent. Once we complete the transactions, Trenwick Group Ltd. will be the controller of Chartwell Managing Agents, a Lloyd's regulated managing agency, several Trenwick and LaSalle controlled Lloyd's corporate members, and a Trenwick controlled registered Lloyd's advisor. Prior written consent of Lloyd's is required for Trenwick Group Ltd. to become a controller of these entities. Trenwick Group Ltd. will file an application with Lloyd's to become a controller of these entities. It takes approximately six weeks from receipt of a completed application for a change of control for Lloyd's to reach a formal decision regarding the change in control. In addition, Lloyd's consent is required for the appointment of directors of these Lloyd's entities. Other. Any 10% or greater shareholder of Trenwick Group Ltd. may need to make filings or request exemptions from insurance regulators or Lloyd's. In addition, Trenwick and LaSalle may be required to obtain regulatory approvals, file notices, or make other filings in other jurisdictions in which one or the other maintains an office, conducts business or has customers. At the time of this filing, Trenwick and 62 74 LaSalle do not expect any such other approvals, notices or other filings to be material in connection with the business combination. We are not aware of any governmental approvals or actions that may be required for consummation of the transactions other than as described above. Should any other approval or action be required, we currently contemplate that such approval or action would be sought. SUPREME COURT OF BERMUDA APPROVAL If the schemes of arrangement are approved by the requisite majorities at the court meetings, they are then subject to approval by the Supreme Court of Bermuda. In connection with obtaining this approval, LaSalle and LaSalle Re filed an originating summons and supporting affidavit with the Supreme Court on August 14, 2000 and a hearing on such originating summons took place on August 17, 2000. At the originating summons hearing, the Supreme Court gave directions as to how the court meetings are to be convened and ordered that a notice of separate court meetings to be held among the holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares be given. The court meetings are scheduled for September 25, 2000, the same day that the special general meetings will be held. The court meetings will be held in accordance with the directions given by the Supreme Court at the hearing of the originating summons. The special general meetings will be held in accordance with LaSalle's and LaSalle Re's bye-laws. Approval of the proposal to approve and adopt the schemes of arrangement at the court meetings will require the affirmative vote of: - a majority in number of LaSalle common shareholders who represent at least 75% in value of the LaSalle common shares present and voting at the LaSalle meeting; and - a majority in number of LaSalle Re exchangeable non-voting common shareholders who represent at least 75% in value of the LaSalle Re exchangeable non-voting common shares present and voting at the LaSalle Re meeting. Once the court meetings and the special general meetings are held, LaSalle and LaSalle Re will file with the Supreme Court of Bermuda a chairman's report of the results of the court meetings, a signed petition, an affidavit by the chairman in support of the petition and an affidavit of posting of the scheme documents on behalf of LaSalle and LaSalle Re. Assuming the requisite shareholder approvals are received at the court meetings and special general meetings on September 25, 2000, the Supreme Court is expected to conduct an open hearing on such petitions on September 27, 2000. Holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares will be entitled to be present and be heard. To approve the schemes of arrangement, the Supreme Court will consider, among other things, whether the schemes of arrangement are fair to the holders of LaSalle common shares and LaSalle Re exchangeable non-voting common shares. The schemes of arrangement will become effective when the Supreme Court order sanctioning the schemes is filed with the Registrar of Companies of Bermuda, which LaSalle expects will be made as soon as the other conditions to closing are met or waived. ABSENCE OF APPRAISAL RIGHTS Appraisal rights are statutory rights that enable shareholders who object to extraordinary corporate actions, such as business combinations, to demand the fair value of their shares in cash as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary corporate action. Appraisal rights are not available in all circumstances. Under Delaware law, which governs Trenwick and the plan of reorganization, Trenwick stockholders are not entitled to appraisal rights with respect to the plan of reorganization or any other proposal to be voted upon at the Trenwick special meeting because there are no appraisal rights on a dissolution. Under Bermuda law, which governs LaSalle, LaSalle Re and the schemes of arrangement, LaSalle common shareholders and holders of LaSalle Re exchangeable non-voting common shares are not entitled to appraisal rights with respect to the schemes of arrangement or any other proposals to be voted upon at the LaSalle and LaSalle Re special general and court meetings. 63 75 INTERESTS OF DIRECTORS AND OFFICERS IN THE TRANSACTIONS A number of directors and executive officers of LaSalle, LaSalle Re and Trenwick have interests in the transactions as directors or employees that are different from, or in addition to, the interests of shareholders generally. If we complete the transactions: - Robert V. Deutsch, Clement S. Dwyer, Jr. and Peter J. Rackley and all of the directors of Trenwick will become members of the board of directors of Trenwick Group Ltd.; - James F. Billett, Jr. will be the Chairman, President and Chief Executive Officer of Trenwick Group Ltd.; - Guy D. Hengesbaugh will retain his position as President of LaSalle Re; - options to purchase LaSalle or LaSalle Re shares held by LaSalle's directors, officers and their affiliates will be replaced by options to acquire shares of Trenwick Group Ltd., adjusted to account for the applicable exchange ratio; - Mr. Hengesbaugh will be entitled to receive greater severance benefits under his employment and option agreements than he would have received prior to the proposed transactions; and - Trenwick Group Ltd. will continue specific indemnification arrangements and directors' and officers' liability insurance for existing directors and officers of LaSalle. The other executive officers of Trenwick Group Ltd. upon completion of the transactions will be Trenwick's current executive officers and individual executive officers of LaSalle appointed by the Trenwick Group Ltd. board of directors upon completion of the transactions. EXISTING BUSINESS RELATIONSHIPS BETWEEN TRENWICK AND LASALLE From time to time in the past, LaSalle Re has acted as a reinsurer of Trenwick's United States and international operations. LaSalle Re currently is a 50% reinsurer of Trenwick America Reinsurance Corporation, on the 2000 Special Property Catastrophe excess of loss agreement. This contract expires December 31, 2002, however, there is a cancellation option at any January 1 anniversary date. The contract provides LaSalle Re with gross written premium of $2,175,000 per annum which is subject to a contingent profit commission clause. This provides for a profit commission of 100% of the profit calculated on the basis of 85% of the gross written premiums less any losses incurred to be paid to Trenwick America Reinsurance Corporation. In addition, LaSalle, through its subsidiary LaSalle Re Capital, provides capital support on an underwriting year basis to selected Lloyd's syndicates, including syndicate 839, which is managed by Chartwell Managing Agents Limited. Chartwell Managing Agents Limited is a subsidiary of Trenwick. Out of a total of approximately $23.3 million of underwriting capacity provided to Lloyd's syndicates for the 2000 year of account, LaSalle Re Capital provided approximately $6.2 million to syndicate 839. RESTRICTIONS ON RESALES BY AFFILIATES The Trenwick Group Ltd. common shares issued in connection with the transactions will be registered under the Securities Act and subject to Rules 144 and 145 of the Securities Act. As a result, the Trenwick Group Ltd. common shares will be freely transferable, except that persons who are deemed to be affiliates of Trenwick at the time of the Trenwick special meeting or of LaSalle at the time of the LaSalle special general and court meetings may resell their Trenwick Group Ltd. common shares only in transactions permitted by the resale provisions of Rule 145 under the Securities Act or as otherwise permitted under the Securities Act. Persons who may be deemed to be affiliates of Trenwick or LaSalle generally include individuals or entities that control, are controlled by, or are under common control with, such party and may include officers and directors of such party as well as principal shareholders of such party. 64 76 Under the agreement, before we complete the transactions, Trenwick will deliver to LaSalle a letter identifying all persons whom Trenwick believes to be affiliates of Trenwick for purposes of Rule 145. Trenwick will use its commercially reasonable efforts to cause each affiliate to execute and deliver to LaSalle prior to the completion of the transactions, a written agreement, in a form mutually agreeable to Trenwick and LaSalle that such person will not offer or sell or otherwise dispose of any of the Trenwick Group Ltd. shares issued to such person as a result of the transactions in violation of the Securities Act or related rules and regulations. LaSalle will deliver to Trenwick a letter identifying all persons whom LaSalle believes to be affiliates of LaSalle for purposes of Rule 145. LaSalle will use commercially reasonable efforts to cause each affiliate to execute and deliver to Trenwick prior to the completion of the transactions a written agreement, in a form mutually agreeable to Trenwick and LaSalle, that such person will not offer or sell or otherwise dispose of any of the Trenwick Group Ltd. common shares issued to such person as a result of the transactions in violation of the Securities Act or related rules and regulations. This document cannot be used in connection with resales of Trenwick Group Ltd. common shares received in the transactions by any person who may be deemed to be an affiliate of Trenwick or LaSalle under the Securities Act. EMPLOYMENT AND SEVERANCE ARRANGEMENTS LASALLE EMPLOYMENT AGREEMENTS Effective October 1, 1999, LaSalle entered into an amended employment agreement with Guy D. Hengesbaugh to reflect Mr. Hengesbaugh's promotion to the position of President and Chief Executive Officer. The agreement provides for automatic renewal on a daily basis, so that the remaining term of the agreement will always equal two years. If either party gives notice of termination, the agreement will expire two years after that notice is given. The agreement provides for an annual salary of $450,000. In addition, Mr. Hengesbaugh is entitled to an annual nondiscretionary bonus based in part on the amount by which LaSalle Re's return on equity for that year exceeds 10% per annum, and is also eligible to receive a bonus awarded at the discretion of the LaSalle board of directors. The agreement provides Mr. Hengesbaugh with various benefits, including disability and pension benefits, automobile allowance, club membership, housing and living allowance and reimbursement of reasonable business expenses. The agreement also includes a non-competition and non-solicitation covenant that will generally apply for a period of 12 months following the termination of Mr. Hengesbaugh's employment. Effective July 1, 1999, LaSalle entered into an amended employment agreement with Victor H. Blake to reflect the fact that on that date Mr. Blake retired from the position of President and Chief Executive Officer, while continuing to act as Chairman and to perform services for LaSalle and LaSalle Re. The agreement extends the term of Mr. Blake's employment to September 30, 2003 and provides for the continuation of Mr. Blake's annual salary of $575,000 through October 31, 2000, and the payment of an annual salary of $300,000 for the period beginning on November 1, 2000. The agreement also provides for acceleration of the present value of payments otherwise payable to Mr. Blake upon a change of control or, at the discretion of the LaSalle board of directors, upon his termination of employment by the company without cause. The agreement provides Mr. Blake with various benefits, including disability and life insurance benefits, use of an automobile and club memberships through September 30, 2000. The agreement also includes a non-competition and non-solicitation covenant that will generally apply for a period of 24 months following the termination of Mr. Blake's employment. In addition, LaSalle has previously loaned $695,000 to Mr. Blake in order to finance the purchase of a condominium in Bermuda. In addition, under a Stock Appreciation Rights Agreement dated April 1, 1994, Mr. Blake has been awarded 340,872 stock appreciation rights, or SARs. Based on LaSalle's financial performance from November 22, 1993 through December 31, 1999, only 92,035 of these SARs are, or will ever become, exercisable. Mr. Blake may exercise these SARs at any time on or before March 30, 2004 or, if earlier, two years after his termination of employment. The current base value for each SAR is $6.03. Upon 65 77 exercise, the SARs entitle Mr. Blake to a cash payment equal to the value of the SARs as of the exercise date. Alternatively, at LaSalle's sole discretion, the SARs will entitle Mr. Blake to either: - the number of special non-voting shares, which were issued by LaSalle Re in connection with the formation and capitalization of LaSalle Re, equal to the aggregate value of the SARs divided by the fair market value of a LaSalle common share at the exercise date; or - upon payment of the base value for each SAR, the number of special non-voting shares equal to the number of SARs exercised. Effective October 1, 1998, LaSalle entered into an employment agreement with Mark Stockton, who now serves as Senior Vice President and Chief Underwriting Officer. The agreement provides for automatic renewal on a daily basis, so that at the remaining term of the agreement will always equal one year. If either party gives notice of termination, the agreement will expire one year after that notice is given. The agreement provides for an annual base salary of $230,000, which effective July 1, 1999 was increased to $275,000 by action of LaSalle's Compensation Committee. In addition, Mr. Stockton is entitled to an annual nondiscretionary bonus based in part on the amount by which LaSalle Re's return on equity for that year exceeds 10% per annum, and is also eligible to receive a bonus awarded at the discretion of the LaSalle board of directors. The agreement provides Mr. Stockton with various benefits, including disability and pension benefits, automobile allowance, club membership, housing and living allowance and reimbursement of reasonable business expenses. The agreement also includes a non-competition and non-solicitation covenant that will generally apply for a period of 24 months following the termination of Mr. Stockton's employment. Effective October 1, 1998, LaSalle entered into an employment agreement with Clare Moran, who now serves as Senior Vice President, Treasurer and Interim Financial Officer. The agreement provides for automatic renewal on a daily basis, so that the remaining term of the agreement will always equal one year. If either party gives notice of termination, the agreement will expire one year after that notice is given. The agreement provides for an annual base salary of $125,000, which effective August 15, 1999 was increased to $155,000 by action of LaSalle's Compensation Committee. In addition, Ms. Moran is eligible for an annual bonus to be determined in the discretion of the LaSalle board of directors. The agreement provides Ms. Moran with various benefits, including disability and pension benefits, automobile allowance, housing and living allowance and reimbursement of reasonable business expenses. The agreement also includes a non-competition and non-solicitation covenant that will generally apply for a period of 12 months following the termination of Ms. Moran's employment. LASALLE SEVERANCE ARRANGEMENTS Any executive officer who is discharged by LaSalle for reasons other than cause, or is constructively discharged, will be entitled to: - salary continuation payments for the remainder of the term of his or her employment agreement; - a pro rata portion of the bonus that would have been paid for the fiscal year in which the termination occurs, except for Victor Blake; - continued payment by LaSalle of housing expenses and continued participation in LaSalle's medical and dental plans for up to three months following the date of termination; and - accelerated vesting of 100% of any options and/or restricted stock held as of the date of termination. If there is a change in control of LaSalle: - any options granted to the executive officers during the 1998 fiscal year and any restricted stock granted to Messrs. Hengesbaugh and Blake in the 1999 fiscal year will become fully vested if the change in control is followed within one year by the officer's involuntary termination of 66 78 employment or by the officer's voluntary termination of employment for good reason, as defined in the option or restricted stock agreement; and - any options granted to the executive officers prior to the 1998 fiscal year will become fully vested upon the occurrence of the change in control. Effective March 1, 1999, LaSalle entered into an employment agreement with Robert P. Cuthbert, who served as Senior Vice President, Chief Financial Officer and Treasurer. On May 1, 1999, Mr. Cuthbert resigned from his positions with LaSalle and, under a separation agreement, he became entitled to receive salary continuation payments of $25,000 per month through April 2000 and also a bonus of $100,000, half of which was paid immediately upon separation and half of which was paid on September 30, 1999. TRENWICK SEVERANCE ARRANGEMENTS Commencing on November 3, 1999, Trenwick entered into change of control severance agreements with Mr. Billett and the ten other senior officers of Trenwick that are designated "Tier I Officers." Under the change of control severance agreements, a change of control of Trenwick will occur at the time that Trenwick's stockholders approve the business combination. Under these agreements, if, during a two year period following a change of control, Trenwick terminates a Tier I Officer without cause or disability, or a Tier I Officer terminates employment for a defined good reason, then the Tier I Officer is entitled to the following: - base salary for two years after termination or three years for Mr. Billett; - bonus in the year of termination or for three years for Mr. Billett, equal to the greater of (x) the last bonus paid or (y) the average of the last two bonuses paid; and - medical benefits and perquisites for two years or three years for Mr. Billett. OTHER ARRANGEMENTS WITH EMPLOYEES STOCK OPTION PLANS, WARRANTS AND STOCK PURCHASE PLANS When we complete the proposed transactions, each employee and director stock option to purchase Trenwick common stock and LaSalle common shares, whether or not then vested or exercisable, will be replaced by an option to acquire Trenwick Group Ltd. shares. The terms of the options to acquire Trenwick Group Ltd. shares will be no less favorable to the optionholder than the terms currently applicable to the options to acquire Trenwick common stock or LaSalle common shares. The number of Trenwick Group Ltd. shares subject to the options will be determined by multiplying the number of shares subject to the options by the appropriate exchange ratio. Holders of options to acquire Trenwick common stock will pay a price determined by dividing the exercise price per share under such option in effect immediately prior to the completion of the reorganization by the Trenwick exchange ratio. Holders of options to acquire LaSalle common shares will pay a price determined by dividing the exercise price per share under such option in effect immediately prior to the completion of the schemes of arrangement by the LaSalle exchange ratio. Also, if Victor H. Blake exercises any of his stock appreciation rights any time after the completion of the schemes of arrangement and until November 22, 2003, he will be entitled to the number of Trenwick Group Ltd. common shares as is equal to the appropriate exchange ratio. At the completion of the business combination, each outstanding warrant to purchase Trenwick common stock shall be assumed by Trenwick Group Ltd. in accordance with its terms. 67 79 OTHER EMPLOYEE BENEFITS For at least one year following the completion of the transactions, Trenwick Group Ltd. will provide employee benefits to employees of Trenwick and LaSalle who become employees of Trenwick Group Ltd. as of the completion of the proposed transactions. These benefits will be no less favorable in the aggregate than Trenwick's or LaSalle's benefits immediately prior to the completion of the proposed transactions. To the extent permissible under the law, Trenwick Group Ltd. will cause these employees to receive full credit for service with Trenwick or LaSalle for purposes of eligibility, vesting and entitlement to benefits but no one will be entitled to duplicate benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any preexisting condition limitation. Employees of both Trenwick and LaSalle will be given credit for amounts paid under a corresponding benefit plan during the period of at least one year after the completion of the proposed transactions for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the Trenwick Group Ltd. employee benefit plan. 68 80 SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT SECURITY OWNERSHIP OF SHAREHOLDERS The following table lists the shareholders expected to become beneficial owners of more than five percent of the outstanding common stock of Trenwick Group Ltd. immediately following completion of the transactions. The following table is based upon information filed with the Securities and Exchange Commission and assumes the exchange ratio for Trenwick and LaSalle shareholders remains at one-to-one.
SHARES BENEFICIALLY NAME & ADDRESS OWNED PERCENT - -------------- ------------ ------- CNA Financial Corporation(1)................................ 3,707,400 10.09% CNA Plaza Chicago, IL 60685 Aon Corporation(2).......................................... 3,644,174 9.94% 123 North Wacker Drive Chicago, IL 60606 NewSouth Capital Management, Inc.(3)........................ 2,162,920 5.89% 1000 Ridgeway Loop Road, Suite 233 Memphis, Tennessee 38120
- --------------- (1) Based upon information contained in Amendment No. 1 to Schedule 13D filed with the Securities and Exchange Commission on November 6, 1998 with respect to LaSalle. Of the 3,707,400 shares 3,389,250 and 318,150 are owned by Continental Casualty Company and CNA (Bermuda) Services Limited, respectively, both of which are wholly-owned subsidiaries of CNA Financial Corporation. According to information provided in CNA Financial Corporation's definitive proxy statement filed with the SEC on March 29, 2000, Loews Corporation owned approximately 86.8% of the outstanding voting securities of CNA Financial Corporation as of February 28, 2000. (2) Based upon information provided by Aon Corporation and information contained in Amendment No. 1 to Schedule 13D filed with the Securities and Exchange Commission on February 11, 2000 with respect to LaSalle. Of the 3,644,174 shares, 916,282 are owned by each of Combined Insurance Company of America and Virginia Surety Company, Inc., which are wholly-owned subsidiaries of Aon Corporation. The remaining 1,811,610 shares are owned by 123 Newco, Inc. Aon Corporation has sole dispositive power but no voting power with respect to the shares owned by 123 Newco, Inc. (3) Based upon information contained in Amendment No. 5 to Schedule 13G filed with the Securities and Exchange Commission on February 14, 2000 with respect to Trenwick. Sole voting power is held over 2,143,170 shares, shared voting power is held over 19,750 shares and sole dispositive power is held over all the shares. 69 81 BOARD OF DIRECTORS The board of directors of Trenwick Group Ltd. will be divided into three classes, two of which consist of five directors and one of which will consist of six directors. Each class will serve three years, with the terms of office of the respective classes expiring in successive years. The terms of the office of directors in the classes of directors will expire as follows: - Class I: At the 2001 Annual Meeting. - Class II: At the 2002 Annual Meeting. - Class III: At the 2003 Annual Meeting. The agreement established the composition of the board of directors of Trenwick Group Ltd. Vacancies in directorships, including vacancies resulting from resignations and newly created directorships, may be filled, until the expiration of the term of the vacated directorship and until a successor is elected and qualified, by the vote of a majority of the directors then in office. Upon completion of the business combination, there will be two vacancies in the board of directors. CLASS I DIRECTORS FRANK E. GRZELECKI Frank E. Grzelecki, 63, has served as a director of Trenwick and a member of the Investment Committee since October 1999. From March 1994 until its merger with Trenwick, Mr. Grzelecki was a director of Chartwell Re Corporation. Mr. Grzelecki is a Managing Director of Saugatuck Associates, Inc., a private investment firm. He retired as a director and Vice Chairman of Handy & Harman in 1998, a position he held since 1997. From 1992 to 1997, Mr. Grzelecki served as a director and President and Chief Operating Officer of Handy & Harman. Mr. Grzelecki is also a director of Barnes Group Inc. PETER J. RACKLEY Peter J. Rackley, 62, has been a director of LaSalle since its organization in October 1995 and a director of LaSalle Re since its organization in October 1993. Mr. Rackley has been Chairman and Group Chief Executive of Western International Financial Group Ltd., a Bermuda-based insurance business, since 1993. Prior to that time, Mr. Rackley held senior management executive positions in General Accident Fire & Life Assurance Company plc and NZI Insurance Group. Mr. Rackley is also Chairman of Catlin Westgen Holdings Limited, Westgen High Ridge Holdings Ltd. and CERTA (UK) Limited and a director of Stockton Holdings Limited. FREDERICK D. WATKINS Frederick D. Watkins, 84, has been a director of Trenwick and its predecessor since 1979, a member of the Executive Committee since 1979, a member of the Compensation Committee since 1986 and a member of the Audit Committee since 1988. He is retired Executive Vice President of Connecticut General Insurance Corporation (1979-1980) and former President of Aetna Insurance Company (1966-1979), which he joined in 1937. Mr. Watkins was Chairman of Terra Nova Insurance Company Ltd. from 1978 until 1994. STEPHEN R. WILCOX Stephen R. Wilcox, 66, has been a director of Trenwick and its predecessor since 1978, a member of the Investment Committee since 1979 and a member of the Audit Committee since 1985, serving as the latter's Chairman since 1988. Since 1998, Mr. Wilcox has been President and Chief Executive Officer of Kelton International Inc., a securities broker-dealer. He has been President of The Wilcox Group, Inc., a financial and consulting firm, since 1998. He was a Senior Consultant of Hyperion Capital Management from 1986 to 1988 and a Partner and Senior Vice President of Conning & Company, with which he was associated from 1958 to 1988. 70 82 CLASS II DIRECTORS ANTHONY S. BROWN Anthony S. Brown, 57, has served as a director of Trenwick since 1990 and member of the Audit Committee since 1991. He is a Professor at the Terry Sanford Institute of Public Policy at Duke University and was Director of Equity Administration of The First Boston Corporation, an investment banking firm, between 1991 and 1993. Prior to 1991, Mr. Brown was Vice President, External Affairs, of the University of Connecticut and was formerly Chairman and Chief Executive Officer of Covenant Insurance Company, with which he was associated from 1968 to 1989. RICHARD E. COLE Richard E. Cole, 61, has served as a director of the Company and a member of the Executive Committee since October 1999. Until the merger of Chartwell Re Corporation with Trenwick, Mr. Cole was the Chairman of the Board of Directors of Chartwell Re Corporation (from March 1993) and Chartwell Re Corporation's Chief Executive Officer and a director (from July 1990). From July 1990 to March 1993, Mr. Cole also served as President of Chartwell Re Corporation. From October 1988 to July 1990, Mr. Cole was engaged as a principal in various entrepreneurial activities outside of the insurance and reinsurance industries. Prior to October 1988, Mr. Cole was President of Cole, Booth, Potter (formerly Sten-Re Cole & Associates, Inc.), a reinsurance brokerage firm focusing on specialty lines insurance and reinsurance for regional companies. Mr. Cole is also a director of Indiana Lumbermens Mutual Insurance Company. NEIL DUNN Neil Dunn, 50, has been a director of Trenwick and its predecessor since 1984, a member of the Investment Committee since 1984 and a member of the Executive Committee and the Compensation Committee since 1986. He is Managing Director of Kempen Capital Management (UK) Ltd and previously served in the same capacity for Voyageur International Asset Managers Ltd and for Piper International Asset Management, an affiliate of Piper Jaffray Companies Inc. Prior to 1994, Mr. Dunn was Senior Partner of the investment advisory firm Neil Dunn & Company, Scotland. CLEMENT S. DWYER, JR. Clement S. Dwyer, Jr., 52, has been a director of LaSalle and LaSalle Re since February 1998. He has 29 years of experience in the insurance industry, concentrating primarily in worldwide property casualty business and the financing of insurance enterprises. Since 1997, Mr. Dwyer has been Managing Member of URSA Advisors, L.L.C., which provides advisory and capital-raising services to insurance and reinsurance companies. From May to December 1996, he was President and Chief Executive Officer of Signet Star Holdings, Inc., the holding company for the reinsurance subsidiaries of W. R. Berkeley Corp. From 1992 to 1996, he was Executive Vice President and Director of Guy Carpenter & Company, Inc., a reinsurance broker and a subsidiary of Marsh & McLennan Companies Inc., by whom he had been employed in various executive capacities since 1970. P. ANTHONY JACOBS P. Anthony Jacobs, 58, has been a director of Trenwick and its predecessor since 1979, a member of the Investment Committee since 1979, the Executive Committee and the Compensation Committee since 1986, and the Audit Committee since 1998. Mr. Jacobs served as President and Chief Executive Officer of Lab Holdings, a lab testing services company, from September 1997 until August 1999, at which time the company was merged with its subsidiary Lab One and Mr. Jacobs retired. Mr. Jacobs also served as President of Lab Holdings from May 1993 to September 1997 and as its Chief Operating Officer from May 1990 to September 1997. From December 1996 until August 1998, he was Chairman of the Board of SLH Corporation. Mr. Jacobs is also a director of Response Oncology, Inc. and Syntroleum Corporation. 71 83 CLASS III DIRECTORS JAMES F. BILLETT, JR. James F. Billett, Jr., 56, has served as Chairman of the Board and Chief Executive Officer of Trenwick and its predecessor since 1978 and resumed the Presidency in 1988. He is Chairman of the Executive Committee and the Investment Committee. Mr. Billett was formerly a Vice President of General Reinsurance Corporation. W. MARSTON BECKER W. Marston Becker, 48, has served as a director of Trenwick since 1997, Chairman of the Compensation Committee since May 1998 and a member of the Executive Committee since May 1998. He has been Chairman of Hales & Company, an investment company, since June 2000. He was President -- Specialty Insurance of Royal & SunAlliance USA, Inc., an insurance company, from its acquisition of Orion Capital Corporation in November 1999 until May 2000 and is currently a director of Royal & SunAlliance USA, Inc. From January 1997 to November 1999, he was Chairman of the Board and Chief Executive Officer of Orion Capital Corporation. He was previously Vice Chairman of the Board (March 1996 to December 1996) and Senior Vice President (July 1994 to March 1996) of Orion Capital Corporation and served as President and Chief Executive Officer of the DPIC Companies (subsidiaries of Orion Capital Corporation) from July 1994 to June 1996 and as President and Chief Executive Officer of McDonough Caperton Insurance Group, an insurance brokerage firm, from March 1987 to July 1994. ROBERT M. DEMICHELE Robert M. DeMichele, 55, has been a director of Trenwick and a member of the Investment Committee since October 1999. From December 1995 until its merger with Trenwick, Mr. DeMichele was a director of Chartwell Re Corporation. From December 1995 to the present he has been a director, Chief Executive Officer and President of Lexington Global Asset Management. From 1982 until December 1995, Mr. DeMichele served as President, Chief Executive Officer and a director of Piedmont Management Company Inc. Mr. DeMichele also serves as a director of The Navigators Group, Inc. ROBERT V. DEUTSCH Robert V. Deutsch, 40, has been a director of LaSalle since September 1999. Since August 1999, he has been Senior Vice President and Chief Financial Officer of CNA Financial Corporation. From May 1997 to August 1999, Mr. Deutsch was Executive Vice President and a director of Executive Risk Inc., a specialty insurer based in Connecticut. He was also Chief Financial Officer of Executive Risk Inc. from August 1990 to August 1999, Chief Actuary of Executive Risk Inc. from June 1987 to August 1999 and Senior Vice President of Executive Risk Inc. from June 1987 to May 1997. Mr. Deutsch's professional experience also includes serving as Assistant Vice President with Swiss Re America and a senior manager with Ernst & Young. He is a fellow of the Casualty Actuarial Society, an associate of the Society of Actuaries and a member of the American Academy of Actuaries. JOSEPH D. SARGENT Joseph D. Sargent, 70, has been a director of Trenwick and its predecessor since 1978, a member of the Executive Committee since 1979 and a member of the Compensation Committee since 1986. He has been Chairman and a Principal of Bradley, Foster & Sargent, an investment advisory firm, since 1994. Mr. Sargent is a member of the Board of Directors of Mutual Risk Management, Ltd., Policy Management Systems Corporation and Command Systems Inc. There are no family relationships among any directors and executive officers of Trenwick Group Ltd. 72 84 SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth the number of Trenwick Group Ltd. common shares expected to be beneficially owned immediately following completion of the business combination by each director and executive officer named in this joint proxy statement/prospectus and by all directors and executive officers as a group. The following table is based upon information available to Trenwick and LaSalle as of the date of this document.
AMOUNT OF BENEFICIAL OWNERSHIP(1) ------------------------- NUMBER OF COMMON DIRECTORS SHARES PERCENT - --------- ---------- ------- W. Marston Becker........................................... 616,964(2) 1.68% Anthony S. Brown............................................ 12,825(3) * Richard E. Cole............................................. 260,929(4) 0.71% Robert M. DeMichele......................................... 19,003(5) * Robert V. Deutsch........................................... 3,718,704(6) 10.12% Neil Dunn................................................... 9,000(3) * Clement S. Dwyer............................................ 22,339 * Frank E. Grzelecki.......................................... 4,125(5) * P. Anthony Jacobs........................................... 10,500(3) * Peter J. Rackley............................................ 1,104 * Joseph D. Sargent........................................... 140,650(3)(7) 0.38% Frederick D. Watkins........................................ 13,200(3) * Stephen R. Wilcox........................................... 8,500(3) *
- --------------- * Less than 0.1%
AMOUNT OF BENEFICIAL OWNERSHIP(1) ------------------------- NUMBER OF COMMON NAMED EXECUTIVE OFFICERS SHARES PERCENT - ------------------------ ---------- ------- James F. Billett, Jr........................................ 331,285(8) 0.90% Steven J. Bensinger......................................... 209,379(9) 0.57% John V. Del Col............................................. 16,766(10) * Paul Feldsher............................................... 90,250(11) 0.25% Robert A. Giambo............................................ 71,894(12) 0.20% Alan L. Hunte............................................... 95,365(13) 0.26% Coleman D. Ross............................................. 5,833(14) * Directors and executive officers as a group (20 individuals).............................................. 5,658,615 15.09%
- --------------- (1) Includes, in each case, shares deemed to be beneficially owned by such persons because they hold or share investment or voting power. Includes, as to directors, other than Mr. Billett, a total of 288,337 shares subject to outstanding stock options that are vested and exercisable within 60 days of the date of this document. Includes, as to executive officers, a total of 331,481 shares subject to outstanding stock options that are vested and exercisable within 60 days of the date of this document and 132,019 restricted shares not vested within 60 days of the date of this document, but that have full dividend and voting rights and that are included in the computation of such executive officers' percentage of beneficial ownership. (2) Includes 4,500 shares subject to stock options that are vested and exercisable within 60 days of the date of this document. Also includes 608,269 shares owned by Royal & SunAlliance USA, Inc. Mr. Becker is a director of Royal & SunAlliance USA, Inc. Mr. Becker disclaims beneficial ownership of the shares attributed to Royal & SunAlliance USA, Inc. 73 85 (3) Includes 7,500 shares subject to stock options that are vested and exercisable within 60 days of the date of this document. (4) Includes 232,237 shares subject to stock options that are vested and exercisable within 60 days of the date of this document. (5) Includes 3,300 shares subject to stock options that are vested and exercisable within 60 days of the date of this document. (6) Of the 3,718,704 shares, 3,389,250 are owned by Continental Casualty Company, a wholly-owned subsidiary of CNA Financial Corporation and 318,150 are owned by CNA (Bermuda) Services Limited, also a wholly-owned subsidiary of CNA Financial Corporation. Mr. Deutsch may be deemed to share voting and investment power over such shares as Senior Vice President and Chief Financial Officer of CNA Financial Corporation. Mr. Deutsch disclaims beneficial ownership of the shares attributed to CNA Financial Corporation and its subsidiaries. (7) Also includes 29,775 shares owned by relatives or held in trust for them, as to which Mr. Sargent disclaims beneficial ownership. (8) Includes 38,019 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 47,147 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (9) Includes 186,202 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 14,423 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (10) Includes 9,074 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 7,692 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (11) Includes 33,752 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 19,391 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (12) Includes 31,807 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 18,562 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (13) Includes 32,627 shares subject to stock options that are vested and exercisable within 60 days of the date of this document and 18,971 restricted shares that are not vested within 60 days of the date of this document, but that have full dividend and voting rights. (14) Includes 5,833 restricted shares that are not vested within 60 days of this document, but that have full dividend and voting rights. 74 86 MANAGEMENT Steven J. Bensinger, 45, has been an Executive Vice President of Trenwick since October 1999. Prior to the merger of Chartwell Re Corporation with Trenwick, Mr. Bensinger served as President of Chartwell Re Corporation from March 1993 and as director of Chartwell Re Corporation from February 1994. From July 1998 until the merger of Chartwell Re Corporation with Trenwick, Mr. Bensinger also served as Chairman and Chief Executive of Chartwell UK plc and Chartwell Managing Agents Limited. From February 1991 to November 1992, Mr. Bensinger was President and Chief Operating Officer of Skandia America Reinsurance Corporation. From prior to 1988 to February 1991, Mr. Bensinger was Skandia America Reinsurance Corporation's Chief Financial Officer. Prior to joining Skandia America Reinsurance Corporation, he was a partner with the international accounting and consulting firm of PricewaterhouseCoopers LLP. John V. Del Col, 38, has served as Senior Vice President, General Counsel, and Secretary of Trenwick since October 1999. From January 1998 until the merger with Chartwell Re Corporation, Mr. Del Col was Vice President, General Counsel, and Secretary of Chartwell Re Corporation. From July 1994 until December 1997, Mr. Del Col was the Deputy General Counsel and Assistant Secretary at MeesPierson Holdings Inc., a Dutch merchant bank. From November 1991 until July 1994, Mr. Del Col was an associate in the law firm LeBoeuf, Lamb, Greene & MacRae. Prior thereto, Mr. Del Col was an associate in the law firm of Sullivan & Cromwell. Paul Feldsher, 51, has been an Executive Vice President and Chief Underwriting Officer of Trenwick since 1999, a director of Trenwick America Reinsurance Corporation since 1988 and an Executive Vice President of Trenwick America Reinsurance Corporation since 1993. Mr. Feldsher manages Trenwick's underwriting policy and quality control operations. He began his career with Liberty Mutual Insurance Company in 1972 and was employed by North American Reinsurance prior to joining Trenwick America Reinsurance Corporation in 1983. Robert A. Giambo, 47, has served as an Executive Vice President and Chief Actuary of Trenwick since 1999, a director and Chief Actuary of Trenwick America Reinsurance Corporation since 1988 and an Executive Vice President of Trenwick America Reinsurance Corporation since 1993. Prior to joining Trenwick America Reinsurance Corporation in 1986, he was associated with The Home Insurance Company and The Insurance Services Office. Mr. Giambo received his Casualty Actuarial Fellowship in 1980. Alan L. Hunte, 51, was appointed Chief Accounting Officer of Trenwick in 2000, Executive Vice President in 1999, Treasurer in 1987 and Vice President in 1984. Mr. Hunte was Chief Financial Officer of Trenwick from 1993 to 2000. Mr. Hunte has been a director and Treasurer of Trenwick America Reinsurance Corporation since 1988 and also Executive Vice President and Chief Financial Officer of Trenwick America Reinsurance Corporation since 1993. Mr. Hunte is a Chartered Accountant, having served as audit manager for a public accounting firm prior to joining the Company in 1981. Coleman D. Ross, 57, was appointed Executive Vice President and Chief Financial Officer of Trenwick in June 2000. Prior to joining Trenwick, he was associated with the firm of PricewaterhouseCoopers LLP as a general partner from July 1, 1977 to June 30, 1999. 75 87 THE AGREEMENT GENERAL The following is a summary of the material terms in the agreement not discussed elsewhere in this joint proxy statement/prospectus. The agreement and the amendment to the agreement are incorporated by reference in their entirety and attached to this joint proxy statement/prospectus as Appendices A and B. We encourage you to carefully read the agreement and the amendment to the agreement in their entirety for a more complete description of the transactions. Many of the representations and warranties and conditions to closing of Trenwick and LaSalle contained in the agreement are qualified by reference to materiality. The agreement defines a "material adverse effect" or "material adverse change" as any material adverse effect on or change with respect to: - the agreement or related transactions or the announcement thereof; - the insurance, reinsurance or financial services industry in general; - any decrease in the value of portfolio investments resulting from changes in prevailing market interest rates; - economic or market conditions generally; - laws, regulations, accounting principles, or regulations or policies of general applicability; and - actions or omissions of a party taken with the prior written consent of the other parties in contemplation of the proposed transactions. REPRESENTATIONS AND WARRANTIES REPRESENTATIONS AND WARRANTIES OF TRENWICK AND LASALLE The agreement contains representations and warranties between Trenwick and LaSalle relating to a number of matters, including, - the capital structure, organization, licenses, corporate power and related matters of LaSalle, Trenwick and each of our subsidiaries; - authorization, execution, delivery, performance and enforceability of the agreement and related matters; - the absence of any acceleration of the maturity of any indebtedness or the creation of any lien on the property of any party or its subsidiaries; - the absence of any declaration of dividends, other than ordinary dividends on common stock, or distributions; - the timeliness and accuracy of all filings of financial statements and documents filed with the SEC; - the absence of undisclosed liabilities that would be required to be on a balance sheet; - the absence of material adverse changes; - the absence of any change in accounting principles or practices, unless required by a change in the applicable accounting principles; - the absence of undisclosed broker, agent, financial advisor or other intermediary fees and expenses; - the absence of default or violation of our charters and by-laws, or agreements to or by which any party or its subsidiaries or any property of a party or its subsidiaries is bound; 76 88 - the absence of any required government consents, approvals and filings except as disclosed; - compliance with applicable laws; - the accuracy of information supplied for use in the registration statement on Form S-4, of which this document is a part; - the absence of undisclosed material contracts; - the absence of undisclosed derivative contracts; - tax matters and the payment of taxes; - the absence of any tax election that would have a material adverse effect; - the absence of litigation; - title to property and status of leases; - the compliance with all laws relating to employment of labor; - the absence of any labor disputes; - the absence of any known activities of any labor union to organize any employees of Trenwick or LaSalle; - the absence of any increases in compensation or bonus to current or former officers or directors of Trenwick or LaSalle, except in the ordinary course of business; - the absence of any increase in severance or termination pay to current or former officers or directors of Trenwick or LaSalle; - the absence of any amendments of any employment or similar agreements with any current or former director or officer; - the absence of any undisclosed change in control, severance, termination or indemnification agreements; - employee benefit matters, including compliance of employee benefit plans with applicable laws; - intellectual property; - the inapplicability of takeover statutes to the transactions; - the receipt of fairness opinions from their respective financial advisors; - insurance matters relating to in-force treaties and agreements, actuarial reports, policy forms, rates and insurance agents; - the determination of reserves and admitted assets; - the absence of activity which would require registration as an investment adviser or investment company; - reinsurance contracts, coverholders and managing general agents; - compliance with conditions for reinsurance accounting; - the absence of any futures or option contracts, swaps, hedges or similar instruments which, individually or in the aggregate could have a material adverse effect; and - the absence of undisclosed related party transactions. 77 89 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF LASALLE LaSalle has made additional representations relating to a number of matters including the vote of LaSalle common shareholders and LaSalle Re exchangeable non-voting common shareholders required to approve and adopt the proposed transactions. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF TRENWICK Trenwick has also made representations and warranties relating to a number of matters including the vote of Trenwick stockholders required to approve and adopt the proposed transactions and the amendments to Trenwick's rights agreement so that the transactions do not trigger any rights. COVENANTS AND AGREEMENTS CONDUCT OF BUSINESS OF TRENWICK AND LASALLE We have agreed that, after the date of the agreement and before we complete the transactions, we will carry on our businesses in the ordinary and usual course in a manner consistent with past practices. We have also agreed, to the extent consistent with the agreement, to use our commercially reasonable efforts to preserve intact our current business organizations, keep available the services of our current officers and employees and preserve current business relationships. Without the prior written consent of the other party, the agreement generally limits our ability to: - amend our charter organizational documents and by-laws; - split, combine or reclassify our outstanding shares of stock; - declare or pay any dividends, other than regular quarterly cash dividends or redeem, purchase or otherwise acquire shares of capital stock or other securities; - issue, deliver, sell, grant, pledge, or otherwise encumber any shares of our capital stock or any securities convertible into, or exercisable or exchangeable for any shares of its capital stock; - acquire any other business organization or make any material investment other than in the ordinary course of business; - borrow money or become liable for the obligations of any other person, or except in the ordinary course of business, make any loans to any person, encumber shares of our capital stock or of our subsidiaries, or mortgage or pledge any of our material assets; - make any capital expenditure, other than in the ordinary course of business, and in no case will Trenwick make any capital expenditure in excess of $1 million, or LaSalle make any capital expenditure in excess of $350,000; - enter into, adopt, amend or terminate any benefit plan or arrangement for the welfare or benefit of any director, officer or employee; - increase any compensation or benefits of any director, officer or employee, except in connection with merit increases in the ordinary course of business, and promotions and, in the case of LaSalle, any new or amended pension plan provisions required by Bermuda law; - hire employees at the level of vice president or above or pay any benefit not required under existing plans or arrangements; - enter into any agreement that restricts our operations or that could restrict the operations of Trenwick Group Ltd. after the plans; - make any tax election or settle or compromise any material income tax liability or waive or extend the statute of limitations in respect of any such taxes; 78 90 - make any change in accounting principles except as required by a change in GAAP or as a result of a change of law; - make any material change in our retrocessional agreements or arrangements, which involve reinsurance of a reinsurance company, or commute any corporate aggregate excess of loss reinsurance contracts or arrangements; - pay, discharge, settle or satisfy any claims, liabilities or obligations, other than in the ordinary course of business consistent with past practice of claims for contractual benefits under any insurance or reinsurance contract; - adopt a plan of liquidation, dissolution, amalgamation, consolidation, restructuring, recapitalization or other reorganization; - enter into any new lines of business or make any material changes to the operation of our businesses or loss reserves; - lease, transfer or dispose of any material assets outside the ordinary course of business or enter into any material commitment or transaction outside the ordinary course of business; - commute any corporate aggregate excess of loss reinsurance contracts or arrangements; or - enter into any new related party transaction, agreement, arrangement or understanding that would be required to be disclosed in SEC filings. ADDITIONAL COVENANTS OF TRENWICK AND LASALLE The agreement contains a number of additional agreements including agreements relating to: - the preparation, filing and distribution of this document and Trenwick's filing of the registration statement on Form S-4 of which this document is a part; - press releases and other public statements concerning the transactions; - cooperation with respect to filings with governmental authorities and other agencies and organizations; - the delivery of "comfort letters" from each of our independent accountants in connection with the filing of the registration statement on Form S-4 of which this document is a part; - cooperation in the defense of any litigation relating to the transactions; and - the use of commercially reasonable efforts to exempt the transactions from, and otherwise act to eliminate or minimize the effects of, any applicable takeover or change of control law. Trenwick also has committed not to amend its rights agreement in any manner adverse to LaSalle and to take all actions requested by LaSalle to render the Trenwick rights agreement inapplicable to the transactions. COVENANTS OF TRENWICK GROUP LTD. Trenwick Group Ltd. has agreed to: - indemnify officers and directors of Trenwick and LaSalle for losses, expenses, claims, damages, and liabilities arising out of the transactions and maintain directors, officers and fiduciary liability insurance coverage for 6 years after the completion of the transactions for such officers and directors; - use commercially reasonable efforts to cooperate with LaSalle shareholders and Trenwick stockholders in the completion of a gain recognition agreement under Section 367 of the Internal Revenue Code; 79 91 - maintain employee benefits for employees of Trenwick and LaSalle for at least one year and honor all disclosed employee compensation arrangements other than the LaSalle employee stock purchase plan; - take all actions necessary to implement its shareholder rights plan; - assume the outstanding warrants of Trenwick; - file a registration statement with respect to Trenwick, LaSalle and LaSalle Re options that become Trenwick Group Ltd. options; - assume the obligation to deliver one Trenwick Group Ltd. share in exchange for each exchangeable non-voting common share of LaSalle Re surrendered for exchange by its holder if the LaSalle Re scheme of arrangement is not approved by the required vote of the holders of the exchangeable non-voting common shares of LaSalle Re; and - assume the obligation to deliver to any holders of Series B preferred shares of LaSalle who surrender those shares for conversion, the same amount of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of LaSalle shares that they would have received upon conversion of those Series B preferred shares had the LaSalle scheme of arrangement not been consummated. COVENANTS OF TRENWICK, LASALLE AND TRENWICK GROUP LTD. Trenwick, LaSalle and Trenwick Group Ltd. have agreed to: - use commercially reasonable efforts to cause the shares of Trenwick Group Ltd. to be issued and approved for listing on the NYSE; - use best efforts to cause the plan of reorganization to qualify as a "reorganization" under Section 368(a) of the Internal Revenue Code and to cause the schemes of arrangement to qualify as tax-free under Section 351 of the Internal Revenue Code; and - promise to refrain from taking any action that would be inconsistent with the qualification of the plan of reorganization and the schemes of arrangement as tax-free under Section 351 or Section 368(a) of the Internal Revenue Code. ADDITIONAL COVENANT OF LASALLE RE LaSalle Re has agreed to use commercially reasonable efforts to obtain the consent of the holders of the LaSalle Re options to the cancellation of such options in exchange for Trenwick Group Ltd. options on terms no less favorable than those currently applicable to the LaSalle Re options. CONDITIONS CONDITIONS TO EACH PARTY'S OBLIGATION TO COMPLETE THE TRANSACTIONS. Our obligation to complete the transactions is subject to the fulfillment of the following conditions: - Shareholder Approval. We must obtain the LaSalle shareholder approval and the Trenwick stockholder approval. - Stock Exchange Listing. The NYSE must authorize the Trenwick Group Ltd. common shares issuable in the transactions for listing, subject to official notice of issuance. - Governmental Approvals. We must obtain all required regulatory approvals, all waiting periods must lapse, and the Bermuda Supreme Court must approve the schemes of arrangement on the terms contemplated by the agreement. These approvals may not be subject to conditions which would impose material and adverse limitations on the ability of Trenwick Group Ltd. to conduct its business, require changes to the transactions that would be material 80 92 and adverse to us or to Trenwick Group Ltd., or which would change the consideration payable to you. - Third Party Consents. We must obtain required consents and approvals from our lenders and equity providers. - No Injunctions or Restraints. There must be no effective legal restraint or prohibition which would prevent the completion of the transactions. - Antitrust laws. The waiting period, and any extension of time thereof, applicable to the transactions under U.S. antitrust laws must have expired or been terminated. - Registration Statement. The registration statement of which this joint proxy statement/prospectus is a part must become effective with no stop orders in effect or threatened. - Legal Opinions. LaSalle. LaSalle and Trenwick Group Ltd. must receive a tax opinion stating that the schemes of arrangement will qualify as an exchange under sec.351(a) of the Internal Revenue Code and that LaSalle shareholders and that U.S. transferors of LaSalle Re exchangeable non- voting shares will not recognize any taxable gain or loss upon the receipt of Trenwick Group Ltd. shares. Trenwick. Trenwick and Trenwick Group Ltd. must receive a legal opinion that the U.S. transferors of Trenwick shares will not recognize any taxable gain or loss upon receipt of Trenwick Group Ltd. shares and that the plan of reorganization will qualify as a tax-free reorganization. CONDITIONS TO THE OBLIGATION OF TRENWICK TO COMPLETE THE TRANSACTIONS. Trenwick's obligation to complete the transactions is subject to the following additional conditions: - Performance by LaSalle. LaSalle must materially perform the obligations and covenants to be performed by it at or prior to the closing. - Representations and Warranties. LaSalle's representations and warranties in the agreement must be true and correct, as of the date of the agreement and as of the effective time of the agreement, subject to qualifications set forth in the agreement. - Closing Documents. Trenwick must receive customary and satisfactory closing documents. - Comfort Letters. Trenwick must receive customary and satisfactory comfort letters from LaSalle's accountants. - Approvals. LaSalle must receive all required consents and approvals. - Fiduciary Duties. LaSalle's board must not withdraw or adversely modify its approval of the agreement in favor of a superior proposal and determine in good faith with legal counsel's advice that failing to take such action is reasonably likely to result in the breach of its fiduciary duties. - Legal Opinion. Trenwick and Trenwick Group Ltd. must receive a legal opinion from Baker & McKenzie, dated the effective time of the transactions, stating that Trenwick shall treat the plan of reorganization as a taxable disposition of assets but that Trenwick will not be subject more than $60 million of U.S. federal income tax. - Material Adverse Change. LaSalle must not have experienced a material adverse change. This condition does not apply after the LaSalle shareholders approve and adopt the transactions. 81 93 CONDITIONS TO THE OBLIGATIONS OF LASALLE TO COMPLETE THE TRANSACTIONS. LaSalle's obligation to complete the transactions is subject to the following additional conditions: - Performance by Trenwick. Trenwick must materially perform the obligations and covenants to be performed by it at or prior to the closing. - Representations and Warranties. Trenwick's representations and warranties in the agreement must be true and correct, as of the date of the agreement and as of the effective time of the agreement, subject to qualifications set forth in the agreement. - Closing Documents. LaSalle must receive customary and satisfactory closing documents. - Comfort Letters. LaSalle must receive customary and satisfactory comfort letters from Trenwick's accountants. - Approvals. Trenwick must receive all required consents and approvals. - Rights Agreement. Trenwick must take all necessary actions so that, prior to the effective date, we will have no obligations under the Trenwick rights agreement and no one will have rights under the rights agreement. - Fiduciary Duties. Trenwick's board must not withdraw or adversely modify its approval of the agreement in favor of a superior proposal and determine in good faith with legal counsel's advice that failing to take such action is reasonably likely to result in the breach of its fiduciary duties. - Legal Opinion. Trenwick and Trenwick Group Ltd. must receive a legal opinion from Baker & McKenzie, dated the effective time of the transactions, stating that Trenwick shall treat the plan of reorganization as a taxable disposition of assets but that Trenwick will not be subject more than $40 million of U.S. federal income tax. - Material Adverse Change. Trenwick must not have experienced a material adverse change. This condition does not apply after the Trenwick stockholders approve and adopt the transactions. Neither Trenwick nor LaSalle may rely on the failure of any condition set forth above to be satisfied if the failure of that condition was caused by the party's own failure to use reasonable efforts to complete the transactions contemplated by the agreement or the other agreements entered into in connection with the agreement. NO SOLICITATION The agreement provides that we will not authorize or permit any of our respective officers, directors, employees, investment bankers, financial advisors, attorneys, accountants or other representatives to: - solicit, initiate, encourage, or facilitate any inquiries that might constitute or lead to any takeover proposal; or - participate in any discussions or negotiations regarding any takeover proposal. A takeover proposal means any inquiry, proposal or offer from any person relating to any: - acquisition or purchase by a third party of a business that constitutes 15% or more of the net revenues, net income or assets of either Trenwick and its subsidiaries or LaSalle and its subsidiaries, taken as a whole; - acquisition or purchase by a third party of 15% or more of any class of equity securities of either Trenwick or LaSalle or any of its subsidiaries; 82 94 - tender offer or exchange offer that, if consummated, can result in any person beneficially owning 15% or more of any class of equity securities of either Trenwick or LaSalle or any of its subsidiaries; or - merger, consolidation, amalgamation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Trenwick or LaSalle or any of its subsidiaries. If at any time the board of either Trenwick or LaSalle determines in good faith, after consultation with and taking into account the advice of independent legal counsel that it is necessary to do so in order to act in a manner consistent with that board's fiduciary duties to its shareholders under applicable law, Trenwick or LaSalle, as the case may be, may in response to an unsolicited superior proposal and upon prior written notice to the other party: - furnish information with respect to Trenwick or LaSalle as the case may be to any person pursuant to a confidentiality agreement in reasonably customary form; and - participate in discussions or negotiations regarding the superior proposal. At all times and before taking any of these actions, Trenwick or LaSalle must also notify the other party if it receives a request for material non-public information or a takeover proposal, inform the other party of the identity of any person making a request or takeover proposal and of the material terms of the request or takeover proposal, and keep the other party informed of the status and material details of any such request or proposal. The other party will keep all such information confidential. A "superior proposal" must meet the following criteria: - the proposal is made by a third party to acquire, directly or indirectly, more than 50% of the combined voting power of the shares of Trenwick common stock or LaSalle common shares then outstanding or all or substantially all the assets of Trenwick or LaSalle including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction; - the proposal offers consideration consisting of cash and/or securities; - the proposal is otherwise on terms which the Trenwick or LaSalle board determines in its good faith judgment, based on the advice of a financial advisor of nationally recognized reputation, to be more favorable to Trenwick's stockholders or LaSalle's common shareholders than the agreement and related transactions; and - if the proposal requires financing the required financing is then committed or, in the good faith judgment of the Trenwick or LaSalle board, is reasonably capable of being obtained by the third party. In addition, except in the circumstances described below, neither the Trenwick or LaSalle board nor any committee of the Trenwick or LaSalle board may: - withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to the other company the approval or recommendation by the Trenwick or LaSalle board of the transactions; - approve or recommend, or propose publicly to approve or recommend, any takeover proposal; or - cause Trenwick or LaSalle to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any takeover proposal. The Trenwick or LaSalle board may withdraw or modify its approval and recommendation if it determines that it has the fiduciary duty to do so. If the Trenwick or LaSalle board is prepared to accept a superior proposal, the Trenwick or LaSalle board must forward written notice to the other party specifying the material terms and conditions of the superior proposal and identifying the person making the superior 83 95 proposal. The other party will keep all of the information in the written notice confidential. After the fifth business day following the other party's receipt of the written notice, the board of Trenwick or LaSalle may terminate the agreement, upon payment of the applicable termination fee, and if it chooses, cause the other party to enter into an acquisition agreement with respect to any superior proposal. None of Trenwick's or LaSalle's obligations described above prohibits Trenwick or LaSalle from taking and disclosing to the Trenwick or LaSalle shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to Trenwick or LaSalle shareholders if, in the good faith judgment of the board of Trenwick or LaSalle after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law. TERMINATION The agreement may be terminated and the related transactions may be abandoned at any time prior to the completion of the transactions, whether before or after shareholder approval: (a) by the mutual written consent of Trenwick and LaSalle; (b) by the written notice by either Trenwick or LaSalle: - if the business combination has not become effective on or before the first business day after September 30, 2000, unless the failure to complete the business combination is the result of the failure by the party seeking to terminate the agreement to fulfill any of its obligations under the agreement; - if a governmental authority has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the agreement and such order, decree, ruling or other action has become final and nonappealable, despite Trenwick's and LaSalle's commercially reasonable effort to lift it; - if Trenwick fails to obtain the required approval of its stockholders; - if LaSalle fails to obtain the required approval of its common shareholders; or - if any single natural catastrophe has occurred which results in net losses to LaSalle and its subsidiaries or to Trenwick and its subsidiaries of $100 million or more. (c) by the LaSalle board: - if Trenwick breaches or fails in any material respect to perform or comply with any of its covenants and agreements, or if Trenwick breaches any of its representations and warranties and such breach would have or would be reasonably likely to have a material adverse effect on Trenwick and its subsidiaries, in each case such that the conditions to LaSalle's obligation to complete the transactions cannot be satisfied; however, LaSalle may not terminate the agreement if Trenwick can cure the breach within 10 days following the discovery of the breach; - if the board of Trenwick withdraws or modifies or changes its approval or recommendation of the agreement in a manner adverse to LaSalle or determines in good faith, after consultation with outside legal counsel, that the failure to take such action is reasonably likely to result in the breach of its fiduciary duties under applicable law; or - after LaSalle gives Trenwick five business days written notice that it is prepared to accept a superior proposal as permitted under the no-solicitation provision, gives Trenwick 48 hours advance notice of termination, and pays the required termination fee. See "-- No Solicitation". LaSalle will notify Trenwick promptly if it is no longer prepared to accept the LaSalle superior proposal referred to in its notification. 84 96 (d) by the Trenwick board: - if LaSalle breaches or fails in any material respect to perform or comply with any of its covenants and agreements, or if LaSalle breaches any of its representations and warranties and such breach would have or would be reasonably likely to have a material adverse effect on LaSalle and its subsidiaries, in each case such that the conditions to Trenwick's obligation to complete the transactions cannot be satisfied; however, Trenwick may not terminate the agreement if LaSalle can cure the breach within 10 days following the discovery of the breach; - if the board of directors of LaSalle withdraws or modifies or changes its approval or recommendation of the agreement in a manner adverse to Trenwick or determines in good faith, after consultation with outside legal counsel, that the failure to take such action is reasonably likely to result in the breach of its fiduciary duties under applicable law; or - after Trenwick gives LaSalle five business days written notice that it is prepared to accept a superior proposal as permitted under the no-solicitation provision gives LaSalle 48 hours advance notice of termination, and pays the required termination fee. See "-- No Solicitation." Trenwick will notify LaSalle promptly if it is no longer prepared to accept the Trenwick superior proposal referred to in its notification. Upon termination, the agreement shall become void and have no effect, without any liability or obligation on the part of Trenwick or LaSalle, other than the payment of fees and expenses as described in "-- Expenses and Termination Fees" below, the payment of the termination fee, as described below, and obligations with respect to public announcements and confidentiality, if required. Termination does not relieve any party from liability for any willful and material breach of the representations, warranties, covenants or agreements set forth in the agreement prior to any such termination. EXPENSES AND TERMINATION FEES Trenwick and LaSalle will pay their own fees and expenses in connection with the agreement, the stock option agreements and related transactions, except that Trenwick and LaSalle shall each pay one-half of the costs and expenses incurred in connection with the printing and mailing of this document and specified regulatory filings. In addition, Trenwick will pay LaSalle a termination fee in the amount of $12 million, plus expenses not to exceed $2 million, if: - the agreement is terminated by either Trenwick or LaSalle because: -- the transactions have not been completed on or before the first business day after September 30, 2000, unless the failure to complete the transactions is the result of a failure by the party seeking to terminate the agreement to fulfill any of its obligations under the agreement; or -- Trenwick fails to obtain the required approval of its stockholders; and a takeover proposal of Trenwick has been made. - the agreement is terminated by Trenwick giving LaSalle five business days written notice that it is prepared to accept a superior proposal as permitted under the no-solicitation provision, giving LaSalle 48 hours advance notice of termination. See "-- No Solicitation". - the agreement is terminated by LaSalle because Trenwick breaches or fails in any material respect to perform or comply with any of its covenants and agreements or because Trenwick breaches any of its representations and warranties and such breach would have or would be reasonably likely to have a material adverse effect on Trenwick and its subsidiaries, and the conditions to LaSalle's obligation to complete the transactions cannot be satisfied; provided that LaSalle may not terminate the agreement if Trenwick cures the breach within 10 days following the discovery of the breach; and there is a takeover proposal of Trenwick at the time of the breach; or 85 97 - the agreement is terminated by LaSalle because: -- the Trenwick board withdraws or modifies or changes its approval or recommendation of the agreement or the related transactions in a manner adverse to LaSalle; or -- Trenwick determines in good faith, after consultation with its outside legal counsel, that failure to withdraw, modify or change such approval or recommendation is reasonably likely to result in a breach of the fiduciary duties of the Trenwick board. LaSalle will pay Trenwick a termination fee in the amount of $12 million, plus expenses not to exceed $2 million, if: - the agreement is terminated by either Trenwick or LaSalle because: -- the transactions have not been completed on or before the first business day after September 30, 2000, unless the failure to complete the transactions is the result of the failure by the party seeking to terminate the agreement to fulfill any of its obligations under the agreement; or -- Trenwick fails to obtain the required approval of its stockholders; and a takeover proposal of LaSalle has been made. - the agreement is terminated by LaSalle giving Trenwick five business days written notice that it is prepared to accept a superior proposal as permitted under the no-solicitation provision, giving Trenwick 48 hours advance notice of termination. See "-- No Solicitation." - the agreement is terminated by Trenwick because LaSalle breaches or fails in any material respect to perform or comply with any of its covenants and agreements, or because LaSalle breaches any of its representations and warranties and such breach would have or would be reasonably likely to have a material adverse effect on LaSalle and its subsidiaries, and the conditions to Trenwick's obligation to complete the transactions cannot be satisfied; provided that Trenwick may not terminate the agreement if LaSalle cures the breach within 10 days following the discovery of the breach; and there is a takeover proposal of LaSalle at the time of the breach; or - the agreement is terminated by Trenwick because: -- the LaSalle board withdraws or modifies or changes its approval or recommendation of the agreement or the related transactions in a manner adverse to Trenwick; or -- LaSalle determines in good faith, after consultation with its outside legal counsel, that failure to withdraw, modify or change such approval or recommendation is reasonably likely to result in a breach of the fiduciary duties of the LaSalle board. INDEMNIFICATION AND INSURANCE The agreement provides that Trenwick Group Ltd. will indemnify the present and former directors and officers of Trenwick and LaSalle against liabilities arising out of the proposed transactions. Subject to applicable Bermuda law and public policy, after we complete the transactions, Trenwick Group Ltd. will honor indemnification rights of the current and former directors and officers of Trenwick, LaSalle or any of our subsidiaries. For at least six years from the effective time, Trenwick Group Ltd. will maintain, for all former and current directors and officers of Trenwick, LaSalle and our subsidiaries, the current directors' and officers' liability insurance, fiduciary liability insurance and indemnification policies maintained by Trenwick and LaSalle. However, Trenwick Group Ltd. need not maintain these policies if the annual premium for the policies would be more than twice the last annual premium paid before the agreement was signed. Instead of maintaining these policies, Trenwick Group Ltd. may be authorized to provide acceptable alternate coverage. If the existing policies expire or are cancelled or terminated, or if the annual 86 98 premium under those policies would be more than twice the last annual premium paid before the agreement was signed, before six years after we complete the transactions, Trenwick Group Ltd. will use its reasonable efforts to buy, for the remainder of the six-year period, as much coverage as it can buy for an annualized premium that is not more than twice the last annual premium paid before the agreement was signed. AMENDMENT AND WAIVER Subject to applicable law, Trenwick and LaSalle can agree in writing to amend, modify, or supplement any provision of the agreement at any time before we complete the transactions, whether before or after shareholder approval, except that, if the Trenwick stockholders or LaSalle common shareholders already have adopted the transactions, the amount of consideration to be paid to you may not be decreased and the form of that consideration may not be altered without your approval, and Trenwick and LaSalle may not make any amendment that requires additional approval by you unless they obtain such additional approval. At any time, either party may waive in writing compliance by the other party with any agreements or conditions of the other party. ACCESS TO INFORMATION We have each agreed to provide, and to cause our subsidiaries to provide, to the other party's officers, employees, counsel, accountants and other authorized representatives access during normal business hours to our and our subsidiaries' personnel, offices and other facilities and to our books and records throughout the period prior to the effective time of the business combination. In addition, during such period we will each permit the other party and its authorized representatives to make such inspections of our financial and operating data and information with respect to our businesses and properties as the other party may reasonably request. 87 99 RELATED AGREEMENTS AND TRANSACTIONS STOCK OPTION AGREEMENTS GENERAL DESCRIPTION OF THE STOCK OPTION AGREEMENT Immediately following the execution of the agreement, Trenwick and LaSalle entered into two stock option agreements, each dated December 19, 1999. LaSalle granted Trenwick an irrevocable option to purchase 3,105,110 LaSalle common shares. Trenwick granted LaSalle an irrevocable option to purchase 3,462,164 shares of Trenwick common stock. Each option is for approximately 19.9% of the issuer's outstanding shares. Except as otherwise noted below, the terms and conditions of the Trenwick stock option agreement and the LaSalle stock option agreement are identical in all material respects. The stock option agreements are attached as Appendices D and E, respectively, to this document. We urge you to read these agreements carefully. EXERCISE OF THE OPTIONS To exercise its option, Trenwick must pay LaSalle an exercise price of $12.81 for each LaSalle share. To exercise its option, LaSalle must pay Trenwick an exercise price of $18.04 for each Trenwick share. Each exercise price is equal to the average of the last sale prices of LaSalle common shares or Trenwick common stock, as the case may be, on the 10 trading days immediately prior to the date we publicly announced the agreement. The optionholder may pay the exercise price in cash or may elect a cashless exercise of the options. The cashless exercise method permits the optionholder to pay for the option shares by permitting a number of option shares having a market value equal to the cash exercise price to be withheld. Except as described below, each option may be exercised within 180 days following any event entitling the optionholder to receive the termination fee under the agreement. The right to exercise the option expires upon either: - the effective time of the business combination; - 180 days after the date that the optionholder becomes entitled to receive the termination fee under the agreement; and - the termination of the agreement for any reason that would not trigger a termination fee. The issuer's obligation to deliver the shares is conditioned on the expiration or termination of any waiting period under the Hart-Scott-Rodino Act, approval of the option shares for listing on the NYSE, receipt of required consents or approvals and the absence of any injunctions. ADJUSTMENTS TO NUMBER AND TYPE OF SHARES The total number of shares purchasable upon the exercise of each option, and the purchase price, may be adjusted from time to time to reflect changes in the capitalization of Trenwick or LaSalle. CASH PAYMENT FOR THE OPTION If an option becomes exercisable, the optionholder may require the issuer to repurchase the option in whole or in part, for a price equal to the number of shares of stock then purchasable upon exercise of the option multiplied by the excess of the fair market value over the exercise price. The fair market value is defined in the stock option agreement as the highest of: - the price per share at which a tender or exchange offer for the applicable stock has been made during the term of the option; and - the average of the last sale prices of Trenwick or LaSalle shares, as applicable, on the NYSE preceding the delivery of the notice requesting cash payment for the option. 88 100 If the option has been exercised, the optionholder may, at any time during the five years following exercise, require the issuer to repurchase any option shares at a price equal to the number of shares designated for repurchase multiplied by the higher of the exercise price and the fair market value. REPURCHASE AT THE OPTION OF THE ISSUER After an option has been exercised, the issuer has the right, for six months after the option first becomes exercisable, to repurchase all of the shares issued upon the exercise of the option at a purchase price per share equal to the greater of 110% of the average of the last sale prices per share on the NYSE for the 10 trading days preceding the repurchase request and the total exercise price paid, plus interest. Upon repurchase, the issuer must also pay the optionholders's out-of-pocket expenses in connection with the transactions. FIRST REFUSAL At any time prior to the second anniversary of the first purchase of shares under an option, the issuer would have a right of first refusal over the shares issued under the option in the event the holder desired to sell or transfer such shares. LIMITATION ON PROFIT Each stock option agreement provides that in no event will optionholder's total profit from the option exceed in the aggregate $15 million. Total profit includes the termination fee under the agreement, excluding expenses, as well as amounts paid with respect to the option by the issuer or any third party, in excess of any exercise price paid by the optionholder. The stock option agreements do not permit the optionholder to exercise the options for a number of shares that would result in a deemed profit, as of the date of the exercise notice, of more than $15 million. REGISTRATION RIGHTS For two years following exercise of the option, the optionholder may require the issuer to file, at the issuer's expense, up to two registration statements permitting the sale of the option shares. The issuer of the option may instead purchase all or any part of the shares proposed to be registered at fair market value. EFFECT OF THE STOCK OPTION AGREEMENTS The stock options agreements increase the likelihood that the transactions will be completed in accordance with their terms. They provide compensation to the optionholder for the efforts undertaken and the expenses, losses and opportunity costs incurred by it in connection with the transactions if they are not completed under circumstances involving an acquisition or potential acquisition of the issuer by a third party. We entered into the stock option agreements to accomplish these objectives. The stock option agreements may have the effect of discouraging offers by third parties to acquire either LaSalle or Trenwick prior to the business combination, even if such persons were prepared to offer to pay consideration to you which has a higher current market than the Trenwick Group Ltd. common shares you will receive in the transactions. SHAREHOLDERS AGREEMENT GENERAL Immediately prior to the execution of the agreement, Trenwick and shareholders who together held approximately 16.9% of the outstanding LaSalle common shares and all of the LaSalle Re exchangeable non-voting common shares that were not held by LaSalle entered into the shareholders agreement. These shareholders agreed to vote their shares in favor of adoption of the agreement and approval of the transactions contemplated by the agreement. 89 101 - They also agreed to vote against: - any action that would result in a breach of the agreement; - any other extraordinary transaction; - a transfer of a material amount of assets of LaSalle or any of its subsidiaries; - any change in the majority of the board of directors of LaSalle or LaSalle Re; - any material change in the capitalization of LaSalle or LaSalle Re or the corporate structure of LaSalle or LaSalle Re; or - any action that would interfere with the agreement. These shareholders also agreed to revoke any proxy they previously granted with respect to such matters. The shareholders agreement does not prohibit these shareholders from transferring their shares or options to any person. The shareholders agreement is attached as Appendix F to this document. We urge you to read this agreement carefully. TERMINATION OF THE SHAREHOLDERS AGREEMENT The voting provisions terminate if LaSalle's board either modifies or withdraws its approval and recommendation of the agreement based on its fiduciary duties or terminates the agreement in order to accept a superior proposal. The entire shareholders agreement terminates 180 days after the agreement is terminated, or if earlier, upon the closing of the schemes of arrangement. THE CLOSING Unless we agree otherwise, the closing of the transactions will take place at 9:00 a.m. on the business day after all other closing conditions have been satisfied or waived. The closing of the transactions will take place at the offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019-5820, unless Trenwick and LaSalle agree in writing to another date, time or place. The closing of the transactions is expected to take place shortly after the approval of the stockholders of Trenwick, common shareholders of LaSalle and holders of LaSalle Re exchangeable non-voting common shares at the special meetings and the receipt of all necessary insurance and other regulatory approvals. EFFECTIVE TIME At the closing, Trenwick Group Ltd. will acquire all of the assets and assume all of the liabilities of Trenwick in exchange for Trenwick Group Ltd. common shares. The plan of reorganization will become effective at the time Trenwick Group Ltd. common shares are distributed to holders of Trenwick common stock. The schemes of arrangement must be approved by an order of the Supreme Court of Bermuda. Upon the filing of the orders with the Bermuda Registrar of Companies, the schemes of arrangement will become effective. The filing of the Bermuda Supreme Court orders approving the schemes of arrangement with the Bermuda Registrar of Companies and the reorganization will occur on the same day. The effective time of the business combination will be the later of the effective time of the schemes of arrangement and the effective time of the plan of reorganization. TRENWICK GROUP LTD. AFTER COMPLETION OF THE TRANSACTIONS Upon completion of the transactions, Trenwick Group Ltd.'s restated memorandum of association and bye-laws as in effect immediately prior to the effective time of the transactions will continue to be the memorandum of association and bye-laws of Trenwick Group Ltd. Mr. Billett will be the Chairman, President and Chief Executive Officer of Trenwick Group Ltd. and Mr. Hengesbaugh will be President of LaSalle Re. The executive officers of Trenwick Group Ltd. will consist of Trenwick's current executive officers and individual executive officers of LaSalle appointed by the Trenwick Group Ltd. board. 90 102 INFORMATION REGARDING TRENWICK Trenwick Group Inc. is a holding company with four principal operating units: Trenwick America Reinsurance Corporation, Trenwick International Limited, Chartwell Managing Agents Limited and Canterbury Financial Group Inc. Of Trenwick's 1999 total net premiums each of Trenwick's operating units contributed as follows: - Trenwick America Re -- 43.7%. - Trenwick International -- 36.5%. - Chartwell Managing Agents -- 18.2%. - Canterbury -- 1.6%. Net premiums are insurance or reinsurance premiums received minus premiums paid or payable for Trenwick's own reinsurance coverage. The premiums contributed by Chartwell Managing Agents and Canterbury only reflect the period from October 27, 1999, the date of their acquisition by Trenwick, to December 31, 1999. Trenwick America Re, located in Stamford, Connecticut, provides reinsurance to U.S. insurance companies for property and casualty risks. Its statutory surplus, which is shareholders equity, determined in accordance with insurance accounting principles was $262.6 million as of June 30, 2000. Trenwick America Re provides treaty reinsurance, where it agrees in advance to take a specific share of part of an insurance company's business. As a broker market reinsurer, Trenwick America Re obtains substantially all of its business through brokers who represent insurance companies. Trenwick America Re is licensed or otherwise authorized to do business in all fifty states and the District of Columbia. Trenwick International, which Trenwick acquired in February 1998, is headquartered in London, England. Trenwick International is authorized to write insurance in over 30 countries and participates in the London market for worldwide reinsurance. Its business, which is conducted outside of the United States, consists principally of direct insurance provided to policyholders and specialized risk reinsurance provided to insurance companies. It also provides insurance companies with property and casualty reinsurance through treaties. A recently-opened branch office in Paris, France specializes in specialized risk property reinsurance. Trenwick International obtains its business through brokers who represent policyholders, in the case of direct insurance, and insurance companies, in the case of reinsurance. Its regulatory surplus, which is shareholders equity, determined in accordance with insurance accounting principles was $121.4 million as of June 30, 2000. Trenwick acquired Chartwell Managing Agents as part of its acquisition of Chartwell Re Corporation and its subsidiaries in October 1999. Chartwell Managing Agents is among the largest managing agents at Lloyd's and manages three underwriting syndicates at Lloyd's, with a total underwriting capacity of approximately L230 million ($380 million) for the 2000 year of account. Over 98% of Chartwell Managing Agents' syndicates' 2000 capacity is supplied by Trenwick. Chartwell Managing Agent's principal office is in London, England. Canterbury Financial Group, which Trenwick also acquired as part of the Chartwell transaction, is located in Stamford, Connecticut. Canterbury underwrites specialty property and casualty primary insurance programs through managing general agents. Canterbury's insurance subsidiaries, The Insurance Corporation of New York and Chartwell Insurance Company, have statutory surplus, which is shareholders equity, determined in accordance with insurance accounting principles, of $140.8 million and $211.9 million, respectively, as of June 30, 2000. The Insurance Corporation of New York and Chartwell Insurance Company are licensed in 50 and 49 states, respectively. Canterbury has also established a surplus lines company -- Dakota Specialty Insurance Company -- which is authorized to underwrite business in 34 states. All of Trenwick's principal insurance and reinsurance subsidiaries are rated A (Excellent) by A.M. Best Company, an independent insurance rating organization. Standard & Poor's Rating Services rates the 91 103 financial strength of Trenwick's principal insurance and reinsurance subsidiaries as A+ (Good). Standard & Poor's also rates the Trenwick's counterparty credit and senior debt as BBB+ and its preferred stock as BBB-. On December 20, 1999, Moody's Investors Service confirmed its previously issued Baa2 rating for Trenwick's senior debt and revised its rating outlook to "stable." Except for the ratings which specifically address Trenwick's senior debt and preferred stock, these ratings are issued to assist insurance companies and policyholders, not to protect investors. Prior to the business combination, Trenwick will complete an internal restructuring designed to organize Trenwick's subsidiaries into three separate groups: a chain of U.S. corporations, a chain of U.K. corporations and a chain of Bermuda corporations. Trenwick's principal executive office is located at One Canterbury Green, Stamford, Connecticut 06901, and its telephone number is 203-353-5500. Its Internet address is http://www.trenwick.com. INFORMATION REGARDING TRENWICK GROUP LTD. Trenwick Group Ltd.,which was formerly known as Gowin Holdings International Limited, is a Bermuda holding company which has been formed to accomplish the transactions. Trenwick Group Ltd. has no significant assets or capitalization and has not engaged in any business or prior activities other than in connection with the transactions. Trenwick Group Ltd.'s principal executive office will be located at Continental Building, 25 Church Street, Hamilton HM12, Bermuda. INFORMATION REGARDING LASALLE LaSalle's principal focus is to write property catastrophe reinsurance on a worldwide basis through its subsidiary, LaSalle Re. Property catastrophe reinsurance contracts cover unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes, riots, floods and other man-made or natural disasters. LaSalle seeks a geographically diverse portfolio of property catastrophe reinsurance risks. LaSalle also writes other lines of business that have a catastrophe orientation when pricing opportunities arise. These lines currently include: - Property risk excess, which covers damage to specified property after a stated deductible has been exceeded; - Property pro rata treaty, which covers a stated percentage of the property insurance policies written by the company whose risks are being reinsured; - Casualty; - Marine; - Crop hail; - Aviation; - Satellite; and - Political risk. 92 104 In addition, through its subsidiary LaSalle Re Corporate Capital Ltd., LaSalle provides capital support to selected Lloyd's syndicates that individually write the following lines of business: - Direct insurance; - Facultative reinsurance, which covers damage to specific property insured by the company whose risks are being reinsured; - Marine insurance and reinsurance; - Professional indemnity insurance; - Directors' and officers' insurance; and - Bankers' blanket bonds, which cover theft or the disappearance of money or other property held by a bank or financial institution. LaSalle seeks to maintain and develop long-term relationships with its clients and brokers by promptly responding to underwriting submissions, designing customized programs and offering lead terms when circumstances warrant and paying valid claims within an average of five days. By providing a high level of service, LaSalle retains a substantial portion of its clients from year to year. In addition, LaSalle's relationships with brokers enable it to obtain business and monitor developments in various lines of reinsurance in order to increase its writings when market conditions in those lines are favorable. For additional information about LaSalle you should read LaSalle's annual report on Form 10-K for the fiscal year ended September 30, 1999 and LaSalle's quarterly report on Form 10-Q for the quarter ended June 30, 2000. See also "Where You Can Find More Information." 93 105 UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION On December 19, 1999, Trenwick announced that it had entered into an Agreement, Schemes of Arrangement and Plan of Reorganization with LaSalle and LaSalle Re which agreement was amended and restated as of March 20, 2000 and amended as of June 28, 2000. At the effective time of the business combination, each of your shares will be converted into the right to receive one Trenwick Group Ltd. common share, subject to adjustment in the event of a sufficiently large natural catastrophe as described in this document. The unaudited pro forma combined consolidated financial statements assume that all of your shares will be exchanged at the fixed exchange ratio. The total value of the consideration for pro forma purposes was determined using the average closing price of Trenwick common stock on the New York Stock Exchange for the five day trading period ended December 22, 1999. Under the terms of the agreement, a newly-formed holding company, Trenwick Group Ltd., will acquire all of the assets and assume all of the liabilities of Trenwick in exchange for Trenwick Group Ltd. common shares. Thereafter, Trenwick will be completely liquidated. Upon completion of the reorganization, holders of Trenwick common stock will receive one Trenwick Group Ltd. common share in exchange for each share of Trenwick common stock that they hold. In addition, each LaSalle common share and each LaSalle Re exchangeable non-voting common share will be exchanged for one Trenwick Group Ltd. common share, subject to the terms and conditions of the agreement. LaSalle will be treated as the acquiror for accounting purposes. On October 27, 1999, Trenwick completed its acquisition of Chartwell. Therefore, Trenwick's historical statement of operations for the year ended December 31, 1999 includes the results of Chartwell's operations for the period from October 28, 1999 through December 31, 1999. Trenwick's historical balance sheet as of December 31, 1999 includes the financial position of Chartwell. The following unaudited pro forma combined consolidated balance sheet as of June 30, 2000 is based on the historical consolidated financial statements of LaSalle and Trenwick, combined and adjusted to give effect to the business combination, using the purchase method of accounting as if it occurred on June 30, 2000. The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 1999 and the six months ended June 30, 2000 reflect the business combination as if it occurred on January 1, 1999. In addition the unaudited pro forma combined consolidated statement of operations for the year ended December 31, 1999 includes the historical results of Chartwell's operations for the period from January 1, 1999 through October 27, 1999, adjusted to give effect to the acquisition, using the purchase method of accounting, as if it occurred on January 1, 1999. Reclassifications have been made to the historical financial statements to conform with this pro forma presentation. You should read these statements in conjunction with those historical financial statements and the notes thereto, which are incorporated by reference in this document. The pro forma adjustments are based upon preliminary estimates, information currently available and a number of assumptions that management of Trenwick and LaSalle believe are reasonable under the circumstances. Trenwick Group Ltd.'s actual consolidated financial statements will reflect the effects of the business combination on and after the effective time of the business combination rather than the dates indicated above. The unaudited pro forma combined consolidated financial statements do not purport to represent what the combined results of operations or financial position actually would have been had the business combination occurred on the assumed dates, nor do they purport to project the combined results of operations and financial position for any future period. Operating expense savings that may result from business combination have not been reflected in these pro forma financials. Described below are the preliminary adjustments to record the assets and liabilities at fair value and allocate the excess of the fair value of net assets acquired over the purchase price. Total consideration has been allocated based on management's best estimate. All amounts are in thousands, except per share amounts. 94 106 UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
TRENWICK GROUP INC. LASALLE RE TOTAL ---------- ---------- --------- DETERMINATION OF PURCHASE PRICE(A) Trenwick shares (16,288,082 common)...................... 16,288 16,288 LaSalle Re minority shares (4,725,546 non-voting common)................................................ 4,726 4,726 Exchange ratio for the conversion of shares.............. 1.0 1.0 1.0 Trenwick Group Ltd. common shares issued in exchange for Trenwick and LaSalle Re shares......................... 16,288 4,726 21,014 Trenwick average price per voting common share........... $ 15.76 $ 15.76 $ 15.76 --------- ------- --------- Consideration for Trenwick and LaSalle Re shares......... $ 256,699 $74,482 $ 331,181 Consideration for Trenwick and LaSalle Re stock options................................................ 5,414 1,056 6,470 --------- ------- --------- Total purchase price before acquisition costs............ 262,113 75,538 337,651 Acquisition costs........................................ 9,704 2,796 12,500 --------- ------- --------- Total purchase price..................................... $ 271,817 $78,334 $ 350,151 ========= ======= ========= ALLOCATION OF PURCHASE PRICE Net book value as at June 30, 2000(B): Trenwick net assets.................................... $ 439,472 $ 439,472 LaSalle Re minority interest........................... $85,161 85,161 Adjustment for effect of transaction on carrying value of Trenwick deferred income taxes(C)...................... (7,231) (7,231) Adjustments to reflect fair value of assets acquired and liabilities assumed(D): Trenwick indebtedness, net of income taxes of $1,226... 2,277 2,277 Trenwick mandatorily redeemable preferred capital securities, net of income taxes of $8,824........... 16,386 16,386 LaSalle Re note receivable and other assets............ 160 160 Adjustments to eliminate intangible assets(E): Trenwick goodwill...................................... (150,655) (150,655) Trenwick other intangible assets including unamortized debt issuance costs, net of income taxes of $2,883.............................................. (13,892) (13,892) LaSalle Re intangible assets........................... (258) (258) --------- ------- --------- Sub-total................................................ 286,357 85,063 371,420 Adjustments to reduce carrying value of other long term assets(F): Trenwick premises and equipment, net of income taxes of $3,206.............................................. (5,952) (5,952) LaSalle Re premises and equipment...................... (198) (198) Trenwick non-marketable other equity investments, net of income taxes of $4,624........................... (8,588) (8,588) Excess of fair value of LaSalle Re net assets acquired over purchase price (classified in other liabilities)(F)........................................ (6,531) (6,531) --------- ------- --------- Allocation of purchase price............................. $ 271,817 $78,334 $ 350,151 ========= ======= =========
Refer to pages 100 through 103 for footnotes (A) through (F). 95 107 UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS(1) SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS, EXCEPT PER SHARE DATA)
LASALLE TRENWICK PRO FORMA HISTORICAL(2) HISTORICAL ADJUSTMENTS PRO FORMA ------------- ---------- ----------- --------- REVENUES Net premiums earned......................... $55,988 $288,264 $ -- $344,252 Net investment income....................... 18,187 54,018 2,412(D) 74,617 Net realized investment gains (losses)...... (2,186) (375) -- (2,561) Other income................................ -- 2,574 -- 2,574 Foreign currency gain (loss)................ 373 (912) -- (539) Service and other revenue................... -- 1,811 327(F) 2,138 Equity in net earnings of investees......... -- 5,472 826(F) 6,298 ------- -------- ------- -------- Total revenues.............................. 72,362 350,852 3,565 426,779 ------- -------- ------- -------- EXPENSES Claims and claims expenses incurred......... 53,266 206,494 -- 259,760 Policy acquisition costs.................... 11,110 81,047 -- 92,157 Underwriting expenses....................... 6,661 34,780 (1,393)(F) 40,048 Amortization of goodwill.................... -- 4,097 (4,097)(F) -- General and administrative expenses......... 2,869 5,404 -- 8,273 Interest expense............................ 611 13,050 (464)(E) 13,833 636(D) Minority interest in subsidiary trust....... -- 4,851 345(D) 5,196 ------- -------- ------- -------- Total expenses.............................. 74,517 349,723 (4,973) 419,267 ------- -------- ------- -------- Income (loss) before other minority interest and income taxes.......................... (2,155) 1,129 8,538 7,512 Minority interest in net (loss) of subsidiary................................ (1,258) -- 1,258(A) -- Dividends on preferred stock of subsidiary................................ -- -- 3,282(A) 3,282 ------- -------- ------- -------- Income (loss) before income taxes........... (897) 1,129 3,998 4,230 Income tax expense (benefit)................ -- (2,560) 1,434(G) (1,126) ------- -------- ------- -------- Income (loss) before extraordinary item..... (897) 3,689 2,564 5,356 Extraordinary loss on debt redemption, net of income tax benefit..................... -- (825) -- (825) ------- -------- ------- -------- Net income (loss)........................... $ (897) $ 2,864 $ 2,564 $ 4,531 ======= ======== ======= ======== Basic earnings (loss) per share: Income (loss) before extraordinary item... $ (0.27) $ 0.23 n/a $ 0.15 Net income (loss)......................... $ (0.27) $ 0.18 n/a $ 0.12 Diluted earnings (loss) per share: Income (loss) before extraordinary item... $ (0.27) $ 0.23 n/a $ 0.15 Net income (loss)......................... $ (0.27) $ 0.18 n/a $ 0.12 Basic weighted average shares outstanding... 15,617 15,961 4,726 36,304 Diluted weighted average shares outstanding............................... 15,617 15,981 5,116 36,714
- --------------- (1) This statement of operations assumes that the business combination was consummated on January 1, 1999. (2) La Salle's fiscal year ends on September 30. The historical LaSalle information above has been prepared by adding the results of LaSalle's operations for the three months ended March 31, 2000 and the three months ended June 30, 2000. (Refer to page 105 for support). Refer to pages 100 through 104 for pro forma adjustment footnotes. 96 108 UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS(1) YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
TRENWICK LASALLE PRO PRO FORMA HISTORICAL(2) FORMA(3) ADJUSTMENTS PRO FORMA ------------- --------- ----------- --------- REVENUES Net premiums earned................................ $121,876 $ 478,226 $ -- $ 600,102 Net investment income.............................. 34,481 88,099 4,824(D) 127,404 Net realized investment gains (losses)............. (1,577) 1,083 -- (494) Other income (loss)................................ -- (3,419) -- (3,419) Foreign currency gain (loss)....................... (363) (62) -- (425) Service and other revenue.......................... -- 9,908 653(F) 10,561 Equity in net earnings of investees................ -- (175) 1,652(F) 1,477 -------- --------- ------- --------- Total revenues..................................... 154,417 573,660 7,129 735,206 -------- --------- ------- --------- EXPENSES Claims and claims expenses incurred................ 147,203 414,811 -- 562,014 Policy acquisition costs........................... 20,396 158,473 -- 178,869 Underwriting expenses.............................. 15,492 76,440 (3,562)(F) 88,370 Amortization of goodwill........................... -- 6,459 (6,459)(E) -- General and administrative expenses................ 2,100 9,262 -- 11,362 Interest expense................................... 1,595 17,513 (292)(E) 20,088 -- 1,272(D) Minority interest in subsidiary trust.............. -- 9,702 690(D) 10,392 Loss on commutation................................ -- 57,869 -- 57,869 -------- --------- ------- --------- Total expenses..................................... 186,786 750,529 (8,351) 928,964 -------- --------- ------- --------- Income (loss) before other minority interest....... (32,369) (176,869) 15,480 (193,758) Minority interest in net (loss) of subsidiary...... (8,990) -- 8,990(A) -- Dividends on preferred stock of subsidiary......... -- -- 6,563(A) 6,563 -------- --------- ------- --------- Income (loss) before income taxes.................. (23,379) (176,869) (73) (200,321) Income tax expense (benefit)....................... -- (52,538) 2,917(G) (49,621) -------- --------- ------- --------- Net (loss)......................................... $(23,379) $(124,331) $(2,990) $(150,700) ======== ========= ======= ========= Basic and diluted net loss per share............... $ (1.91) $ (6.76) n/a $ (3.89) Basic and diluted weighted average shares outstanding...................................... 15,676 18,308 4,726 38,710
- --------------- (1) This statement of operations assumes that the business combination was consummated on January 1, 1999. (2) LaSalle's fiscal year ends on September 30. The historical information presented above has been prepared by subtracting the results of LaSalle's operations for the three months ended December 31, 1998 from the fiscal year end results and adding the results for the three months ended December 31, 1999. (Refer to the page 106 for support.) After the consummation of the business combination, the fiscal year end for the combined company will be December 31. (3) Trenwick's acquisition of Chartwell was consummated on October 27, 1999 and Trenwick's historical results of operations for the year 1999 includes the results of Chartwell from the date of its acquisition. The pro forma Trenwick information presented above has been prepared by adding the historical results of Chartwell's operations for the period from January 1, 1999 through October 27, 1999 and Trenwick's operations for the year ended December 31, 1999. (Refer to pages 107 through 108 for support). Refer to pages 100 through 104 for pro forma adjustments. 97 109 UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET(1) AS OF JUNE 30, 2000 (IN THOUSANDS)
LASALLE TRENWICK PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ---------- ----------- ---------- ASSETS Debt securities available for sale............ $450,873 $1,147,805 $ -- $1,598,678 Equity securities available for sale.......... -- 107,222 -- 107,222 Other investments............................. -- 24,736 (13,212)(F) 11,524 Investments held by managed syndicates........ -- 147,608 -- 147,608 -------- ---------- --------- ---------- Total investments............................. 450,873 1,427,371 (13,212) 1,865,032 Cash and cash equivalents..................... 98,532 147,044 245,576 Cash and cash equivalents held by managed syndicates.................................. -- 102,985 -- 102,985 Accrued investment income..................... 12,284 23,701 -- 35,985 Premiums in the course of collection.......... 97,825 452,617 -- 550,442 Deferred policy acquisition costs............. 13,457 93,132 -- 106,589 Prepaid reinsurance premiums.................. 17,163 114,823 -- 131,986 Reinsurance recoverable balances, net......... 8,081 743,124 (1,849)(H) 749,356 Deposits...................................... 27,938 20,771 -- 48,709 Net deferred income taxes..................... -- 101,354 (7,231)(C) 94,786 663(G) Goodwill...................................... -- 150,655 (150,655)(E) -- Other assets.................................. 4,642 113,604 160(D) 92,017 (17,033)(E) (9,356)(F) -------- ---------- --------- ---------- Total assets.................................. $730,795 $3,491,181 $(198,513) $4,023,463 ======== ========== ========= ========== LIABILITIES Unpaid claims and claims expenses............. $178,143 $2,050,332 $ -- $2,228,475 Unearned premium income....................... 75,793 434,421 -- 510,214 Indebtedness.................................. -- 271,831 (3,503)(D) 268,328 Other liabilities............................. 35,119 185,004 12,500(A) 237,305 6,531(F) (1,849)(H) -------- ---------- --------- ---------- Total liabilities............................. 289,055 2,941,588 13,679 3,244,322 -------- ---------- --------- ---------- MINORITY INTEREST Company-obligated mandatorily redeemable preferred capital securities of subsidiary trust holding solely junior subordinated debentures of Trenwick Group Inc............ -- 110,000 (25,210)(D) 84,790 Minority interest in common stock of subsidiary.................................. 85,161 121 (85,161)(B) 121 Minority interest in preferred stock of subsidiary.................................. -- -- 73,283(A) 73,283 -------- ---------- --------- ---------- Total minority interest....................... 85,161 110,121 (37,088) 158,194 -------- ---------- --------- ----------
98 110
LASALLE TRENWICK PRO FORMA HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA ---------- ---------- ----------- ---------- SHAREHOLDERS' EQUITY Preferred stock............................... 3,000 -- (3,000)(A) -- Common stock.................................. 15,625 1,629 21,014(A) 36,639 (1,629)(B) Additional paid-in capital.................... 293,321 280,527 246,354(A) 539,675 (280,527)(B) Retained earnings............................. 51,480 176,870 (176,870)(B) 51,480 Accumulated other comprehensive income........ (6,540) (13,641) 13,641(B) (6,540) Deferred compensation under share award plan........................................ (307) (5,913) 5,913(B) (307) -------- ---------- --------- ---------- Total shareholders' equity.................... 356,579 439,472 (175,104) 620,947 -------- ---------- --------- ---------- Total liabilities, minority interest and shareholders' equity........................ $730,795 $3,491,181 $(198,513) $4,023,463 ======== ========== ========= ==========
- --------------- (1) This balance sheet assumes that the business combination was consummated on June 30, 2000. Refer to pages 100 through 104 for pro forma adjustments. 99 111 NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS The purchase accounting and pro forma adjustments related to the unaudited pro forma combined consolidated statements of operations and balance sheet are described below. All amounts are in thousands, except share and per share amounts. (A) Trenwick Group Ltd. will issue one common share for each outstanding common share of Trenwick (16,288,082 shares at June 30, 2000). The average share price of Trenwick common stock for a reasonable period before and after the date that the terms of the acquisition was announced was determined to be $15.76. That value is being used to determine the purchase price of $256,699 at June 30, 2000. Trenwick Group Ltd. will also assume all of the outstanding options in Trenwick common stock (2,189 options at June 30, 2000). Based on the Black Scholes option pricing model the fair value of these options at June 30, 2000 is $5,414. Trenwick Group Ltd. will also issue one common share for each outstanding non-voting common share of LaSalle Re (4,725,546 at June 30, 2000) and for each outstanding option of LaSalle Re non-voting common stock (108,578 at June 30, 2000), which are exercisable at $6.03 per share. This acquisition of all the minority interest of a subsidiary is also being accounted for by the purchase method. The minority interest will no longer exist after the business combination. Based on the $15.76 value of Trenwick common stock, the purchase price applicable to the outstanding LaSalle Re common shares and options at June 30, 2000 is $74,482 and $1,056, respectively. Direct costs associated with the acquisition are estimated to be $12,500 and consists of attorney fees, financial advisor fees and accountants fees. These costs will be capitalized as part of the total purchase price. Preferred stock of LaSalle currently outstanding will be reflected as minority interest in preferred stock of subsidiary by Trenwick Group Ltd. at June 30, 2000. LaSalle shareholders' equity includes $73,283 applicable to the preferred stock ($3,000 in par value and $70,283 in additional paid-in capital). LaSalle's preferred stock dividends, previously deducted from retained earnings, have been deducted from operations on a pro forma basis and reflected as dividends in preferred stock of subsidiary. LaSalle's minority interest in net income (loss) of its subsidiary, LaSalle Re, previously deducted from operations, has been eliminated to reflect the share exchange described above. The issuance of Trenwick Group Ltd. common stock for the common stock of Trenwick and LaSalle Re common stock (16,288,082 shares and 4,725,546 shares, respectively) and the recording of the fair value of the stock options, together with the reclassification of the LaSalle preferred stock to minority interest, results in the following adjustments to the shareholders' equity in the pro forma consolidated balance sheet at June 30, 2000: Preferred stock of LaSalle reclassified to minority interest............................................. $ (3,000) ======== Common stock: Issued to Trenwick shareholders...................... $ 16,288 Issued to LaSalle Re shareholders.................... 4,726 $ 21,014 -------- ======== Additional paid-in capital: Applicable to Trenwick common stock and options, less par value......................................... $245,825 Applicable to LaSalle Re common stock and options, less par value.................................... 70,812 Applicable to LaSalle preferred stock, less par value............................................. (70,283) $246,354 -------- ========
100 112 (B) The net book value of Trenwick net assets at June 30, 2000 was $439,472. The net book value of LaSalle Re minority interest at June 30, 2000 was $85,161. Elimination of these amounts results in the following adjustments to shareholders' equity and minority interest in common stock of subsidiary in the pro forma consolidated balance sheet at June 30, 2000: Trenwick: Common shares............................................. $ (1,629) Additional paid-in capital................................ (280,527) Retained earnings......................................... (176,870) Accumulated other comprehensive income.................... 13,641 Deferred compensation under share award plan.............. 5,913 --------- Total.................................................. $(439,472) ========= LaSalle Re: Minority interest in common stock of subsidiary........... $ (85,161) =========
(C) Merging Trenwick into Trenwick Group Ltd. may result in the loss of certain future tax benefits because Trenwick Group Ltd. will not be subject to income taxes in the United States unless it conducts a trade or business in the United States. The adjustment to the carrying value of Trenwick's deferred income taxes at June 30, 2000 is a reduction in the asset by $7,231. (D) Adjustments to reflect the fair value of Trenwick and LaSalle Re assets acquired and liabilities assumed are as follows:
INCOME GROSS TAXES NET ------- -------- ------- LaSalle -- other assets, including note receivable................................. $ 160 $ -- $ 160 Trenwick: Indebtedness............................... 3,503 (1,226) 2,277 Mandatorily redeemable preferred capital securities.............................. 25,210 (8,824) 16,386 ------- -------- ------- $28,873 $(10,050) $18,823 ======= ======== =======
The income statement effects of these adjustments are reflected over the remaining lives of the financial instruments: one to three years for indebtedness and 37 years for the preferred capital securities. Trenwick's investments in available for sale debt securities are carried at fair value with differences between fair value and amortized cost reflected in stockholders' equity. Under purchase accounting, the basis of these securities will be adjusted from their amortized cost to their fair values on the date of the business combination. The difference between the fair value and the amortized cost of each security will be amortized or accreted to operations over the remaining term to maturity. For the majority of Trenwick's debt securities, the fair value was lower than the amortized cost as of June 30, 2000. Therefore, the accretion of the difference would generate a pro forma increase in investment income. 101 113 The effects of the fair value and basis adjustments in the pro forma combined consolidated statement of operations for the year ended December 31, 1999 are as follows:
INCOME GROSS TAXES NET ------- ------ ------ LaSalle -- net investment income................ $ 32 $ -- $ 32 Trenwick: Net investment income......................... 4,792 1,676 3,116 Interest expense.............................. (1,272) (445) (827) Minority interest in subsidiary trust......... (690) (242) (448) ------- ------ ------ $ 2,862 $ 989 $1,873 ======= ====== ======
Adjustments are reflected in the June 30, 2000 pro forma combined consolidated statement of operations at their prorated amounts. (E) Adjustments to eliminate intangible assets of Trenwick and LaSalle Re are as follows:
INCOME GROSS TAXES NET --------- ------ --------- Trenwick: Goodwill................................. $(150,655) $ -- $(150,655) Other intangible assets.................. (10,582) 715 (9,867) Unamortized debt issuance costs.......... (6,193) 2,168 (4,025) LaSalle: Intangible assets........................ (258) -- (258) --------- ------ --------- $(167,688) $2,883 $(164,805) ========= ====== =========
The income statement effects of these adjustments on the pro forma combined consolidated statement of operations for the year ended December 31, 1999 are as follows:
INCOME GROSS TAXES NET ------ ------ ------ Trenwick: Amortization of goodwill........................ $6,459 $ -- $6,459 Interest expense................................ 292 102 190 ------ ---- ------ $6,751 $102 $6,649 ====== ==== ======
Adjustments are reflected in the June 30, 2000 pro forma combined consolidated statement of operations at their recorded or prorated amounts as applicable. (F) After adjusting the net book value of Trenwick and LaSalle Re (1) for the effect of the transaction on the carrying value of Trenwick's deferred income taxes (Note C), (2) to reflect the fair value of assets acquired and liabilities assumed (Note D), and (3) to eliminate intangible assets (Note E), there is an excess of the fair value of net assets acquired. The fair value of the net assets of Trenwick being acquired by LaSalle ($286,357) exceeds the total purchase price ($271,817)(determined based on the price of Trenwick common stock) due to the depressed valuation placed by the market on companies in the property -- casualty reinsurance sector, including Trenwick. Trenwick's common stock has been trading at a discount to book value since July 1999. Similarly, the fair value of the minority interest in LaSalle Re being acquired by LaSalle ($85,063) exceeds the total purchase price ($78,334). Trenwick and LaSalle Re conduct actuarial studies of their claims liabilities on a quarterly basis. In addition, Trenwick and LaSalle Re conduct comprehensive actuarial review on an annual basis. 102 114 These actuarial studies provide a systematic method of establishing Trenwick's and LaSalle Re's claims liabilities to reflect as accurately as possible its most current estimates of its insurance liabilities. A summary of the pro forma excess at June 30, 2000 follows:
TRENWICK LASALLE GROUP INC. RE TOTAL ---------- ------- -------- Fair value of net assets acquired........... $286,357 $85,063 $371,420 Total purchase price........................ 271,817 78,334 350,151 -------- ------- -------- Excess...................................... $ 14,540 $ 6,729 $ 21,269 ======== ======= ========
The excess has been applied to reduce values otherwise assigned to all noncurrent assets (other than marketable investments) of Trenwick and LaSalle Re as follows:
INCOME GROSS TAXES NET -------- ------ -------- Trenwick: Premises and equipment..................... $ (9,158) $3,206 $ (5,952) Non-marketable other equity investments.... (13,212) 4,624 (8,588) -------- ------ -------- (22,370) 7,830 (14,540) LaSalle Re: -- Premises and equipment........ (198) -- (198) -------- ------ -------- $(22,568) $7,830 $(14,738) ======== ====== ========
The remaining excess of $6,531 pertaining to LaSalle Re, after reducing noncurrent assets to zero, has been determined to be an excess of fair value of net assets acquired over the purchase price. It is classified in other liabilities and is being amortized over 10 years. The historical depreciation expense on Trenwick's and LaSalle Re's premises and equipment is being eliminated. The adjustment to Trenwick's non-marketable other equity investments is being amortized over eight years, the remaining estimated period to the liquidation of the underlying investment fund. The income statement effects of these adjustments on the pro forma combined consolidated statement of operations for the year ended December 31, 1999 are as follows:
INCOME GROSS TAXES NET ------ ------ ------ Trenwick: Underwriting expenses.......................... $3,562 $1,248 $2,314 Equity in net earnings of investees............ 1,652 578 1,074 LaSalle Re -- service and other revenue.......... 653 -- 653 ------ ------ ------ $5,867 $1,826 $4,041 ====== ====== ======
Adjustments are reflected in the June 30, 2000 pro forma combined consolidated statement of operations at their prorated amounts. (G) The adjustment to income taxes on the June 30, 2000 pro forma balance sheet resulting from the adjustments to reflect fair value of assets acquired and liabilities assumed (Note D), to eliminate 103 115 intangible assets (Note E) and to reduce the carrying value of other long-term assets (Note F) is as follows: Reflect fair value of assets acquired and liabilities assumed................................................... $(10,050) Eliminate intangible assets................................. 2,883 Decrease carrying value of other long-term assets........... 7,830 -------- Total.................................................. $ 663 ========
The income statement effects of these adjustments on the income tax (benefit) expense in the pro forma combined consolidated statement of operations for the year ended December 31, 1999 are as follows: Reflect fair value of assets acquired and liabilities assumed................................................... $ 989 Eliminate intangible assets................................. 102 Decrease carrying value of other long-term assets........... 1,826 ------ $2,917 ======
Adjustments are reflected in the June 30, 2000 pro forma combined consolidated statement of operations at their prorated amounts. (H) At June 30, 2000 profit commissions of $1,849 are due from LaSalle Re to Trenwick under a specific catastrophe reinsurance treaty. The pro forma balance sheet at June 30, 2000 reflects an adjustment to eliminate both the receivable and the payable. The profit commission represents a policy acquisition cost for LaSalle Re and a reduction in policy acquisition costs for Trenwick. As these amounts are offsetting, a pro forma adjustment has not been made to the statement of operations when the historical statements of Trenwick and LaSalle are combined. 104 116 LASALLE RE HOLDINGS LIMITED UNAUDITED HISTORICAL STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS THREE MONTHS SIX MONTHS ENDED ENDED ENDED MARCH 31, 2000 JUNE 30, 2000 JUNE 30, 2000 -------------- ------------- ------------- REVENUES Net premiums earned................................ $ 27,212 $28,776 $55,988 Net investment income.............................. 8,936 9,251 18,187 Net realized investment gains (losses)............. (2,224) 38 (2,186) Foreign currency gain (loss)....................... 170 203 373 -------- ------- ------- Total revenues..................................... 34,094 38,268 72,362 -------- ------- ------- EXPENSES Claims and claims expenses incurred................ 43,546 9,720 53,266 Policy acquisition costs........................... 4,524 6,586 11,110 Underwriting expenses.............................. 3,752 2,909 6,661 General and administrative expenses................ 452 2,417 2,869 Interest expense................................... 305 306 611 -------- ------- ------- Total expenses..................................... 52,579 21,938 74,517 -------- ------- ------- INCOME Income (loss) before minority interest............. (18,485) 16,330 (2,155) Minority interest in net income (loss) of subsidiary....................................... (4,676) 3,418 (1,258) -------- ------- ------- Income (loss) before income taxes.................. (13,809) 12,912 (897) Income taxes....................................... -- -- -- -------- ------- ------- Net income (loss).................................. (13,809) 12,912 (897) Dividends on preferred stock....................... 1,641 1,641 3,282 -------- ------- ------- Net income (loss) available to common shareholders..................................... $(15,450) $11,271 $(4,179) ======== ======= ======= RESTATED EARNINGS PER SHARE(1) Basic earnings (loss) per share.................... $ (0.99) $ 0.72 $ (0.27) Diluted earnings (loss) per share(2)............... $ (0.99) $ 0.71 $ (0.27) Basic weighted average shares outstanding.......... 15,610 15,624 15,617 Diluted weighted average shares outstanding........ 15,610 20,663 15,617
- --------------- (1) Subsequent to the issuance of LaSalle's 1999 consolidated financial statements, LaSalle's management determined that for purposes of the calculation of earnings per common share, the exchangeable non-voting shares of LaSalle Re are not considered to be outstanding common shares of LaSalle. As a result, basic earnings per common share and diluted earnings per common share have been restated from the amounts previously reported. The LaSalle Re exchangeable non-voting shares have been removed from LaSalle's calculation of weighted average number of common shares, but the dilutive effect has been included in the adjusted weighted average number of common shares outstanding. (2) Diluted earnings (loss) per common share equals income before minority interest and after preferred dividends declared and in arrears divided by the adjusted weighted average number of common shares and exchangeable non-voting common shares outstanding. 105 117 LASALLE RE HOLDINGS LIMITED HISTORICAL STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
LESS: PLUS: THREE THREE MONTHS MONTHS YEAR YEAR ENDED ENDED ENDED ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1999 1998 1999 1999 ------------- ------------ ------------ ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) REVENUES Net premiums earned........................... $126,615 $35,130 $ 30,391 $121,876 Net investment income......................... 33,847 7,954 8,588 34,481 Net realized investment gains (losses)........ 615 2,192 -- (1,577) Foreign currency gain (loss).................. 470 805 (28) (363) -------- ------- -------- -------- Total revenues................................ 161,547 46,081 38,951 154,417 -------- ------- -------- -------- EXPENSES Claims and claims expenses incurred........... 131,147 30,586 46,642 147,203 Policy acquisition costs...................... 19,790 5,251 5,857 20,396 Underwriting expenses......................... 13,787 2,849 4,554 15,492 General and administrative expenses........... 788 71 1,383 2,100 Interest expense.............................. 1,714 465 346 1,595 -------- ------- -------- -------- Total expenses................................ 167,226 39,222 58,782 186,786 -------- ------- -------- -------- INCOME Income (loss) before minority interest........ (5,679) 6,859 (19,831) (32,369) Minority interest in net income (loss) of subsidiary.................................. (2,845) 1,155 (4,990) (8,990) -------- ------- -------- -------- Income (loss) before income taxes............. (2,834) 5,704 (14,841) (23,379) Income taxes.................................. -- -- -- -- -------- ------- -------- -------- Net income (loss)............................. (2,834) 5,704 (14,841) (23,379) Dividends on preferred stock.................. 6,563 1,641 1,641 6,563 -------- ------- -------- -------- Net income (loss) available to common stockholders................................ $ (9,397) $ 4,063 $(16,482) $(29,942) ======== ======= ======== ======== RESTATED EARNINGS PER SHARE(1) Basic net income (loss) per share............. $ (0.60) $ 0.26 $ (1.06) $ (1.91) Diluted net income (loss) per share(2)........ $ (0.60) $ 0.25 $ (1.06) $ (1.91) Basic weighted average shares outstanding..... 15,629 15,346 15,604 15,676 Diluted weighted average shares outstanding... 15,629 20,860 15,604 15,676
- --------------- (1)Subsequent to the issuance of LaSalle's 1999 consolidated financial statements, LaSalle's management determined that for purposes of the calculation of earnings per common share, the exchangeable non-voting shares of LaSalle Re are not considered to be outstanding common shares of LaSalle. As a result, basic earnings per common share and diluted earnings per common share have been restated from the amounts previously reported. La Salle Re exchangeable non-voting shares have been removed from LaSalle's calculation of weighted average number of common shares, but the dilutive effect has been included in the adjusted weighted average number of common shares outstanding. (2)Diluted earnings (loss) per common share equals income before minority interest and after preferred dividends declared and in arrears divided by the adjusted weighted average number of common shares and exchangeable non-voting common shares outstanding. 106 118 TRENWICK GROUP INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS(1) YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
TRENWICK TRENWICK CHARTWELL PRO FORMA PRO FORMA HISTORICAL ACQUISITION(2) ADJUSTMENTS(3) TOTAL ---------- -------------- -------------- --------- REVENUES Net premiums earned................................ $325,114 $ 153,112 $ -- $ 478,226 Net investment income.............................. 66,394 21,901 (196) 88,099 Net realized investment gains (losses)............. 1,916 (833) -- 1,083 Other income (loss)................................ 63 (3,482) -- (3,419) Foreign currency gain (loss)....................... (62) -- -- (62) Service and other revenue.......................... 672 9,236 -- 9,908 Equity in net earnings of investees................ 188 (363) -- (175) -------- --------- ------- --------- Total revenues..................................... 394,285 179,571 (196) 573,660 -------- --------- ------- --------- EXPENSES Claims and claims expenses incurred................ 254,538 160,273 -- 414,811 Policy acquisition costs........................... 96,095 62,378 -- 158,473 Underwriting expenses.............................. 37,389 39,051 -- 76,440 Amortization of goodwill........................... 1,423 3,517 1,519 6,459 General and administrative expenses................ 7,182 2,080 -- 9,262 Interest expense................................... 9,176 9,583 (1,246) 17,513 Minority interest in subsidiary trust.............. 9,702 -- -- 9,702 Loss on commutation................................ -- 57,869 -- 57,869 -------- --------- ------- --------- Total expenses..................................... 415,505 334,751 273 750,529 -------- --------- ------- --------- Income (loss) before income taxes.................. (21,220) (155,180) (469) (176,869) Income tax expense (benefit)....................... (10,172) (42,202) (164) (52,538) -------- --------- ------- --------- Net income (loss).................................. $(11,048) $(112,978) $ (305) $(124,331) ======== ========= ======= ========= Basic and diluted net loss per share............... $ (0.94) n/a n/a $ (6.76) Basic and diluted weighted average shares outstanding...................................... 11,762 n/a 6,546 18,308
- --------------- (1) This statement of operations assumes that the business combination with Chartwell was consummated on January 1, 1999. (2) The "Chartwell Acquisition" column represents the historical results of Chartwell's operations for the period from January 1, 1999 through October 27, 1999. Chartwell had aggregate excess of loss reinsurance treaties in place for 1997, 1998 and 1999. As a condition to entering into the adverse development cover described below, Chartwell commuted these excess of loss reinsurance agreements and incurred a loss on commutation of $57,869. As a condition to the merger agreement with Chartwell, Trenwick was indemnified and guaranteed, effective upon completion of the merger, against adverse development in Chartwell's business and such indemnity and guarantee was accomplished through an adverse development cover, which was an express condition to the completion of the business combination. The adverse development cover provides up to $100,000 in coverage for unanticipated reserve increases relating to losses that existed as of the effective date of the business combination and unanticipated adverse development of reinsurance recoverables, profit commission accruals and premium payment receivables. In Trenwick's historical income statement, the claims and claims expenses incurred and other underwriting expenses are recorded net of the losses and other balances ceded under the adverse development cover. For the year ended December 31, 1999, the total losses ceded under the adverse development cover were $46,460 and other underwriting expenses ceded were $8,030. The premiums paid by Chartwell under the adverse development cover were $56,000 and are reflected as a reduction to net premiums earned of $153,112 in Chartwell's historical financial statements prior to Chartwell's acquisition by Trenwick. The adverse development cover described above differs from the aggregate excess of loss treaties in place for 1997, 1998 and 1999 in the following respects: (a) the adverse development cover attaches at a higher reserve level than the aggregate excess of loss treaties; (b) the adverse development cover covers all losses relating to business written by Chartwell prior to the merger date, while the aggregate excess of loss treaties provide coverage 107 119 for losses relating to business written between 1997 and 1999; (c) the adverse development cover provides coverage for several types of underwriting liabilities, while the aggregate excess of loss treaties only provided coverage for loss reserves; and (d) the sublimits within the adverse development cover and the aggregate excess of loss treaties differ significantly. (3) In connection with Trenwick's acquisition of Chartwell in October, 1999, adjustments were made to Chartwell's net assets to reflect the fair value of net assets acquired and liabilities assumed, to eliminate Chartwell's intangible assets and to record intangible assets to reflect the excess cost over the fair value of net tangible assets acquired. Adjustments to Chartwell's historical results in the unaudited pro forma combined consolidated statement of operations for the year ended December 31, 1999 are as follows: Net investment income of $(196) reflecting the amortization of the difference between the historical amortized costs and the fair value of Chartwell's investments in debt securities over the remaining term to maturity. Amortization of goodwill of $1,519, reflecting the elimination of Chartwell's historical amortization of goodwill of $(3,517) and $5,036 reflecting amortization of goodwill recorded in the Chartwell acquisition. Interest expense of $(1,246) reflecting the total of the amortization of the difference between the historical basis and the fair value of Chartwell's debt obligations over the remaining term to maturity of $(295), and the elimination of the amortization of Chartwell's historical debt issuance costs of $(951). Income tax benefit of $(164) reflecting the tax effects of the above adjustments. 108 120 DESCRIPTION OF TRENWICK GROUP LTD. SHARE CAPITAL GENERAL Trenwick Group Ltd.'s authorized share capital is U.S.$15,000,000 consisting of 150,000,000 shares, par value U.S.$.10 per share. As of the date of this document, there were 12,000 common shares of Trenwick Group Ltd. outstanding, and no other shares were issued and outstanding. TRENWICK GROUP LTD. COMMON SHARES Each Trenwick Group Ltd. common shareholder is entitled to one vote for each common share held on all matters to be voted on by common shareholders. Subject to provisions of law and the rights of any preferred shares having preference over the common shares then outstanding, dividends may be paid on the common shares at such times and in such amounts as the board of directors shall determine. Upon liquidation, dissolution or winding up of Trenwick Group Ltd. and subject to the preferential amounts to be distributed to the preferred shareholders, the common shareholders shall be entitled to receive all remaining assets of Trenwick Group Ltd. available for distribution to its shareholders ratably in proportion to the number of common shares held by them respectively. TRENWICK GROUP LTD. PREFERRED SHARES The Trenwick Group Ltd. board may adopt, from time to time, resolutions to issue preferred shares. For each series of Trenwick Group Ltd. preferred shares it establishes, the Trenwick Group Ltd. board has the authority to fix its designation; relative rights, including voting, dividend, conversion, sinking fund and redemption rights; preferences, including with respect to dividends and on liquidation and limitations. COMPARISON OF RIGHTS OF TRENWICK STOCKHOLDERS, TRENWICK GROUP LTD. SHAREHOLDERS AND LASALLE SHAREHOLDERS The following discussion is a summary of material changes in your rights as a shareholder following completion of the transactions. We believe this summary is accurate. However, it is subject to the complete text of the relevant provisions of the Companies Act 1981 of Bermuda, the Delaware General Corporation Law, Trenwick's by-laws and certificate of incorporation, LaSalle's memorandum of association and bye-laws and Trenwick Group Ltd.'s memorandum of association and bye-laws. The rights of Trenwick stockholders are governed by Delaware law and Trenwick's by-laws and certificate of incorporation and the rights of LaSalle shareholders are governed by Bermuda law and LaSalle's memorandum of association and bye-laws. After completion of the transactions, you will become shareholders of Trenwick Group Ltd. and your rights will be governed by Bermuda law and Trenwick Group Ltd.'s memorandum of association and bye-laws. There are differences between the rights of stockholders under Delaware law and the rights of shareholders under Bermuda law, which is based on English legal principles. In addition, there are differences between Trenwick's certificate of incorporation and by-laws, LaSalle's memorandum of association and bye-laws and Trenwick Group Ltd.'s memorandum of association and bye-laws. Among the most significant changes are: - The bye-laws of Trenwick Group Ltd. limit the voting rights of any person, partnership, syndicate or other group that owns 10% or more of the shares of Trenwick Group Ltd. to 9.9%. This provision is intended to prevent Trenwick Group Ltd. from being characterized as a controlled foreign corporation, which could cause U.S. persons owing 10% or more of Trenwick Group Ltd.'s shares to suffer adverse U.S. tax consequences. - The board of Trenwick Group Ltd. may in its discretion, redeem shares from a shareholder at fair market value if it determines that share ownership by that shareholder could result in 109 121 adverse tax, regulatory or legal consequences to Trenwick Group Ltd. and any of Trenwick Group Ltd.'s subsidiaries or shareholders; - A shareholder's right to bring derivative suits is more limited under Bermuda law than the stockholder's rights to bring derivative suits under Delaware law. Copies of Trenwick's certificate of incorporation and by-laws and LaSalle's memorandum of association and bye-laws are incorporated herein by reference and will be provided upon request and Trenwick Group Ltd.'s memorandum of association and bye-laws will be provided upon request. See "Where You Can Find More Information." TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED CAPITAL STOCK AUTHORIZED CAPITAL The Trenwick certificate of incorporation provides for authorized capital stock consisting of 30,000,000 shares of Trenwick common stock, par value $.10 per share, and 2,000,000 shares of preferred stock, par value $.10 per share. Each common share entitles the holder to one vote and to such dividends as the board may from time to time declare. If there is a winding-up or dissolution of the company, or any dissolution of capital, the shareholders are entitled to the surplus assets of the company and all other rights attaching to shares. The board may determine the number, issuance and rights attached to the preferred shares. The Trenwick Group Ltd. memorandum of association provides for authorized capital stock consisting of 150 million shares consisting of two classes of shares. These shares consist of common shares of par value U.S.$.10 and preferred shares of par value U.S.$.10. Each common share entitles the holder to one vote and to such dividends as the board may from time to time declare. If there is a winding-up or dissolution of the company, or any dissolution of capital, the shareholders are entitled to the surplus assets of the company and all other rights attaching to shares. The board may determine the number, issuance and rights attached to the preferred shares. The LaSalle memorandum of association provides for authorized capital stock consisting of 100 million shares consisting of two classes of shares. These shares consist of common shares of par value U.S.$1.00 and preferred shares of par value U.S.$1.00. Each common share entitles the holder to one vote and to such dividends as the board may from time to time declare. If there is a winding-up or dissolution of the company, or any dissolution of capital, the shareholders are entitled to the surplus assets of the company and all other rights attaching to shares. The board may determine the number, issuance and rights attached to the preferred shares. RESTRICTIONS ON TRANSFER Under Delaware law, the certificate of incorporation, the by-laws or an agreement between the corporation and/or one or more stockholders may impose reasonable restrictions on the transferability of common stock. The Trenwick certificate of incorporation and by-laws impose no restrictions on the transferability of common stock. A majority of all board members must approve any transfers that will cause any shareholder other than an investment company to hold more than 5% of the outstanding capital stock of the company, or any shareholder that is an investment company to acquire 10% or more of the outstanding common shares of the company. A majority of all board members must approve any transfers that will cause any shareholder other than an investment company to hold more than 5% of the outstanding capital stock of the company, or any shareholder that is an investment company to acquire more than 9.9% of the outstanding capital stock of the company. 110 122 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED UNILATERAL REPURCHASE OF COMMON SHARES Under Delaware law, a corporation may not redeem shares of common stock at its option absent a provision in the certificate of incorporation. The Trenwick certification of incorporation contains no provision making the common stock redeemable at the option of Trenwick. The bye-laws contain a provision that if the board of directors of Trenwick Group Ltd. determines that any shareholder's share ownership may result in adverse tax, regulatory or legal consequences to the company or any shareholder, it may repurchase shares at fair market value. The company also may assign its repurchase right to a third party, including other shareholders. The same repurchase right on behalf of the company applies if a shareholder is involuntarily dissolved or liquidated or otherwise required to transfer involuntarily any or all of its shares. The bye-laws contain a provision that if the board of directors of LaSalle determines that any shareholder's share ownership may result in adverse tax, regulatory or legal consequences to the company or any shareholder, it may repurchase shares at fair market value. The company also may assign its repurchase right to a third party, including other shareholders. The same repurchase right on behalf of the company applies if a shareholder is involuntarily dissolved or liquidated or otherwise required to transfer involuntarily any or all of its shares. DISTRIBUTIONS AND DIVIDENDS; STOCK REPURCHASES Under Delaware law, a corporation may pay dividends out of surplus and, if there is no surplus, out of net profits for the current and/or the preceding fiscal year, unless the net assets of the corporation are less than the capital represented by issued and outstanding stock having a preference on asset distributions. Surplus is defined under Delaware law as the excess of the net assets over capital. Capital is generally the aggregate par value of the outstanding shares, but may be increased or decreased by the board of directors, but in no event may capital be decreased less than the aggregate par value of the outstanding shares of capital stock. A Delaware corporation may purchase shares of any class except when its capital is impaired or would be impaired by such purchase. A corporation may, however, purchase out of capital shares that are entitled upon any distribution of its assets to a preference over another class or series of its stock if these shares are to be retired and the capital reduced. Under Bermuda law, a company may not pay a dividend if there are reasonable grounds for believing that (1) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (2) the realizable value of the company's assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. Under Bermuda law, if at least two directors swear an affidavit to the effect that, taking into account the purchase, the company is solvent, Trenwick Group Ltd. can repurchase its own shares. A company may reissue repurchased shares without shareholder action. Under Bermuda law, a company may not pay a dividend if there are reasonable grounds for believing that (1) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (2) the realizable value of the company's assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. Under Bermuda law, if at least two directors swear an affidavit to the effect that, taking into account the purchase, the Company is solvent, LaSalle can repurchase its own shares. A company may reissue repurchased shares without shareholder action. 111 123 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED BOARD OF DIRECTORS NUMBER OF DIRECTORS The Trenwick by-laws fix the number of directors at not less than three nor more than 20. The exact number of directors will be determined from time to time by resolution adopted by affirmative vote of at least a majority of the whole board of directors. Currently, there are 11 directors. The Trenwick Group Ltd. bye-laws fix the number of directors at not less than two nor more than 20. The exact number will be determined from time to time by a resolution supported by simple majority. However, if there is no such resolution in effect, the number of directors shall be 20. At closing it is anticipated that there will be 15 directors. The LaSalle bye-laws fix the number of directors at not less than two nor more than 13. The exact number will be determined by a resolution supported by simple majority. However, if there is no such resolution in effect, the number of directors shall be 13. Currently there are 8 directors in office. REMOVAL Under the Trenwick certificate of incorporation, any director may be removed from office, with or without cause, by the affirmative vote of the holders of 80% of the outstanding shares of voting stock. Any director or the entire board may be removed by the affirmative vote of more than 50% of the votes cast at a shareholders general meeting at which a quorum is present provided that notice of such meeting contains a statement of intention to vote for the removal of such director and is provided not less than 14 days before the meeting and that the director is entitled to be heard on the motion for such director's removal. A director may be removed by the affirmative vote of more than 50% of the votes cast at any special general meeting of shareholders convened for the purpose of removing a director provided that notice of any such meeting contains a statement of the intention to vote for the removal of a director and is provided not less than 14 days before the meeting and that such director is entitled to be heard on the motion for such director's removal. COMMITTEES The board of directors may, by resolution, designate one or more committees. Each committee consists of one or more directors. If provided in the resolution and subject to Delaware law, committees have and may exercise the powers and authority of the full board of directors. The bye-laws of Trenwick Group Ltd. authorize the board of directors to appoint and delegate any of its powers to one or more board committees, which may include non-directors as members. The bye-laws of LaSalle authorize the board of directors to appoint and delegate any of its powers to one or more board committees, which may include non-directors as members. 112 124 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED DIRECTOR'S INTERESTS Under Delaware law, no transaction between a corporation and any of its directors or officers, or between a corporation and another entity in which its directors or officers have a financial interest, is void or voidable solely for that reason or solely because the director or officer is present at or participates in that meeting which authorizes the transaction or solely because those directors' votes are counted for that purpose if: - - the material facts of the relationship or interest are known to the board of directors and the board of directors in good faith authorizes the contract by the affirmative vote of the disinterested directors; - - the material facts of the relationship or interest are known to the stockholders and the contract is specifically approved in good faith by the stockholders; or - - the contract is fair to the corporation at the time it is authorized. Interested directors may be counted in determining the presence of a quorum at a meeting which authorizes the transaction with the interested director. Any director or his firm or affiliate thereof may act in a professional capacity for the company, and expect remuneration as if such director were not a director, provided that he shall not act as auditor of the company. A director who is directly or indirectly interested in a contract with the company or any of its subsidiaries is required to disclose the nature of such interest at the first opportunity. Following such disclosure, and unless disqualified by the chairman of the relevant board meeting, a director may vote in respect of any contract or arrangement in which such director is interested and may be counted in the quorum at such meeting. Any director or his firm or affiliate thereof may act in a professional capacity for the company, and expect remuneration as if such director were not a director, provided that he shall not act as auditor of the company. A director who is directly or indirectly interested in a contract with the company or any of its subsidiaries is required to disclose the nature of such interest at the first opportunity. Following such disclosure, and unless disqualified by the chairman of the relevant board meeting, a director may vote in respect of any contract or arrangement in which such director is interested and may be counted in the quorum at such meeting. QUORUM A majority of the whole board shall constitute a quorum. The quorum necessary for the transaction of business may be fixed by the affirmative vote of more than 50% of the directors then in office and unless so fixed shall be the lesser of six or 50% of the directors then in office. The quorum necessary for the transaction of business may be fixed by the affirmative vote of more than 50% of the directors then in office and unless so fixed shall be the lesser of six or 50% of the directors then in office. 113 125 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED VOTING The affirmative vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board. A resolution considered by the board shall be carried by the affirmative vote of more than 50% of the votes of the directors present at a duly constituted meeting at which a quorum is present. A resolution considered by the board shall be carried by the affirmative vote of more than 50% of the votes of the directors present at a duly constituted meeting at which a quorum is present. In addition, to approve a change such that more than 20% of LaSalle's premiums are to come from non-property catastrophe reinsurance, the affirmative vote of 75% of the directors is required. SHAREHOLDERS SHAREHOLDER ACTION BY WRITTEN CONSENT Stockholders of Trenwick may not act by written consent. Any stockholder action must be effected at a meeting of stockholders at which a quorum is present. Shareholder actions by written consent may be signed in counterparts and shall be as valid as if passed in a general meeting. They will be effective on the date the last shareholder signs. The resolution shall constitute minutes and shall not be used to remove a director before the expiration of his term. Shareholders actions by written consent may be signed in counterparts and shall be as valid as if passed in a general meeting. They will be effective on the date the last shareholder signs. The resolution shall constitute minutes and shall not be used to remove a director before the expiration of his term. SPECIAL MEETINGS OF SHAREHOLDERS The Chairman or President of Trenwick may call special meetings of stockholders pursuant to a resolution approved by a majority of the board of directors. The stockholders are not entitled to call special meetings of stockholders. The chairman or two directors or any director and a secretary or the board may call special meetings of shareholders whenever necessary. The meeting shall not take place in the U.S. and requires at least five days notice. Under Bermuda law, shareholders holding 10% or more of the paid-up share capital of the company with the right to vote may require the board to convene a special general meeting of shareholders. The chairman or two directors or any director and a secretary or the board may call special meetings of shareholders whenever necessary. The meeting shall not take place in the U.S. and requires at least five days notice. Under Bermuda law, shareholders holding 10% or more of the paid-up share capital of the company with the right to vote may require the board to convene a special general meeting of shareholders. 114 126 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED NOMINATIONS OF DIRECTORS BY SHAREHOLDERS Stockholders of record may nominate persons for election to the board with proper written notice to Trenwick. The notice must be sent 90 days prior to an annual meeting or seven days after notice of a special meeting. Proper notice must contain: - - the name and address of the stockholder and of the nominee(s); - - a representation that the stockholder is a stockholder of record who is entitled to vote and intends to be represented at the meeting in person or by proxy to make the nomination; - - a description of any arrangements or understandings between the stockholder and the nominee(s); - - other information regarding the nominee(s) as would be required by the SEC in a proxy statement; and - - the consent of the nominee(s). A shareholder must give written notice of director nominations to the secretary at the registered office of the company not less than 60 days nor more than 120 days before the meeting of the shareholders. The chairman of the meeting may refuse to acknowledge a nomination that is not made in compliance with the procedure specified in the bye-laws. A shareholder must give written notice of director nominations to the secretary at the registered office of the company not less than 60 days nor more than 120 days before the meeting of the shareholders. The chairman of the meeting may refuse to acknowledge a nomination that is not made in compliance with the procedure specified in the bye-laws. 115 127 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED VOTING Under Delaware law, unless otherwise provided in the certificate of incorporation, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. The Trenwick By-Laws provide that directors are elected at annual meetings and under Delaware law directors are elected by a plurality of votes cast at an annual meeting at which a quorum is present. Each director holds office until the annual meeting in the year in which his term expires and until his successor is duly elected and qualified or until the director's earlier resignation or removal. Unless otherwise provided in the certificate of incorporation, each stockholder is entitled to one vote for each share of capital stock held by that stockholder. Any question proposed for consideration by the shareholders will require the affirmative vote of more than 50% of the votes cast. The bye-laws contain a provision limiting the voting rights of any person, partnership, syndicate or other group who owns, directly, indirectly or constructively under the Internal Revenue Code, 10% or more of the shares of Trenwick Group Ltd. to 9.9%. This provision is intended to prevent Trenwick Group Ltd. from being characterized as a controlled foreign corporation, which could cause U.S. persons owning 10% or more of its shares to suffer adverse U.S. tax consequences. Except as described above, the bye-laws provide that each shareholder is entitled to one vote for each common share held by that shareholder. Any question proposed for consideration by the shareholders at any general meeting will require the affirmative vote of more than 50% of the votes cast. However, amendments to the bye-law provisions regarding nomination of directors by shareholders requires the affirmative vote of 66 2/3% of the shareholders. Each shareholder is entitled to one vote for each common share held by that shareholder. 116 128 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED SHAREHOLDERS' SUITS Under Delaware law, a stockholder may not commence or maintain a derivative proceeding unless the stockholder: - - was a stockholder of the corporation at the time of the act or omission complained of; or - - became a stockholder through transfer by operation of law from a shareholder who was a shareholder at that time. In addition, the stockholder must remain a stockholder throughout the litigation. The Bermuda courts ordinarily follow English precedent, which permits a shareholder to commence a derivative action in the name of the company to remedy a wrong done to the company only: - - where the act complained of is alleged to be beyond the corporate power of the company or illegal; - - where the act complained of is alleged to constitute a fraud against the minority shareholders by those controlling the company; provided that the majority shareholders have used their controlling position to prevent the company from taking action against the wrongdoers; - - where an act requires approval by a greater percentage of the company's shareholders than actually approved it; or - - where a derivative action is necessary to avoid a violation of the company's memorandum of continuance or bye-laws. The Bermuda courts ordinarily follow English precedent, which permits a shareholder to commence a derivative action in the name of the company to remedy a wrong done to the company only: - - where the act complained of is alleged to be beyond the corporate power of the company or illegal; - - where the act complained of is alleged to constitute a fraud against the minority shareholders by those controlling the company; provided that the majority shareholders have used their controlling position to prevent the company from taking action against the wrongdoers; - - where an act requires approval by a greater percentage of the company's shareholders than actually approved it; or - - where a derivative action is necessary to avoid a violation of the company's memorandum of continuance or bye-laws. 117 129 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED SHAREHOLDER APPROVAL OF BUSINESS COMBINATIONS Under Delaware law, holders of a majority of the shares entitled to vote must approve a merger or consolidation, sale, lease, exchange or other disposition of all or substantially all of the assets, or a dissolution of the corporation. In addition, under Delaware law, class voting rights exist with respect to amendments to the certificate of incorporation that: (1) increase or decrease number of shares of class; (2) change par value of class; or (3) alter or change the powers, preferences or special rights of the shares so as to affect them adversely. These class voting rights do not exist as to other extraordinary matters, unless the certificate of incorporation provides otherwise. The certificate of incorporation of Trenwick does not provide otherwise. The certificate of incorporation prohibits Trenwick from engaging in business transactions with an interested stockholder unless a majority of stockholder votes entitled to be cast approve the transaction. No vote is necessary if the transaction is an approved category of transactions by a majority of disinterested directors. In addition, because Trenwick is a Delaware corporation, it has the benefit of a Delaware law that generally prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for three years after the person became an interested stockholder. This does not apply if, prior to that time, the board of directors approves the transaction or the business combination which resulted in the stockholder becoming an Bermuda law permits an amalgamation between two or more Bermuda companies, or between one or more Bermuda exempted companies and one or more foreign corporations, subject, unless the bye-laws otherwise provide, to obtaining a majority vote of three fourths of the shareholders of each such company present and voting in person or by proxy at a meeting called for the purpose. Bermuda law also provides that where an offer is made for shares in a company by another company and, within four months of the offer, the holders of at least 90% in value of the shares which are the subject of the offer, other than shares already held by or on behalf of the offeror, accept, the offeror may by notice, given within two months after the expiration of the said four months, require any dissenting shareholders to transfer their shares on the terms of the offer. Dissenting shareholders may apply to a court within one month of notice objecting to the transfer and the court may make any order it thinks fit. Bermuda law permits a company to reorganize its share capital in a scheme of arrangement between a company and its shareholders, or any class of shareholders, if the shareholders approve the scheme and the Supreme Court of Bermuda sanctions the scheme following a court hearing. A scheme of arrangement can be, and often is, used to effect a business combination between companies. Approval of a scheme of arrangement requires the affirmative vote of the holders of at least 75% of the shares that are represented and voted, either in person or by proxy, at a meeting of shareholders or, if applicable, a meeting of the relevant class of shareholders, Bermuda law permits an amalgamation between two or more Bermuda companies, or between one or more Bermuda exempted companies and one or more foreign corporations, subject, unless the bye-laws otherwise provide, to obtaining a majority vote of three fourths of the shareholders of each such company present and voting in person or by proxy at a meeting called for the purpose. Bermuda law also provides that where an offer is made for shares in a company by another company and, within four months of the offer, the holders of at least 90% in value of the shares which are the subject of the offer, other than shares already held by or on behalf of the offeror, accept, the offeror may by notice, given within two months after the expiration of the said four months, require any dissenting shareholders to transfer their shares on the terms of the offer. Dissenting shareholders may apply to a court within one month of notice objecting to the transfer and the court may make any order it thinks fit. Bermuda law permits a company to reorganize its share capital in a scheme of arrangement between a company and its shareholders, or any class of shareholders, if the shareholders approve the scheme and the Supreme Court of Bermuda sanctions the scheme following a court hearing. A scheme of arrangement can be, and often is, used to effect a business combination between companies. Approval of a scheme of arrangement requires the affirmative vote of the holders of at least 75% of the shares that are represented and voted, either in person or by proxy, at a meeting of shareholders or, if 118 130 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED interested stockholder and upon consummation of the transaction, the interested stockholder owned at least 85% of the outstanding voting stock. The outstanding voting stock shall exclude shares owned by directors who are also officers and by certain employee plans; or on or after that time the board of directors and the stockholders by an affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder approve the transaction. The definition of "business combinations" includes mergers, assets sales and other transactions resulting in a financial benefit to the interested shareholder. An "interested shareholder" is a person who, together with affiliates and associates, owns or, within three years, did own 15% or more of the corporation's voting shares. provided that those holders also constitute a majority of the record holders who are present and voting, either in person or by proxy, at the meeting. applicable, a meeting of the relevant class of shareholders, provided that those holders also constitute a majority of the record holders who are present and voting, either in person or by proxy, at the meeting. 119 131 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED APPRAISAL RIGHTS Under Delaware law, a stockholder of a corporation which is the constituent corporation of a merger will not have appraisal rights, if: - - the shares of the corporation are listed on (1) a national securities exchange or (2) designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (3) held of record by more than 2,000 stockholders; or - - the corporation will be the surviving corporation of the merger and approval of the merger requires no vote of the stockholders of the surviving corporation. However, a stockholder is entitled to appraisal rights in the case of a merger or consolidation if an agreement of merger or consolidation requires the stockholder to accept in exchange for its shares anything other than: - - shares of stock of the corporation surviving or resulting from the merger or consolidation; - - shares of any other corporation that on the effective date of the merger or consolidation will be either (1) listed on a national securities exchange or (2) designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (3) held of record by more than 2,000 stockholders; - -- cash in lieu of fractional shares of the corporation; or - - any combination of the above. Under Bermuda law, a dissenting shareholder of a company participating in an amalgamation, other than an amalgamation between a company and its wholly-owned subsidiary or between two or more wholly-owned subsidiaries, within one month of the notice of the meeting of shareholders, of the same holding company, may apply to the court to appraise the fair value of his or her shares. Under Bermuda law, a dissenting shareholder of a company participating in an amalgamation, other than an amalgamation between a company and its wholly-owned subsidiary or between two or more wholly-owned subsidiaries, within one month of the notice of the meeting of shareholders, of the same holding company, may apply to the court to appraise the fair value of his or her shares. 120 132 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED LIMITATION ON BUSINESS COMBINATION TRANSACTIONS The Trenwick certificate of incorporation generally prohibits certain transactions between Trenwick and any 10% stockholder, or any affiliate or associate of Trenwick who has been a 10% stockholder within the past two years, unless the transaction is approved by a majority of disinterested directors. Prohibited transactions include: - - mergers and consolidations with any interested stockholder or any company that will become an affiliate or associate of an interested stockholder by virtue of the merger or consolidation; - - certain transfers of company assets or securities; - - liquidation or dissolution; - - reclassification, recapitalization or similar transactions that have the effect of increasing the percentage of stock owned by an interested stockholder. These provisions are in addition to the restrictions imposed by Delaware law on transactions with interested stockholders described above. There are no specific limitations expressed in the bye-laws. There are no specific limitations expressed in the bye-laws. 121 133 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED STOCKHOLDER RIGHTS PLANS Delaware law permits corporations to issue stock purchase rights or adopt a shareholder rights plan. The Trenwick rights plan provides for the distribution of a dividend of one preferred stock purchase right for each outstanding share of Trenwick common stock. The rights are attached to shares of Trenwick common stock but will separate from Trenwick common stock on the tenth business day following: - - a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Trenwick common stock; or - - the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of the outstanding Trenwick common stock. The rights are not triggered if the acquiring person is: - - Trenwick or any subsidiary of Trenwick, - - any employee benefit plan or employee benefit plan fiduciary of Trenwick, - - any subsidiary of Trenwick, any person or group who gains beneficial ownership of 15% or more of the outstanding shares by virtue of a reduction in the total number of shares outstanding, - - or any person who inadvertently trips one of the triggers set forth above. Bermuda law does not prohibit companies from issuing share purchase rights or adopting a shareholder rights plan. The Trenwick Group Ltd. rights plan provides for the distribution of a dividend of one preferred share purchase right for each outstanding Trenwick Group Ltd. common share. The rights will be attached to Trenwick Group Ltd. common shares but will separate from Trenwick Group Ltd. common shares on the tenth business day following one of the following events: - - a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 10% or more of the outstanding Trenwick Group Ltd. common shares; or - - the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 10% or more of the outstanding Trenwick Group Ltd. common shares. LaSalle does not have a shareholder rights plan. 122 134 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED STOCKHOLDER RIGHTS PLANS (CONTINUED) When exercisable, each right will entitle its holder to buy one two-hundredths of a share of Trenwick junior participating preferred stock at a purchase price of $125.00. If any person or group of persons becomes the beneficial owner of 15% or more of Trenwick's common stock, then each right not owned by such person or group will entitle its holder to purchase, at the right's then current exercise price, shares of Trenwick's common stock having a value of twice the right's exercise price. If Trenwick is acquired in a merger or other business combination transaction and Trenwick is not the surviving corporation or if 50% of Trenwick's assets or earning power is sold or transferred, in some circumstances, holders of rights will be entitled to purchase a number of the acquiring company's shares having a market value equal to twice the exercise price of the rights. Before any person or group beneficially owns 15% or more of Trenwick's common stock, the rights are redeemable for $.01 per right at the option of Trenwick's board. If a person or a group becomes the beneficial owner of 15% or more of Trenwick's common stock, Trenwick's board may exchange each right not owned by such person or group for one share of common stock of Trenwick. The rights will expire on September 23, 2007, unless earlier redeemed or exchanged by Trenwick. The business combination and related transactions will not cause the rights plan to be triggered. The rights are not triggered if the acquiring person is: - - Trenwick Group Ltd. or any subsidiary of Trenwick Group Ltd., - - any employee benefit plan or employee benefit plan fiduciary of Trenwick Group Ltd., - - any subsidiary of Trenwick Group Ltd., - - any person or group who gains beneficial ownership of 10% or more of the outstanding shares by virtue of a reduction in the total number of shares outstanding, - - or any person who inadvertently trips one of the triggers set forth above. When exercisable, each right will entitle its holder to buy one one-hundredth of a Trenwick Group Ltd. first preference share at a purchase price to be determined before the closing of the business combination. If any person or group, other than a "grandfathered person" becomes the beneficial owner of 10% or more of Trenwick Group Ltd. common shares, then each right not owned by such person or group will entitle its holder to purchase, at the right's then current exercise price, Trenwick Group Ltd. common shares having a value of twice the right's exercise price. If Trenwick Group Ltd. is acquired in a merger or other business combination transaction and Trenwick Group Ltd. is not the surviving corporation or if 50% of Trenwick Group Ltd.'s assets or earning power is sold or transferred, in some circumstances, holders of rights will be entitled to purchase a number of the acquiring company's shares having a market value equal to twice the exercise price of the rights. Before any person or group beneficially owns 10% or more of Trenwick Group Ltd. 123 135 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED common shares, the rights are redeemable for $.01 per right at the option of Trenwick Group Ltd.'s board. If a person or a group becomes the beneficial owner of 10% or more of Trenwick Group Ltd.'s common shares, Trenwick Group Ltd.'s board may exchange each right not owned by such person or group for one Trenwick Group Ltd. common share. The rights will expire on the tenth anniversary of the adoption of Trenwick Group Ltd.'s rights plan, unless earlier redeemed or exchanged by Trenwick Group Ltd. The business combination and related transactions will not cause the rights plan to be triggered. INSPECTION OF BOOKS AND RECORDS Under Delaware law, any stockholder of record may inspect the corporation's books and records for a purpose reasonably related to such person's interest as a stockholder. Bermuda law provides the general public with a right of inspection of a Bermuda company's public documents at the office of the Registrar of Companies in Bermuda, and provides a Bermuda company's shareholders with a right of inspection of the company's bye-laws, minutes of general shareholders meetings and audited financial statements. The register of shareholders is also open to inspection by shareholders free of charge and, upon payment of a small fee, by any other person. A Bermuda company is required to maintain its share register in Bermuda but may in certain circumstances establish a branch register outside of Bermuda. A Bermuda company is required to keep at its registered office a register of its directors and officers which is open for inspection by members of the public without charge. Bermuda law provides the general public with a right of inspection of a Bermuda company's public documents at the office of the Registrar of Companies in Bermuda, and provides a Bermuda company's shareholders with a right of inspection of the company's bye-laws, minutes of general shareholders meetings and audited financial statements. The register of shareholders is also open to inspection by shareholders free of charge and, upon payment of a small fee, by any other person. A Bermuda company is required to maintain its share register in Bermuda but may in certain circumstances establish a branch register outside of Bermuda. A Bermuda company is required to keep at its registered office a register of its directors and officers which is open for inspection by members of the public without charge. 124 136 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION OF LIABILITY Delaware law generally permits a corporation to indemnify any director, officer, employee or agent as provided in the corporation's certificate of incorporation or by-laws, agreement or otherwise, against judgments, fines, expenses and amounts paid in settlement actually and reasonably incurred by the person in connection with a proceeding in which a person is involved by reason of his or her status as director, officer, employee or agent if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation. Delaware law also permits such person to be indemnified by a corporation if such person is found at a proceeding to be successful on the merits. A corporation may also advance to a director or officer the costs of defending a proceeding upon receipt of an undertaking to repay if it is ultimately determined that such person is not entitled to be indemnified. The by-laws of Trenwick provide for indemnification on the part of Trenwick to the fullest extent permitted by law. Under Bermuda law, a company is permitted to indemnify any officer or director, out of the funds of the company, against: - - any liability he or she incurs in defending any proceedings, whether civil or criminal, in which (1) judgment is given in his or her favor, or (2) he or she is acquitted, or (3) he or she is granted relief from liability by the court in connection with any application under relevant Bermuda legislation; and - - any loss or liability resulting from negligence, default, breach of duty or breach of trust, save for his or her fraud or dishonesty. Trenwick Group Ltd.'s bye-laws provide that Trenwick Group Ltd. will indemnify its officers and directors as well as their heirs, executors and administrators to the fullest extent permitted by law. Bermuda law does not permit indemnification of a person who is or may be found guilty of fraud or dishonesty. Trenwick Group Ltd. will advance all reasonable expenses incurred by or on behalf of the indemnitee in connection with any related proceeding. Under Bermuda law, a company is permitted to indemnify any officer or director, out of the funds of the company, against: - - any liability he or she incurs in defending any proceedings, whether civil or criminal, in which (1) judgment is given in his or her favor, or (2) he or she is acquitted, or (3) he or she is granted relief from liability by the court in connection with any application under relevant Bermuda legislation; and - - any loss or liability resulting from negligence, default, breach of duty or breach of trust, save for his or her fraud or dishonesty. LaSalle's bye-laws provide that LaSalle indemnifies its officers and directors as well as their heirs, executors and administrators to the fullest extent permitted by law. Bermuda law does not permit indemnification of a person who is or may be found guilty of fraud or dishonesty. LaSalle advances all reasonable expenses incurred by or on behalf of the indemnitee in connection with any related proceeding. LIMITED LIABILITY OF DIRECTORS Delaware corporations may adopt a charter provision limiting or eliminating the monetary liability of a director to the corporation or its stockholders by reason of a director's breach of the fiduciary duty of care. However, Delaware law does not permit any limitation of the liability of a director for: - - breaching the duty of loyalty to the corporation or its stockholders; Under Bermuda law, a director must observe the statutory duty of care. A director must act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Bermuda law renders void any provision in the bye-laws or any contract between a company and Under Bermuda law, a director must observe the statutory duty of care. A director must act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Bermuda law renders void any provision in the bye-laws or any contract between a company and 125 137 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED - - failing to act in good faith; - - engaging in intentional misconduct or a known violation of law; - - obtaining an improper personal benefit from the corporation; or - - paying a dividend or approving a stock repurchase in violation of Delaware law. The Trenwick certificate of incorporation eliminates monetary liability of a director to the fullest extent provided by Delaware law. any director exempting him or her from, or indemnifying him or her against, any liability in respect of any fraud or dishonesty of which he or she may be guilty in relation to the company. The Trenwick Group Ltd. bye-laws provide that the shareholders waive any claim or right of action they might have, whether individually or by or in the right of the company, against any director on account of any action taken by or omission of such director in the performance as a director of the company unless such act or omission involves fraud, dishonesty, personal profit or gain by the director. any director exempting him or her from, or indemnifying him or her against, any liability in respect of any fraud or dishonesty of which he or she may be guilty in relation to the company. The LaSalle bye-laws provide that the shareholders waive any claim or right of action they might have, whether individually or by or in the right of the company, against any director on account of any action taken by or omission of such director in the performance as a director of the company unless such act or omission involves fraud, dishonesty, personal profit or gain by the director. AMENDMENT OF GOVERNING DOCUMENTS Under Delaware law, the certificate of incorporation may be amended if: - - the board of directors sets forth the proposed amendment in a resolution, declares the amendment advisable and directs that it be submitted to a vote at the meeting of stockholders; and - - unless the charter requires the vote of a greater number of shares, holders of at least a majority of shares entitled to vote approve the amendment. Trenwick's certificate of incorporation provides that the corporation reserves the right to amend, alter, change or repeal any provision in the certificate of incorporation in the manner prescribed by Delaware law. Provisions governing classification and nomination of directors however, only may be amended with the affirmative vote of at least 80% of the stockholders' voting power. In addition alterations, amendments, or changes to and repeals of provisions governing transactions with interested stockholders that are Under Bermuda law, the bye-laws and/or memorandum of association of a company may be amended only by both (1) a resolution of the board of directors and (2) a resolution of the shareholders approved by shareholders with a majority of voting power voting on the amendment. Bermuda law also allows a minority of a company's shareholders holding 20% or more of the company's share capital, and in some cases debtholders, to apply to the Bermuda Supreme Court within 21 days after an amendment to the memorandum of association is passed, to ask the court to annul the amendment. Under Bermuda law, the bye-laws and/or memorandum of association of a company may be amended only by both (1) a resolution of the board of directors and (2) a resolution of the shareholders approved by shareholders with a majority of voting power voting on the amendment. Bermuda law also allows a minority of a company's shareholders holding 20% or more of the company's share capital, and in some cases debtholders, to apply to the Bermuda Supreme Court within 21 days after an amendment to the memorandum of association is passed, to ask the court to annul the amendment. 126 138 TRENWICK GROUP INC. TRENWICK GROUP LTD. LASALLE RE HOLDINGS LIMITED recommended by interested stockholders must be approved by the affirmative vote of a majority of stockholders entitled to vote or must be recommended by a majority of disinterested directors. Trenwick's by-laws may be altered, amended or repealed by the affirmative vote of a majority of stockholders. Under Delaware law, the board of directors may amend the by-laws if so authorized in the charter. Trenwick's charter expressly authorizes the board of directors to make, alter or repeal the by-laws. 127 139 SHAREHOLDER RIGHTS PLANS BEFORE THE COMPLETION OF THE TRANSACTIONS Trenwick has amended the Trenwick rights agreement so that it will not be triggered by the proposed transactions. The Trenwick rights agreement provides for the issuance of a stock purchase right to the holder of each share of Trenwick common stock. If any person becomes the beneficial owner of 15% or more of the outstanding common stock of Trenwick, each rights owner will have the right to receive Trenwick common stock equal to twice the exercise price of the right. LaSalle does not currently have a rights agreement in place. AFTER THE COMPLETION OF THE TRANSACTIONS The agreement provides that the board of directors of Trenwick Group Ltd. must take all action necessary to implement a rights agreement after we complete the transactions. The rights agreement is substantially similar to the Trenwick rights agreement, except that the percentage that triggers the rights will be 10% instead of 15%. OTHER CONSIDERATIONS As "exempted" companies, Trenwick Group Ltd., LaSalle, LaSalle Re and LaSalle Re Capital may not: - acquire or hold land in Bermuda, unless required for business and held by way of lease or tenancy agreement for 50 years at most or that used to provide accommodation or recreational facilities for its officers and employees and held with the consent of the Minister for 21 years at most; - take mortgages on land in Bermuda in excess of $50,000; or - carry on business of any kind in Bermuda, except in limited circumstances such as doing business with another exempted undertaking in furtherance of business carried on outside Bermuda without the express authorization of the Bermuda legislature or a license granted by a minister. The Bermuda government encourages foreign investment in "exempted" entities like Trenwick Group Ltd., LaSalle, LaSalle Re and LaSalle Re Capital that are based in Bermuda but do not operate in competition with local businesses. As well as having no restrictions on the degree of non-Bermudian ownership, Trenwick Group Ltd., LaSalle, LaSalle Re and LaSalle Re Capital are not currently subject to taxes on their income or dividends or to any foreign exchange controls in Bermuda. In addition, there currently is no capital gains tax in Bermuda, and profits can be accumulated by Trenwick Group Ltd., LaSalle, LaSalle Re and LaSalle Re Capital as required, without limitation under general Bermuda law. LEGAL MATTERS The validity of the Trenwick Group Ltd. common shares to be issued in connection with the transactions will be passed upon for Trenwick Group Ltd. by Appleby Spurling & Kempe, Bermuda counsel to Trenwick Group Ltd. It is a condition to the completion of the transactions that Baker & McKenzie, counsel to Trenwick and Trenwick Group Ltd., deliver opinions concerning the U.S. federal income tax consequences of the plan of reorganization, and that Mayer, Brown & Platt, counsel to LaSalle and LaSalle Re, deliver an opinion concerning the U.S. federal income tax consequences of the scheme of arrangement. 128 140 EXPERTS The consolidated financial statements and the related financial statement schedules incorporated by reference in this document from Trenwick's Annual Report on Form 10-K as of December 31, 1999 and for the three years then ended have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. The financial statements and the related financial statement schedules incorporated in this document by reference from LaSalle's Amended Annual Report on Form 10-K/A for the year ended September 30, 1999 have been audited by Deloitte & Touche, independent auditors, with respect to the year ended September 30, 1999, and by KPMG, independent auditors, with respect to the years ended September 30, 1998 and September 30, 1997, as stated in their respective reports, (each of which reports expresses an unqualified opinion and includes an explanatory paragraph referring to the restatement of basic and diluted earnings per share) which are incorporated in this document by reference. The financial statements and the related financial statement schedules have been incorporated in this document in reliance upon the reports of those independent auditors given upon their authority as experts in accounting and auditing. FUTURE SHAREHOLDER PROPOSALS If you intend to present a proposal for inclusion in Trenwick Group Ltd.'s proxy statement for its 2001 annual shareholders meeting, it must be sent to the Secretary of Trenwick Group Ltd. at Continental Building, 25 Church Street, Hamilton HM12, Bermuda and must be received by December 18, 2000. If you present a proposal at the 2001 annual meeting without Trenwick Group Ltd.'s having received notice of the proposal by March 3, 2001, the proxies designated by Trenwick Group Ltd.'s board of directors may vote on the proposal in their discretion without mention of the proposal in the proxy statement or the proxy card. WHERE YOU CAN FIND MORE INFORMATION Trenwick and LaSalle each file annual, quarterly and other reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy this information at the following locations of the SEC: Public Reference Room New York Regional Office Chicago Regional Office 450 Fifth Street, N.W. 7 World Trade Center Citicorp Center Room 1024 Suite 1300 500 West Madison Street Washington, D.C. 20549 New York, New York 10048 Suite 1400 Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC's Public Reference Room in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet world wide web site that contains reports, proxy statements and other information about issuers, such as Trenwick and LaSalle, who file electronically with the SEC. The address of that site is http://www.sec.gov. You can also inspect reports, proxy statements and other information about Trenwick and LaSalle at the offices of the NYSE at 20 Broad Street, New York, New York 10005. Trenwick Group Ltd. has filed a registration statement on Form S-4 to register with the SEC the Trenwick Group Ltd. common shares to be issued to Trenwick stockholders and LaSalle common shareholders and all holders of LaSalle Re exchangeable non-voting common shares pursuant to the terms of the proposed transactions. This document is part of the registration statement and constitutes a 129 141 prospectus of Trenwick Group Ltd. in addition to being a proxy statement of LaSalle for the LaSalle and LaSalle Re special general meetings and a proxy statement of Trenwick for the Trenwick special meeting. As allowed by the SEC rules and regulations, this document does not contain all the information you can find in the registration statement or the exhibits to the registration statement. The SEC allows us to "incorporate by reference" information into this document, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this document, except for any information superseded by information in this document. This document incorporates by reference the documents set forth below that Trenwick and LaSalle have previously filed with the SEC. These documents contain important information about the companies and their financial condition. TRENWICK SEC FILINGS (FILE NO. 1-15389) PERIOD OR DATE FILED Registration Statement on Form 8-A Filed on September 24, 1997 Annual Report on Form 10-K Year ended December 31, 1999 Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30, 2000 Proxy Statement for its annual meeting of Filed on April 17, 2000 stockholders held on May 18, 1999 Current Report on Form 8-K Filed on June 25, 1999 Current Report on Form 8-K Filed on September 1, 1999 Registration Statement on Form S-4 Filed on September 7, 1999 Registration Statement on Form 8-A Filed on October 13, 1999 Current Report on Form 8-K Filed on December 22, 1999 Registration Statement on Form 8-A/A Filed on January 13, 2000 Current Report on Form 8-K Filed on March 20, 2000 Current Report on Form 8-K Filed on June 29, 2000 Amendment to Annual Report on Form 10-K/A Filed on August 22, 2000 LASALLE RE HOLDINGS SEC FILINGS PERIOD OR DATE FILED (FILE NO. 1-12823) Registration Statement on Form 8-A Filed on March 28, 1997 Annual Report on Form 10-K Year ended September 30, 1999 Current Report on Form 8-K Filed on December 22, 1999 Proxy Statement for its annual meeting of Filed on January 24, 2000 shareholders held on February 17, 2000 Quarterly Reports on Form 10-Q Quarters ended December 31, 1999, March 31, 2000 and June 30, 2000 Current Report on Form 8-K Filed on March 20, 2000 Current Report on Form 8-K Filed on June 29, 2000 Amendment to Annual Report on Form 10-K/A Filed on August 22, 2000 Amendment to Quarterly Report on Form 10-Q/A Filed on August 23, 2000 for the Quarter ended December 31, 1999 Amendment to Quarterly Report on Form 10-Q/A Filed on August 23, 2000 for the Quarter ended March 31, 2000
We incorporate by reference additional documents that we may file with the SEC between the date of this document and the date of the special meetings. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. Trenwick has supplied all information contained or incorporated by reference in this document relating to Trenwick, and LaSalle has supplied all such information relating to LaSalle. 130 142 You can obtain any of the documents incorporated by reference in this document from Trenwick or LaSalle, as the case may be, or from the SEC through the SEC's web site at the address described above. Documents incorporated by reference are available from the companies without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit in this document. You can obtain documents incorporated by reference in this document by requesting them in writing or by telephone from the appropriate company at the following addresses: TRENWICK GROUP INC. LASALLE RE HOLDINGS LIMITED One Canterbury Green Continental Building Stamford, Connecticut 06901 25 Church Street (203) 353-5500 Hamilton HM 12 Attention: John V. Del Col Bermuda Senior Vice President, (441) 292-3339 General Counsel & Attention: Diane H. Newman Secretary Investor Relations Manager
If you would like to request documents from us, please do so by September 11, 2000 to receive them before the Trenwick special meeting or the LaSalle special meeting, as the case may be. This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make offer or solicitation in such jurisdiction. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS DOCUMENT TO VOTE ON THE APPROVAL AND ADOPTION OF THE AGREEMENT AND THE RELATED TRANSACTIONS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED AUGUST 23, 2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THIS DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO SHAREHOLDERS NOR THE ISSUANCE OF TRENWICK GROUP LTD. COMMON SHARES AS CONTEMPLATED IN THIS DOCUMENT SHALL CREATE ANY IMPLICATION TO THE CONTRARY. 131 143 APPENDIX A AMENDED AND RESTATED AGREEMENT, SCHEMES OF ARRANGEMENT AND PLAN OF REORGANIZATION BY AND AMONG LASALLE RE HOLDINGS LIMITED, LASALLE RE LIMITED, TRENWICK GROUP INC. AND GOWIN HOLDINGS INTERNATIONAL LIMITED DATED AS OF MARCH 20, 2000 144 TABLE OF CONTENTS ARTICLE 1 CERTAIN DEFINITIONS................................................. A-2 Section 1.1. Certain Definitions......................................... A-2 ARTICLE 2 THE PLANS........................................................... A-4 Section 2.1. The Plans................................................... A-4 Section 2.2. Application to the Court; Shareholder Meetings; Effective Time of the Plans; Closing.................................. A-5 Section 2.3. Effects of the Plans........................................ A-5 Section 2.4. Governing Documents......................................... A-6 Section 2.5. Board of Directors of New Holdings.......................... A-6 Section 2.6. Terms of the Schemes of Arrangement: Exchange of Securities.................................................. A-6 Section 2.7. Terms of the Plan of Reorganization: Issuance of Securities.................................................. A-7 Section 2.8. Terms of the Schemes of Arrangement: Surrender and Payment..................................................... A-7 Section 2.9. Terms of the Plan of Reorganization: Surrender and Payment..................................................... A-8 Section Voting...................................................... A-9 2.10. Section Lost Certificates........................................... A-9 2.11. Section No Fractional Shares........................................ A-10 2.12. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TRENWICK.......................... A-10 Section 3.1. Corporation; Organization................................... A-10 Section 3.2. Authority; Approval and Fairness............................ A-11 Section 3.3. Capital Structure........................................... A-11 Section 3.4. SEC Reports; Financial Statements........................... A-12 Section 3.5. Absence of Certain Changes or Events........................ A-13 Section 3.6. Certain Fees................................................ A-13 Section 3.7. No Defaults................................................. A-13 Section 3.8. Consents.................................................... A-14 Section 3.9. Compliance with Applicable Law.............................. A-14 Section Information Supplied........................................ A-14 3.10. Section Material Contracts.......................................... A-15 3.11. Section Taxes....................................................... A-15 3.12. Section Litigation.................................................. A-16 3.13. Section Title to Properties; Leases................................. A-16 3.14. Section Employees................................................... A-17 3.15. Section Benefit Plans............................................... A-17 3.16. Section Intellectual Property....................................... A-21 3.17. Section Takeover Statutes........................................... A-22 3.18. Section Opinion of Financial Advisor................................ A-22 3.19. Section Rights Agreement............................................ A-22 3.20. Section Insurance Matters........................................... A-22 3.21. Section Liabilities and Reserves.................................... A-23 3.22. Section Investment Company.......................................... A-23 3.23. Section Finite Risk Reinsurance..................................... A-23 3.24. Section Reinsurance Contracts, Coverholders and MGAs................ A-23 3.25. Section Derivatives................................................. A-24 3.26. Section Related Party Transactions.................................. A-24 3.27.
A-ii 145 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF LASALLE HOLDINGS.................. A-24 Section 4.1. Corporation; Organization................................... A-24 Section 4.2. Authority; Approval and Fairness............................ A-25 Section 4.3. Capital Structure........................................... A-25 Section 4.4. SEC Reports; Financial Statements........................... A-26 Section 4.5. Absence of Certain Changes or Events........................ A-27 Section 4.6. Certain Fees................................................ A-28 Section 4.7. No Defaults................................................. A-28 Section 4.8. Consents.................................................... A-28 Section 4.9. Compliance with Applicable Law.............................. A-28 Section Information Supplied........................................ A-29 4.10. Section Material Contracts.......................................... A-29 4.11. Section Taxes....................................................... A-29 4.12. Section Litigation.................................................. A-30 4.13. Section Title to Properties; Leases................................. A-31 4.14. Section Approval of Schemes of Arrangement.......................... A-31 4.15. Section Employees................................................... A-31 4.16. Section Intellectual Property....................................... A-32 4.17. Section Takeover Statutes........................................... A-32 4.18. Section Opinions of Financial Advisors.............................. A-33 4.19. Section Insurance Matters........................................... A-33 4.20. Section Liabilities and Reserves.................................... A-33 4.21. Section Investment Company.......................................... A-33 4.22. Section Reinsurance Contracts, Coverholders and MGAs................ A-33 4.23. Section Derivatives................................................. A-34 4.24. Section Related Party Transactions.................................. A-34 4.25. Section Finite Risk Reinsurance..................................... A-34 4.26. ARTICLE 5 COVENANTS........................................................... A-34 Section 5.1. Conduct of Business of Trenwick............................. A-34 Section 5.2. Conduct of Business of LaSalle Holdings..................... A-37 Section 5.3. No Solicitation............................................. A-39 Section 5.4. Access to Information; Confidentiality...................... A-42 Section 5.5. Form S-4; Regulatory Matters................................ A-42 Section 5.6. Public Announcements........................................ A-42 Section 5.7. Supplemental Information.................................... A-42 Section 5.8. Shareholders' Meetings...................................... A-43 Section 5.9. Trenwick Options, LaSalle Holdings Options, LaSalle Re Options and Trenwick Warrants............................... A-43 Section Takeover Laws............................................... A-45 5.10. Section Affiliates.................................................. A-45 5.11. Section Stock Exchange Listing...................................... A-45 5.12. Section Indemnification and Insurance............................... A-45 5.13. Section Commercially Reasonable Efforts............................. A-46 5.14. Section Post-Closing Matters........................................ A-46 5.15. Section Employee Benefit Plans; Existing Agreements................. A-46 5.16. Section Letters from Accountants.................................... A-47 5.17. Section Litigation.................................................. A-48 5.18. Section Advice of Changes........................................... A-48 5.19. Section Trenwick Rights Agreement................................... A-48 5.20.
A-iii 146 Section New Holdings Rights Agreement............................... A-48 5.21. Section Assumption of Non-Voting Share Conversion Obligation........ A-48 5.22. Section Assumption of Series B Preferred Share Conversion 5.23. Obligation.................................................. A-48 Section Tax-Free Reorganization..................................... A-48 5.24. ARTICLE 6 CONDITIONS TO THE PLANS............................................. A-49 Section 6.1. Conditions to Each Party's Obligation to Effect the Plans... A-49 Section 6.2. Additional Conditions to Trenwick's Obligation to Effect the Plans....................................................... A-50 Section 6.3. Additional Conditions to LaSalle Holdings' Obligation to Effect the Plans............................................ A-51 ARTICLE 7 TERMINATION AND ABANDONMENT......................................... A-52 Section 7.1. Termination by Trenwick or LaSalle Holdings................. A-52 Section 7.2. Termination by Trenwick..................................... A-53 Section 7.3. Termination by LaSalle Holdings............................. A-53 Section 7.4. Procedure and Effect of Termination......................... A-53 ARTICLE 8 MISCELLANEOUS PROVISIONS............................................ A-54 Section 8.1. Non-Survival of Representations, Warranties, Covenants and Agreements.................................................. A-54 Section 8.2. Amendment and Modification.................................. A-54 Section 8.3. Waiver of Compliance; Consents.............................. A-54 Section 8.4. Severability and Validity................................... A-55 Section 8.5. Expenses and Obligations.................................... A-55 Section 8.6. Parties in Interest......................................... A-55 Section 8.7. Notices..................................................... A-55 Section 8.8. Governing Law............................................... A-56 Section 8.9. Counterparts................................................ A-56 Section Headings.................................................... A-56 8.10. Section Entire Agreement; Assignment................................ A-57 8.11. Section Interpretation.............................................. A-57 8.12.
SCHEDULES AND EXHIBITS Schedule I........ Minority Shareholders Exhibit A-1...... LaSalle Stock Option Agreement Exhibit A-2...... Trenwick Stock Option Agreement Exhibit B-1...... Memorandum of Association of New Holdings Exhibit B-2...... Bye-Laws of New Holdings Exhibit C.. New Holdings Directors
A-iv 147 AMENDED AND RESTATED AGREEMENT, SCHEMES OF ARRANGEMENT AND PLAN OF REORGANIZATION This Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization (this "Agreement") is made as of the 20th day of March, 2000, by and among LaSalle Re Holdings Limited, a company organized under the laws of Bermuda ("LaSalle Holdings"), LaSalle Re Limited, a company organized under the laws of Bermuda and a majority-owned Subsidiary (as defined herein) of LaSalle Holdings ("LaSalle Re"), Trenwick Group Inc., a Delaware corporation ("Trenwick") and Gowin Holdings International Limited, a company organized under the laws of Bermuda which will be changing its name to Trenwick Group Ltd. prior to the Effective Time, as defined herein, ("New Holdings"), and amends and restates the Agreement, Scheme of Arrangement, Plan of Merger and Plan of Reorganization (the "Original Agreement") dated as of December 19, 1999 by and among LaSalle Holdings, LaSalle Re, Trenwick, Trenwick Group Delaware, Inc., a Delaware corporation and New Holdings. WHEREAS, the issued share capital of LaSalle Re consists of voting common shares, par value $1.00 per share ("Voting Shares"), all of which are beneficially owned by LaSalle Holdings, and non-voting common shares, par value $1.00 per share (the "Non-Voting Shares"), all of which are beneficially owned by LaSalle Holdings and the shareholders of LaSalle Re listed on Schedule I hereto (the "Minority Shareholders"). LaSalle Holdings owns 15,603,570 Voting Shares and Non-Voting Shares in the aggregate. The Minority Shareholders own 4,725,546 Non-Voting Shares in the aggregate (the "Minority Shares"). WHEREAS, the respective Boards of Directors of LaSalle Holdings, LaSalle Re, Trenwick and New Holdings (a) deem it advisable and in the best interests of their respective companies and shareholders to enter into this Agreement whereby (i) each of LaSalle Holdings and LaSalle Re become Subsidiaries of New Holdings pursuant to a scheme of arrangement between LaSalle Holdings and the holders of its common shares, par value $1.00 per share (the "LaSalle Holdings Shares") (the "LaSalle Holdings Scheme of Arrangement"), and a scheme of arrangement between LaSalle Re and the holders of the Non-Voting Shares (the "LaSalle Re Scheme of Arrangement," and together with the LaSalle Holdings Scheme, the "Schemes of Arrangement") and (ii) the assets of Trenwick are transferred to New Holdings pursuant to a plan of reorganization described in Section 2.1(b) (the "Plan of Reorganization," and together with the Schemes of Arrangement, the "Plans") as provided for herein and (b) have adopted resolutions approving this Agreement, the Plans and the transactions contemplated hereby; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to the willingness of LaSalle Holdings and Trenwick to enter into this Agreement, LaSalle Holdings and Trenwick have entered into (i) a Stock Option Agreement dated as of the date of the Original Agreement and attached hereto as Exhibit A-1 (the "LaSalle Stock Option Agreement"), pursuant to which Trenwick has granted LaSalle Holdings an option to purchase a number of shares equal to 19.9% of the then outstanding Common Stock, par value $0.10 per share, of Trenwick ("Trenwick Shares", which shall refer to all such outstanding shares) and (ii) a Stock Option Agreement dated as of the date of the Original Agreement and attached hereto as Exhibit A-2 (the "Trenwick Stock Option Agreement" and together with the LaSalle Stock Option Agreement, the "Stock Option Agreements"), pursuant to which LaSalle Holdings has granted Trenwick an option to purchase a number of shares equal to 19.9% of the then outstanding LaSalle Holdings Shares; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Trenwick to enter into this Agreement, Trenwick and the Minority Shareholders have entered into a Shareholders Agreement pertaining to the voting of shares held of record and beneficially in favor of the transactions contemplated hereby; and WHEREAS, the parties hereto intend that each of the Plans shall qualify as tax-free under the United States Internal Revenue Code of 1986, as amended (the "Code"). A-1 148 NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE 1 CERTAIN DEFINITIONS Section 1.1. Certain Definitions. Certain capitalized terms used in this Agreement shall have the meaning set forth below: (a) An "Affiliate" of, or a Person "affiliated" with, a specified Person means any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. (b) "Average Closing Price" means an amount equal to the average per share closing price of a Trenwick Share as reported on the NYSE for the ten (10) NYSE trading days immediately preceding the three (3) NYSE trading days prior to the Effective Date (as defined below). (c) "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in Bermuda or in the State of Connecticut in the United States of America are authorized or required by law to be closed. (d) "Confidentiality Letters" means the letter agreements between LaSalle Holdings and Trenwick, dated as of August 30, 1999 and November 19, 1999. (e) "Control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. (f) "Dollars" or "$" means the lawful currency of the United States of America. (g) "Employee Benefit Plan" means (i) any "employee welfare benefit plan" or "employee pension benefit plan" (as those terms are defined in sections 3(1) and 3(2) of ERISA, respectively), other than a "multiemployer plan" (as defined in Section 3(37) of ERISA); (ii) any retirement or deferred compensation plan, incentive compensation plan, stock plan, unemployment compensation plan, vacation pay, severance pay, bonus or benefit arrangement, insurance or hospitalization program or any other fringe benefit arrangements for any current or former employee, director, consultant or agent, whether pursuant to contract, arrangement, custom or informal understanding, which does not constitute an employee benefit plan (as defined in Section 3(3) of ERISA); or (iii) any employment agreement or consulting agreement. (h) "ERISA" means the United States Employee Retirement Income Security Act of 1974, as amended. (i) "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. (j) "GAAP" means generally accepted accounting principles as in effect in the United States of America (as such principles may change from time to time). (k) "Governmental Authority" means any governmental, quasi-governmental, judicial or regulatory agency or entity or subdivision thereof with jurisdiction over Trenwick, LaSalle Holdings, LaSalle Re, New Holdings or any of their respective Subsidiaries or any of the transactions contemplated by this Agreement (including, without limitation, the Corporation of Lloyd's ("Lloyd's")). A-2 149 (l) "Knowledge" (i) an individual will be considered to have "Knowledge" of a fact or matter if the individual is actually aware of the fact or matter; (ii) an entity will be considered to have "Knowledge" of a fact or matter if any individual who is serving, or who has at any time served, as a senior executive of such entity has, or at any time had, Knowledge of the fact or matter; and Trenwick and LaSalle Holdings will be considered to have "Knowledge" of a fact or matter if Trenwick or its Subsidiaries or LaSalle Holdings or its Subsidiaries, as the case may be, has Knowledge of the fact or matter. (m) "LaSalle Disclosure Letter" means the letter, dated as of the date of the Original Agreement, from LaSalle Holdings to Trenwick regarding certain matters related to this Agreement. (n) "LaSalle Fair Market Value" means the product of (i) the average of the closing sale price as reported on the NYSE Composite Tape for the LaSalle Holdings Shares for the thirty (30) trading days immediately preceding the Effective Date multiplied by (ii) the aggregate number of issued and outstanding Voting Shares and Non-Voting Shares on the Effective Date. (o) "Lien" means any mortgage, lien, security interest, pledge, lease or other charge or encumbrance of any kind, including, without limitation, the lien or retained security title of a purchase money creditor or conditional vendor, and any easement, right of way or other encumbrance on title to real property, and any agreement to give any of the foregoing. (p) "Material Adverse Change" or "Material Adverse Effect" means, with respect to any Person, any change, effect, event, condition or development, occurrence or state of facts that is materially adverse to the business, assets, results of operations, properties, financial or operating condition of such party and its Subsidiaries, taken as a whole or the ability to perform obligations under this Agreement; provided, however, that any change, effect, event, condition or development, occurrence or state of facts resulting from or arising in connection with (i) this Agreement, the Schemes of Arrangement, the Plan of Reorganization or the transactions contemplated hereby or the public announcement thereof, (ii) changes generally affecting the insurance, reinsurance or financial services industry (including, without limitation, the impact of any natural catastrophes causing a Net Loss from a single loss occurrence and not in the aggregate to such Persons of $100,000,000 or less, (iii) changes in the value of portfolio investments resulting from changes in prevailing interest rates, (iv) changes in economic or market conditions generally, (v) changes in laws, regulations, accounting principles, or regulations or policies of general applicability or (vi) changes resulting from actions or omissions of a party hereto taken with the prior written consent of the other parties in contemplation of the Schemes of Arrangement and associated transactions contemplated by this Agreement shall not constitute a Material Adverse Effect for purposes of this Agreement. (q) "Net Loss" means, with respect to any Person, the estimated amount of all losses and loss adjustment expenses incurred or to be incurred by such Person and its Subsidiaries in connection with the occurrence of a single natural catastrophe occurring between the date of the Original Agreement and the Effective Time, net of all applicable reinsurance recoverables, determined in accordance with GAAP and generally accepted actuarial standards of practice as applied in the insurance industry, each as in effect on the date of determination of such Net Loss. Net Loss shall be determined as soon as reasonably practicable following the occurrence of a natural catastrophe by the Settlement Auditor. In the event that there is more than one Person serving as the Settlement Auditor, Net Loss shall be determined by taking the average of the Net Loss determinations established by each Settlement Auditor. (r) "NYSE" means The New York Stock Exchange, Inc. (s) "Permitted Liens" means, with respect to Trenwick or LaSalle Holdings (as the case may be), (i) Liens for Taxes or other assessments or charges of Governmental Authorities that are not yet delinquent or that are being contested in good faith by appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP; (ii) statutory Liens of landlords and mortgagees of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law and created in the ordinary course of business for amounts not yet more than thirty (30) days overdue or which are being contested in good faith by A-3 150 appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP; (iii) leases or subleases, easements, rights-of-way, covenants, consents and Liens which do not interfere materially with the ordinary conduct of the business of Trenwick or LaSalle Holdings (as the case may be) and their respective Subsidiaries, taken as a whole, or detract materially from the value of the property to which they attach or materially impair the use thereof to such party and its Subsidiaries; and (iv) Liens granted by Trenwick or LaSalle Holdings (as the case may be) or any of their respective Subsidiaries to lenders pursuant to credit agreements in existence on the date of the Original Agreement. (t) "Person" means any individual, company, corporation, estate, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or other entity. (u) "SEC" means the United States Securities and Exchange Commission. (v) "Securities Act" means the United States Securities Act of 1933, as amended. (w) "Settlement Auditor" means either Ernst & Young LLP or Paragon Risk Management Services, Inc., as shall be mutually agreed by LaSalle Holdings and Trenwick. In the event LaSalle Holdings and Trenwick are unable to agree upon a Settlement Auditor within 30 calendar days following the completion of a natural catastrophe, both Ernst & Young LLP and Paragon Risk Management Services, Inc. shall serve as the Settlement Auditor. (x) "Subsidiary" means, with respect to a specified Person, each company, partnership or other entity in which the specified Person owns or controls, directly or indirectly through one or more intermediaries, fifty percent (50%) or more of the shares or other interests having general voting power in the election of directors or Persons performing similar functions or rights to fifty percent (50%) or more of any distributions. (y) "Tax" or "Taxes" means any Bermuda or United States federal, state, local, foreign or other income, share capital, employees' income withholding, foreign Person withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer or other tax, including any interest, penalties or other additions to tax in respect to the foregoing, whether disputed or not. (z) "Trenwick Disclosure Letter" means the letter, dated as of the date of the Original Agreement, from Trenwick to LaSalle Holdings regarding certain matters related to this Agreement. (aa) "Trenwick Fair Market Value" means the product of (i) the average of the closing sale price as reported on the NYSE Composite Tape for the Trenwick Shares for the thirty (30) trading days immediately preceding the Effective Date multiplied by (ii) the number of issued and outstanding Trenwick Shares on the Effective Date. ARTICLE 2 THE PLANS Section 2.1. The Plans. (a) The Schemes of Arrangement. At the Effective Time (as defined herein), and upon the terms and subject to the conditions hereof and subject to the Supreme Court of the Islands of Bermuda (the "Court") exercising its discretion and sanctioning the Schemes of Arrangement pursuant to Section 99(2) of The Companies Act, 1981 of Bermuda, as amended (the "Companies Act"), and making such facilitating orders as are appropriate pursuant to Section 101 of the Companies Act, all of the issued and outstanding LaSalle Holdings Shares and all of the issued and outstanding Minority Shares shall be transferred to New Holdings, and holders of LaSalle Holdings Shares and Minority Shares shall become holders of common shares of New Holdings ("New Holdings Shares") in accordance with the terms of this Agreement. A-4 151 (b) The Plan of Reorganization. At the Effective Time, upon the terms and subject to the conditions hereof, New Holdings shall acquire all of the assets of and shall assume all of the liabilities of Trenwick, pursuant to Section 271 of the GCL, in exchange for New Holdings Shares which shall be distributed to the holders of Trenwick Shares in complete liquidation of Trenwick pursuant to Section 275 of the GCL, in a transaction intended to qualify as a tax-free reorganization under Section 368(a) of the Code. Section 2.2. Application to the Court; Shareholder Meetings; Effective Time of the Plans; Closing. (a) As soon as practicable after the date hereof, LaSalle Holdings and LaSalle Re, acting through their respective Boards of Directors, in accordance with applicable law shall: (i) cause an application to be made to the Court, pursuant to Section 99(1) of the Companies Act, requesting the Court to summon such class meetings of members of LaSalle Holdings and LaSalle Re as the Court may direct; (ii) give notice of, convene and hold such class meetings for the purpose of obtaining such approvals of the Schemes of Arrangement as may be required under Section 99(2) of the Companies Act; and (iii) subject to such approvals being obtained, cause a petition to be presented to the Court seeking the sanctioning of the Schemes of Arrangement pursuant to Section 99 of the Companies Act and file such other documents as are required to be duly filed with the Court to effect the Schemes of Arrangement. (b) As soon as practicable after the date hereof, Trenwick, acting through its Board of Directors, in accordance with applicable law shall duly call, give notice of, convene and hold an annual or special meeting of its stockholders for the purpose of obtaining their approval of this Agreement and the Plan of Reorganization. (c) Upon receipt of orders from the Court sanctioning the Schemes of Arrangement, upon approval by the stockholders of Trenwick of this Agreement and the Plan of Reorganization and upon the terms and subject to the satisfaction or waiver, if permissible, of the conditions hereof, the orders sanctioning the Schemes of Arrangement shall be duly filed with the Registrar of Companies of Bermuda (the "Registrar"). The Schemes of Arrangement shall become effective upon the filing of the orders of the Court with respect to the Schemes of Arrangement with the Registrar (the time of such filing being the "Effective Time" and the date of such filing being the "Effective Date"). The Plan of Reorganization shall become effective at the Effective Time. Immediately prior to such filings, a closing (the "Closing") shall be held at such time as the last condition set forth hereunder shall be fulfilled or waived, at the New York office of Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019-5820, at 9:00 a.m. or such other place and/or time as the parties shall agree, for the purpose of confirming the satisfaction or waiver of the conditions set forth in Article 5. The date upon which the Closing shall occur is referred to herein as the "Closing Date." Section 2.3. Effects of the Plans. (a) Effect of the Schemes of Arrangement. As of the Effective Time, LaSalle Holdings shall be a wholly-owned Subsidiary of New Holdings and LaSalle Re shall be, directly and indirectly through LaSalle Holdings, a wholly-owned Subsidiary of New Holdings, and holders of LaSalle Holdings Shares and Minority Shares shall only have the right to receive the LaSalle Consideration as set forth in Section 2.6(c). (b) Effect of the Plan of Reorganization. As of the Effective Time, Trenwick shall have transferred all of its assets to New Holdings and New Holdings shall have assumed all the liabilities of Trenwick and the holders of Trenwick Shares shall only have the right to receive the Trenwick Consideration as set forth in Section 2.7(b). A-5 152 Section 2.4. Governing Documents. (a) New Holdings. (i) At or prior to the Closing, the memorandum of association of New Holdings shall be in the form set forth in Exhibit B(i) attached hereto. (ii) At or prior to the Closing, the bye-laws of New Holdings shall be in the form set forth in Exhibit B(ii) attached hereto. (b) LaSalle Holdings. (i) The memorandum of association of LaSalle Holdings in effect at the Effective Time shall continue to be the memorandum of association of LaSalle Holdings until thereafter amended or restated as provided therein and by law. (ii) The bye-laws of LaSalle Holdings in effect at the Effective Time, shall continue to be the bye-laws of LaSalle Holdings until thereafter amended or restated as provided therein and by law. (c) LaSalle Re. (i) The memorandum of association of LaSalle Re in effect at the Effective Time shall continue to be the memorandum of association of LaSalle Re until thereafter amended or restated as provided therein and by law. (ii) The bye-laws of LaSalle Re in effect at the Effective Time shall continue to be the bye-laws of LaSalle Re until thereafter amended or restated as provided therein and by law. Section 2.5. Board of Directors of New Holdings. The parties hereto shall procure that at or prior to the Closing, the directors of New Holdings shall be the individuals designated in Exhibit C attached hereto, which such directors shall constitute the entire Board of Directors of New Holdings at such time, each of such directors to hold office in accordance with the applicable provisions of the bye-laws of New Holdings and until their successors shall be elected or appointed and shall duly qualify. Section 2.6. Terms of the Schemes of Arrangement: Exchange of Securities. Subject to Section 2.6(e), at the Effective Time, by virtue of the Schemes of Arrangement and without any action on the part of LaSalle Holdings, LaSalle Re or the holder of any of the following securities: (a) Subject to Section 2.6(c) and Section 2.12, each LaSalle Holdings Share and each Minority Share that is issued and outstanding immediately prior to the Effective Time shall be transferred to New Holdings and there shall be allotted and issued to the holder thereof such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio, as defined below (the "LaSalle Consideration"). The "LaSalle Exchange Ratio" means the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value minus 50% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $40,000,000 and is less than or equal to $60,000,000 and minus 100% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $60,000,000 and is less than or equal to $100,000,000, divided by (B) the LaSalle Fair Market Value. New Holdings shall issue the New Holdings Shares to be received as LaSalle Consideration and register the Persons to whom New Holdings Shares are issued on New Holdings' register of members. The Non-Voting Shares held by LaSalle Holdings shall not be affected by the Schemes of Arrangement. (b) Each LaSalle Holdings Option (as defined herein) and each LaSalle Re Option (as defined herein) outstanding as of the Effective Time shall be treated in accordance with the provisions of Section 5.9. (c) Each LaSalle Holdings Share that is issued and outstanding immediately prior to the Effective Time that is owned by LaSalle Holdings, LaSalle Re, Trenwick, New Holdings or any Subsidiary of either of the foregoing shall be automatically cancelled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. A-6 153 (d) Each Series A Preferred Share of LaSalle Holdings or LaSalle Re that is issued and outstanding immediately prior to the Effective Time shall remain unchanged as a Series A Preferred Share of LaSalle Holdings or LaSalle Re, as the case may be. (e) In the event that this Agreement and the LaSalle Re Scheme of Arrangement are not approved by the vote specified in Section 4.15(b), then the LaSalle Re Scheme of Arrangement shall not be effected and the provisions of Section 5.9(c) shall not apply. Section 2.7. Terms of the Plan of Reorganization: Issuance of Securities. At the Effective Time, by virtue of the Plan of Reorganization and without any action on the part of Trenwick or the holder of any of the following securities: (a) Subject to Section 2.7(c) and Section 2.12, there shall be allotted and issued to each holder of Trenwick Shares a number of fully paid and nonassessable New Holdings Shares as is equal to the Trenwick Exchange Ratio, as defined below (the "Trenwick Consideration"). The "Trenwick Exchange Ratio" means the product of (i) 1.0 multiplied by (ii) the quotient of (A) the Trenwick Fair Market Value minus 50% of the amount by which any Net Loss experienced by Trenwick exceeds $40,000,000 and is less than or equal to $60,000,000 and minus 100% of the amount by which any Net Loss experienced by Trenwick exceeds $60,000,000 and is less than or equal to $100,000,000, divided by (B) the Trenwick Fair Market Value. If prior to the Effective Time either Trenwick, LaSalle Holdings or LaSalle Re should split or combine the Trenwick Shares, the LaSalle Re Shares or the Minority Shares, as applicable, pay a stock dividend or otherwise change the Trenwick Shares, the LaSalle Re Shares or the Minority Shares, as applicable, into any other securities, or make any other dividend or distribution on the Trenwick Shares, the LaSalle Re Shares or the Minority Shares, as applicable, then the Trenwick Exchange Ratio will be appropriately adjusted to reflect such split, combination, dividend or other distribution or changes. New Holdings shall issue the New Holdings Shares to be received as Trenwick Consideration and register the Persons to whom such New Holdings Shares are issued in New Holdings' register of members. (b) Each Trenwick Option (as defined herein) outstanding as of the Effective Time shall be treated in accordance with the provisions of Section 5.9. (c) Each Trenwick Share that is issued and outstanding immediately prior to the Effective Time that is owned by LaSalle Holdings, LaSalle Re, Trenwick, New Holdings or any Subsidiary of any of the foregoing (together, in each case, with the associated Right (as defined in Section 3.3(a)) shall be automatically cancelled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. Section 2.8. Terms of the Schemes of Arrangement: Surrender and Payment. (a) Promptly after the Effective Time, New Holdings shall (i) appoint an agent (the "LaSalle Exchange Agent") for the purpose of exchanging certificates representing LaSalle Holdings Shares and Minority Shares for New Holdings Shares pursuant to Section 2.6(a), (ii) deposit with the LaSalle Exchange Agent certificates representing the aggregate LaSalle Consideration to be paid in respect of the LaSalle Holdings Shares and the Minority Shares (together with any dividends or distributions with respect thereto) and (iii) send, or cause the LaSalle Exchange Agent to send, to each holder of LaSalle Holdings Shares and each holder of Minority Shares at the Effective Time a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the certificates representing LaSalle Holdings Shares or Minority Shares (as applicable) to the LaSalle Exchange Agent). (b) Each holder of LaSalle Holdings Shares or Minority Shares that have been transferred to New Holdings pursuant to the Schemes of Arrangement, upon surrender to the LaSalle Exchange Agent of a certificate or certificates representing such shares, together with a properly completed letter of transmittal covering such shares, shall be entitled to receive the LaSalle Consideration payable in respect of such shares. Until so surrendered, each such certificate shall, after the Effective Time, represent for all purposes only the right to receive such LaSalle Consideration. A-7 154 (c) If any portion of the LaSalle Consideration is to be paid to a Person other than the registered holder of the LaSalle Holdings Shares or Minority Shares (as applicable) represented by the certificate or certificates surrendered in exchange therefor, it shall be a condition to such payment that the certificate or certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the LaSalle Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such shares or establish to the satisfaction of the LaSalle Exchange Agent that such Tax has been paid or is not payable. (d) After the Effective Time, there shall be no further registrations of transfers of LaSalle Holdings Shares or Minority Shares other than the registration of LaSalle Holdings Shares and Minority Shares in the name of New Holdings pursuant to Section 2.6(a). If, after the Effective Time, certificates representing LaSalle Holdings Shares or Minority Shares are presented to LaSalle Holdings or, subject to the provisions of Section 2.8(e), the LaSalle Exchange Agent, they shall be cancelled and exchanged for the LaSalle Consideration in accordance with the procedures set forth in this Section 2.8. (e) Any portion of the LaSalle Consideration (together with any dividends or distributions with respect to the New Holdings Shares) deposited with the LaSalle Exchange Agent pursuant to Section 2.8(a) and any cash payment for a fractional New Holdings Share pursuant to Section 2.12, that remains unclaimed by the holders of LaSalle Holdings Shares or the holders of Minority Shares twelve months after the Effective Time shall be returned to New Holdings or an Affiliate designated by New Holdings, upon demand, and any such holder who has not exchanged his LaSalle Holdings Shares or Minority Shares for the LaSalle Consideration in accordance with this Section 2.8 prior to that time shall thereafter look only to New Holdings for his claim for New Holdings Shares and any dividends or distributions with respect to New Holdings Shares. Notwithstanding the foregoing, New Holdings shall not be liable to any holder of LaSalle Holdings Shares or any holder of Minority Shares for any amount paid to a public official pursuant to applicable abandoned property laws. (f) No dividends or other distributions with respect to the New Holdings Shares constituting part of the LaSalle Consideration shall be paid to the holder of any unsurrendered certificates representing LaSalle Holdings Shares or Minority Shares until such certificates are surrendered as provided in this Section 2.8. Upon such surrender, there shall be paid, without interest, to the Person in whose name the certificates representing the New Holdings Shares received in exchange for such LaSalle Holdings Shares or Minority Shares (as applicable) are registered, (i) all dividends and other distributions in respect of New Holdings Shares that are payable on a date subsequent to, and the record date for which occurs after, the Effective Time and (ii) all dividends or other distributions in respect of LaSalle Holdings Shares or Minority Shares (as applicable) that are payable on a date subsequent to, and the record date for which occurs on or before, the Effective Time. (g) At and after the Effective Time, each holder of a certificate or certificates that represented issued and outstanding LaSalle Holdings Shares or Minority Shares immediately prior to the Effective Time shall cease to have any rights as a shareholder of LaSalle Holdings or LaSalle Re (as applicable), except for the right to surrender its certificate or certificates in exchange for the LaSalle Consideration as provided in this Section 2.8. Section 2.9. Terms of the Plan of Reorganization: Surrender and Payment. (a) Promptly after the Effective Time, New Holdings shall (i) appoint an agent (the "Trenwick Exchange Agent") for the purpose of exchanging certificates representing Trenwick Shares for New Holdings Shares pursuant to Section 2.7, (ii) deposit with the Trenwick Exchange Agent certificates representing the aggregate Trenwick Consideration to be paid in exchange for the Trenwick Shares (together with any dividends or distributions with respect thereto) and (iii) send, or cause the Trenwick Exchange Agent to send, to each holder of Trenwick Shares at the Effective Time a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the certificates representing Trenwick Shares to the Trenwick Exchange Agent). A-8 155 (b) Each holder of Trenwick Shares that has the right to receive the Trenwick Consideration pursuant to the Plan of Reorganization, upon surrender to the Trenwick Exchange Agent of a certificate or certificates representing such Trenwick Shares, together with a properly completed letter of transmittal covering such Trenwick Shares, shall be entitled to receive the Trenwick Consideration payable in respect of such Trenwick Shares. Until so surrendered, each such certificate shall, after the Effective Time, represent for all purposes only the right to receive such Trenwick Consideration. (c) If any portion of the Trenwick Consideration is to be paid to a Person other than the registered holder of the Trenwick Shares represented by the certificate or certificates surrendered in exchange therefor, it shall be a condition to such payment that the certificate or certificates so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Trenwick Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Trenwick Shares or establish to the satisfaction of the Trenwick Exchange Agent that such Tax has been paid or is not payable. (d) After the Effective Time, there shall be no further registrations of transfers of Trenwick Shares. If, after the Effective Time, certificates representing Trenwick Shares are presented to Trenwick or, subject to the provisions of Section 2.9(e), the Trenwick Exchange Agent, they shall be cancelled and exchanged for the Trenwick Consideration in accordance with the procedures set forth in this Section 2.9. (e) Any portion of the Trenwick Consideration (together with any dividends or distributions with respect to the New Holdings Shares) deposited with the Trenwick Exchange Agent pursuant to Section 2.9(a), and any cash payment for a fractional New Holdings Share pursuant to Section 2.12, that remains unclaimed by the holders of Trenwick Shares twelve months after the Effective Time shall be returned to New Holdings or an Affiliate designated by New Holdings, upon demand, and any such holder who has not exchanged his Trenwick Shares for the Trenwick Consideration in accordance with this Section 2.9 prior to that time shall thereafter look only to New Holdings for his claim for New Holdings Shares, any cash in lieu of fractional New Holdings Shares and any dividends or distributions with respect to New Holdings Shares. Notwithstanding the foregoing, New Holdings shall not be liable to any holder of Trenwick Shares for any amount paid to a public official pursuant to applicable abandoned property laws. (f) No dividends or other distributions with respect to the New Holdings Shares constituting part of the Trenwick Consideration shall be paid to the holder of any unsurrendered certificates representing Trenwick Shares until such certificates are surrendered as provided in this Section 2.9. Upon such surrender, there shall be paid, without interest, to the Person in whose name the certificates representing the New Holdings Shares allotted in exchange for such Trenwick Shares are registered, (i) all dividends and other distributions in respect of New Holdings Shares that are payable on a date subsequent to, and the record date for which occurs after, the Effective Time and (ii) all dividends or other distributions in respect of Trenwick Shares that are payable on a date subsequent to, and the record date for which occurs on or before, the Effective Time. (g) At and after the Effective Time, each holder of a certificate or certificates that represented issued and outstanding Trenwick Shares immediately prior to the Effective Time shall cease to have any rights as a stockholder of Trenwick, except for the right to surrender its certificate or certificates in exchange for the Trenwick Consideration as provided in this Section 2.9. Section 2.10. Voting. In determining shareholders of New Holdings entitled to notice of and to vote at meetings of shareholders of New Holdings, former shareholders of record of LaSalle Holdings, LaSalle Re and Trenwick shall not be deemed shareholders of record until the register of members of New Holdings is amended to reflect the allotment and issue of the New Holdings Shares to such former shareholders. Section 2.11. Lost Certificates. If any certificate representing Trenwick Shares, LaSalle Holdings Shares or Non-Voting Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen or destroyed and, if required by New Holdings, the posting by such Person of a bond in such reasonable amount as the New Holdings may A-9 156 direct as indemnity against any claim that may be made against it with respect to such certificate, the Trenwick Exchange Agent or LaSalle Exchange Agent, as the case may be, will deliver in exchange for such lost, stolen or destroyed certificate the Trenwick Consideration or LaSalle Consideration, as the case may be, with respect to the Trenwick Shares, LaSalle Holdings Shares or Non-Voting Shares formerly represented thereby, without any interest thereon. Section 2.12. No Fractional Shares. No certificates or scrip representing fractional New Holdings Shares shall be issued in exchange for Trenwick Shares, LaSalle Holding Shares, or Non-Voting Shares, but in lieu thereof each holder otherwise entitled to a fractional New Holdings Share (after taking into account all Trenwick Shares, LaSalle Holdings Shares or Non-Voting Shares, as applicable, owned by such holder) shall be entitled to receive, from the Trenwick Exchange Agent or the LaSalle Exchange Agent, as applicable, in accordance with the provisions of this Section 2.12, a cash payment in lieu of such fractional New Holdings Share representing the value of such fraction, which for this purpose shall be calculated by (i) multiplying such fraction by the product of the Average Closing Price and the Trenwick Exchange Ratio in the case of Trenwick Shares and (ii) multiplying such fraction by the product of the Average Closing Price and the LaSalle Exchange Ratio in the case of LaSalle Holdings Shares and Non-Voting Shares. As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Trenwick Shares, LaSalle Holdings Shares, or Non-Voting Shares, as applicable, in lieu of any fractional New Holdings Share, the Trenwick Exchange Agent or the LaSalle Exchange Agent, as applicable, shall promptly pay without interest to all holders of Trenwick Shares, LaSalle Holdings Shares, or Non-Voting Shares, as applicable, entitled thereto all such amounts. Holders of interests representing fractional New Holdings Shares shall not be entitled to vote such interests or to any other rights as a shareholder of New Holdings. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TRENWICK Trenwick hereby represents and warrants to LaSalle Holdings that as of the date of the Original Agreement (except to the extent that a representation or warranty speaks as of an earlier date), with references to "the date hereof" or the "date of this Agreement" in this Article 3 being deemed to be references to the date of the Original Agreement: Section 3.1. Corporation; Organization. (a) Except as set forth in Section 3.1(a) of the Trenwick Disclosure Letter, each of Trenwick and its Subsidiaries is a company duly incorporated, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction of its incorporation. Each of Trenwick and its Subsidiaries (i) is qualified, licensed or domesticated as a foreign corporation in all jurisdictions where such qualification, license or domestication is required to own and operate its properties and conduct its business in the manner and at the places presently conducted; (ii) holds all franchises, grants, licenses, certificates, permits, consents and orders, all of which are valid and in full force and effect, from all applicable regulatory authorities necessary to own and operate its properties and to conduct its business in the manner and at the places presently conducted; and (iii) has full power and authority (corporate and other) to own, lease and operate its respective properties and assets and to carry on its business as presently conducted and as proposed to be conducted, except where the failure to be so qualified, licensed or domesticated or to hold such franchises, grants, licenses, certificates, permits, consents and orders or to have such power and authority would not, when taken together with all other such failures, reasonably be expected to have a Material Adverse Effect on Trenwick. Trenwick has furnished to LaSalle Holdings complete and correct copies of its certificate of incorporation and by-laws as in effect on the date hereof. Such certificate of incorporation and by-laws are in full force and effect and no other constitutional documents are applicable to or binding upon Trenwick. (b) Trenwick conducts its insurance and reinsurance operations through the Subsidiaries set forth in Section 3.1(b) of the Trenwick Disclosure Letter (collectively, the "Trenwick Insurance Subsidiaries"). A-10 157 Each of the Trenwick Insurance Subsidiaries is (i) duly licensed or authorized as an insurance company or (as applicable) a reinsurer in its jurisdiction of incorporation or duly licensed to operate in the insurance or reinsurance business (as applicable) in its jurisdiction of incorporation, (ii) duly licensed or authorized as an insurance company and (as applicable) a reinsurer in each other jurisdiction where it is required to be so licensed or authorized or duly licensed to operate in the insurance or reinsurance business (as applicable) in each other jurisdiction where it is required to be so licensed and (iii) duly authorized in its jurisdiction of incorporation and each other applicable jurisdiction to write each line of business currently written by such Trenwick Insurance Subsidiaries, except, in any such case, where the failure to be so licensed or authorized is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Except as set forth in Section 3.1(b) of the Trenwick Disclosure Letter, Trenwick has made all required filings under applicable insurance holding company statutes except where the failure to file is not reasonably expected to have a Material Adverse Effect on Trenwick. Section 3.2. Authority; Approval and Fairness. (a) Trenwick has all requisite corporate power and authority to execute and deliver this Agreement and, subject to the due approval and adoption of this Agreement by its stockholders, to perform its obligations hereunder and consummate the transactions contemplated hereby. Trenwick has all requisite corporate power and authority to enter into the Stock Option Agreements and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement by Trenwick, the performance by Trenwick of its obligations hereunder and the consummation by Trenwick of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Trenwick, subject only to compliance with the provisions of Sections 271 and 275 of the GCL. No other corporate proceedings on the part of Trenwick are necessary for the execution and delivery of this Agreement by Trenwick and, subject to compliance with the provisions of Sections 271 and 275 of the GCL, the performance by Trenwick of its obligations hereunder and the consummation by Trenwick of the transactions contemplated hereby. This Agreement and the Stock Option Agreements have been duly executed and delivered by Trenwick and (assuming the due authorization, execution and delivery of this Agreement and the Stock Option Agreements by LaSalle Holdings, LaSalle Re), subject to the provisions of Sections 271 and 275 of the GCL, constitute legal, valid and binding obligations of Trenwick, enforceable against Trenwick in accordance its terms, subject with respect to enforceability to the effect of bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or similar laws now or hereafter affecting the enforcement of creditors' rights generally and to the availability of equitable remedies. (b) The Board of Directors of Trenwick (the "Trenwick Board") (i) has unanimously (by all directors present at a meeting duly called and held) declared that it considers this Agreement, the Plan of Reorganization and the other transactions contemplated hereby to be advisable and in the best interests of Trenwick and its stockholders, and (ii) has authorized and approved in all respects this Agreement, the Plans and the other transactions contemplated hereby. Section 3.3. Capital Structure. (a) As of the date hereof, the authorized capital stock of Trenwick consists of 30,000,000 shares of common stock with a par value of $0.10 per share and 2,000,000 shares of preferred stock with a par value of $0.10 per share. As of December 15, 1999, (i) 17,388,981 shares of common stock were issued and outstanding, (ii) no shares of common stock were held as treasury shares or by Subsidiaries of Trenwick, (iv) 200,000 shares of Series B Junior Participating Preferred Stock were reserved for issuance upon exercise of the rights (the "Rights") distributed to the holders of shares of common stock pursuant to the Rights Agreement dated as of September 24, 1997 (the "Rights Agreement"), between Trenwick and First Chicago Trust Company of New York, as Rights Agent, and (v) no shares of preferred stock were issued or outstanding. Section 3.3(a) of the Trenwick Disclosure Letter sets forth each plan, arrangement or agreement pursuant to which options or stock appreciation rights with respect to Trenwick Shares may be granted or under which such options or stock appreciation rights have been granted and are outstanding (the "Trenwick Option Plans") and in the aggregate the maximum number of options and stock appreciation rights outstanding as of the date hereof and the class and number of Trenwick Shares A-11 158 reserved for issue pursuant to the Trenwick Option Plans (such options and rights being herein collectively referred to as the "Trenwick Options"), together with a listing of the aggregate number of such Trenwick Options which shall vest at the Effective Time as a result of the Plan of Reorganization. Each of the outstanding shares of capital stock of each Subsidiary of Trenwick, other than the 110,000 redeemable preferred capital securities (liquidation amount $1,000 per security) issued by Trenwick Capital Trust I, a Delaware statutory business trust ("Trenwick Capital"), and other than as set forth in Section 3.3(a) of the Trenwick Disclosure Letter, is directly or indirectly owned by Trenwick, free and clear of all Liens. (b) Except as described in Section 3.3(b) of the Trenwick Disclosure Letter, no bonds, debentures, notes or other indebtedness having the right to vote (or convertible into or exercisable for securities having the right to vote) on any matters on which stockholders may vote ("Voting Debt") of Trenwick or any of its Subsidiaries are issued or outstanding. (c) Except as described in Sections 3.3(a), (b) or (c) of the Trenwick Disclosure Letter, there are no options, warrants, calls, rights, commitments or agreements of any character to which Trenwick or any of its Subsidiaries is a party or by which any of them is bound obligating Trenwick or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt of Trenwick or any of its Subsidiaries or obligating Trenwick or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. Except as set forth in this Agreement or in Section 3.3(c) of the Trenwick Disclosure Letter, there are no outstanding contractual obligations of Trenwick or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Trenwick or any of its Subsidiaries. (d) Except as described in Section 3.3(d) of the Trenwick Disclosure Letter or as specifically described in this Agreement and except for quarterly dividends in an amount not in excess of $0.26 per share, since September 30, 1999, Trenwick has not (i) made or agreed to make any share split or share dividend, or issued or permitted or agreed to permit to be issued any shares, or securities exercisable for or convertible into shares, of capital stock of Trenwick other than pursuant to and as required by the terms of any Trenwick Option; (ii) repurchased, redeemed or otherwise acquired any shares of capital stock of Trenwick; or (iii) declared, set aside, made or paid to the stockholders of Trenwick dividends or other distributions on the outstanding shares of capital stock of Trenwick. Section 3.4. SEC Reports; Financial Statements. (a) Trenwick has delivered or made available to LaSalle Holdings a true and complete copy of each report, schedule, registration statement and definitive proxy statement or information statement (including exhibits) filed by Trenwick or Chartwell Re Corporation ("Chartwell") with the SEC in respect of their respective fiscal years ending December 31, 1997 and 1998 and their respective quarters ending after December 31, 1998 under the Securities Act and the Exchange Act and will deliver to LaSalle Holdings promptly upon the filing thereof with the SEC all such reports, schedules, registration statements and proxy statements (including exhibits) as may be filed after the date hereof and prior to the Effective Time (as such documents have since the time of their filing been amended, including without limitation, amendments reflected in the Joint Proxy Statement/Prospectus dated September 7, 1999 or may after their filing, if after the date hereof, be amended, the "Trenwick SEC Reports"), which are or will be all the documents that Trenwick was or will be required to file with the SEC. Except as disclosed in Section 3.4(a) of the Trenwick Disclosure Letter, as of their respective dates, the Trenwick SEC Reports complied or will comply in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to the Trenwick SEC Reports, and none of the Trenwick SEC Reports contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made or will be made, not misleading. (b) As of their respective dates, the financial statements of Trenwick included or to be included in the Trenwick SEC Reports (the "Trenwick Financial Statements") complied or will comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations A-12 159 of the SEC with respect thereto, and presented or will present fairly in all material respects the consolidated financial position of Trenwick and its Subsidiaries and the consolidated results of operations, changes in stockholders' equity and cash flows of Trenwick and its Subsidiaries as of the dates and for the periods indicated, in accordance with GAAP applied on a consistent basis, subject in the case of interim financial statements to normal year-end adjustments and except for the absence of certain footnote information in the unaudited statements. (c) Except as set forth in, or arising out of facts or circumstances disclosed in, filings by Trenwick with the SEC prior to the date hereof, Trenwick and its Subsidiaries have no liabilities, debts, claims or obligations of any nature on the date hereof, whether accrued, absolute, direct or indirect, contingent or otherwise, whether due or to become due, that would be required to be included on a balance sheet prepared in accordance with GAAP ("Trenwick Liabilities"), and there is no existing condition or set of circumstances which would reasonably be expected to result in a Trenwick Liability, except for (i) Trenwick Liabilities incurred in the ordinary and usual course of business and consistent with past practice since September 30, 1999, (ii) Trenwick Liabilities incurred in connection with or as a result of the transactions contemplated by this Agreement and (iii) Trenwick Liabilities that would not reasonably be expected to have a Material Adverse Effect on Trenwick. Section 3.5. Absence of Certain Changes or Events. Except in connection with this Agreement, the Plans, the Stock Option Agreements and the transactions contemplated hereby and thereby or except as described in Section 3.5 of the Trenwick Disclosure Letter, as disclosed in the Trenwick SEC Reports filed and publicly available prior to the date of this Agreement (the "Filed Trenwick SEC Reports") since the date of the most recent audited financial statements included in the Filed Trenwick SEC Reports, Trenwick and its Subsidiaries have conducted their business in the ordinary course consistent with past practice, and there has not occurred (i) any event or change having individually or in the aggregate a Material Adverse Effect on Trenwick, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of Trenwick's outstanding capital stock, other than regular quarterly cash dividends of not more than $0.26 per share on the Trenwick Shares and dividends paid by wholly owned subsidiaries, (iii) (A) any granting by Trenwick or any of its Subsidiaries to any current or former director or officer of Trenwick or its Subsidiaries of any increase in compensation, bonus or other benefits, except for normal increases in the ordinary course of business, (B) any granting by Trenwick or any of its Subsidiaries to any such current or former director or officer of any increase in severance or termination pay or (C) any entry by Trenwick or any of its Subsidiaries into, or any amendments of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director or officer, (iv) any tax election that individually or in the aggregate would have a Material Adverse Effect on Trenwick or any of its tax attributes or any settlement or compromise of any material income tax liability, or (v) any change in accounting methods, principles or practices by Trenwick or any of its Subsidiaries materially affecting their assets, liabilities or business, except insofar as may have been required or permitted by a change in applicable accounting principles (including statutory accounting practices ("SAP")). Section 3.6. Certain Fees. No finder, broker, agent, financial advisor or other intermediary other than DLJ has acted on behalf of Trenwick in connection with this Agreement or the transactions contemplated hereby, or is entitled to any payment in connection herewith. Trenwick has provided to LaSalle Holdings copies of Trenwick's engagement letter with DLJ in connection with this Agreement and the transactions contemplated hereby. Section 3.7. No Defaults. Neither Trenwick nor any of its Subsidiaries is in default or violation (and no event has occurred which with notice or lapse of time or both would constitute a default or violation) of its certificate of incorporation or by-laws or other governing document, or any material agreement, mortgage, indenture, debenture, trust, lease, license or other instrument or obligation to or by which it or any of its properties is subject or bound (the "Trenwick Instruments"), except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Except as set forth in Section 3.7 of the Trenwick Disclosure Letter, the execution, delivery and performance of this Agreement and the taking of any other action A-13 160 contemplated by this Agreement will not (i) result in any violation of or be in conflict with or constitute a breach or default (with or without notice or lapse of time or both) under (a) the certificate of incorporation or by-laws of Trenwick or its Subsidiaries or (b) any of the other Trenwick Instruments, except for any such violation of, conflict with, breach of or default under which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick, (ii) result in or constitute an event entitling any party to a Trenwick Instrument to effect an acceleration of the maturity of any indebtedness of Trenwick or any of its Subsidiaries or an increase in the rate of interest presently in effect with respect to such indebtedness, except for any such accelerations or increases which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick or (iii) result in the creation of any Lien upon any of the properties or assets of Trenwick, except for Permitted Liens and any Liens which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Section 3.8. Consents. (a) Except as set forth in Section 3.8 of the Trenwick Disclosure Letter and except for compliance with the provisions of Sections 271 and 275 of the GCL and the approval of Lloyd's, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority ("Consent") is required on the part of Trenwick or any of its Subsidiaries in connection with the execution, delivery and performance by Trenwick of this Agreement and the consummation by Trenwick of the transactions contemplated hereby, except those required by (i) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) United States federal and state securities or "Blue Sky" laws and (iii) where failure to obtain such Consent would not be reasonably expected to have a Material Adverse Effect on Trenwick. (b) Other than the affirmative vote of the holders of more than 50% of the issued and outstanding Trenwick Shares (with each share having one vote per share) required to approve and adopt this Agreement and the Plan of Reorganization, there is no other vote, consent or approval of the holders of any class of shares of Trenwick necessary to approve and adopt this Agreement, the Plan of Reorganization and the transactions contemplated hereby. Section 3.9. Compliance with Applicable Law. Each of Trenwick and its Subsidiaries is in compliance with all licenses, permits and other authorizations, domestic or foreign, necessary to conduct its respective business, except where failure to have or comply with such licenses, permits and authorizations would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Neither Trenwick nor any of its Subsidiaries is in default or violation (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) of any judgment, decree, order, law, statute, rule or regulation of any Governmental Authority, except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Subject to obtaining the Consents referred to in Section 3.8, the execution, delivery and performance of this Agreement by Trenwick and the consummation by Trenwick of the transactions contemplated hereby prior to the date or dates as of which the representations and warranties herein are made or deemed made, will not result in any default or violation of any judgment, decree, order, law, statute, rule or regulation of any Governmental Authority applicable to Trenwick or its Subsidiaries, except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Section 3.10. Information Supplied. None of the information supplied or to be supplied by Trenwick for inclusion or incorporation by reference in the Registration Statement on Form S-4 (the "Form S-4") to be filed with the SEC by New Holdings relating to the New Holdings Shares comprising LaSalle Consideration and Trenwick Consideration will, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such A-14 161 statements were made, not misleading. The letters to shareholders, notices of meetings, proxy statements and forms of proxies to be distributed to shareholders of LaSalle Holdings and stockholders of Trenwick, respectively, in connection with the Plans and the transactions contemplated hereby, except information supplied by LaSalle Holdings in writing for inclusion in the Joint Proxy Statement (as defined herein), will not, as of the date the Joint Proxy Statement is first mailed to such shareholders and on the date of the meetings of Trenwick's stockholders or LaSalle Holdings' shareholders, as the case may be, and the date of any postponement or adjournment thereof, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The information and documents referred to in the previous two sentences are herein referred to as the "Joint Proxy Statement." All documents that Trenwick is responsible for filing with any Governmental Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of any applicable law. Section 3.11. Material Contracts. Except as set forth in Section 3.11 of the Trenwick Disclosure Letter: (a) All of the contracts of Trenwick and its Subsidiaries that are required to be described in the Trenwick SEC Reports or to be filed as exhibits thereto (including, without limitation, contracts of Chartwell) are described in the Trenwick SEC Reports or filed as exhibits thereto and are in full force and effect. (b) Neither Trenwick nor any of its Subsidiaries is a party to any agreement containing any provision or covenant limiting in any material respect the ability of Trenwick or any of its Subsidiaries (or New Holdings or any of its Subsidiaries subsequent to the Effective Time) to (i) sell any products or services of or to any other Person, (ii) engage in any line of business in any geographical area or (iii) compete with or to obtain products or services from any Person or limiting the ability of any Person to provide products or services to Trenwick or any of its Subsidiaries. (c) Neither Trenwick nor any of its Subsidiaries is a party to or bound by any contract, agreement or arrangement which would cause the rights or obligations of any party thereto to change in the event of the Plans, except for any such contract, agreement or arrangement which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Section 3.12. Taxes. Except as provided in Section 3.12 of the Trenwick Disclosure Letter: (a) Trenwick and its Subsidiaries have filed or caused to be filed with the appropriate United States federal, state, local, foreign and other Governmental Authorities, all Tax returns, information returns and reports required to be filed on or prior to the date hereof (taking into account all valid extensions). All such Tax returns, information returns and reports are complete and accurate in all material respects. (b) Trenwick and its Subsidiaries have paid in full or made adequate provision (in accordance with GAAP) for the payment of all Taxes shown to be due on the Tax returns referred to in Section 3.12(a). All material written assessments of Taxes due and payable by or on behalf of Trenwick or any of its Subsidiaries have either been paid or provided for (in accordance with GAAP) or are being contested in good faith by appropriate proceedings. (c) There are no material Tax claims pending against Trenwick or any of its Subsidiaries and Trenwick does not know of any threatened claim for Tax deficiencies or any basis for such claims, no material issues have been raised in any examination by any taxing authority with respect to Trenwick or any of its Subsidiaries which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined, and there are not now in force any waivers or agreements by Trenwick or any of its Subsidiaries for the extension of time for the assessment of any material Tax, nor has any such waiver or agreement been requested by any taxing authority. Neither Trenwick nor any of its Subsidiaries has any liability for any material United States federal, state, local, foreign or other Taxes of any corporation or entity other than Trenwick and its Subsidiaries. A-15 162 (d) There are no Liens on any of the assets of Trenwick or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Taxes (other than Taxes that are not due as of the date hereof). (e) Trenwick and its Subsidiaries have withheld and paid all United States federal, state, local, foreign and other Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. (f) To Trenwick's knowledge, Section 3.12(f) of the Trenwick Disclosure Letter discloses, with respect to the year ended December 31, 1998 and for the period commencing January 1, 1999 and ending on the date of the Trenwick Disclosure Letter, (i) each insurance or reinsurance transaction by Trenwick or any of its Subsidiaries directly with stockholders of Trenwick and (ii) each insurance or reinsurance transaction by Trenwick or any of its Subsidiaries directly or indirectly with Persons related to stockholders of Trenwick and not disclosed in clause (i) above, which would cause Trenwick or any of its Subsidiaries to have any "related person insurance income" within the meaning of Section 953(c)(2) of the Code. (g) To Trenwick's knowledge, Trenwick and its Subsidiaries did not have for the year ended December 31, 1998, and Trenwick does not expect Trenwick or any of its Subsidiaries to have for the period ending at the Effective Time (treating such period as if it were a taxable year), "related person insurance income" within the meaning of Section 953(c)(2) of the Code in excess of the exceptions provided in Sections 953(c)(3)(A) and (B) of the Code. (h) To Trenwick's knowledge, except as disclosed in Section 3.12(h) of the Trenwick Disclosure Letter, neither Trenwick nor any of its Subsidiaries is, nor has Trenwick or any of its Subsidiaries ever been, a "controlled foreign corporation" within the meaning of Section 957(a) or 957(b) of the Code. (i) A representation with respect to Taxes contained in this Section 3.12 shall be deemed to be accurate unless an inaccuracy contained therein would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. Section 3.13. Litigation. Except as disclosed in the Trenwick SEC Reports filed prior to the date hereof or in Section 3.13 of the Trenwick Disclosure Letter, there are no actions, suits, claims, proceedings or investigations pending against or, to the knowledge of Trenwick, threatened against or affecting, Trenwick or any of its Subsidiaries or any of their respective properties or any syndicates managed by a Lloyd's or other managing agency which is a Subsidiary of Trenwick ("Trenwick Managing Agency") before any Governmental Authority or otherwise which (a) would be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick, (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or (c) alleges criminal action or inaction. As of the date hereof, neither Trenwick nor its Subsidiaries or any of their respective properties is subject to any order, writ, judgment, injunction, decree, determination or award having, or which would reasonably be expected to have, a Material Adverse Effect on Trenwick or which would prevent or delay the consummation of the transactions contemplated hereby. Except as disclosed in the Trenwick SEC Reports filed prior to the date hereof, there are no pending or, to the knowledge of Trenwick, threatened claims for indemnification by Trenwick or any of its Subsidiaries in favor of directors, officers, employees and agents of Trenwick or any of its Subsidiaries. Section 3.14. Title to Properties; Leases. Except as set forth in Section 3.14(a) of the Trenwick Disclosure Letter, each of Trenwick and its Subsidiaries has good and marketable title to, and is the lawful owner of, or has the right to use pursuant to a license or otherwise, all of the tangible and intangible assets, properties and rights used in its businesses and all tangible and intangible assets, properties and rights reflected on the balance sheet of Trenwick dated September 30, 1999 or acquired since September 30, 1999, free and clear of all Liens (other than Permitted Liens) and material defects. Trenwick and its Subsidiaries own no real property. Section 3.14(b) of the Trenwick Disclosure Letter sets forth all material real property and personal property leases of Trenwick and its Subsidiaries. All such leases are valid, binding and enforceable against Trenwick or its Subsidiaries (and, to the knowledge of Trenwick and its Subsidiaries, each other party thereto) in accordance with their respective terms, and A-16 163 there does not exist, under any lease of real property or personal property, any material defect or any event which, with notice or lapse of time or both, would constitute a material default by the Trenwick or its Subsidiaries, as the case may be, or, to the knowledge of Trenwick and its Subsidiaries, by any other party thereto. Section 3.15. Employees. (a) Section 3.15(a) of the Trenwick Disclosure Letter lists all employment contracts and similar arrangements between Trenwick or any of its Subsidiaries and their respective executive officers and all plans and arrangements pursuant to which Trenwick or any of its Subsidiaries is obligated to make any payment or confer any material benefit upon any officer, director, employee or agent of Trenwick or any of its Subsidiaries as a result of or in connection with any of the transactions contemplated by this Agreement or any transaction or transactions resulting in a change of control of Trenwick or any of its Subsidiaries (including as a result of a termination of employment in connection with any of such events). Except as described in Section 3.15(a) of the Trenwick Disclosure Letter and except as would not reasonably be expected to have a Material Adverse Effect on Trenwick, (a) Trenwick and its Subsidiaries have complied with all laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity and collective bargaining and (b) no labor dispute with employees of Trenwick or any of its Subsidiaries exists or, to the knowledge of Trenwick, is threatened. The severance costs associated with the acquisition of Chartwell and related workforce reductions have been identified and are as set forth in Section 3.15(a) of the Trenwick Disclosure Letter. (b) Except as set forth in Section 3.15(b) of the Trenwick Disclosure Letter, neither Trenwick nor any of its Subsidiaries is a party to any collective bargaining or other labor union contract applicable to Persons employed by Trenwick or any of its Subsidiaries, no collective bargaining agreement is being negotiated by Trenwick or any of its Subsidiaries and Trenwick has no knowledge of any activities or proceedings of any labor union to organize any of their respective employees. There is no labor dispute, strike or work stoppage against Trenwick or any of its Subsidiaries pending or, to Trenwick's knowledge, threatened which may interfere with the respective business activities of Trenwick or any of its Subsidiaries, except where such dispute, strike or work stoppage would not reasonably be expected to have a Material Adverse Effect on Trenwick. (c) Trenwick has made all necessary notifications to and received all necessary consents from Lloyd's and the Financial Services Authority with respect to the employment of personnel requiring such notification or consents. Section 3.16. Benefit Plans. (a)(i) Each Employee Benefit Plan maintained or contributed to, or required to be maintained or contributed to, by Trenwick or any of its Subsidiaries for the benefit of any present or former U.S. officer, employee or director of Trenwick or any of its Subsidiaries (all the foregoing collectively referred to hereinafter as "Trenwick Benefit Plans") has been administered substantially in accordance with its terms and any related trust agreement or insurance contract has been administered substantially in accordance with its terms. Trenwick, its Subsidiaries and all the Trenwick Benefit Plans, and any related trust agreements or insurance contracts, are in substantial compliance with the applicable provisions of ERISA, the Code, all other applicable laws and all applicable collective bargaining agreements. (ii) None of Trenwick or any other person or entity that together with Trenwick is treated as a single employer under Section 414 of the Code (each a "Trenwick Commonly Controlled Entity") has incurred any material liability under Title IV of ERISA (other than for the payment of benefits or the timely payment of Pension Benefit Guaranty Corporation insurance premiums, in either case in the ordinary course) or under Section 412(f) or 412(n) of the Code, and no condition exists which could reasonably be expected to present a risk of Trenwick or any Commonly Controlled Entity incurring such a material liability. (iii) Neither Trenwick nor any Trenwick Commonly Controlled Entity is obligated to contribute to any "multiemployer plan" (as defined in Section 3(37) or Section 4001(a)(3) of A-17 164 ERISA) or has any material liability, including current or potential withdrawal liability (within the meaning of Section 4201 of ERISA) with respect to any multiemployer plan. (iv) Except as contemplated by Section 2.4 or as disclosed in the Filed Trenwick SEC Documents or in Section 3.16(a)(iv) of the Trenwick Disclosure Schedule, since the date of the most recent audited financial statements included in the Filed Trenwick SEC Documents, there has not been any adoption or amendment by Trenwick or any of its Subsidiaries of any collective bargaining agreement or any Trenwick Benefit Plan. Except as disclosed in the Filed Trenwick SEC Documents or in Section 3.16(a)(iv) of the Trenwick Disclosure Schedule, there exist no employment, consulting, change in control, severance, termination or indemnification agreements, arrangements or understandings between Trenwick or any Subsidiary and any current or former employee, officer or director of Trenwick or any Subsidiary or any Trenwick Benefit Plan. (v) All material contributions and other payments required to be made by Trenwick and its subsidiaries to any Trenwick Benefit Plan prior to the date hereof have been made and all accruals required to be made under any Trenwick Benefit Plan have been made. There is no claim, dispute, grievance, charge, complaint, restraining or injunctive order, litigation or proceeding pending, or, to the knowledge of Trenwick, threatened or anticipated (other than routine claims for benefits) against or relating to any Trenwick Benefit Plan or against the assets of any Trenwick Benefit Plan which could reasonably be expected to result in the imposition of any material liability of Trenwick. Neither Trenwick nor any of its Subsidiaries has communicated generally to employees or specifically to any employee regarding any future increase of benefit levels (or future creations of new benefits) with respect to any Trenwick Benefit Plans. (vi) Each Trenwick Benefit Plan can be terminated or otherwise discontinued without any liability to Trenwick or any Subsidiary that would reasonably be expected to have a Material Adverse Effect. With respect to each Trenwick Benefit Plan subject to Title IV of ERISA and with respect to each plan of a Trenwick Commonly Controlled Entity subject to Title IV of ERISA (each a "Trenwick Defined Benefit Plan") Trenwick Defined Benefit Plan (i) no termination of any Trenwick Defined Benefit Plan has occurred pursuant to which all liabilities have not been satisfied in full, and no event has occurred and no condition exists that could reasonably be expected to result in Trenwick or any Trenwick Commonly Controlled Entity incurring liability under Title IV of ERISA or could constitute grounds for terminating any Trenwick Defined Benefit Plan; (ii) each Trenwick Defined Benefit Plan which is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code, has been maintained in compliance with the minimum funding standards of ERISA and the Code and no such Trenwick Defined Benefit Plan has incurred any "accumulated funding deficiency," as defined in Section 412 of the Code and Section 302 of ERISA, whether or not waived; (iii) neither Trenwick nor any Trenwick Commonly Controlled Entity has sought or received a waiver of its funding requirements with respect to any Trenwick Defined Benefit Plan and all material contributions payable with respect to each Defined Benefit Plan have been timely made; (iv) no reportable event, within the meaning of Section 4043 of ERISA, and no event described in Section 4062 or 4063 of ERISA, has occurred with respect to any Trenwick Defined Benefit Plan; (v) the aggregate accumulated benefit obligations of each Trenwick Defined Benefit Plan subject to Title IV of ERISA (as of the date of the most recent actuarial valuation prepared for such Trenwick Defined Benefit Plan) do not exceed the fair market value of the assets of such Trenwick Defined Benefit Plan (as of the date of such valuation); and (vi) no amendment has been made to any Trenwick Defined Benefit Plan that has required or would require the provision of security under ERISA Section 307 or Code Section 401(a)(29). (vii) The execution, delivery and performance of this Agreement and the transactions contemplated hereby will not in and of themselves result in the imposition of any federal excise tax with respect to any Trenwick Benefit Plan. A-18 165 (viii) Neither Trenwick nor any Subsidiary maintains or contributes (or has maintained or contributed to) any Trenwick Benefit Plan which provides, or has a liability to provide, life insurance, medical, severance, or other employee welfare benefits to any employee upon his retirement or termination of employment, except as may be required by Section 4980B of the Code. (ix) Neither Trenwick nor any of its subsidiaries maintains or contributes to a trust, organization or association described in any of the Sections 501(c)(9), 501(c)(17) or 501(c)(2) of the Code. (x) Favorable determination letters have been received from the Internal Revenue Service with respect to each Trenwick Benefit Plan which is intended to comply with the provisions of Section 401(a) of the Code, and each such Trenwick Benefit Plan complies in form and in operation in all material respects with the requirements of a "qualified plan" under Section 401(a) of the Code. (xi) Neither Trenwick nor any of its Subsidiaries, nor any of their respective directors, officers, employees or, to the knowledge of Trenwick any other "fiduciary," as such term is defined in Section 3(21) of ERISA, has any liability for failure to comply with ERISA or the Code for any action or failure to act in connection with the administration or investment of the Trenwick Benefit Plans. (xii) There has been no act or acts which would result in a disallowance of a deduction or the imposition of a tax pursuant to Section 4980B, or with regard to plan years beginning before December 31, 1988, Section 162(i) of the Code as in effect immediately prior to the enactment of the Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated thereunder, whether final, temporary or proposed. No event has occurred with respect to which Trenwick or any of its subsidiaries could be liable for a tax imposed by Chapter 43 of Subtitle A of the Code, or for a civil penalty or other liability under Section 502(c) or Section 501(l) of ERISA. Each Trenwick Benefit Plan that is a "group health plan" as defined in Section 607 of ERISA complies in all material respects and has been operated in substantial compliance in all respects with Part 7 of Title I, Subtitle B of ERISA and Subtitle K of the Code. (xiii) With respect to each of the Trenwick Benefit Plans, Trenwick has delivered to LaSalle Holdings true and complete copies of: (a) the plan documents, including any related trust agreements, insurance contracts or other funding arrangements, or a written summary of the terms and conditions of the plan if there is no written plan document; (b) the most recent determination letter received from the Internal Revenue Service; (c) the most recent IRS Form 5500; (d) the most recent actuarial valuation; (e) the most recent financial statement; (f) all material correspondence with the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation with respect to the past three plan years other than IRS Form 5500 filings and PBGC premium payments; and (g) the most recent summary plan description. (xiv) None of the payments contemplated by any Trenwick Employee Benefit Plans would, in the aggregate, constitute excess parachute payments (as defined in Section 280G of the Code (without regard to subsection (b)(4) thereof)). (xv) Except as disclosed in the Section 3.16(a)(xv) of the Trenwick Disclosure Letter, the consummation of the Plan of Reorganization (or the approval thereof by the parties' respective shareholders) and the other transactions contemplated by this Agreement, will not (x) entitle any employees or directors of Trenwick or of any Trenwick Commonly Controlled Entity, directly or indirectly to severance pay; (y) accelerate the time of payment or vesting or trigger any payment of compensation or benefits under, or increase the amount payable or trigger any other material obligation pursuant to, any of the Trenwick Benefit Plans; or (z) result in any breach or violation of, or default under any of the Trenwick Benefit Plans. A-19 166 (b) Except as would not have a Material Adverse Effect on Trenwick, except as set forth in Section 3.16(b) of the Trenwick Disclosure Letter and so far as Pierre D. Croizat, Russell J. English, Andrew Okell and Joanne Merrick, who are senior management of Trenwick's international operations, are aware: (i) There is no existing or threatened or pending industrial or trade dispute involving Trenwick International Limited ("Trenwick International") and any of the employees of Trenwick International and there are no facts known or which would on reasonable inquiry be known to Trenwick International which might indicate that there may be any such dispute (excluding the Plan of Reorganization and the transactions contemplated by this Agreement). There are no agreements or arrangements (whether oral or in writing or existing by reason of custom and practice and whether or not legally binding) between Trenwick International and any trade union or other employees' representatives or organization concerning or affecting the employees of Trenwick International and there are no trade unions or other employees' representatives whom Trenwick International recognizes to any extent for collective bargaining purposes nor, so far as Trenwick International is aware, has Trenwick International done any act which might be construed as recognition. (ii) Trenwick International has given no notice of any redundancies to the U.K. Secretary of State nor started consultations with any independent trade union or employees' representatives within the preceding period of one year in relation to any employees of Trenwick International. No circumstances have arisen under which Trenwick International is likely to be required to pay damages for wrongful dismissal or breach of contract, to make any contractual or statutory redundancy payment or make or pay any compensation in respect of unfair dismissal, to make any other payment under any employment protection legislation or to reinstate or re-engage any former employee. No circumstances have arisen under which Trenwick International is likely to be required to pay damages or compensation, or suffer any penalty or be required to take corrective action or be subject to any form of discipline under the Employment Rights Act 1996, the Trade Union and Labor Relations (Consolidation) Act 1992, the Transfer of Undertakings (Protection of Employment) Regulations 1981, the Sex Discrimination Act 1975, the Equal Pay Act 1970, the Treaty of Rome or any Directive or recommendation made pursuant to it, the Race Relations Act 1976 or the Disability Discrimination Act 1995. So far as Trenwick International is aware, there are no current, pending or threatened claims of any type against Trenwick International by any existing or former employees or directors of Trenwick International or by any existing or former consultants to Trenwick International. (iii) There are no existing service or other agreements or contracts between Trenwick International and any of its directors or executives or employees which cannot be lawfully terminated by six calendar months' notice or less without giving rise to any claim for damages or compensation other than a statutory redundancy payment or a claim for unfair dismissal depending on the circumstances of the termination. Trenwick International has complied with all its material obligations under all legislation, regulations and other requirements having the force of law (including, without limitation, orders and awards) in connection with its employees, directors and consultants. (iv) Trenwick International is not involved in negotiations (whether with employees or any trade union or other employees' representatives) to vary the terms and conditions of employment or engagement of any of its employees, directors or consultants and has not made any representations, promises, offers or proposals to any of its employees, directors or consultants or to any trade union or other employees' representatives concerning or affecting the terms and conditions of employment or engagement of any of its employees, directors or consultants. (v) Trenwick International has discharged its obligations in full in relation to salary, wages, fees, commission, bonuses, overtime pay, holiday pay, sick pay and all other benefits and emoluments relating to its employees, consultants and directors in respect of all prior periods. A-20 167 (vi) There are no pension, share option, share incentive, life assurance, disability or similar schemes, arrangements or obligations for any employees or directors of Trenwick International, and Trenwick International has no obligations (whether legally binding or established by custom) to pay any pension or make any other payment after retirement or death or otherwise to provide "relevant benefits" within the meaning of Section 612 of the U.K. Income and Corporation Taxes Act 1988 or to make any payment for the purpose of providing such "relevant benefits" to or in respect of any person who is now or has been an officer or employee of Trenwick International and is not a party to any scheme or arrangement having as its purpose or one of its purposes the making of such payments or the provision of such benefits. (vii) All Employee Benefit Plans comply with and have at all times complied with the provisions of the relevant legislation and the requirements of the Pension Schemes Office and the Contributions Agency affecting schemes approved under Chapter I of Part XIV of the U.K. Income and Corporation Taxes Act 1988. Trenwick International and the trustees of such schemes have duly complied with their respective obligations under the trust deeds and the rules thereof and under the aforementioned legislation and requirements. All amounts due to the trustees thereof or to any insurance company in connection therewith have been paid. (viii) Neither Trenwick International nor the trustees of any pension scheme is engaged in any litigation or arbitration proceedings in respect of any Employee Benefit Plan or any benefit provided thereunder in relation to the employees or former employees of Trenwick International and there are no current submissions or referrals to the Pensions Ombudsman or to the Occupational Pensions Advisory Service in respect of Trenwick International or any pension scheme. (ix) No Employee Benefit Plan in which employees or former employees of Trenwick International participate or have participated has been or is in the process of being (or is proposed to be) wound up (in whole or in part) or closed to new entrants (in whole or in part). Section 3.17. Intellectual Property. Trenwick and its Subsidiaries own or possess, or have all necessary rights and licenses in, all patents, patent rights, licenses, inventions (whether or not patentable or reduced to practice), copyrights (whether registered or unregistered), know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), registered and unregistered trademarks, service marks and trade names and other intellectual property rights (collectively, "Intellectual Property") necessary to conduct their business as conducted and proposed to be conducted except to the extent that the failure of Trenwick or its Subsidiaries to own or have such rights and licenses in such Intellectual Property would not reasonably be expected to have a Material Adverse Effect on Trenwick. Neither Trenwick nor any of its Subsidiaries have received any unresolved notice of, or is aware of any fact or circumstance that would give any Person a right to assert, infringement or misappropriation of, or conflict with, asserted rights of others or invalidity or unenforceability of any Intellectual Property owned by Trenwick or any of its Subsidiaries with respect to any of the foregoing which, singly or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Trenwick. To the knowledge of Trenwick, the use of such Intellectual Property to conduct the business and operations of Trenwick and its Subsidiaries as conducted or proposed to be conducted does not infringe on the rights of any person in any case where such infringement would reasonably be expected to have a Material Adverse Effect on Trenwick. To the knowledge of Trenwick, no person is challenging, infringing on or otherwise violating any right of Trenwick or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to Trenwick or any of its Subsidiaries. Except as set forth in Section 3.17 of the Trenwick Disclosure Letter, neither the execution of this Agreement or the Stock Option Agreements nor the consummation of the transactions contemplated hereby or thereby will result in a loss or limitation in the rights and licenses of Trenwick to use or enjoy the benefit of any Intellectual Property employed by Trenwick or any of its Subsidiaries in connection with its business as conducted or proposed to be conducted where such loss or limitation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Trenwick. Following the Effective Date, Trenwick's Intellectual Property may be used by New Holdings or any of its Subsidiaries, except to the extent that A-21 168 failure to be so able to use Trenwick's Intellectual Property would not have a Material Adverse Effect on New Holdings or any of its Subsidiaries. Section 3.18. Takeover Statutes. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under any Delaware law is applicable to the Plans, the Stock Option Agreements or the other transactions contemplated hereby or thereby. Trenwick has taken all corporate action necessary to render the provisions of Section 203 of the GCL inapplicable to the Plans, the Stock Option Agreements and the other transactions contemplated hereby and thereby. Section 3.19. Opinion of Financial Advisor. Trenwick has received the written opinion of Donaldson, Lufkin & Jenrette ("DLJ"), dated December 16, 1999, to the effect that, as of such date, the Trenwick Exchange Ratio is fair to Trenwick from a financial point of view, a copy of which written opinion will be delivered to LaSalle Holdings. Section 3.20. Rights Agreement. (a) Trenwick and its Board of Directors have taken all necessary actions, including the amendment to the Rights Agreement, so that the execution and delivery of this Agreement, the LaSalle Stock Option Agreement or the consummation of the transactions contemplated hereby and thereby will not (i) cause any of the Rights to become exercisable, (ii) cause LaSalle Holdings or New Holdings to be an Acquiring Person (as defined in the Rights Agreement) or (iii) trigger other provisions of the Rights Agreement, including giving rise to a Distribution Date (as defined in the Rights Agreement), and the Expiration Date (as defined in the Rights Agreement) of the Rights shall occur immediately prior to the Effective Time. Such amendment shall be in full force and effect from and after the date hereof. (b) Trenwick has taken all necessary action with respect to all of the outstanding Rights so that, as of immediately prior to the Effective Time, (i) none of Trenwick, New Holdings, LaSalle Holdings, LaSalle Re and Acquisition will have any obligations under the Rights or the Rights Agreement and (ii) the holders of the Rights will have no rights under the Rights or the Rights Agreement. Section 3.21. Insurance Matters. (a) All insurance, reinsurance and coinsurance treaties or agreements, including retrocessional agreements, to which Trenwick or any Trenwick Insurance Subsidiary or any syndicate managed by any Trenwick Managing Agency is a party or under which Trenwick or any Trenwick Insurance Subsidiary or any syndicate managed by any Trenwick Managing Agency, has any existing rights, obligations or liabilities are in full force and effect, except for such treaties or agreements the failure to be in full force and effect of which are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. (b) Prior to the date hereof, Trenwick has delivered or made available to LaSalle Holdings a true and complete copy of the most recent actuarial reports prepared by actuaries, independent or otherwise, with respect to Trenwick or any Trenwick Insurance Subsidiary since December 31, 1998 and all attachments, addenda, supplements and modifications thereto (the "Trenwick Actuarial Analyses"). The information and data furnished by Trenwick or any Trenwick Insurance Subsidiary to its independent actuaries in connection with the preparation of Trenwick Actuarial Analyses were accurate in all material respects. (c) Except as disclosed in Section 3.21 of the Trenwick Disclosure Letter: (i) All in-force primary insurance policies issued by Trenwick or any of its Insurance Subsidiaries are, to the extent required under applicable insurance laws, rules or regulations, on forms and at rates approved by the insurance regulatory authority of the jurisdiction where issued or have been filed with and not objected to by such authority within the period provided for objection, except as would not individually or in the aggregate have a Material Adverse Effect on Trenwick. A-22 169 (ii) To the knowledge of Trenwick, except as would not individually or in the aggregate have a Material Adverse Effect on Trenwick, each insurance agent or solicitor, including, without limitation, salaried employees of Trenwick or any Insurance Subsidiary appointed as an insurance agent or solicitor, at the time which agent or solicitor wrote, sold, solicited or produced business for such insurer since January 1, 1996, was duly licensed as an insurance agent (for the type of business written, sold, solicited or produced by such insurance agent or solicitor in the particular jurisdiction in which such agent or solicitor wrote, sold, solicited or produced such business). Section 3.22. Liabilities and Reserves. Except for instances where the failure of the following statements to be true would not reasonably be expected to have a Material Adverse Effect on Trenwick, (a) the reserves carried on the financial statements of each Trenwick Insurance Subsidiary for future insurance policy benefits, losses, claims and similar purposes were, as of the respective dates of such financial statements, in compliance with the requirements for reserves established by the insurance departments of the jurisdiction of such Trenwick Insurance Subsidiary or (as the case may be) by Lloyd's, were determined in accordance with generally accepted actuarial standards and principles consistently applied and were fairly stated in accordance with sound actuarial and statutory accounting principles (it being understood that no representation or warranty is made in this Agreement to the effect that such reserves will prove to be adequate to cover the actual amount of liabilities that are eventually paid after the date hereof); and (b) the admitted assets of each Trenwick Insurance Subsidiary as determined under applicable laws or under Lloyd's regulations are in an amount at least equal to the minimum amounts required by applicable laws or regulations. Section 3.23. Investment Company. Neither Trenwick nor any of its Subsidiaries conducts activities of, or is otherwise deemed under applicable law to control, an "investment adviser" as such term is defined in Section 2(a)(20) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), whether or not registered under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). Neither Trenwick nor any of its Subsidiaries is an "investment company" as defined under the Investment Company Act and neither Trenwick nor any of its Subsidiaries sponsors any Person that is such an investment company. Section 3.24. Finite Risk Reinsurance. Except as set forth in Section 3.24 of the Trenwick Disclosure Letter, none of Trenwick's Insurance Subsidiaries has ceded business pursuant to a reinsurance agreement that does not meet the conditions for reinsurance accounting as provided by the Statement of Financial Accounting Standards No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Term Contracts." Section 3.25. Reinsurance Contracts, Coverholders and MGAs. (a) Section 3.25 of the Trenwick Disclosure Letter contains a true and complete list of all managing general agents ("MGAs") and coverholders with whom each Subsidiary of Trenwick does business that have been appointed within the twelve (12) months preceding the date of this Agreement and all in force contracts, treaties or arrangements regarding the credit of reinsurance, coinsurance, excess insurance (collectively, the "Reinsurance Contracts") which generate premium income in excess of $1,000,000. Except as would not, individually or in the aggregate, have a Material Adverse Effect on Trenwick: (i) each of the foregoing Reinsurance Contracts is valid and binding in accordance with its terms, and is in full force and effect and (ii) neither the Subsidiaries of Trenwick nor, to the knowledge of Trenwick, or other party thereto, is in default in any material respect with respect to any such Reinsurance Contract, nor to the knowledge of Trenwick does any condition exist that with notice or lapse of time or both would constitute such a material default thereunder. Except as set forth in Section 3.25 of the Trenwick Disclosure Letter, none of the contracts, treaties or arrangements which generate premium income in excess of $1,000,000 involving the MGAs or coverholders with whom each Subsidiary of Trenwick does business contain "change of control" provisions and no such Reinsurance Contract contains any provision providing that any such other party thereto may terminate, cancel or commute the same by reason of the transactions contemplated by this Agreement or any other provision which would be altered or otherwise become applicable by reason of such transactions, and no party has given notice of termination, A-23 170 cancellation or commutation of any such Reinsurance Contract or that it intends to terminate, cancel or commute any such Reinsurance Contract as a result of the transactions contemplated hereby. (b) Except as set forth in Section 3.25 of the Trenwick Disclosure Letter, Trenwick America Reinsurance Company ("TARCO") is entitled under applicable insurance laws, rules and regulations to take credit in its statutory financial statements in accordance with Chapter 22 of the NAIC Accounting Practices and Procedures Manual for Property and Casualty Insurance Companies as in effect on the date hereof, with respect to those Reinsurance Contracts to which it is a party and all such amounts are properly reflected in the statutory financial statements of TARCO. Except as set forth in Section 3.25 of the Trenwick Disclosure Letter, Trenwick International is entitled under applicable insurance laws, rules and regulations to take credit in its statutory financial statements in accordance with Lloyd's regulations as in effect on the date hereof, with respect to those Reinsurance Contracts to which it is a party and all such amounts are properly reflected in the statutory financial statements of Trenwick International. Each of Trenwick, TARCO and Trenwick International has no knowledge of any disputes as to reinsurance or retrocessional coverage under, or any terms of provisions of, any such Reinsurance Contract except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. To the knowledge of Trenwick and TARCO and Trenwick International, the financial condition of any other party to any such Reinsurance Contract is not impaired to the extent that a default thereunder could reasonably be expected to occur. Section 3.26. Derivatives. As of the date hereof, other than as set forth in Section 3.26 of the Trenwick Disclosure Letter, neither Trenwick nor any of its Subsidiaries is a party to any futures or option contracts, swaps, hedges or similar instruments which, individually or in the aggregate, could have a Material Adverse Effect on Trenwick. Section 3.27. Related Party Transactions. Except as set forth in Section 3.27 of the Trenwick Disclosure Letter, since September 30, 1999, there have been no transactions, agreements, arrangements or understandings between Trenwick and its Subsidiaries, on the one hand, and Trenwick affiliates (other than wholly-owned Subsidiaries of Trenwick) or other Person, on the other hand, in existence as of the date hereof that are or would be required to be disclosed in the Trenwick SEC Reports in accordance with Item 404 of Regulation S-K under the Securities Act. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF LASALLE HOLDINGS LaSalle Holdings hereby represents and warrants to Trenwick and the Minority Shareholders that as of the date of the Original Agreement (except to the extent that a representation or warranty speaks as of an earlier date), with references to "the date hereof" or the "date of this Agreement" in this Article 4 being deemed to be references to the date of the Original Agreement: Section 4.1. Corporation; Organization. (a) Except as set forth in Section 4.1(a) of the LaSalle Disclosure Letter, each of LaSalle Holdings and its Subsidiaries is a company duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction of its organization. Each of LaSalle Holdings and its Subsidiaries (i) is qualified, licensed or domesticated as a foreign company in all jurisdictions where such qualification, license or domestication is required to own and operate its properties and conduct its business in the manner and at the places presently conducted; (ii) holds all franchises, grants, licenses, certificates, permits, consents and orders, all of which are valid and in full force and effect, from all applicable Bermuda and foreign regulatory authorities necessary to own and operate its properties and to conduct its business in the manner and at the places presently conducted; and (iii) has full power and authority (corporate and other) to own, lease and operate its respective properties and assets and to carry on its business as presently conducted and as proposed to be conducted, except where the failure to be so qualified, licensed or domesticated or to hold such franchises, grants, licenses, certificates, permits, consents and orders or to have such power and authority would not, when taken together with all other A-24 171 such failures, reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. LaSalle Holdings has furnished to Trenwick complete and correct copies of its memorandum of association and bye-laws as in effect on the date hereof. Such memorandum of association and bye-laws are in full force and effect and no other constitutional documents are applicable to or binding upon LaSalle Holdings. (b) LaSalle Holdings conducts its reinsurance operations through the Subsidiaries set forth in Section 4.1(b) of the LaSalle Disclosure Letter (collectively, the "LaSalle Reinsurance Subsidiaries"). Each of the LaSalle Reinsurance Subsidiaries is (i) duly licensed or authorized as a reinsurer in its jurisdiction of organization or duly licensed to operate in the reinsurance business (as applicable) in its jurisdiction of organization, (ii) duly licensed or authorized as a reinsurer in each other jurisdiction where it is required to be so licensed or authorized or duly licensed to operate in the reinsurance business in each other jurisdiction where it is required to be so licensed and (iii) duly authorized in its jurisdiction of organization and each other applicable jurisdiction to write each line of business currently written by such LaSalle Reinsurance Subsidiaries, except, in any such case, where the failure to be so licensed or authorized is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Except as set forth in Section 4.1(b) of the LaSalle Disclosure Letter, LaSalle Holdings has made all required filings under applicable insurance holding company statutes except where the failure to file is not reasonably expected to have a Material Adverse Effect on LaSalle Holdings. Section 4.2. Authority; Approval and Fairness. (a) LaSalle Holdings has all requisite corporate power and authority to execute and deliver this Agreement and, subject to the due approval and adoption of this Agreement by its shareholders, to perform its obligations hereunder and consummate the transactions contemplated hereby. LaSalle Holdings has all requisite corporate power and authority to enter into the Stock Option Agreements and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement by LaSalle Holdings, the performance by LaSalle Holdings of its obligations hereunder and the consummation by LaSalle Holdings of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of LaSalle Holdings, subject only to compliance with the provisions of Section 99 of the Companies Act. No other corporate proceedings on the part of LaSalle Holdings are necessary for the execution and delivery of this Agreement by LaSalle Holdings and, subject to compliance with the provisions of Section 99 of the Companies Act, the performance by LaSalle Holdings of its obligations hereunder and the consummation by LaSalle Holdings of the transactions contemplated hereby. This Agreement and the Stock Option Agreements have been duly executed and delivered by LaSalle Holdings and, assuming the due authorization, execution and delivery hereof and thereof by Trenwick, New Holdings and Acquisition, and subject to the provisions of Section 99 of the Companies Act constitutes the legal, valid and binding obligations of LaSalle Holdings, enforceable against LaSalle Holdings in accordance its terms, subject with respect to enforceability to the effect of bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium or similar laws now or hereafter affecting the enforcement of creditors' rights generally and to the availability of equitable remedies. (b) The Board of Directors of LaSalle Holdings (the "LaSalle Board") (i) has unanimously (by all directors present at a meeting duly called and held) declared that it considers this Agreement, the Schemes of Arrangement and the other transactions contemplated hereby to be advisable and in the best interests of LaSalle Holdings and its shareholders and (ii) has authorized and approved in all respects this Agreement, the Plans and the other transactions contemplated hereby. Section 4.3. Capital Structure. (a) As of the date hereof, the authorized share capital of LaSalle Holdings is $100,000,000 comprised of 100,000,000 shares with a par value of $1.00 per share. As of December 15, 1999, (i) 15,603,652 LaSalle Holdings Shares were issued and outstanding, (ii) no LaSalle Holdings Shares were held as treasury shares or by Subsidiaries of LaSalle Holdings and (ii) 3,000,000 Series A Preferred Shares were issued and outstanding. In addition, there are 4,000,000 Series B Preferred Shares of LaSalle Holdings reserved for issuance pursuant to the CatEPut, which shares are convertible into LaSalle Holdings Shares. Section 4.3(a) of the LaSalle Disclosure Letter sets forth each plan, arrangement or A-25 172 agreement pursuant to which options or stock appreciation rights with respect to LaSalle Holdings Shares or shares of LaSalle Re may be granted or under which such options or stock appreciation rights have been granted and are outstanding (the "LaSalle Option Plans") and in the aggregate the maximum number of options and stock appreciation rights outstanding as of the date hereof and the class and number of LaSalle Holdings Shares or shares of LaSalle Re reserved for issuance pursuant to the plan, arrangement or agreement (such options and rights being herein collectively referred to as the "LaSalle Holdings Options" and the "LaSalle Re Options," as the case may be), together with a listing of the aggregate number of such LaSalle Holdings Options and LaSalle Re Options which shall vest at the Effective Time as a result of the Schemes of Arrangement. Except as set forth in Section 4.3(a) of the LaSalle Disclosure Letter, each of the outstanding shares of each Subsidiary of LaSalle Holdings, other than the Non-Voting Shares owned by the Minority Shareholders, is directly or indirectly owned by LaSalle Holdings, free and clear of all Liens. (b) Except as described in Section 4.3(b) of the LaSalle Disclosure Letter, as of the date hereof, no Voting Debt of LaSalle Holdings or any of its Subsidiaries is issued or outstanding. (c) Except as described in Section 4.3(a), (b) or (c) of the LaSalle Disclosure Letter, as of the date hereof, there are no options, warrants, calls, rights, commitments or agreements of any character to which LaSalle Holdings or any of its Subsidiaries is a party or by which any of them is bound obligating LaSalle Holdings or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares or any Voting Debt or obligating LaSalle Holdings or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. Except as set forth in this Agreement or in Section 4.3(c) of the LaSalle Disclosure Letter, as of the date hereof, there are no outstanding contractual obligations of LaSalle Holdings or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of LaSalle Holdings or any of its Subsidiaries. (d) Except as described in Section 4.3(d) of the LaSalle Disclosure Letter or as specifically described in this Agreement and except for quarterly dividends in an amount not in excess of $0.375 per LaSalle Holdings Share and $1.0938 per Series A Preferred Share, since June 30, 1999, LaSalle Holdings has not (i) made or agreed to make any share split or share dividend, or issued or permitted or agreed to permit to be issued any shares, or securities exercisable for or convertible into shares, of LaSalle Holdings other than pursuant to and as required by the terms of any LaSalle Holdings Option; (ii) repurchased, redeemed or otherwise acquired any shares of LaSalle Holdings; or (iii) declared, set aside, made or paid to the shareholders of LaSalle Holdings dividends or other distributions on the outstanding shares of LaSalle Holdings. (e) Except as described in Section 4.3(e) of the LaSalle Disclosure Letter or as specifically described in this Agreement and except for quarterly dividends in an amount not in excess of $0.375 per Minority Share, since June 30, 1999, LaSalle Re has not (i) made or agreed to make any share split or share dividend, or issued or permitted or agreed to permit to be issued any shares, or securities exercisable for or convertible into shares, of LaSalle Re other than pursuant to and as required by the terms of any LaSalle Re Option; (ii) repurchased, redeemed or otherwise acquired any shares of LaSalle Re; or (iii) declared, set aside, made or paid to the shareholders of LaSalle Re (other than LaSalle Holdings) dividends or other distributions on the outstanding shares of LaSalle Re. Section 4.4. SEC Reports; Financial Statements. Except as set forth in Section 4.4 of the LaSalle Disclosure Letter, (a) LaSalle Holdings has delivered or made available to Trenwick a true and complete copy of each report, schedule, registration statement and definitive proxy statement or information statement (including exhibits) filed by LaSalle Holdings with the SEC in respect of its fiscal years ending September 30, 1997 and 1998 and its quarters ending after September 30, 1998 under the Securities Act and the Exchange Act and will deliver to Trenwick promptly upon the filing thereof with the SEC all such reports, schedules, registration statements and proxy statements (including exhibits) as may be filed after the date hereof and prior to the Effective Time (as such documents have since the time of their filing been amended or may after their filing, if after the date hereof, be amended, the "LaSalle SEC Reports"), which are or will be A-26 173 all the documents that LaSalle Holdings was or will be required to file with the SEC. Except as disclosed in Section 4.4(a) of the LaSalle Disclosure Letter, as of their respective dates, the LaSalle SEC Reports complied or will comply in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to the LaSalle SEC Reports, and none of the LaSalle SEC Reports contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made or will be made, not misleading. (b) As of their respective dates, the financial statements of LaSalle Holdings included or to be included in the LaSalle SEC Reports (the "LaSalle Financial Statements") complied or will comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and present or will present fairly in all material respects the consolidated financial position of LaSalle Holdings and its Subsidiaries and the consolidated results of operations, changes in shareholders' equity and cash flows of LaSalle Holdings and its Subsidiaries as of the dates and for the periods indicated, in accordance with GAAP applied on a consistent basis, subject in the case of interim financial statements to normal year-end adjustments and except for the absence of certain footnote information in the unaudited statements. (c) Except as set forth in, or arising out of facts or circumstances disclosed in, filings by LaSalle Holdings with the SEC prior to the date hereof, LaSalle Holdings and its Subsidiaries have no liabilities, debts, claims or obligations of any nature on the date hereof, whether accrued, absolute, direct or indirect, contingent or otherwise, whether due or to become due, that would be required to be included on a balance sheet prepared in accordance with GAAP ("LaSalle Liabilities"), and there is no existing condition or set of circumstances which would reasonably be expected to result in a LaSalle Liability, except for (i) LaSalle Liabilities incurred in the ordinary and usual course of business and consistent with past practice since June 30, 1998, (ii) LaSalle Liabilities incurred in connection with or as a result of the transactions contemplated by this Agreement and (iii) LaSalle Liabilities that would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. Section 4.5. Absence of Certain Changes or Events. Except in connection with this Agreement, the Plans, the Stock Option Agreements and the transactions contemplated hereby and thereby, as disclosed in the LaSalle SEC Reports filed and publicly available prior to the date of this Agreement (the "Filed LaSalle SEC Reports") since the date of the most recent audited financial statements included in the Filed LaSalle SEC Reports, LaSalle Holdings and its Subsidiaries have conducted their business in the ordinary course consistent with past practice, and there has not occurred (i) any event or change having individually or in the aggregate a Material Adverse Effect on LaSalle Holdings, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of LaSalle Holdings's outstanding capital stock, other than regular quarterly dividends in an amount payable in cash not in excess of $1.0938 per Series A Preferred Share and quarterly dividends in an amount payable in cash not in excess of $0.375 per LaSalle Holdings Share, Voting Share and Non-Voting Share and dividends paid by wholly owned Subsidiaries, (iii) (A) any granting by LaSalle Holdings or any of its Subsidiaries to any current or former director or officer of LaSalle Holdings or its Subsidiaries of any increase in compensation, bonus or other benefits, except for normal increases in the ordinary course of business, (B) any granting by LaSalle Holdings or any of its Subsidiaries to any such current or former director or officer of any increase in severance or termination pay or (C) any entry by LaSalle Holdings or any of its Subsidiaries into, or any amendments of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director or officer, (iv) any tax election that individually or in the aggregate would have a Material Adverse Effect on LaSalle Holdings or any of its tax attributes or any settlement or compromise of any material income tax liability, or (v) any change in accounting methods, principles or practices by LaSalle Holdings or any of its Subsidiaries materially affecting their assets, liabilities or business, except insofar as may have been required or permitted by a change in applicable accounting principles (including SAP). A-27 174 Section 4.6. Certain Fees. No finder, broker, agent, financial advisor or other intermediary, other than Lazard Freres & Co. LLC, Salomon Smith Barney Inc. and Aon Capital Markets, have acted on behalf of LaSalle Holdings in connection with this Agreement or the transactions contemplated hereby or is entitled to any payment in connection herewith. LaSalle Holdings has provided to Trenwick copies of LaSalle Holdings' engagement letters with Lazard Freres & Co. LLC, Salomon Smith Barney Inc. and Aon Capital Markets, Inc. in connection with this Agreement and the transactions contemplated hereby. Section 4.7. No Defaults. Neither LaSalle Holdings nor any of its Subsidiaries is in default or violation (and no event has occurred which with notice or lapse of time or both would constitute a default or violation) of its memorandum of association or bye-laws or other governing document or any material agreement, mortgage, indenture, debenture, trust, lease, license or other instrument or obligation to or by which it or any of its properties is subject or bound (the "LaSalle Instruments"), except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Except as set forth in Section 4.7 of the LaSalle Disclosure Letter, the execution, delivery and performance of this Agreement and the taking of any other action contemplated by this Agreement will not (i) result in any violation of or be in conflict with or constitute a breach or default (with or without notice or lapse of time or both) under (a) the memorandum of association or bye-laws of LaSalle Holdings or its Subsidiaries or (b) any of the other LaSalle Instruments, except for any such violation of, conflict with, breach of or default under which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings, (ii) result in or constitute an event entitling any party to a LaSalle Holdings Instrument to effect an acceleration of the maturity of any indebtedness of LaSalle Holdings or any of its Subsidiaries or an increase in the rate of interest presently in effect with respect to such indebtedness, except for any such accelerations or increases which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings or (iii) result in the creation of any Lien upon any of the properties or assets of LaSalle Holdings, except for Permitted Liens and any Liens which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Section 4.8. Consents. Except as set forth in Section 4.8 of the LaSalle Disclosure Letter and except for compliance with the provisions of Section 99 of the Companies Act, the approval of Lloyd's, the consent of the Court to the Plans and the filing of the order or orders of the Court pursuant to Section 2.2 of this Agreement, no Consent is required on the part of LaSalle Holdings or any of its Subsidiaries in connection with the execution, delivery and performance by LaSalle Holdings of this Agreement and the consummation by LaSalle Holdings of the transactions contemplated hereby, except those required by (i) compliance with any applicable requirements of the HSR Act, (ii) United States federal and state securities or "Blue Sky" laws and (iii) where failure to obtain such Consent would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. Section 4.9. Compliance with Applicable Law. Each of LaSalle Holdings and its Subsidiaries is in compliance with all licenses, permits and other authorizations, domestic or foreign, necessary to conduct its respective business, except where failure to have or comply with such licenses, permits and authorizations would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Neither LaSalle Holdings nor any of its Subsidiaries is in default or violation (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) of any judgment, decree, order, law, statute, rule or regulation of any Governmental Authority, except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Subject to obtaining the Consents referred to in Section 4.8, the execution, delivery and performance of this Agreement by LaSalle Holdings and the consummation by LaSalle Holdings of the transactions contemplated hereby prior to the date or dates as of which the representations and warranties herein are made or deemed made, will not result in any default or violation of any judgment, decree, order, law, statute, rule or regulation of any Governmental Authority applicable to LaSalle Holdings or its Subsidiaries, except for such defaults or violations as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. A-28 175 Section 4.10. Information Supplied. None of the information supplied or to be supplied by LaSalle Holdings for inclusion or incorporation by reference in the Form S-4 to be filed with the SEC by New Holdings relating to the New Holdings Shares comprising LaSalle Consideration and Trenwick Consideration will, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading. The letters to shareholders, notices of meetings, proxy statements and forms of proxies to be distributed to shareholders of LaSalle Holdings and stockholders of Trenwick, respectively, in connection with the Plans and the transactions contemplated hereby, except information supplied by Trenwick in writing for inclusion in the Joint Proxy Statement, will not, as of the date the Joint Proxy Statement is first mailed to such shareholders and on the date of the meetings of LaSalle Holdings' shareholders or Trenwick's stockholders, as the case may be, and the date of any postponement or adjournment thereof, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents that LaSalle Holdings is responsible for filing with any Governmental Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of any applicable law. Section 4.11. Material Contracts. Except as set forth in Section 4.11 of the LaSalle Disclosure Letter: (a) All of the contracts of LaSalle Holdings and its Subsidiaries that are required to be described in the LaSalle SEC Reports or to be filed as exhibits thereto are described in the LaSalle SEC Reports or filed as exhibits thereto and are in full force and effect. (b) Neither LaSalle Holdings nor any of its Subsidiaries is, as of the date hereof, party to any agreement containing any provision or covenant limiting in any material respect the ability of LaSalle Holdings or any of its Subsidiaries (or New Holdings or any of its Subsidiaries subsequent to the Effective Time) to (i) sell any products or services of or to any other Person, (ii) engage in any line of business in any geographical area or (iii) compete with or to obtain products or services from any Person or limiting the ability of any Person to provide products or services to LaSalle Holdings or any of its Subsidiaries. (c) Neither LaSalle Holdings nor any of its Subsidiaries is a party to or bound by any contract, agreement or arrangement which would cause the rights or obligations of any party thereto to change in the event of the Plans, except for any such contract, agreement or arrangement which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Section 4.12. Taxes. Except as provided in Section 4.12 of the LaSalle Disclosure Letter: (a) To LaSalle Holdings' knowledge, neither LaSalle Holdings nor any of its Subsidiaries has, nor has it had, any income which is, or has been, subject to the United States federal income tax as income which is effectively connected with the conduct of a trade or business within the United States, within the meaning of Section 882(a)(1) of the Code. LaSalle Holdings and its Subsidiaries have filed or caused to be filed with the appropriate United States federal, state, local, foreign and other Governmental Authorities, all Tax returns, information returns and reports required to be filed on or prior to the date hereof (taking into account all valid extensions). All such Tax returns, information returns and reports are complete and accurate in all material respects. (b) LaSalle Holdings and its Subsidiaries have paid in full or made adequate provision (in accordance with GAAP) for the payment of all Taxes shown to be due on the Tax returns referred to in Section 4.12(a). All material written assessments of Taxes due and payable by or on behalf of LaSalle Holdings or any of its Subsidiaries have either been paid or provided for (in accordance with GAAP) or are being contested in good faith by appropriate proceedings. A-29 176 (c) There are no material Tax claims pending against LaSalle Holdings or any of its Subsidiaries and LaSalle Holdings does not know of any threatened claim for Tax deficiencies or any basis for such claims, no material issues have been raised in any examination by any taxing authority with respect to LaSalle Holdings or any of its Subsidiaries which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined, and there are not now in force any waivers or agreements by LaSalle Holdings or any of its Subsidiaries for the extension of time for the assessment of any material Tax, nor has any such waiver or agreement been requested by any taxing authority. Neither LaSalle Holdings nor any of its Subsidiaries has any liability for any material United States federal, state, local, foreign or other Taxes of any corporation or entity other than LaSalle Holdings and its Subsidiaries. (d) There are no Liens on any of the assets of LaSalle Holdings or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Taxes (other than Taxes that are not due as of the date hereof). (e) LaSalle Holdings and its Subsidiaries have withheld and paid all United States federal, state, local, foreign and other Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. (f) To LaSalle Holdings' knowledge, Section 4.12(f) of the LaSalle Disclosure Letter discloses, with respect to the year ended September 30, 1998 and for the period commencing October 1, 1998 and ending on the date of the LaSalle Disclosure Letter, (i) each insurance or reinsurance transaction by LaSalle Holdings or any of its Subsidiaries directly with shareholders of LaSalle Holdings and (ii) each insurance or reinsurance transaction by LaSalle Holdings or any of its Subsidiaries directly or indirectly with Persons related to shareholders of LaSalle Holdings and not disclosed in clause (i) above, which would cause LaSalle Holdings or any of its Subsidiaries to have any "related person insurance income" within the meaning of Section 953(c)(2) of the Code. (g) To LaSalle Holdings' knowledge, LaSalle Holdings and its Subsidiaries did not have for the year ended September 30, 1998, and LaSalle Holdings does not expect LaSalle Holdings or any of its Subsidiaries to have for the period ending at the Effective Time (treating such period as if it were a taxable year), "related person insurance income" within the meaning of Section 953(c)(2) of the Code in excess of the exceptions provided in Sections 953(c)(3)(A) and (B) of the Code. (h) To LaSalle Holdings' knowledge, neither LaSalle Holdings nor any of its Subsidiaries is, nor has LaSalle Holdings or any of its Subsidiaries ever been, a "controlled foreign corporation" within the meaning of Section 957(a) or 957(b) of the Code. (i) A representation with respect to Taxes contained in this Section 4.12 shall be deemed to be accurate unless an inaccuracy contained therein would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. Section 4.13. Litigation. Except as disclosed in the LaSalle SEC Reports filed prior to the date hereof or in Section 4.13 of the LaSalle Disclosure Letter, there are no actions, suits, claims, proceedings or investigations pending against or, to the knowledge of LaSalle Holdings, threatened against or affecting, LaSalle Holdings or any of its Subsidiaries or any of their respective properties before any Governmental Authority or otherwise which (a) would be expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings, (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or (c) alleges criminal action or inaction. As of the date hereof, neither LaSalle Holdings nor its Subsidiaries or any of their respective properties is subject to any order, writ, judgment, injunction, decree, determination or award having, or which would reasonably be expected to have, a Material Adverse Effect on LaSalle Holdings or which would prevent or delay the consummation of the transactions contemplated hereby. Except as disclosed in the LaSalle SEC Reports filed prior to the date hereof, there are no pending or, to the knowledge of LaSalle Holdings, threatened claims for indemnification by LaSalle Holdings or any of its Subsidiaries in favor of directors, officers, employees and agents of LaSalle Holdings or any of its Subsidiaries. A-30 177 Section 4.14. Title to Properties; Leases. Except as set forth in Section 4.14(a) of the LaSalle Disclosure Letter, each of LaSalle Holdings and its Subsidiaries has good and marketable title to, and is the lawful owner of, or has the right to use pursuant to a license or otherwise, all of the tangible and intangible assets, properties and rights used in its businesses and all tangible and intangible assets, properties and rights reflected on the balance sheet of LaSalle Holdings dated June 30, 1999 or acquired since June 30, 1999, free and clear of all Liens (other than Permitted Liens) and material defects. LaSalle Holdings and its Subsidiaries own no real property. Section 4.14(c) of the LaSalle Disclosure Letter sets forth all material real property and personal property leases of LaSalle Holdings and its Subsidiaries. All such leases are valid, binding and enforceable against LaSalle Holdings or its Subsidiaries (and, to the knowledge of LaSalle Holdings and its Subsidiaries, each other party thereto) in accordance with their respective terms, and there does not exist, under any lease of real property or personal property, any material defect or any event which, with notice or lapse of time or both, would constitute a material default by the LaSalle Holdings or its Subsidiaries, as the case may be, or, to the knowledge of LaSalle Holdings and its Subsidiaries, by any other party thereto. Section 4.15. Approval of Schemes of Arrangement. Other than (a) the affirmative vote of the holders of at least seventy-five percent (75%) of the LaSalle Holdings Shares that are represented and voted, either in person or by proxy, at the shareholder meeting and class meeting called for the purpose of approving and adopting this Agreement and the LaSalle Holdings Scheme of Arrangement, which holders must also constitute a majority of the record holders who are present and voting, either in person or by proxy, at each such meeting, and (b) the affirmative vote of the holders of at least seventy-five percent (75%) of the Non-Voting Shares that are represented and voted, either in person or by proxy, at the shareholder meeting and class meeting called for the purpose of approving and adopting this Agreement and the LaSalle Re Scheme of Arrangement, which holders must also constitute a majority of the record holders who are present and voting, either in person or by proxy, at each such meeting, there is no other vote, consent or approval of the holders of any class of shares of LaSalle Holdings or LaSalle Re necessary to approve and adopt this Agreement, the Schemes of Arrangement and the transactions contemplated hereby. Section 4.16. Employees. (a) Section 4.16(a) of the LaSalle Disclosure Letter lists, as of the date hereof, all employment contracts and similar arrangements between LaSalle Holdings or any of its Subsidiaries and their respective executive officers and all plans and arrangements pursuant to which LaSalle Holdings or any of its Subsidiaries is obligated to make any payment or confer any material benefit upon any officer, director, employee or agent of LaSalle Holdings or any of its Subsidiaries as a result of or in connection with any of the transactions contemplated by this Agreement or any transaction or transactions resulting in a change of control of LaSalle Holdings or any of its Subsidiaries (including as a result of a termination of employment in connection with any of such events). Except as described in Section 4.16(a) of the LaSalle Disclosure Letter and except as would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings, (i) LaSalle Holdings and its Subsidiaries have complied with all laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity and collective bargaining, (ii) no labor dispute with employees of LaSalle Holdings or any of its Subsidiaries exists or, to the knowledge of LaSalle Holdings, is threatened, (iii) each Employee Benefit Plan maintained by LaSalle Holdings or any of its Subsidiaries (each a "LaSalle Employee Benefit Plan") conforms to, and its administration is in conformity with, all applicable laws, no liability has been or is expected to be incurred by LaSalle Holdings or any of its Subsidiaries with respect to any LaSalle Employee Benefit Plan, except as expressly provided by such plan, (iv) no LaSalle Employee Benefit Plan is subject to ERISA, (v) LaSalle Holdings has made available to Trenwick a true and correct copy of each of the LaSalle Employee Benefit Plans and all applicable trust agreements and all contracts relating thereto or to the funding thereof, (vi) all LaSalle Employee Benefit Plans intended to satisfy applicable Tax qualification requirements, or other requirements necessary to secure favorable Tax or other legal treatment, comply in all material respects with such requirements and (vii) adequate accruals for all obligations under the LaSalle Employee Benefit Plans are reflected in the LaSalle Financial Statements. Except as described in A-31 178 Section 4.16(a) of the LaSalle Disclosure Letter, no agreement, contract or arrangement to which LaSalle Holdings or any of its Subsidiaries is a party would result in a payment that would not be deductible as a result of Section 280G of the Code. (b) Except as set forth in Section 4.16(b) of the LaSalle Disclosure Letter, neither LaSalle Holdings nor any of its Subsidiaries is a party to any collective bargaining or other labor union contract applicable to Persons employed by LaSalle Holdings or any of its Subsidiaries, no collective bargaining agreement is being negotiated by LaSalle Holdings or any of its Subsidiaries and LaSalle Holdings has no knowledge of any activities or proceedings of any labor union to organize any of their respective employees. There is no labor dispute, strike or work stoppage against LaSalle Holdings or any of its Subsidiaries pending or, to LaSalle Holdings' knowledge, threatened which may interfere with the respective business activities of LaSalle Holdings or any of its Subsidiaries, except where such dispute, strike or work stoppage would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. (c) Except as disclosed in the Section 4.16(c) of the LaSalle Disclosure Letter, the consummation of the Schemes of Arrangement (or the approval thereof by the parties' respective shareholders) and the other transactions contemplated by this Agreement, will not (x) entitle any employees or directors of LaSalle or of any LaSalle Holdings Commonly Controlled Entity, directly or indirectly to severance pay; (y) accelerate the time of payment or vesting or trigger any payment of compensation or benefits under, or increase the amount payable or trigger any other material obligation pursuant to, any of the LaSalle Benefit Plans; or (z) result in any breach or violation of, or default under any of the LaSalle Benefit Plans. Section 4.17. Intellectual Property. LaSalle Holdings and its Subsidiaries own or possess, or have all necessary rights and licenses in, all Intellectual Property necessary to conduct their business as conducted and proposed to be conducted except to the extent that the failure of LaSalle Holdings or its Subsidiaries to own or have such rights and licenses in such Intellectual Property would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. Neither LaSalle Holdings nor any of its Subsidiaries have received any unresolved notice of, or is aware of any fact or circumstance that would give any Person a right to assert, infringement or misappropriation of, or conflict with, asserted rights of others or invalidity or unenforceability of any Intellectual Property owned by LaSalle Holdings or any of its Subsidiaries with respect to any of the foregoing which, singly or in the aggregate, would reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. To the knowledge of LaSalle Holdings, the use of such Intellectual Property to conduct the business and operations of LaSalle Holdings and its Subsidiaries as conducted or proposed to be conducted does not infringe on the rights of any person in any case where such infringement would reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. To the knowledge of LaSalle Holdings, no person is challenging, infringing on or otherwise violating any right of LaSalle Holdings or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to LaSalle Holdings or any of its Subsidiaries. Except as set forth in Section 4.17 of the LaSalle Disclosure Letter, neither the execution of this Agreement or the LaSalle Stock Option Agreement nor the consummation of the transactions contemplated hereby or thereby will result in a loss or limitation in the rights and licenses of LaSalle Holdings to use or enjoy the benefit of any Intellectual Property employed by LaSalle Holdings or any of its Subsidiaries in connection with its business as conducted or proposed to be conducted where such loss or limitation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on LaSalle Holdings. Following the Effective Date, LaSalle Holdings Intellectual Property may be used by New Holdings or any of its Subsidiaries, except to the extent that failure to be so able to use LaSalle's Intellectual Property would not have a Material Adverse Effect on New Holdings or any of its Subsidiaries. Section 4.18. Takeover Statutes. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under any Bermuda law is applicable to the Plans, the Stock Option Agreements or the other transactions contemplated hereby or thereby. A-32 179 Section 4.19. Opinions of Financial Advisors. The LaSalle Board has received the separate opinions of Lazard Freres & Co. LLC and Salomon Smith Barney Inc., dated December 16, 1999, to the effect that, as of such date, the LaSalle Exchange Ratio is fair to the holders of LaSalle Holdings Shares from a financial point of view, copies of the written opinions of which will be delivered to Trenwick. Section 4.20. Insurance Matters. (a) All insurance, reinsurance and coinsurance treaties or agreements, including retrocessional agreements, to which LaSalle Holdings or any LaSalle Holdings Reinsurance Subsidiary is a party or under which LaSalle Holdings or any LaSalle Holdings Reinsurance Subsidiary has any existing rights, obligations or liabilities are in full force and effect, except for such treaties or agreements the failure to be in full force and effect of which are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. (b) Prior to the date hereof, LaSalle Holdings has delivered or made available to Trenwick a true and complete copy of the most recent actuarial reports prepared by actuaries, independent or otherwise, with respect to LaSalle Holdings or any LaSalle Holdings Reinsurance Subsidiary since September 30, 1998 and all attachments, addenda, supplements and modifications thereto (the "LaSalle Actuarial Analyses"). The information and data furnished by LaSalle Holdings or any LaSalle Holdings Reinsurance Subsidiary to its independent actuaries in connection with the preparation of the LaSalle Actuarial Analyses were accurate in all material respects. (c) LaSalle Re does not currently issue and has not issued any primary insurance policies in the United States. Section 4.21. Liabilities and Reserves. Except for instances where the failure of the following statements to be true would not reasonably be expected to have a Material Adverse Effect on LaSalle Holdings, (a) the reserves carried on the financial statements of each LaSalle Holdings Reinsurance Subsidiary for future insurance policy benefits, losses, claims and similar purposes were, as of the respective dates of such financial statements, in compliance with the requirements for reserves established by the insurance departments of the jurisdiction of such LaSalle Holdings Reinsurance Subsidiary or (as the case may be) by Lloyd's, were determined in accordance with generally accepted actuarial standards and principles consistently applied, and were fairly stated in accordance with sound actuarial and statutory accounting principles (it being understood that no representation or warranty is made in this Agreement to the effect that such reserves were in fact adequate to cover the actual amount of liabilities that are eventually paid after the date hereof); and (b) the admitted assets of each LaSalle Holdings Reinsurance Subsidiary as determined under applicable laws or under Lloyd's regulations are in an amount at least equal to the minimum amounts required by applicable laws or regulations. Section 4.22. Investment Company. Neither LaSalle Holdings nor any of its Subsidiaries conducts activities of, or is otherwise deemed under applicable law to control, an "investment adviser" as such term is defined in Section 2(a)(20) of the Investment Company Act, whether or not registered under the Investment Advisers Act. Neither LaSalle Holdings nor any of its Subsidiaries is an "investment company" as defined under the Investment Company Act and neither LaSalle Holdings nor any of its Subsidiaries sponsors any Person that is such an investment company. Section 4.23. Reinsurance Contracts, Coverholders and MGAs. (a) Section 4.23 of the LaSalle Disclosure Letter contains a true and complete list of all MGAs and coverholders with whom each Subsidiary of LaSalle Holdings does business that have been appointed within the twelve (12) months preceding the date of this Agreement and all in force Reinsurance Contracts which generate premium income in excess of $1,000,000 to which each Subsidiary of LaSalle Holdings is a party as the cedent thereunder or by or to which each Subsidiary of LaSalle Holdings is bound or subject as the cedent thereunder, as each such Reinsurance Contract may have been amended, modified or supplemented. Except as would not, individually or in the aggregate, have a Material Adverse Effect on LaSalle Holdings: (i) each of the foregoing Reinsurance Contracts is valid and binding in accordance with its terms, and is in full force and effect and (ii) neither the Subsidiaries of LaSalle A-33 180 Holdings nor, to the knowledge of LaSalle Holdings, or other party thereto, is in default in any material respect with respect to any such Reinsurance Contract, nor to the knowledge of LaSalle Holdings does any condition exist that with notice or lapse of time or both would constitute such a material default thereunder. Except as set forth in Section 4.23 of the LaSalle Disclosure Letter, none of the contracts, treaties or arrangements involving the MGAs or coverholders which generate premium income in excess of $1,000,000 with whom each Subsidiary of LaSalle Holdings does business contain "change of control" provisions and no such Reinsurance Contract contains any provision providing that any such other party thereto may terminate, cancel or commute the same by reason of the transactions contemplated by this Agreement or any other provision which would be altered or otherwise become applicable by reason of such transactions, and no party has given notice of termination, cancellation or commutation of any such Reinsurance Contract or that it intends to terminate, cancel or commute any such Reinsurance Contract as a result of the transactions contemplated hereby. (b) Except as set forth in Section 4.23 of the LaSalle Disclosure Letter, LaSalle Re is entitled under applicable insurance laws, rules and regulations to take credit in its statutory financial statements in accordance with applicable Bermuda law as in effect on the date hereof, with respect to the Reinsurance Contracts listed in Section 4.23 of the LaSalle Disclosure Letter and all such amounts are properly reflected in the statutory financial statements of LaSalle Re. Each of LaSalle Holdings and LaSalle Re has no knowledge of any disputes as to reinsurance or retrocessional coverage under, or any terms of provisions of, any such Reinsurance Contract. To the knowledge of LaSalle Holdings and LaSalle Re, the financial condition of any other party to any such Reinsurance Contract is not impaired to the extent that a default thereunder could reasonably be expected to occur. Section 4.24. Derivatives. As of the date hereof, other than as set forth in Section 4.24 of the LaSalle Disclosure Letter, neither LaSalle Holdings nor any of its Subsidiaries is a party to any futures or option contracts, swaps, hedges or similar instruments which, individually or in the aggregate, could have a Material Adverse Effect on LaSalle Holdings. Section 4.25. Related Party Transactions. Except as set forth in Section 4.25 of the LaSalle Disclosure Letter, since June 30, 1999, there have been no transactions, agreements, arrangements or understandings between LaSalle Holdings and its Subsidiaries, on the one hand, and LaSalle Holdings' affiliates (other than wholly-owned Subsidiaries of LaSalle Holdings) or other Persons, on the other hand, in existence as of the date hereof that are or would be required to be disclosed in the LaSalle SEC Reports in accordance with Item 404 of Regulation S-K under the Securities Act. Section 4.26. Finite Risk Reinsurance. Except as set forth in Section 4.26 of the LaSalle Disclosure Letter, none of LaSalle's Reinsurance Subsidiaries has ceded business pursuant to a reinsurance agreement that does not meet the conditions for reinsurance accounting as provided by the Statement of Financial Accounting Standards No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Term Contracts." ARTICLE 5 COVENANTS Section 5.1. Conduct of Business of Trenwick. Except as expressly contemplated by this Agreement, the Stock Option Agreements, as set forth in Section 5.1 of the Trenwick Disclosure Letter or as consented to in writing by LaSalle Holdings, during the period from the date of the Original Agreement to the Effective Time, Trenwick shall, and shall cause each of its Subsidiaries to, conduct its operations and (to the extent it is able to control them) the operations of the syndicates managed by the Trenwick Managing Agencies only in, and neither Trenwick nor any of its Subsidiaries shall take any action and shall not take any action in relation to the syndicates managed by the Trenwick Managing Agencies (to the extent they are able to control them) except in, the ordinary and usual course of business and consistent with past practice, and Trenwick and its Subsidiaries will use all commercially reasonable efforts to preserve intact their business organization, to keep available the services of their officers and employees A-34 181 and to maintain advantageous relationships with and the goodwill of their customers, business partners and others having business relationships with Trenwick or its Subsidiaries or the syndicates managed by the Trenwick Managing Agencies, as the case may be. Without limiting the generality of the foregoing, prior to the Effective Time, neither Trenwick nor any of its Subsidiaries will, except as expressly contemplated by this Agreement, without the prior written consent of LaSalle Holdings: (a) split, combine or reclassify any shares of its capital stock, declare, pay or set aside for payment any dividend or other distribution payable in cash, stock, property or otherwise in respect of its capital stock or directly or indirectly redeem, purchase or otherwise acquire any shares of any class of capital stock or other securities, other than regular quarterly dividends (other than those payable to Trenwick) in an amount payable in cash not in excess of $0.26 per share; after the date of the Original Agreement, LaSalle Holdings and Trenwick will coordinate with each other regarding the declaration of dividends in respect of the Trenwick Shares and the record dates and payment dates relating thereto, it being the intention of the parties that holders of Trenwick Shares will not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to their Trenwick Shares and the New Holdings Shares any such holder receives in exchange therefor in accordance with the Plans; (b) authorize for issuance, issue, sell, grant, pledge, dispose of or encumber, deliver or agree or commit to issue, sell, pledge or deliver (whether through the issue or granting of any options, warrants, commitments, subscriptions, rights to purchase or otherwise) any shares of any class of capital stock of Trenwick or any Subsidiary or any securities convertible into or exercisable or exchangeable for shares of any class of capital stock of Trenwick, except as required by agreements as in effect as of the date of the Original Agreement and disclosed in Section 5.1(b) of the Trenwick Disclosure Letter, or amend any of the terms of any such securities or agreements outstanding as of the date of the Original Agreement; (c) (i) incur or assume any debt, except for borrowings, in each case, in the ordinary course of business consistent with past practices, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except in the ordinary course of business, (iii) make any loans or advances to any Person other than loans or advances of out-of-pocket expenses incurred in connection with the business of Trenwick or its Subsidiaries, (iv) pledge or otherwise encumber shares of capital stock of Trenwick or its Subsidiaries or (v) mortgage or pledge any of its material assets, tangible or intangible, or create any Lien thereupon other than Permitted Liens; (d) except as may be required by law or as contemplated by this Agreement, including Section 5.9, enter into, adopt or amend or terminate any bonus, profit sharing, compensation, severance, termination, change of control, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, consulting, fringe benefit, severance or other Employee Benefit Plan; or enter into or amend any employment or severance agreement with any director, officer, employee or agent of Trenwick or any of its Subsidiaries; or increase in any manner the salary, wages, bonus, commission or other compensation or benefits of any director, officer, employee or agent of Trenwick or any of its Subsidiaries, except, (i) in connection with the promotion of any director, officer, employee or agent of Trenwick or any of its Subsidiaries or (ii) for increases in the ordinary course of business and consistent with past practice which in the aggregate do not exceed 10%; or hire employees at the level of Vice President or above; or pay any benefit not required by any plan and arrangement as in effect as of the date of the Original Agreement (including, without limitation, the granting of stock options, stock appreciation rights or performance units); (e) acquire (by merger, amalgamation, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership, joint venture, association or other business organization or division thereof or make any material investment either by purchase of stock or securities, contributions to capital, property transfer or acquisition (including by lease) of any material amount of properties or assets of any other Person, except for the purchase of investment stock or securities in the ordinary course of business; (f) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise) against Trenwick or any of its Subsidiaries, its directors, officers, employees or agents, other A-35 182 than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of claims for contractual benefits under any insurance or reinsurance contract under which Trenwick or any of its Subsidiaries or syndicates managed by any of its Subsidiaries is the insurer or reinsurer; (g) amend or propose to amend the certificate of incorporation, by-laws or any similar document of Trenwick or any of its Subsidiaries; (h) adopt a plan or resolutions providing for the complete or partial liquidation, dissolution, amalgamation, consolidation, restructuring, recapitalization or other reorganization of Trenwick or any of its Subsidiaries; (i) except as set forth in Section 5.1(i) of the Trenwick Disclosure Letter, enter into any new lines of business (other than in or related to the insurance or reinsurance business) or otherwise make material changes to the operation of its business or its loss reserve; (j) except as set forth in Section 5.1(j) of the Trenwick Disclosure Letter, sell (whether by amalgamation, consolidation or otherwise), lease, transfer or dispose of any material assets (including without limitation, rights of renewal) outside the ordinary course of business consistent with past practice or enter into any material commitment or transaction outside the ordinary course of business consistent with past practices; (k) authorize or make or commit to make any capital expenditures, except for transactions in the ordinary course of business consistent with past practice (but in no event in excess of $1,000,000 in the aggregate) or pursuant to agreements or commitments entered into by Trenwick or any of its Subsidiaries prior to the date of the Original Agreement; (l) make any Tax elections or settle or compromise any material United States federal, state, local or other foreign income Tax liability, or waive or extend the statute of limitations in respect of any such Taxes; (m) except as may be required as a result of a change in law or in GAAP, change any of the accounting principles or practices used by it; (n) amend the Rights or the Rights Agreement in any manner adverse to LaSalle Holdings; (o) enter into any agreement providing for the acceleration of payment or performance or other consequence as a result of a change in control of Trenwick or any of its Subsidiaries; (p) resolve, commit or agree to take any of the foregoing actions or any action which would make any representation or warranty in Article 3 materially untrue or incorrect; (q) make any material change in its retrocessional agreements or arrangements, including without limitation converting any of its funds withheld stop loss reinsurance agreements into another type of reinsurance agreement or entering into new funds withheld stop loss reinsurance agreements or arrangements or stop loss reinsurance agreements or arrangements that attach at an attachment point less than the expected loss ratio; (r) make any material change in its reinsurance agreements or arrangements; (s) enter into any agreement or arrangement that limits or otherwise restricts Trenwick or any of its Subsidiaries or any successor thereto or that could, after the Effective Time, limit or restrict New Holdings and its Subsidiaries or any successor thereto, from engaging or competing in any line of business or in any geographic area; or (t) enter into any new transaction, agreement, arrangement or understanding with any other Persons that would be required to be disclosed in the Trenwick SEC Reports in accordance with Item 404 of Schedule S-K under the Securities Act. A-36 183 Section 5.2. Conduct of Business of LaSalle Holdings. Except as expressly contemplated by this Agreement, the Stock Option Agreements or as set forth in Section 5.2 of the LaSalle Disclosure Letter or as consented to in writing by Trenwick, during the period from the date of the Original Agreement to the Effective Time, LaSalle Holdings shall, and shall cause each of its Subsidiaries to, conduct its operations only in, and neither LaSalle Holdings nor any of its Subsidiaries shall take any action except in, the ordinary and usual course of business and consistent with past practice, and LaSalle Holdings and its Subsidiaries will use all commercially reasonable efforts to preserve intact their business organization, to keep available the services of their officers and employees and to maintain advantageous relationships with and the goodwill of their customers, business partners and others having business relationships with LaSalle Holdings or its Subsidiaries, as the case may be. Without limiting the generality of the foregoing, prior to the Effective Time, neither LaSalle Holdings nor any of its Subsidiaries will, except as expressly contemplated by this Agreement, without the prior written consent of Trenwick: (a) split, combine or reclassify any shares, declare, pay or set aside for payment any dividend or other distribution payable in cash, shares, property or otherwise in respect of its shares or directly or indirectly redeem, purchase or otherwise acquire any shares of any class of capital stock or other securities, other than regular quarterly dividends (other than those payable to LaSalle Holdings) in an amount payable in cash not in excess of $1.0938 per Series A Preferred Share and quarterly dividends in an amount payable in cash not in excess of $0.375 per LaSalle Holdings Share and Non-Voting Share; after the date of the Original Agreement, LaSalle Holdings and Trenwick will coordinate with each other regarding the declaration of dividends (other than those payable to LaSalle Holdings) in respect of the Series A Preferred Shares, LaSalle Holdings Shares and Non-Voting Shares and the record dates and payment dates relating thereto, it being the intention of the parties that holders of LaSalle Holdings Shares and Non-Voting Shares will not receive two dividends for any single calendar quarter with respect to their LaSalle Holdings Shares and Non-Voting Shares and the New Holdings Shares any such holder receives in exchange therefor in accordance with the Plans; (b) authorize for issuance, issue, sell, grant, pledge, dispose of or encumber, deliver or agree or commit to issue, sell, pledge or deliver (whether through the issue or granting of any options, warrants, commitments, subscriptions, rights to purchase or otherwise) any shares of any class of LaSalle Holdings or any Subsidiary or any securities convertible into or exercisable or exchangeable for shares of any class of LaSalle Holdings, except as required by agreements as in effect as of the date of the Original Agreement and disclosed in Section 5.2(b) of the LaSalle Disclosure Letter, or amend any of the terms of any such securities or agreements outstanding as of the date of the Original Agreement; (c)(i) incur or assume any debt, except for borrowings, in each case, in the ordinary course of business consistent with past practices, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except in the ordinary course of business, (iii) make any loans or advances to any Person other than loans or advances of out-of-pocket expenses incurred in connection with the business of LaSalle Holdings or its Subsidiaries, (iv) pledge or otherwise encumber shares of LaSalle Holdings or its Subsidiaries or (v) mortgage or pledge any of its material assets, tangible or intangible, or create any Lien thereupon other than Permitted Liens; (d) except as may be required by law or as contemplated by this Agreement, including Section 5.9, enter into, adopt or amend or terminate any bonus, profit sharing, compensation, severance, termination, change of control, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, consulting, fringe benefit, severance or other Employee Benefit Plan; or enter into or amend any employment or severance agreement with any director, officer, employee or agent of LaSalle Holdings or any of its Subsidiaries; or increase in any manner the salary, wages, bonus, commission or other compensation or benefits of any director, officer, employee or agent of LaSalle Holdings or any of its Subsidiaries, except, (i) in connection with the promotion of any director, officer, employee or agent of LaSalle Holdings or any of its Subsidiaries or (ii) for increases in the ordinary course of business and consistent with past practice for employees below the level of Vice President, in the aggregate case not to exceed 5%; or hire A-37 184 employees at the level of Vice President or above; or pay any benefit not required by any plan and arrangement as in effect as of the date of the Original Agreement (including, without limitation, the granting of stock options, stock appreciation rights or performance units); (e) acquire (by merger, amalgamation, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership, joint venture, association or other business organization or division thereof or make any material investment either by purchase of stock or securities, contributions to capital, property transfer or acquisition (including by lease) of any material amount of properties or assets of any other Person, except for the purchase of investment stock or securities in the ordinary course of business; (f) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise) against LaSalle Holdings or any of its Subsidiaries, its directors, officers, employees or agents, other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of claims for contractual benefits under any insurance or reinsurance contract under which LaSalle Holdings or any of its Subsidiaries or any syndicates managed by any of its Subsidiaries is the insurer or reinsurer; (g) amend or propose to amend the memorandum of association, bye-laws or any similar document of LaSalle Holdings or any of its Subsidiaries; (h) propose to adopt a plan or resolutions providing for the complete or partial liquidation, dissolution, amalgamation, consolidation, restructuring, recapitalization or other reorganization of LaSalle Holdings or any of its Subsidiaries; (i) except as set forth in Section 5.2(i) of the LaSalle Disclosure Letter, enter into any new lines of business (whether or not part of the insurance or reinsurance business) or change any policy forms, investment policies or guidelines or otherwise make material changes to the operation of its business or its loss reserve; (j) except as set forth in Section 5.2(j) of the LaSalle Disclosure Letter, sell (whether by amalgamation, consolidation or otherwise), lease, transfer or dispose of any material assets (including without limitation, rights of renewal) outside the ordinary course of business consistent with past practice or enter into any material commitment or transaction outside the ordinary course of business consistent with past practices; (k) authorize or make or commit to make any capital expenditures, except for transactions in the ordinary course of business consistent with past practice (but in no event in excess of $350,000 in the aggregate) or pursuant to agreements or commitments entered into by LaSalle Holdings or any of its Subsidiaries prior to the date of the Original Agreement; (l) make any Tax elections or settle or compromise any material Bermuda, United States federal, state, local or other foreign income Tax liability, or waive or extend the statute of limitations in respect of any such Taxes; (m) except as may be required as a result of a change in law or in GAAP, change any of the accounting principles or practices used by it; (n) enter into any agreement providing for the acceleration of payment or performance or other consequence as a result of a change in control of LaSalle Holdings or any of its Subsidiaries; (o) resolve, commit or agree to take any of the foregoing actions or any action which would make any representation or warranty in Article 4 materially untrue or incorrect; (p) make any material change in its retrocessional agreements or arrangements, including without limitation converting any of its funds withheld stop loss reinsurance agreements into another type of reinsurance agreement or entering into new funds withheld stop loss reinsurance agreements or arrangements or stop loss reinsurance agreements or arrangements that attach at an attachment point less than the expected loss ratio; A-38 185 (q) make any material change in its reinsurance agreements or arrangements; (r) enter into any agreement or arrangement that limits or otherwise restricts LaSalle Holdings or any of its Subsidiaries or any successor thereto or that could, after the Effective Time, limit or restrict New Holdings and its Subsidiaries or any successor thereto, from engaging or competing in any line of business or in any geographic area; or (s) enter into any new transaction, agreement, arrangement or understanding with any other Persons that would be required to be disclosed in the LaSalle SEC Reports (excluding the amendment to the CatEPut) in accordance with Item 404 of Schedule S-K under the Securities Act. Nothing in this Section 5.2 shall preclude LaSalle Holdings or LaSalle Re from implementing a new pension plan or amending existing pension plans, to comply with Bermuda law. Section 5.3. No Solicitation. (a) No Solicitation by Trenwick. (i) Trenwick shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, and it shall use commercially reasonable efforts to ensure that such Persons do not directly or indirectly, (x) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes any Trenwick Takeover Proposal (as defined below) or (y) participate in any discussions or negotiations regarding any Trenwick Takeover Proposal; provided, however, that if, at any time the Board of Directors of Trenwick determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to comply with its fiduciary duties to the stockholders of Trenwick under applicable law, Trenwick may, in response to a Trenwick Superior Proposal (as defined in Section 5.3(a)(ii)) which was not solicited by it or which did not otherwise result from a breach of this Section 5.3(a)(i), and subject to providing prior written notice of its decision to take such action to LaSalle Holdings and compliance with Section 5.3(a)(iii), (x) furnish information with respect to Trenwick and its Subsidiaries to any Person making a Trenwick Superior Proposal pursuant to a customary confidentiality agreement (as determined by Trenwick after consultation with its outside counsel) and (y) participate in discussions or negotiations regarding such Trenwick Superior Proposal. For purposes of this Agreement, "Trenwick Takeover Proposal" means any inquiry, proposal or offer from any Person relating to any direct or indirect acquisition or purchase of a business that constitutes 15% or more of the net revenues, net income or assets of Trenwick and its Subsidiaries, taken as a whole, or 15% or more of any class of equity securities of Trenwick or any of its Subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 15% or more of any class of equity securities of Trenwick or any of its Subsidiaries, or any merger, consolidation, amalgamation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Trenwick or any of its Subsidiaries, other than the transactions contemplated by this Agreement or the Stock Option Agreements. (ii) Except as expressly permitted by this Section 5.3(a), neither the Board of Directors of Trenwick nor any committee thereof shall (x) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to LaSalle Holdings, the approval or recommendation by such Board of Directors or such committee of this Agreement and the transactions contemplated hereby, (y) approve or recommend, or propose publicly to approve or recommend, any Trenwick Takeover Proposal, or (z) cause Trenwick to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each a "Trenwick Acquisition Agreement") related to any Trenwick Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of Trenwick (x) may withdraw or modify its approval and recommendation of this Agreement and the transactions contemplated hereby if the Board of A-39 186 Directors of Trenwick determines in good faith that it has the fiduciary duty to do so under applicable law and (y) may terminate this Agreement and concurrently with or after such termination, if it so chooses, cause Trenwick to enter into any Trenwick Acquisition Agreement with respect to any Trenwick Superior Proposal, but only at a time that is after the fifth business day following LaSalle Holdings' receipt of written notice advising LaSalle Holdings that the Board of Directors of Trenwick is prepared to accept a Trenwick Superior Proposal, specifying the material terms and conditions of such Trenwick Superior Proposal and identifying the person making such Trenwick Superior Proposal. For purposes of this Agreement, a "Trenwick Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the Trenwick Shares then outstanding or all or substantially all the assets of Trenwick and otherwise on terms which the Board of Directors of Trenwick determines in its good faith judgment (after receiving the advice of a financial advisor of nationally recognized reputation) to be more favorable to Trenwick's stockholders than this Agreement and the transactions contemplated hereby and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of Directors of Trenwick, is reasonably capable of being obtained by such third party. (iii) In addition to the obligations of Trenwick set forth in subparagraphs (a)(i) and (a)(ii) of this Section 5.3, Trenwick shall immediately advise LaSalle Holdings orally and in writing of any request for information or of any Trenwick Takeover Proposal, the material terms and conditions of such request or Trenwick Takeover Proposal and the identity of the Person making such request or Trenwick Takeover Proposal. Trenwick will keep LaSalle Holdings reasonably informed of the status and details (including amendments or proposed amendments) of any such request or Trenwick Takeover Proposal. (iv) Nothing contained in this Section 5.3(a) shall prohibit Trenwick from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to Trenwick's stockholders if, in the good faith judgment of the Board of Directors of Trenwick, after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law. (b) No Solicitation by LaSalle Holdings. (i) LaSalle Holdings shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, and it shall use commercially reasonable efforts to ensure that such Persons do not directly or indirectly, (x) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes any LaSalle Holdings Takeover Proposal (as defined below) or (y) participate in any discussions or negotiations regarding any LaSalle Holdings Takeover Proposal; provided, however, that if, at any time the Board of Directors of LaSalle Holdings determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to comply with its fiduciary duties to shareholders of LaSalle Holdings under applicable law, LaSalle Holdings may, in response to a LaSalle Holdings Superior Proposal (as defined in Section 5.3(b)(ii)) which was not solicited by it or which did not otherwise result from a breach of this Section 5.3(b)(i), and subject to providing prior written notice of its decision to take such action to Trenwick and compliance with Section 5.3(b)(iii), (x) furnish information with respect to LaSalle Holdings and its Subsidiaries to any Person making a LaSalle Holdings Superior Proposal pursuant to a customary confidentiality agreement (as determined by LaSalle Holdings after consultation with its outside counsel) and (y) participate in discussions or negotiations regarding such LaSalle Holdings Superior Proposal. For purposes of this Agreement, "LaSalle Holdings Takeover Proposal" means any inquiry, proposal or offer from any Person relating to any direct or indirect A-40 187 acquisition or purchase of a business that constitutes 15% or more of the net revenues, net income or assets of LaSalle Holdings and its Subsidiaries, taken as a whole, or 15% or more of any class of equity securities of LaSalle Holdings or any of its Subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of LaSalle Holdings or any of its Subsidiaries, or any merger, consolidation, amalgamation, business combination, recapitalization, liquidation, dissolution or similar transaction involving LaSalle Holdings or any of its Subsidiaries, other than the transactions contemplated by this Agreement or the Stock Option Agreements. (ii) Except as expressly permitted by this Section 5.3(b), neither the Board of Directors of LaSalle Holdings nor any committee thereof shall (x) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Trenwick, the approval or recommendation by such Board of Directors or such committee of this Agreement and the transactions contemplated hereby, (y) approve or recommend, or propose publicly to approve or recommend, any LaSalle Holdings Takeover Proposal, or (z) cause LaSalle Holdings to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each a "LaSalle Holdings Acquisition Agreement") related to any LaSalle Holdings Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of LaSalle Holdings (x) may withdraw or modify its approval and recommendation of this Agreement and the transactions contemplated hereby if the Board of Directors of LaSalle Holdings determines in good faith that it has the fiduciary duty to do so under applicable law and (y) may terminate this Agreement and concurrently with or after such termination, if it so chooses, cause LaSalle Holdings to enter into any LaSalle Holdings Acquisition Agreement with respect to any LaSalle Holdings Superior Proposal, but only at a time that is after the fifth business day following Trenwick's receipt of written notice advising Trenwick that the Board of Directors of LaSalle Holdings is prepared to accept a LaSalle Holdings Superior Proposal, specifying the material terms and conditions of such LaSalle Holdings Superior Proposal and identifying the person making such LaSalle Holdings Superior Proposal. For purposes of this Agreement, a "LaSalle Holdings Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, amalgamation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of LaSalle Holdings Shares then outstanding or all or substantially all the assets of LaSalle Holdings and otherwise on terms which the Board of Directors of LaSalle Holdings determines in its good faith judgment (after receiving the advice of a financial advisor of nationally recognized reputation) to be more favorable to LaSalle Holdings' stockholders than this Agreement and the transactions contemplated hereby and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of Directors of LaSalle Holdings, is reasonably capable of being obtained by such third party. (iii) In addition to the obligations of LaSalle Holdings set forth in subparagraphs (b)(i) and (b)(ii) of this Section 5.3, LaSalle Holdings shall immediately advise Trenwick orally and in writing of any request for information or of any LaSalle Holdings Takeover Proposal, the material terms and conditions of such request or LaSalle Holdings Takeover Proposal and the identity of the person making such request or LaSalle Holdings Takeover Proposal. LaSalle Holdings will keep Trenwick reasonably informed of the status and details (including amendments or proposed amendments) of any such request or LaSalle Holdings Takeover Proposal. (iv) Nothing contained in this Section 5.3(b) shall prohibit LaSalle Holdings from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to LaSalle Holdings' shareholders if, in the good faith judgment of the Board of Directors of LaSalle Holdings, after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law. A-41 188 Section 5.4. Access to Information; Confidentiality. Between the date of the Original Agreement and the Effective Time, each of LaSalle Holdings and Trenwick shall, and shall cause each of its respective Subsidiaries to, afford the other party and its officer, employees and authorized representatives (including, without limitation, attorneys, auditors, financial advisors and actuaries) of the other reasonable access during normal business hours during the period prior to the Effective Time to all its personnel, offices and other facilities and to its books and records and will permit such party and its authorized representatives to make such inspections of its financial and operating data and other information with respect to its business and properties as such party and its authorized representatives may from time to time reasonably request. No information or knowledge obtained in any investigation pursuant to this Section 5.4 shall affect or be deemed to modify any representation or warranty contained in the Agreement or the conditions to the obligations of the parties to consummate the Plans. The confidentiality of all such documents and information furnished in connection with the transactions contemplated by this Agreement shall be governed by the terms of the Confidentiality Letter. Section 5.5. Form S-4; Regulatory Matters. As soon as is reasonably practicable following the date of the Original Agreement, LaSalle Holdings and Trenwick shall prepare and file with the SEC, pursuant to Rule 14a-6(a) under the Exchange Act, the Joint Proxy Statement and a registration statement of New Holdings on Form S-4 with respect to the transactions contemplated by this Agreement. LaSalle Holdings and Trenwick shall cause New Holdings to file the Form S-4 promptly after the conclusion of the SEC's review of the Joint Proxy Statement. Each of LaSalle Holdings and Trenwick shall provide reasonable opportunity for the other to review and comment upon the contents of the Joint Proxy Statement and the Form S-4 and shall not include therein or omit therefrom any information or supplement to which counsel to the other shall reasonably object or specifically request (as the case may be). After the date of the mailing of the Joint Proxy Statement, each of LaSalle Holdings and Trenwick agrees promptly to notify the other of and to correct or supplement any information which either of them shall have furnished for inclusion in the Joint Proxy Statement that shall have become false or misleading in any material respect. Trenwick and LaSalle Holdings shall use all commercially reasonable efforts to have the Joint Proxy Statement cleared by the SEC under the Exchange Act and the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing. New Holdings shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or to file a general consent to service of process) required to be taken under any applicable state securities and "Blue Sky" laws in connection with the issue of New Holdings Shares in accordance with the Plans and upon the exercise of New Holdings Options (as defined herein) and each of LaSalle Holdings and Trenwick shall furnish all information concerning itself and its shareholders as may reasonably be requested in connection with any such action. Section 5.6. Public Announcements. LaSalle Holdings and Trenwick shall not issue any press release or otherwise make any public statements with respect to the Plans, this Agreement or the transactions contemplated hereby without first consulting with each other, and providing each other the opportunity to review, comment upon and concur as to the wording, timing and media for such press release or statement, except for any press release or statement as may be required by applicable law, court process or the obligation pursuant to any listing statement with any national securities exchange, in which case notice shall be given to the other party prior to the issuance of such press release or the dissemination of such written material. The parties agree that the initial press release, if any, to be issued with respect to the execution of this Agreement and the transactions contemplated hereby shall be in a form agreed to by the parties. Section 5.7. Supplemental Information. Prior to the Effective Time, each party will promptly disclose in writing to the other parties any matter hereafter arising which, if existing, occurring or known at the date of the Original Agreement would have been required to be disclosed to such other parties. Each party shall promptly advise the other parties of such party's knowledge of any Material Adverse Effect. Except where prohibited by applicable statutes and regulations, each party shall promptly provide the other (or its counsel) with copies of all filings, material notices or material communications made by such party with any Governmental Authority (including the SEC or NYSE) in connection with this A-42 189 Agreement or the Stock Option Agreements, or the transactions contemplated hereby or thereby. No information provided to a party pursuant to this Section 5.7 shall be deemed to cure any breach of any representation of or warranty made in this Agreement unless the party receiving such information specifically agrees thereto in writing. Section 5.8. Shareholders' Meetings. LaSalle Holdings and LaSalle Re shall each request the Court to convene a special meeting of its respective shareholders (and, if necessary, classes of shareholders), with the meeting of LaSalle Holdings to occur first, and Trenwick, acting through its Board of Directors, shall in accordance with the GCL call a special meeting of its stockholders (and, if necessary, classes of stockholders), and shall give notice of, convene and hold such special meetings as soon as practicable, but in no event more than 45 days, after the Form S-4 is declared effective by the SEC for the purpose of approving this Agreement and all actions contemplated hereby. In connection with such meetings, each of LaSalle Holdings, LaSalle Re and Trenwick shall mail the Joint Proxy Statement to its respective shareholders as promptly as practicable. The respective Boards of Directors of each of LaSalle Holdings, LaSalle Re and Trenwick shall submit for approval and adoption by its respective shareholders the matters to be voted upon at such meetings and shall, subject to their fiduciary duties after having consulted with and considered the advice of outside counsel, include in the Joint Proxy Statement the recommendation of its respective Board of Directors that the shareholders vote in favor of the approval and adoption of this Agreement and the Plans and each such party shall (subject to the fiduciary duties of its Board of Directors) use all commercially reasonable efforts to secure such approval and adoption. LaSalle Holdings, LaSalle Re and Trenwick shall coordinate and cooperate with respect to the timing of such meetings and shall endeavor to hold such meetings on the same day. Section 5.9. Trenwick Options, LaSalle Holdings Options, LaSalle Re Options and Trenwick Warrants. (a) Trenwick Options. (i) At the Effective Time, each outstanding Trenwick Option shall be replaced by an option (a "New Holdings Option") to acquire New Holdings Shares, the terms of which shall be no less favorable than the terms currently applicable to such Trenwick Option, under a new stock option plan to be established by New Holdings for such purposes before the Closing Date (the "New Holdings Option Plan"), all as provided in Section 5.9(a)(ii). (ii) The cancellation of Trenwick Options and replacement with New Holdings Options shall comply in all respects with, and shall be performed in accordance with, the methodology prescribed by the provisions of Section 424(a) of the Code and the regulations thereunder and each New Holdings Option shall provide the option holder with termination rights that are no less favorable to such holder than were provided under the Trenwick Option for which it was replaced as of the Effective Time. The parties contemplate that, consistent with the methodology prescribed by Section 424(a) of the Code and the applicable regulations thereunder (A) the number of New Holdings Shares subject to such New Holdings Option will be determined by multiplying the number of Trenwick Shares subject to Trenwick Options by the Trenwick Exchange Ratio (rounded to the next higher whole number with respect to each holder thereof) and (B) the exercise price under such New Holdings Option will be determined by dividing the exercise price per share under the Trenwick Option in effect immediately prior to the Effective Time by the Trenwick Exchange Ratio and rounding the exercise price thus determined to the nearest whole cent (a half-cent shall be rounded to the next higher whole cent). (iii) As promptly as practicable after the Effective Time, New Holdings shall issue to each holder of an outstanding Trenwick Option a document evidencing the New Holdings Option having the terms provided for in Sections 5.9(a)(i) and (ii) and effective as of the Effective Time. A-43 190 (b) LaSalle Holdings Options. (i) At the Effective Time, each outstanding LaSalle Holdings Option shall be replaced by a New Holdings Option, the terms of which shall be no less favorable than the terms currently applicable to such LaSalle Holdings Option, under the New Holdings Option Plan, all as provided in Section 5.9(b)(ii). (ii) The cancellation of LaSalle Holdings Options and replacement with New Holdings Options shall comply in all respects with, and shall be performed in accordance with, the methodology prescribed by the provisions of Section 424(a) of the Code and the regulations thereunder and each New Holdings Option shall provide the option holder with termination rights that are no less favorable to such holder than were provided under the LaSalle Holdings Option for which it was replaced as of the Effective Time. The parties contemplate that, consistent with the methodology prescribed by Section 424(a) of the Code and the applicable regulations thereunder (A) the number of New Holdings Shares subject to such New Holdings Option will be determined by multiplying the number of LaSalle Holdings Shares subject to LaSalle Holdings Options by the LaSalle Exchange Ratio (rounded to the next higher whole number with respect to each holder thereof) and (B) the exercise price under such New Holdings Option will be determined by dividing the exercise price per share under the LaSalle Holdings Option in effect immediately prior to the Effective Time by the LaSalle Exchange Ratio and rounding the exercise price thus determined to the nearest whole cent (a half-cent shall be rounded to the next higher whole cent). (iii) As promptly as practicable after the Effective Time, New Holdings shall issue to each holder of an outstanding LaSalle Holdings Option a document evidencing the New Holdings Option having the terms provided for in Sections 5.9(b)(i) and (ii) and effective as of the Effective Time. (c) LaSalle Re Options. Subject to Section 2.6(e): (i) Pursuant to Section 2(H) of that certain Amended and Restated Option Agreement dated November 27, 1995 among LaSalle Holdings, LaSalle Re and each of the optionholders listed on Schedule I thereto, from and after the Effective Time, each holder of an outstanding option to acquire Non-Voting Shares shall be entitled, upon payment of the exercise price thereof, to receive, at such holder's election, either (i) the number of Non-Voting Shares covered by such option or (ii) the number of New Holdings Shares that such holder would have received pursuant to Section 2.6(a)(plus, if applicable, the amount of cash payable in lieu of a fractional share that such holder would have received pursuant to Section 2.12) if such holder had exercised such option immediately prior to the Effective Time. LaSalle Re undertakes to use commercially reasonable efforts to obtain the consent of each of the holders of such options to the cancellation of such options and replacement thereof with New Holdings Options, the terms of which shall be no less favorable than the terms currently applicable to such options. (ii) Pursuant to Section 2(F) of that certain Stock Appreciation Rights Agreement dated as of April 1, 1994 between Victor H. Blake and LaSalle Re, if Victor H. Blake exercises any of his stock appreciation rights during the period beginning at the Effective Time and ending on November 22, 2003, he shall be entitled to receive the number of New Holdings Shares that he would have received pursuant to Section 2.6(a) (plus, if applicable, the amount of cash payable in lieu of a fractional share that he would have received pursuant to Section 2.12) if he had exercised such stock appreciation rights immediately prior to the Effective Time. (d) Registration of Options. If the New Holdings Options issued pursuant to Sections 5.9(a), (b) and (c) are not already covered by an effective registration statement, New Holdings will file a registration statement as promptly as practicable after the Effective Time, which registration statement will cover the New Holdings Shares issuable upon exercise of the New Holdings Options granted in substitution of Trenwick Options, LaSalle Holdings Options and LaSalle Re Options, and New Holdings A-44 191 will use all commercially reasonable efforts to cause such registration statement to become effective under the Securities Act and to maintain such registration statement in effect until the exercise or termination of all such New Holdings Options. (e) Trenwick Warrants. At the Effective Time, each then outstanding warrant of Trenwick shall be assumed by New Holdings in accordance with its terms. Section 5.10. Takeover Laws. The parties shall use all commercially reasonable efforts to exempt the transactions contemplated by this Agreement from, and otherwise act to eliminate or minimize the effects of any applicable takeover or change of control law. Section 5.11. Affiliates. (a) At least five days prior to the Closing Date, Trenwick shall deliver to LaSalle Holdings a letter identifying all persons who are anticipated to be, at the time of the Trenwick stockholders meeting, "affiliates" of Trenwick for purposes of Rule 145 under the Securities Act ("Rule 145"). Trenwick shall furnish such information and documents as LaSalle Holdings may reasonably request for the purpose of reviewing such letter. Trenwick shall use all commercially reasonable efforts to cause each Person who is identified as an "affiliate" in such letter to deliver to LaSalle Holdings, prior to the Closing Date, a written agreement in connection with restrictions on affiliates under Rule 145, in a form mutually agreeable to Trenwick and LaSalle Holdings. (b) At least five days prior to the Closing Date, LaSalle Holdings shall deliver to Trenwick a letter identifying all Persons who are anticipated to be, at the time of the LaSalle Holdings shareholders meeting, "affiliates" of LaSalle Holdings for purposes of Rule 145. LaSalle Holdings shall furnish such information and documents as Trenwick may reasonably request for the purpose of reviewing such letter. LaSalle Holdings shall use all commercially reasonable efforts to cause each Person who is identified as an "affiliate" in such letter to deliver to Trenwick, prior to the Closing Date, a written agreement in connection with restrictions on affiliates under Rule 145, in a form mutually agreeable to Trenwick and LaSalle Holdings. Section 5.12. Stock Exchange Listing. Trenwick, LaSalle Holdings and New Holdings shall use all commercially reasonable efforts to cause the New Holdings Shares to be issued in accordance with the Plans and the New Holdings Shares to be reserved for issue upon exercise of New Holdings Options to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date. Section 5.13. Indemnification and Insurance. (a) From and after the Effective Time, New Holdings shall indemnify, defend and hold harmless each Person who is, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer or director of Trenwick and LaSalle Holdings (the "Indemnified Parties") against all losses, expenses, claims, damages and liabilities arising out of the transactions contemplated by this Agreement to the fullest extent permitted or required under applicable law (including, without limitation, reasonable attorneys' fees). Subject to any limitations imposed by Bermuda law and public policy, to the extent applicable, New Holdings agrees that all rights to indemnification existing in favor of current and former directors and officers of Trenwick, LaSalle Holdings or any of their respective Subsidiaries as provided in such corporation's certificate of incorporation or by-laws (or analogous documents) or existing indemnification agreements, as in effect as of the date of the Original Agreement, with respect to matters occurring through the Effective Time, shall survive the Plans and shall continue in full force and effect, and New Holdings shall guarantee the obligations of Trenwick and LaSalle Holdings in respect thereof; provided, however, that this shall not limit the ability of New Holdings to effect any corporate restructuring of its Subsidiaries. (b) New Holdings shall cause to be maintained for a period of not less than six years from the Effective Time the directors' and officers' insurance and, fiduciary liability insurance indemnification policies currently maintained by Trenwick and LaSalle Holdings to the extent that such policies provide coverage for events occurring prior to the Effective Time (the "D&O Insurance") for any of the A-45 192 Indemnified Parties so long as the annual premium therefor would not be in excess of two hundred percent (200%) of the last annual premium paid prior to the date of the Original Agreement (two hundred percent (200%) of such premium, the "Maximum Premium"); provided, however, that New Holdings may, in lieu of maintaining such existing D&O Insurance as provided above, cause no less favorable coverage to be provided under any policy maintained for the benefit of the directors and officers of Trenwick, LaSalle Holdings or any of their respective Subsidiaries, so long as (i) the insurance company providing such coverage thereof has an A.M. Best Company rating of A or better and (ii) the material terms thereof are no less advantageous to the Indemnified Parties than the existing D&O Insurance. If the existing D&O Insurance expires, is terminated or cancelled or if the premium for such D&O Insurance exceeds the Maximum Premium during such six-year period, New Holdings will cause to be obtained, to the extent commercially available, replacement D&O Insurance as can be obtained for the remainder of such six-year period for a premium not in excess of the Maximum Premium on terms and conditions no less advantageous to the Indemnified Parties than the existing D&O Insurance. (c) The provisions of Section 5.13 are in addition to, and not in substitution for any rights that an Indemnified Party may have under the applicable certificate of incorporation, memorandum of association, or by-laws, bye-laws or agreements with Trenwick and LaSalle Holdings or any of their respective Subsidiaries or under applicable law. New Holdings agrees to pay all costs and expenses (including fees and expenses of counsel) that may be incurred by an Indemnified Party in successfully enforcing the indemnity or other obligations under this Section 5.13. The provisions of this Section 5.13 shall survive the Closing and are intended for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. Section 5.14. Commercially Reasonable Efforts. Upon the terms and subject to the conditions and other agreements set forth in this Agreement, each of the parties hereto will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner possible, the transactions contemplated by this Agreement (including with respect to Trenwick, the reduction of any taxation of Trenwick arising from the Plan of Reorganization) and shall use all commercially reasonable efforts to obtain all waivers, permits, consents and approvals and to effect all registrations, filings and notices with or to third parties or Governmental Authorities which are necessary or desirable in connection with the transactions contemplated by this Agreement. If, at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers or directors of each of the parties hereto shall take such action. Section 5.15. Post-Closing Matters. (a) LaSalle Holdings, Trenwick and their respective Affiliates shall (and, following the Effective Time, New Holdings shall) take no action with respect to the stock, assets or liabilities of LaSalle Holdings or Trenwick, including, without limitation, the filing of Tax returns or reports, that would be inconsistent with the qualification of the Plans as tax-free under Section 351 of the Code; provided, however, that Trenwick, LaSalle Holdings and their respective Affiliates may file with the appropriate Governmental Authorities and execute all documents necessary to consummate the Plans and other transactions contemplated by this Agreement. (b) Upon request, New Holdings shall use commercially reasonable efforts to cooperate with any LaSalle Holdings shareholder or any Trenwick stockholder in the completion and administration of a gain recognition agreement under Section 367 of the Code. Section 5.16. Employee Benefit Plans; Existing Agreements. (a) For a period of at least one year after the Effective Time, New Holdings will cause (i) the employees of Trenwick and its Subsidiaries who are employed immediately after the Effective Time ("Trenwick Employees") to be provided with employee benefits under Employee Benefit Plans maintained by New Holdings ("New Holdings Plans") which are no less favorable in the aggregate than benefits A-46 193 provided to Trenwick Employees immediately prior to the Effective Time; and (ii) the employees of LaSalle Holdings and its Subsidiaries who are employed immediately after the Effective Time ("LaSalle Holdings Employees") to be provided with employee benefits under the New Holdings Plans which are no less favorable in the aggregate than benefits provided to LaSalle Holdings Employees immediately prior to the Effective Time, except for the termination of the LaSalle Re Holdings Limited Employee Stock Purchase Plan. (b) With respect to each New Holdings Plan, for purposes of determining eligibility to participate, vesting and entitlement to benefits, including for severance benefits and vacation entitlement (but not for accrual of pension benefits except to the extent that past service credit is provided in a similar manner to both Trenwick Employees and LaSalle Holdings Employees), service with Trenwick and its Subsidiaries by Trenwick Employees employed immediately after the Effective Time shall be treated as service with New Holdings and service with LaSalle Holdings and its Subsidiaries by LaSalle Holdings Employees employed immediately after the Effective Time shall be treated as service with New Holdings; provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements or the application of any preexisting condition limitations. Trenwick Employees and LaSalle Holdings Employees shall be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the New Holdings Plan. (c) Except with respect to those plans and arrangements listed in Section 5.16 of the Trenwick Disclosure Letter or the LaSalle Disclosure Letter (as applicable), following the Effective Time, New Holdings shall honor in accordance with their terms (i) all employment, severance and other compensation agreements and arrangements existing on or prior to the execution of this Agreement which are between Trenwick and any director, officer or employee thereof and which have been disclosed in Section 3.16 of the Trenwick Disclosure Letter and previously have been delivered to LaSalle Holdings and (ii) all employment, severance and other compensation agreements and arrangements existing on or prior to the execution of this Agreement which are between LaSalle Holdings and any director, officer or employee thereof and which have been disclosed in Section 4.16(a) of the LaSalle Disclosure Letter and previously have been delivered to Trenwick. (d) It is understood and agreed between the parties that all provisions contained in this Agreement with respect to employee benefit plans or employee compensation are included for the sole benefit of the respective parties hereto and do not and shall not create any right in any other person, including, but not limited to, any LaSalle Holdings Employee or any Trenwick Employee, any participant in any benefit or compensation plan or any beneficiary thereof. Section 5.17. Letters from Accountants. (a) LaSalle Holdings shall use all commercially reasonable efforts to cause to be delivered to Trenwick two letters from Deloitte & Touche LLP, its independent public accountants, one dated a date within two business days before the date on which the Form S-4 shall become effective and one dated a date within two business days before the Effective Date, each addressed to Trenwick, in form and substance reasonably satisfactory to Trenwick and comparable in scope and substance to comfort letters customarily delivered by independent public accountants in connection with registration statements similar to the Form S-4 and transactions such as those contemplated by this Agreement. (b) Trenwick shall use its best efforts to cause to be delivered to LaSalle Holdings two letters of PricewaterhouseCoopers LLP, its independent public accountants, one dated a date within two business days before the date on which the Form S-4 shall become effective and one dated a date within two business days before the Effective Date, each addressed to LaSalle Holdings, in form and substance reasonably satisfactory to LaSalle Holdings and comparable in scope and substance to comfort letters customarily delivered by independent public accountants in connection with registration statements similar to the Form S-4 and transactions such as those contemplated by this Agreement. A-47 194 Section 5.18. Litigation. Each of Trenwick and LaSalle Holdings shall (to the extent their interests do not diverge) cooperate in the defense of any litigation against Trenwick or LaSalle Holdings, as applicable, and its directors and officers relating to the transactions contemplated by this Agreement, the Plans and the Stock Option Agreements. Section 5.19. Advice of Changes. Each of Trenwick and LaSalle Holdings agrees that it shall give the other party prompt notice of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. Section 5.20. Trenwick Rights Agreement. The Board of Directors of Trenwick shall take all further action (in addition to that referred to in Section 3.20) reasonably requested in writing by LaSalle Holdings in order to render the Trenwick Rights inapplicable to transactions contemplated by this Agreement, the Plans and the Stock Option Agreements to the extent provided herein and in the Trenwick Rights Plan amendment. Section 5.21. New Holdings Rights Agreement. The Board of Directors of New Holdings shall take all action necessary to implement a shareholders rights plan (the "New Holdings Rights Agreement"), substantially similar to the Trenwick Rights Agreement and Trenwick Rights, except as otherwise contemplated by Section 5.21 of the Trenwick Disclosure Letter or as otherwise agreed by Trenwick and LaSalle Holdings, with such other changes as are set forth on Section 5.21 of the Trenwick Disclosure Letter and such changes therein as may be agreed by Trenwick and LaSalle Holdings, effective as of the Effective Time. Section 5.22. Assumption of Non-Voting Share Conversion Obligation. In the event that this Agreement and the LaSalle Re Scheme of Arrangement are not approved by the vote specified in Section 4.15(b), then, prior to the consummation of the LaSalle Holdings Scheme of Arrangement, New Holdings shall assume by written instrument the obligation to deliver one New Holdings Share in exchange for each Non-Voting Share surrendered for exchange pursuant to that certain Conversion Agreement dated as of November 27, 1995 among LaSalle Holdings, LaSalle Re and each of the Persons listed on Schedule I thereto. Section 5.23. Assumption of Series B Preferred Share Conversion Obligation. Prior to the Effective Time, New Holdings shall assume by written instrument the obligation to deliver to the holders of any Series B Preferred Shares, par value $1.00 per share, of LaSalle Holdings ("Series B Preferred Shares"), upon the basis and upon the terms and conditions specified in the Certificate of Designation, Preferences and Rights of the Series B Preferred Shares with respect to the conversion of such Series B Preferred Shares, and in lieu of the LaSalle Holdings Shares immediately theretofore receivable upon such conversion, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of LaSalle Holdings Shares equal to the number of LaSalle Holdings Shares immediately theretofore so receivable had the Schemes of Arrangement not been consummated. Section 5.24. Tax-Free Reorganization. Trenwick, New Holdings and LaSalle Holdings shall each use its best efforts to cause the exchange described in Section 2.1(b) to be treated as a reorganization within the meaning of Section 368(a) of the Code and to cause the Schemes of Arrangement to be treated as tax-free under Section 351 of the Code and to cause the delivery of the certificates of officers and opinions upon which the opinions of Baker & McKenzie under Section 6.1(h), Section 6.2(g) and Section 6.3(h) will rely and upon which the opinion of Mayer, Brown & Platt under Section 6.1(g) will rely. A-48 195 ARTICLE 6 CONDITIONS TO THE PLANS Section 6.1. Conditions to Each Party's Obligation to Effect the Plans. The respective obligations of each party to this Agreement to consummate the Plans and to effect the actions referred to in Section 2.2(c) shall be subject to the following conditions: (a) Stockholder Approvals. This Agreement, the Plans and the other transactions contemplated hereby shall have been approved and adopted by any requisite vote or consent of (i) the relevant classes of Trenwick's stockholders as required by the GCL, Trenwick's certificate of incorporation and by-laws and (if applicable), the NYSE and (ii) the relevant classes of LaSalle Holdings' shareholders as required by the Companies Act and (if applicable) the NYSE and LaSalle Holdings' bye-laws, and orders of the Court sanctioning the Schemes of Arrangement shall have been obtained. (b) Third Party Consents. (i) Both of Trenwick and LaSalle Holdings shall have received all consents and approvals required by any lender or equity provider as further set forth in Section 6.1(b) of the Trenwick Disclosure Letter and the LaSalle Disclosure Letter, respectively. (ii) Those regulatory and other approvals required to consummate the Plans and the other transactions contemplated hereby, including but not limited to any applicable Lloyd's approval and those approvals specified in Section 3.8 of the Trenwick Disclosure Letter and Section 4.8 of the LaSalle Disclosure Letter, shall have been obtained (without any terms or conditions to such approvals which would impose material and adverse limitations on the ability of New Holdings and its Subsidiaries to conduct their business after the Effective Time, which would require changes to the terms of the Plans which would be material and adverse to New Holdings, LaSalle Holdings or Trenwick or which would change the consideration payable to shareholders in accordance with the Plans) and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired. (c) No Injunctions or Restraints. No order, decree or injunction of any court or agency of competent jurisdiction shall be in effect, and no law, statute or regulation shall have been enacted or adopted, that enjoins, prohibits or makes illegal consummation of any of the transactions contemplated hereby; provided, however, that each of LaSalle Holdings and Trenwick shall have used all commercially reasonable efforts to prevent any such rule, regulation, injunction, decree or other order, and to appeal as promptly as possible any injunction, decree or other order that may be entered. (d) Form S-4. The Form S-4 shall have been declared effective by the SEC and shall not be subject to a stop order or threatened stop order. (e) HSR Act. Any waiting period (and any extension thereof) applicable to the Plans under the HSR Act shall have terminated or expired. (f) NYSE Listing. The New Holdings Shares to be issued to holders of Trenwick Shares, LaSalle Holdings Shares and Minority Shares upon consummation of the Plans shall have been authorized for trading on the NYSE, subject to official notice of issuance. (g) Mayer, Brown & Platt Opinion. New Holdings and LaSalle Holdings shall have received an opinion of Mayer, Brown & Platt, dated the Effective Date, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the facts existing on the Effective Date, substantially to the effect that (i) the Schemes of Arrangement will qualify as an exchange under Section 351(a) of the Code, (ii) no gain or loss will be recognized by United States transferors of LaSalle Holdings Shares who, actually or constructively within the meaning of Section 958 of the Code, own less than 5% of both the total voting power and the total value of the shares of New Holdings immediately after the Plans upon the receipt of solely New Holdings Shares pursuant to the Schemes of Arrangement, (iii) no gain or loss will be recognized by United States transferors of LaSalle Holdings Shares who own A-49 196 5% or more of the total voting power or the total value of the New Holdings Shares immediately after the Plans upon the receipt of solely New Holdings Shares pursuant to the Schemes of Arrangement, provided that such United States transferors enter into gain recognition agreements meeting the requirements of United States Treasury Regulation sec.1.367(a)-8, (iv) no gain or loss will be recognized by United States transferors of Non-Voting Shares who, actually or constructively within the meaning of Section 958 of the Code, own less than 5% of both the total voting power and the total value of the shares of New Holdings immediately after the Plans upon the receipt of solely New Holdings Shares pursuant to the Schemes of Arrangement, and (v) no gain or loss will be recognized by United States transferors of Non-Voting Shares who own 5%, actually or constructively within the meaning of Section 958 of the Code, or more of the total voting power or the total value of the New Holdings Shares immediately after the Plans upon the receipt of solely New Holdings Shares pursuant to the Schemes of Arrangement, provided that such United States transferors enter into gain recognition agreements meeting the requirements of United States Treasury Regulation 1.367(a)-8. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of LaSalle Holdings, LaSalle Re, Trenwick, New Holdings, foreign counsel and others. (h) Baker & McKenzie Opinion. New Holdings and Trenwick shall have received an opinion of Baker & McKenzie, dated the Effective Date, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the facts existing on the Effective Date substantially to the effect that (i) no gain or loss will be recognized by United States shareholders of Trenwick upon the receipt of solely New Holdings Shares pursuant to the Plan of Reorganization (except with respect to cash received in lieu of a fractional share interest in New Holdings Shares), and (ii) the Plan of Reorganization will qualify as a tax-free reorganization within the meaning of Section 368(a). In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of LaSalle Holdings, LaSalle Re, Trenwick and New Holdings. Section 6.2. Additional Conditions to Trenwick's Obligation to Effect the Plans. The obligation of Trenwick to consummate the Plans and to effect the actions referred to in Section 2.2(c) shall be further subject to the following conditions unless waived in accordance with Section 8.3: (a) Performance of Obligations of LaSalle Holdings. LaSalle Holdings shall have performed in all material respects the obligations and covenants to be performed by it at or prior to the Effective Time. (b) Representations and Warranties. The representations and warranties of LaSalle Holdings contained in this Agreement that are qualified as to materiality shall be true and correct and the representations and warranties of LaSalle Holdings contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of the Original Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made as of and on the Closing Date, except for such failure or failures to be true and correct (or true and correct in all material respects) as would not have or be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on LaSalle Holdings. (c) Compliance with Conditions. Trenwick shall receive customary closing documents in form and substance reasonably satisfactory to it, including a certificate of an executive officer of LaSalle Holdings certifying compliance with the conditions set forth in Sections 6.2(a) and (b). (d) Comfort Letters. Trenwick shall have received from Deloitte & Touche LLP the letters described in Section 5.17(a). (e) Consents and Approvals. Trenwick shall have received evidence, in form and substance reasonably satisfactory to it, that all consents and approvals set forth in Section 4.8 of the LaSalle Disclosure Letter have been obtained. (f) Fiduciary Duties. The Board of Directors of LaSalle Holdings shall not have (A) withdrawn or modified or changed in a manner adverse to Trenwick its approval or recommendation of this Agreement in order to approve and permit LaSalle Holdings to execute a definitive agreement relating to a LaSalle Holdings Superior Proposal (as defined in Section 5.3(b)(ii)), and (B) determined in good faith, after A-50 197 consultation with outside legal counsel to LaSalle Holdings that the failure to take such action as set forth in the preceding clause (A) is reasonably likely to result in the breach of the respective Board of Directors' fiduciary duties under applicable law. (g) Baker & McKenzie Opinion. New Holdings and Trenwick shall have received an opinion of Baker & McKenzie, dated the Effective Date, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the facts existing on the Effective Date substantially to the effect that Trenwick shall treat the Plan of Reorganization as a taxable disposition of assets directly held by Trenwick, but that Trenwick shall not be subject to U.S. federal income tax in excess of $60.0 million with respect to such gain. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of LaSalle Holdings, LaSalle Re, Trenwick and New Holdings, including representations regarding the adjusted tax basis of the assets of Trenwick. In addition, in rendering such opinion, counsel may require and rely upon opinions prepared by valuation experts, including opinions regarding the fair market value of the assets of Trenwick, foreign counsel and others. (h) No Material Adverse Change. At any time after the date of the Original Agreement there shall not have occurred any Material Adverse Change relating to LaSalle Holdings; provided, that this condition shall no longer be applicable following the approval of the LaSalle Holdings' shareholders. Section 6.3. Additional Conditions to LaSalle Holdings' Obligation to Effect the Plans. The obligation of LaSalle Holdings to consummate the Plans and to effect the actions referred to in Section 2.2(c) shall be further subject to the following conditions unless waived in accordance with Section 8.3: (a) Performance of Obligations of Trenwick. Trenwick shall have performed in all material respects the obligations and covenants to be performed by it at or prior to the Effective Time. (b) Representations and Warranties. The representations and warranties of Trenwick contained in this Agreement that are qualified as to materiality shall be true and correct and the representations and warranties of Trenwick contained in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of the Original Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date (immediately prior to the Effective Time and after giving effect to any internal reorganizations of Trenwick and its Subsidiaries), as though made as of and on the Closing Date (immediately prior to the Effective Time and after giving effect to any internal reorganizations of Trenwick and its Subsidiaries), except for such failure or failures to be true and correct (or true and correct in all material respects) as would not have or be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Trenwick. (c) Compliance with Conditions. LaSalle Holdings shall receive customary closing documents in form and substance reasonably satisfactory to it, including a certificate of an executive officer of Trenwick certifying compliance with the conditions set forth in Sections 6.3(a) and (b). (d) Comfort Letters. LaSalle Holdings shall have received from PricewaterhouseCoopers LLP the letters described in Section 5.17(b). (e) Consents and Approvals. LaSalle Holdings shall have received evidence, in form and substance reasonably satisfactory to it, that all consents and approvals set forth in Section 3.8 of the Trenwick Disclosure Letter have been obtained. (f) Rights Agreement. Trenwick shall have taken all necessary action pursuant to Section 3.20 so that, as of immediately prior to the Effective Time, (i) none of Trenwick, New Holdings and LaSalle Holdings will have any obligations under the Rights or the Rights Agreement and (ii) the holders of the Rights will have no rights under the Rights or the Rights Agreement. (g) Fiduciary Duties. The Board of Directors of Trenwick shall not have (A) withdrawn or modified or changed in a manner adverse to LaSalle Holdings its approval or recommendation of this Agreement in order to approve and permit Trenwick to execute a definitive agreement relating to a Trenwick Superior Proposal (as defined in Section 5.3(a)(ii)), and (B) determined in good faith, after A-51 198 consultation with outside legal counsel to Trenwick that the failure to take such action as set forth in the preceding clause (A) is reasonably likely to result in the breach of the respective Board of Directors' fiduciary duties under applicable law. (h) Baker & McKenzie Opinion. In addition to those matters set forth in Section 6.3(h) of the Trenwick Disclosure Letter, New Holdings and Trenwick shall have received an opinion of Baker & McKenzie, dated the Effective Date, on the basis of facts, representations and assumptions set forth in such opinion that are consistent with the facts existing on the Effective Date substantially to the effect that Trenwick shall treat the Plan of Reorganization as a taxable disposition of assets directly held by Trenwick, but that Trenwick shall not be subject to U.S. federal income tax in excess of $40.0 million with respect to such gain. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of LaSalle Holdings, LaSalle Re, Trenwick and New Holdings, including representations regarding the adjusted tax basis of the assets of Trenwick. In addition, in rendering such opinion, counsel may require and rely upon opinions prepared by valuation experts, including opinions regarding the fair market value of the assets of Trenwick, foreign counsel and others. (i) No Material Adverse Change. At any time after the date of the Original Agreement, there shall not have occurred any Material Adverse Change relating to Trenwick; provided, that this condition shall no longer be applicable following the approval of the Trenwick stockholders. ARTICLE 7 TERMINATION AND ABANDONMENT Section 7.1. Termination by Trenwick or LaSalle Holdings. Anything herein contained to the contrary notwithstanding, this Agreement may be terminated and the Plans contemplated hereby may be abandoned at any time prior to the Effective Time, whether before or after approval of the Plans by the shareholders of LaSalle Holdings and LaSalle Re or the stockholders of Trenwick, respectively: (a) by the mutual written consent of LaSalle Holdings and Trenwick; (b) by either LaSalle Holdings or Trenwick by written notice to the other: (i) if the Effective Time shall not have occurred on or before June 30, 2000; provided, however, that the right to terminate this Agreement under this Section 7.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; (ii) if a Governmental Authority shall have issued a final and nonappealable order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their commercially reasonable efforts to lift), in each case, permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; (iii) if the required approval of the classes of stockholders of Trenwick shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such stockholders or at any adjournment or postponement thereof; provided, that, if the terminating party is Trenwick, Trenwick shall not be in material breach of its obligations under Section 5.8; (iv) if the required approval of the shareholders of LaSalle Holdings and LaSalle Re shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of such shareholders or at any adjournment or postponement thereof; provided, that, if the terminating party is LaSalle Holdings, LaSalle Holdings shall not be in material breach of its obligations under Section 5.8; or (v) if any single natural catastrophe shall have occurred which would result in Net Losses to LaSalle Holdings and its Subsidiaries or to Trenwick and its Subsidiaries of $100,000,000 or more. A-52 199 Section 7.2. Termination by Trenwick. (a) Trenwick may terminate this Agreement prior to the Effective Time if LaSalle Holdings (x) breaches or fails in any material respect to perform or comply with any of its covenants and agreements contained herein or (y) breaches its representations or warranties and such breach would have or would be reasonably likely to have a Material Adverse Effect on LaSalle Holdings and its Subsidiaries, in each case such that the conditions set forth in Section 6.2(a) or 6.2(b) would not be satisfied; provided, however, that if such breach is cured by the breaching party within ten (10) days following the discovery of such breach, Trenwick may not terminate this Agreement pursuant to this Section 7.2. (b) Trenwick may terminate this Agreement prior to the Effective Time if LaSalle Holdings has (A) withdrawn or modified or changed in a manner adverse to Trenwick its approval or recommendation of this Agreement, or (B) determined in good faith, after consultation with outside legal counsel to LaSalle Holdings that the failure to take such action as set forth in the preceding clause (A) is reasonably likely to result in the breach of the respective Board of Directors' fiduciary duties under applicable law. (c) Prior to the Effective Time, Trenwick may terminate this Agreement as provided in Section 5.3(a)(ii); provided, that Trenwick shall have given LaSalle Holdings forty-eight (48) hours advance notice of any termination pursuant to this Section 7.2(b) and that Trenwick shall have paid LaSalle Holdings the Trenwick Termination Fee required to be paid by Trenwick pursuant to Section 7.4(b) hereof. Trenwick agrees to notify LaSalle Holdings promptly if it is no longer prepared to accept the Trenwick Superior Proposal. Section 7.3. Termination by LaSalle Holdings. (a) LaSalle Holdings may terminate this Agreement prior to the Effective Time if Trenwick (x) breaches or fails in any material respect to perform or comply with any of its covenants and agreements contained herein or (y) breaches its representations or warranties and such breach would have or would be reasonably likely to have a Material Adverse Effect on Trenwick and its Subsidiaries, in each case such that the conditions set forth in Section 6.3(a)or 6.3(b) would not be satisfied; provided, however, that if such breach is cured by the breaching party within ten (10) days following the discovery of such breach, LaSalle Holdings may not terminate this Agreement pursuant to this Section 7.3(a). (b) LaSalle Holdings may terminate this Agreement prior to the Effective Time if Trenwick has (A) withdrawn or modified or changed in a manner adverse to LaSalle Holdings its approval or recommendation of this Agreement, or (B) determined in good faith, after consultation with outside legal counsel to Trenwick that the failure to take such actions as set forth in the preceding clause (A) is reasonably likely to result in the breach of the respective Board of Directors' fiduciary duties under applicable law. (c) Prior to the Effective Time, LaSalle Holdings may terminate this Agreement as provided in Section 5.3(b)(ii); provided, that LaSalle Holdings shall have given Trenwick forty-eight (48) hours advance notice of any termination pursuant to this Section 7.3(b) and that LaSalle Holdings shall have paid Trenwick the LaSalle Termination Fee required to be paid by LaSalle Holdings pursuant to Section 7.4(c) hereof. LaSalle Holdings agrees to notify Trenwick promptly if it is no longer prepared to accept the LaSalle Holdings Superior Proposal. Section 7.4. Procedure and Effect of Termination. (a) In the event of the termination of this Agreement, except as set forth in Section 7.4(b) and Section 7.4(c), none of the parties hereto shall have any obligation to perform hereunder from and after the date of such termination, except that Sections 5.4 (the last sentence only) (Confidentiality), 5.6 (Public Announcements), 8.5 (Expenses and Obligations), 8.7(Notices) and 8.8 (Governing Law) shall survive such termination and remain in full force and effect notwithstanding such termination. No termination hereof shall relieve any party from any liability resulting from any breach of any of its representations, warranties, covenants or agreements set forth in this Agreement. A-53 200 (b) If this Agreement is terminated by (i) any party pursuant to Section 7.1(b)(i) or 7.1(b)(iii), and in either case there shall have been made or commenced a Trenwick Takeover Proposal, which Trenwick Takeover Proposal shall not have been absolutely and unconditionally withdrawn and abandoned as of the date of such termination, (ii) Trenwick pursuant to Section 7.2(c) or (iii) LaSalle Holdings pursuant to Section 7.3(a) if there is a Trenwick Takeover Proposal outstanding at the time of the breach or 7.3(b), then Trenwick shall pay LaSalle Holdings a non-refundable termination fee of $12,000,000, plus expenses not to exceed $2,000,000 (the "Trenwick Termination Fee"), which amount shall be payable by wire transfer of same-day funds prior to, and as a condition of, the effectiveness of such termination. (c) If this Agreement is terminated by (i) any party pursuant to Section 7.1(b)(i) or 7.1(b)(iii), and in either case there shall have been made or commenced a LaSalle Holdings Takeover Proposal, which LaSalle Holdings Takeover Proposal shall not have been absolutely and unconditionally withdrawn and abandoned as of the date of such termination, (ii) LaSalle Holdings pursuant to Section 7.3(c) or (iii) Trenwick pursuant to Section 7.2(a) if there is a LaSalle Holdings Takeover Proposal outstanding at the time of the breach or 7.2(b), then LaSalle Holdings shall pay Trenwick a non-refundable termination fee of $12,000,000, plus expenses not to exceed $2,000,000 (the "LaSalle Termination Fee"), which amount shall be payable by wire transfer of same-day funds prior to, and as a condition of, the effectiveness of such termination. ARTICLE 8 MISCELLANEOUS PROVISIONS Section 8.1. Non-Survival of Representations, Warranties, Covenants and Agreements. None of the representations, warranties, covenants or agreements contained in this Agreement or in any Disclosure Letter, Exhibit or any document delivered pursuant to this Agreement shall survive the Closing, except for those covenants and agreements contained in this Agreement that by their terms apply or are to be performed in whole or in part after the Closing. Section 8.2. Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement signed on behalf of each party hereto at any time prior to the Effective Time with respect to any of the terms contained herein except that (i) after the meetings of the stockholders of Trenwick as contemplated by Section 5.8, Trenwick Consideration to be paid pursuant to this Agreement to the holders of Trenwick Shares shall in no event be decreased and the form of consideration to be received by the holders of such Trenwick Shares in the Plan of Reorganization shall in no event be altered without the approval of such holders, (ii) after the meetings of the shareholders of LaSalle Holdings as contemplated by Section 5.8, LaSalle Consideration to be paid pursuant to this Agreement to the holders of LaSalle Holdings Shares shall in no event be decreased and the form of consideration to be received by the holders of such LaSalle Holdings Shares in the Schemes of Arrangement shall in no event be altered without the approval of such holders, and (iii) after the meetings of the stockholders of Trenwick, LaSalle Holdings or LaSalle Re as contemplated by Section 5.8, there shall be made no amendment that by law requires further approval by such stockholders without the further approval of such stockholders. Section 8.3. Waiver of Compliance; Consents. (a) Any failure of any party to this Agreement to comply with any obligation, covenant, agreement or condition herein may be waived by written instrument executed by each other party to this Agreement, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. (b) Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 8.3. A-54 201 Section 8.4. Severability and Validity. The provisions set forth in this Agreement are severable. If any term, provision, covenant or restriction of this Agreement is held by record of competent jurisdiction or other authority to be invalid, void or unenforceable in any jurisdiction or against its regulatory or public policy, the remainder of this Agreement, and the application of such provision to other Persons or circumstances, shall not be affected thereby and shall remain valid and enforceable in such jurisdiction, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Upon a determination that any term, provision, covenant or restriction is invalid, void or unenforceable or against the regulatory or public policy of the governing jurisdiction, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the extent possible. Section 8.5. Expenses and Obligations. Each of the parties shall pay its own expenses incurred in connection with the negotiation and preparation of the Original Agreement and this Agreement, the performance of its covenants herein and therein and the effectuation of the transactions contemplated hereby and thereby, including, without limitation, all fees and disbursements of its respective legal counsel, advisors and accountants; provided, however, that nothing in this Section 8.5 shall negate any obligation of either LaSalle Holdings or Trenwick to pay the termination fee specified in Sections 7.4(b)and (c). Each of the LaSalle Holdings and Trenwick shall bear and pay one-half of the filing fees, printing expenses and mailing costs incurred in connection with (1) the filing, printing and mailing of the Form S-4 and the Joint Proxy Statement (including SEC filing fees) and (2) the filings of any required premerger notification and report forms under the HSR Act (including filing fees) and one-half of the fees of the Settlement Auditor. In the event that the transactions contemplated by this Agreement are not consummated, each of the parties shall indemnify and hold harmless the other parties against any claim for fees or commissions of brokers, finders, agents or bankers retained or purportedly retained by the indemnitor party in connection with the transactions contemplated by this Agreement. Section 8.6. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement, except for Section 5.13 (which is intended to be for the benefit of the Persons referred to therein and may be enforced by such Persons). Section 8.7. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile (which is confirmed) or sent by overnight courier (providing proof of delivery) or by registered or certified mail (postage prepaid, return receipt requested), to the other party at the following address (or at such other address for a party as shall be specified by like notice): if to LaSalle Holdings before the Effective Date, to: LaSalle Re Holdings Limited 25 Church Street P.O. Box HM 1502 Hamilton HM FX, Bermuda Fax: (441) 292-2656 Attention: Guy D. Hengesbaugh with a copy to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Fax: (312) 701-7711 Attention: Richard W. Shepro, Esq. A-55 202 if to Trenwick before the Effective Date, to: Trenwick Group Inc. One Canterbury Green Stamford, Connecticut 06901 Fax: (203) 353-5550 Attention: John V. Del Col, Esq. with a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Fax: (212) 891-3835 Attention: James R. Cameron, Esq. if to LaSalle Holdings, Trenwick or New Holdings after the Effective Date: Gowin Holdings International Limited c/o Appleby Spurling & Kempe Cedar House 41 Cedar Avenue P.O. Box HM 1178 Hamilton HM EX, Bermuda Fax: (441) 292-8666 Attention: Warren Cabral, Esq. with a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Fax: (212) 891-3835 Attention: James R. Cameron, Esq. or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Section 8.8. Governing Law. Except for Article 2, which shall be governed by and construed in accordance with the laws of Bermuda and Delaware, as applicable according to the context thereof (i.e., with matters relating to the Schemes of Arrangement being governed by Bermuda law and matters relating to the Plan of Reorganization being governed by Delaware law), this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws rules thereof. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Delaware Court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (b) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such Delaware 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 any Delaware Court. Section 8.9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, and all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. Section 8.10. Headings. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not affect in any way A-56 203 the meaning or interpretation of this Agreement. References to Articles or Sections, unless otherwise specified, are to Articles and Sections of this Agreement. Section 8.11. Entire Agreement; Assignment. This Agreement, including the documents and instruments referred to herein and therein, and the Confidentiality Letters embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no agreements, restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matters. This Agreement shall not be assigned by operation of law or otherwise, except with the prior written consent of each other party hereto; provided, that the transactions contemplated by Section 2.1(b) shall not be considered an assignment by operation of law or otherwise for purposes of this Section 8.11. Any assignment in violation of the preceding sentence shall be void. Subject to the preceding two sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 8.12. Interpretation. When a reference is made in this Agreement to an Article, Section, Exhibit, Letter or Schedule, such reference shall be to an Article or Section of, or an Exhibit, Letter or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 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 phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The words "hereof", "herein" and "hereunder" and the words or similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes. References to a person are also to its permitted successors and assigns. A-57 204 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed and sealed on its behalf by its duly authorized officers, all as of the day and year first above written. LASALLE RE HOLDINGS LIMITED By: /s/ GUY HENGESBAUGH ---------------------------------------- Name: Guy Hengesbaugh ---------------------------------------- Title: President & Chief Executive Officer ---------------------------------------- LASALLE RE LIMITED By: /s/ GUY HENGESBAUGH ---------------------------------------- Name: Guy Hengesbaugh ---------------------------------------- Title: President & Chief Executive Officer ---------------------------------------- GOWIN HOLDINGS INTERNATIONAL LIMITED By: /s/ JOHN V. DEL COL ---------------------------------------- Name: John V. Del Col ---------------------------------------- Title: Director ---------------------------------------- TRENWICK GROUP INC. By: /s/ JAMES F. BILLETT, JR. ---------------------------------------- Name: James F. Billett, Jr. ---------------------------------------- Title: Chairman, President & Chief Executive Officer ---------------------------------------- A-58 205 IN WITNESS WHEREOF, Trenwick Group (Delaware) Inc. has caused this Agreement to be signed and sealed on its behalf by its duly authorized officer, all as of the day and year first written above in accordance with Section 8.2 of the Original Agreement to reflect its agreement to the amendment and restatement of the Original Agreement but agrees that it is no longer a party to this Agreement. TRENWICK GROUP (DELAWARE) INC. By: /s/ JAMES F. BILLETT, JR. ------------------------------------ James F. Billett Jr. Its: Chairman, President & Chief Executive Officer ------------------------------------ A-59 206 APPENDIX B AMENDMENT NO. 1 TO AMENDED AND RESTATED AGREEMENT, SCHEMES OF ARRANGEMENT AND PLAN OF REORGANIZATION This Amendment No. 1 (this "Amendment") is made as of June 28, 2000, by and among LaSalle Re Holdings Limited, a company organized under the laws of Bermuda ("LaSalle Holdings"), LaSalle Re Limited, a company organized under the laws of Bermuda and a majority owned Subsidiary of LaSalle Holdings ("LaSalle Re"), Trenwick Group Inc., a Delaware corporation ("Trenwick") and Trenwick Group Ltd. (formerly known as Gowin Holdings International Limited), a company organized under the laws of Bermuda ("New Holdings"), and amends the Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization (the "Agreement"), dated as of March 20, 2000, by and among LaSalle Holdings, LaSalle Re, Trenwick and New Holdings. Capitalized terms used and not defined in this Amendment shall have the meanings set forth in the Agreement. WHEREAS, LaSalle Holdings, LaSalle Re, Trenwick and New Holdings are parties to the Agreement. WHEREAS, LaSalle Holdings, LaSalle Re, Trenwick and New Holdings desire to amend the Agreement to provide for an extension of the date on which the Agreement may be terminated by either LaSalle Holdings or Trenwick absent prior occurrence of the Effective Time. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: 1. Amendment of Section 7(b)(i). Section 7(b)(i) of the Agreement is amended by deleting such Section in its entirety and inserting in its place the following "if the Effective Time shall not have occurred on or before the first business day following September 30, 2000; provided, however, that the right to terminate this Agreement under this Section 7.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date;" 2. Effectiveness. This Amendment shall be effective as of the date first written above. Except as amended hereby, the Agreement shall remain in full force and affect and shall be otherwise unaffected hereby. Any reference to the Agreement set forth in the Agreement shall refer to the Agreement as amended by this Amendment after the date hereof. 3. Miscellaneous. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such State. This Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument. If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated. B-1 207 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be duly executed, all as of the date and year first above written. LASALLE RE HOLDINGS LIMITED By: /s/ GUY D. HENGESBAUGH ------------------------------------ Name: Guy D. Hengesbaugh Title: President and Chief Executive Officer LASALLE RE LIMITED By: /s/ GUY D. HENGESBAUGH ------------------------------------ Name: Guy D. Hengesbaugh Title: President and Chief Executive Officer TRENWICK GROUP INC. By: /s/ JAMES F. BILLETT, JR. ------------------------------------ Name: James F. Billett, Jr. Title: Chairman, President and Chief Executive Officer TRENWICK GROUP LTD. By: /s/ JOHN V. DEL COL ------------------------------------ Name: John V. Del Col Title: Director B-2 208 APPENDIX C LASALLE RE HOLDINGS LIMITED SCHEME OF ARRANGEMENT EXPLANATORY STATEMENT (IN COMPLIANCE WITH SECTION 100 OF THE COMPANIES ACT) INTRODUCTION LaSalle Re Holdings Limited ("LaSalle Holdings") proposes to effect an arrangement with certain of the holders of its common shares (the shares held by such holders being the "Scheme Shares") pursuant to a scheme of arrangement (the "Scheme") which will result in LaSalle Holdings becoming a wholly-owned subsidiary of Trenwick Group Ltd., a newly incorporated Bermuda exempted company ("New Holdings"). The Scheme is part of a broader business combination between Trenwick Group Inc., a Delaware corporation, ("Trenwick"), and LaSalle Holdings by which these companies will combine their operations under New Holdings. Under the Scheme, the Scheme Shares will be transferred to New Holdings and the holders thereof will be allotted and issued such number of fully paid and non-assessable New Holdings shares as is equal to the LaSalle Exchange Ratio multiplied by the number of Scheme Shares held by such holder immediately prior to such transfer. The LaSalle Exchange Ratio means an exchange of Scheme Shares for New Holdings shares on a one for one basis unless LaSalle Re Limited ("LaSalle Re") incurs a Net Loss (as defined in the Scheme document) which exceeds $40,000,000 and is less than or equal to $100,000,000 in which case such ratio would be the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value minus 50% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $40,000,000 and is less than or equal to $60,000,000 and less 100% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $60,000,000 and is less than or equal to $100,000,000 divided by (B) the LaSalle Fair Market Value. The LaSalle Fair Market Value is the product of (i) the average of the closing sale price as reported on the New York Stock Exchange Composite Tape for the LaSalle Holdings shares for the thirty trading days immediately preceding the Effective Date multiplied by (ii) the aggregate number of issued and outstanding LaSalle Holdings shares on the Effective Date. For example, if the LaSalle Fair Market Value is $210.0 million and LaSalle Re experiences a $70.0 million Net Loss between 19 December, 1999 and the Effective Date, then each of the Scheme Shares automatically will be converted into the right to receive 0.90 of a share of Trenwick Group Ltd. (1.0 multiplied by the quotient of (A) $210.0 million less $10.0 million (which is half of $20.0 million, the Net Loss between $40.0 million and $60.0 million) and less another $10.0 million (which is 100% of the Net Loss between $60.0 million and $100.0 million), divided by (B) the LaSalle Fair Market Value). The purpose of this document is to explain the Scheme, the effect of the Scheme and the steps necessary for the implementation of the Scheme. 1. THE SCHEME OF ARRANGEMENT The Scheme comprises the following principal steps: (a) the transfer to New Holdings of all the Scheme Shares; and (b) the allotment and issue to the holders of the Scheme Shares of such number of fully paid and non-assessable New Holdings shares as is equal to the LaSalle Exchange Ratio multiplied by the number of Scheme Shares held by such holders immediately prior to such transfer. In addition, but not as part of the Scheme, each LaSalle Holdings common share which is issued and outstanding immediately prior to the Effective Date which is owned by LaSalle Re, Trenwick, New C-1 209 Holdings or any Subsidiary thereof (not being Scheme Shares) will be cancelled and no cash or other consideration will be delivered or deliverable in exchange therefor. The Scheme will not be effective until all conditions to the Scheme are satisfied or waived. It is anticipated that all such conditions will have been satisfied or waived by the time of the Bermuda court hearing convened to sanction the Scheme which is expected to be scheduled for 27 September, 2000, which is two days after the date of LaSalle Holdings' scheduled court meeting and special general meeting. For a discussion of the key regulatory approvals necessary for the Scheme, please see "Conditions of the Scheme" below. New Holdings will not issue certificates or scrip representing fractional New Holdings shares in exchange for the transfer of the Scheme Shares. Each holder otherwise entitled to a fractional New Holdings share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive from the LaSalle Exchange Agent a cash payment in lieu of such fractional New Holdings share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price (as defined in the Scheme document) and the LaSalle Exchange Ratio. A more detailed discussion of the consideration to be received pursuant to the Scheme is set out on pages 30 and 31 of the Proxy Statement to which this Explanatory Statement is attached (the "Proxy Statement"). 2. PURPOSE OF THE SCHEME The Scheme is part of a proposed business combination between Trenwick, a Delaware insurance holding company whose principal operating subsidiaries provide reinsurance and specialty insurance coverage to insurance companies in the United States and globally, and LaSalle Holdings, whose principal operating subsidiary, LaSalle Re, provides world wide speciality property and casualty reinsurance to insurance companies globally with an emphasis on catastrophe coverage. The board of directors of each of Trenwick and LaSalle Holdings believe that the business combination will enhance the value of both Trenwick and LaSalle Holdings and will provide their respective shareholders with an opportunity to participate in the growth of a larger, more diversified company with greater resources to compete in the evolving reinsurance and insurance market place. Further details about the reasons for the business combination and the recommendation of the LaSalle Board are set out on pages 25 through 29 of the Proxy Statement. The business combination involves the holders of the Scheme Shares and the holders (other than LaSalle Holdings) of LaSalle Re exchangeable non-voting shares becoming shareholders of New Holdings and LaSalle Holdings and LaSalle Re becoming subsidiaries of New Holdings pursuant to this Scheme and the Scheme of Arrangement of LaSalle Re. The business combination will also provide that the assets and liabilities of Trenwick will be transferred to New Holdings and that the shareholders of Trenwick will become shareholders of New Holdings. Pursuant to the business combination, approximately 16,288,082 shares in New Holdings will be issued to the holders of shares in Trenwick and 20,359,940 shares in New Holdings will be issued to the holders of the Scheme Shares and the holders (other than LaSalle Holdings) of LaSalle Re exchangeable non-voting common shares. These shares will represent approximately 44.4% and 55.6% respectively of the outstanding common shares of New Holdings. The Proxy Statement contains selected consolidated historical financial data and unaudited proforma combined consolidated financial information with regard to Trenwick and LaSalle Holdings on pages 94 through 108. 3. CONDITIONS OF THE SCHEME The Scheme will become effective and binding on all holders of Scheme Shares ("Scheme Shareholders") if the following conditions are satisfied or, if permissible, waived: - Scheme Shareholders must approve the Scheme at the meeting convened for the purpose by order of the Bermuda court (the "Court Meeting"). C-2 210 - A Special General Meeting of the holders of the LaSalle Holdings common shares must approve the Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization dated as of 20 March, 2000 by and among LaSalle Holdings, LaSalle Re, Trenwick and New Holdings (the "Business Combination Agreement") and the Trenwick stockholders must approve and adopt the Business Combination Agreement and approve and adopt the related plan of reorganization; - Trenwick and LaSalle Holdings must receive all approvals of any governmental authority, including Lloyd's and insurance regulatory approvals required to consummate the transactions contemplated by the Business Combination Agreement (the "Plans"), and such approvals may not be subject to conditions which would impose material and adverse limitations on the ability of New Holdings to conduct its business, require changes to be made to the Plans that would be material and adverse to New Holdings, LaSalle Holdings or Trenwick, or which would change the consideration payable to shareholders; - Trenwick and LaSalle Holdings must receive all consents and approvals required by any lender or equity provider required to consummate the Plans; - there must be no legal restriction which prohibits completion of the Plans imposed by any court or agency of competent jurisdiction or arising from any law, statute or regulation, provided that LaSalle Holdings and Trenwick will use all commercially reasonable efforts to prevent or appeal any such restriction; - the registration statement on Form S-4 filed with the United States Securities and Exchange Commission ("SEC") to register New Holdings common shares to be issued in the Plans of which this document is a part, must be declared effective under the United States Securities Act of 1933 and there must be no stop order suspending the effectiveness of such registration statement and no proceedings for that purpose initiated by the SEC; - any waiting period (or extension thereof) applicable to the business combination contemplated by the Plans under the United States Hart-Scott-Redino Act must expire or terminate; - the New Holdings common shares to be issued upon consummation of the Plans must be authorised for trading on the New York Stock Exchange; - New Holdings and LaSalle Holdings must receive a legal opinion stating that the scheme of arrangement will qualify as an exchange under Section 351 (a) of the United States Internal Revenue Code and that the holders of shares of LaSalle Holdings and the U.S. transferors of exchangeable non-voting common shares of LaSalle Re will not recognise any gain or loss for tax purposes upon the receipt of New Holdings shares, provided, in certain cases that such transferors take certain actions; and - New Holdings and Trenwick must receive a legal opinion that the U.S. transferors of shares of Trenwick will not recognise any gain or loss for tax purposes upon the receipt of New Holdings shares and the plan of reorganization described in the Business Combination Agreement will qualify as a tax-free reorganization within the meaning of Section 368(a) of the United States Internal Revenue Code. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF TRENWICK AND LASALLE HOLDINGS In addition, the obligations of Trenwick and LaSalle Holdings under the Plans are subject to the further satisfaction or waiver by each party of the following conditions: - the other party must have performed in all material respects all obligations and covenants required to be performed by it under the Business Combination Agreement at or prior to the Effective Date; - the representations and warranties of the other party set forth in the Business Combination Agreement must be true and correct both as of the date of the Business Combination Agreement and at and as of the Effective Date, as if made at and as of such time (unless the representation or C-3 211 warranty is made as of an earlier date, in which case it must be true as of that earlier date), except where the failure of those representations and warranties to be true and correct does not have, and is not likely to have, either individually or in the aggregate, a material adverse effect on the party making the representation; - Trenwick and LaSalle Holdings must receive the customary and satisfactory closing documents; - Trenwick and LaSalle Holdings must receive comfort letters from their respective accountants; - Trenwick and LaSalle Holdings must receive all required consents and approvals; - the board of directors of the other party must not have withdrawn or adversely modified its approval or recommendation of the Business Combination Agreement in order to approve and permit such other party to execute a definitive agreement relating to a superior proposal meeting the criteria described below, and must not have determined in good faith, after consultation with outside legal counsel, that the failure to take such action is reasonably likely to result in the breach of its fiduciary duties under applicable law; and - no material adverse change that relates to the other party will have occurred (this condition will not apply with respect to the other party after the Trenwick stockholders and LaSalle common Shareholders approve and adopt the Business Combination Agreement and the related transactions). ADDITIONAL CONDITIONS TO TRENWICK'S OBLIGATIONS - New Holdings and Trenwick must receive a legal opinion dated the Effective Date of the Plans, stating the Trenwick shall treat the plan of reorganization described in the Business Combination Agreement as a taxable disposition of assets but that Trenwick will not be subject to U.S. federal income tax in excess of $60.0 million. 4. THE EFFECT OF THE SCHEME OF ARRANGEMENT As a result of the implementation of the Scheme, LaSalle Holdings will become a wholly-owned subsidiary of New Holdings. 5. MATERIAL INTERESTS OF THE DIRECTORS OF LASALLE HOLDINGS The material interests of the Directors and other members of the management of LaSalle Holdings and the effect of the Scheme on such persons is described in the Proxy Statement under the captions "Interests of Directors and Officers in the Transactions" (page 64), "Employment and "Severance Arrangements" (pages 65 through 67), "Other Arrangements with Employees" (pages 67 and 68), and "Indemnification and Insurance" (pages 86 and 87). 6. THE SPECIAL GENERAL MEETING AND THE COURT MEETING The notice of the Special General Meeting of the holders of LaSalle Holdings common shares to be convened on 25 September, 2000 to approve the Business Combination Agreement is set out in the Proxy Statement and the notice of the Court Meeting of the holders of the Scheme Shares to be convened on 25 September, 2000 to approve the Scheme is set out in the Proxy Statement. Assuming a quorum is present, the affirmative vote of the holders of a majority of the LaSalle Holdings Shares present and voting at the Special General Meeting is necessary to approve and adopt the Business Combination Agreement. Approval of the Scheme at the Court Meeting requires the affirmative vote of 75% of the Scheme Shares that are represented and voted, either in person or by proxy, provided that those holders also constitute a majority of the record holders who are present and voting, either in person or by proxy, at the meeting. A further discussion of the Special General Meeting and the Court Meeting is contained on pages 20 and 21 of the Proxy Statement. C-4 212 IN THE SUPREME COURT OF BERMUDA CIVIL JURISDICTION ------------------------ IN THE MATTER OF LASALLE RE HOLDINGS LIMITED AND IN THE MATTER OF SECTION 99 OF THE COMPANIES ACT 1981 ------------------------ SCHEME OF ARRANGEMENT BETWEEN LASALLE RE HOLDINGS LIMITED AND THE HOLDERS OF THE SCHEME SHARES (AS HEREINAFTER DEFINED) ------------------------ PRELIMINARY ------------------------ (A) In this Scheme of Arrangement, unless inconsistent with the subject or context, the following expressions shall bear the following meanings: "Average Closing Price" means an amount equal to the average per share closing price of a share of common stock, par value $.10 per share, of Trenwick as reported on the NYSE for the ten (10) NYSE trading days immediately preceding the three (3) NYSE trading days prior to the Effective Date; "Court" means the Supreme Court of Bermuda; "Effective Date" means the date on which this Scheme becomes effective in accordance with clause 2 of this Scheme of Arrangement; "GAAP" means generally accepted accounting principles as in effect in the United States of America (as such principles may change from time to time); "LaSalle Consideration" means such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio; "LaSalle Exchange Agent" means the agent appointed for the purpose of exchanging certificates representing Scheme Shares for the New Holdings Shares; "LaSalle Exchange Ratio" means an exchange of Scheme Shares for New Holdings Shares on a one for one basis unless LaSalle Re incurs a Net Loss which exceeds $40,000,000 and is less than or equal to $100,000,000 in which case such ratio would be the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value minus 50% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $40,000,000 and is less than or equal to $60,000,000 and less 100% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $60,000,000 and is less than or equal to $100,000,000 divided by (B) the LaSalle Fair Market Value; "LaSalle Fair Market Value" means the product of (i) the average of the closing sale price as reported on the NYSE Composite Tape for the LaSalle Holdings Shares for the thirty (30) trading days immediately preceding the Effective Date multiplied by (ii) the aggregate number of issued and outstanding LaSalle Holdings on the Effective Date; C-5 213 "LaSalle Holdings" means LaSalle Re Holdings Limited, a company organised under the laws of Bermuda; "LaSalle Holdings Shares" means the common shares, par value $1.00 per share, of LaSalle Holdings issued and outstanding on the Effective Date; "LaSalle Holdings Shareholders" means the holders of LaSalle Holdings Shares; "LaSalle Re" means LaSalle Re Limited, a company organised under the laws of Bermuda and a majority owned Subsidiary of LaSalle Holdings; "Latest Practicable Date" means 21 August, 2000 being that latest practicable date prior to printing of this document, sent to, inter alia, Scheme Shareholders, in which this Scheme of Arrangement is contained; "Net Loss" means, with respect to any Person, the estimated amount of all losses and loss adjustment expenses incurred or to be incurred by such a Person and its Subsidiaries in connection with the occurrence of a single natural catastrophe occurring between 19 December, 1999 and the Effective Date, net of all applicable reinsurance recoverables determined in accordance with GAAP and generally accepted actuarial standards of practice as applied in the insurance industry, each as in effect on the date of determination of such Net Loss. Net Loss shall be determined as soon as reasonably practicable following the occurrence of a natural catastrophe by the Settlement Auditor. In the event that there is more than one Person acting as the Settlement Auditor, Net Loss shall be determined by taking the average of the Net Loss determinations established by each Settlement Auditor. "New Holdings" means Trenwick Group Limited, a company organised under the laws of Bermuda; "New Holdings Shares" means the common shares, par value $1.00 per share, of New Holdings; "NYSE" means the New York Stock Exchange, Inc.; "Person" means any individual, company, corporation, estate, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organisation or government or any agency or political subdivision thereof or other entity; "Registrar" means the Registrar of Companies of Bermuda; "Scheme of Arrangement" means this scheme of arrangement in its present form or with or subject to any modification or addition or condition which the Court may approve or impose; "Scheme Shares" means all the outstanding LaSalle Holdings Shares, other than those owned immediately prior to the Effective Date by LaSalle Re, Trenwick, New Holdings or any Subsidiary of the foregoing; "Scheme Shareholders" means the holders of Scheme Shares; "Settlement Auditor" means either Ernst & Young LLP or Paragon Risk Management Services, Inc., as shall be mutually agreed by LaSalle Holdings and Trenwick. In the event LaSalle Holdings and Trenwick are unable to agree upon a Settlement Auditor within 30 calendar days following the completion of a natural catastrophe, both Ernst & Young LLP and Paragon Risk Management Services, Inc. shall serve as the Settlement Auditor; "Subsidiary" means, with respect to a specified Person, each company, partnership or other entity in which the specified Person owns or controls, directly or indirectly through one or more intermediaries, fifty percent (50%) or more of the shares or other interests having general voting power in the election of directors or Persons performing similar functions or rights to fifty percent (50%) or more of any distributions; "Trenwick" means Trenwick Group Inc., a Delaware corporation; C-6 214 "$" means United States dollars. (B) LaSalle Holdings was incorporated on 20th September, 1995 in Bermuda under the Companies Act 1981 of Bermuda with an authorised share capital of $12,000 divided into 12,000 shares, par value $1.00 per share, and as of the Latest Practicable Date had an authorised share capital of $100,000,000 divided into: 93,000,000 Common Shares of which 15,634,394 have been issued and are fully paid or credited as fully paid; 3,000,000 Series A Preferred Shares of which 3,000,000 have been issued and are fully paid or credited as fully paid; 4,000,000 Series B Preferred Shares of which none has been issued. (C) The LaSalle Holdings Shares are listed on the New York Stock Exchange. (D) On the Effective Date, subject to Section (F), each Scheme Share that is issued and outstanding immediately prior to the Effective Date shall be transferred to New Holdings. (E) Each of the Scheme Shareholders shall be allotted and issued such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio times the number of Scheme Shares held by such holder immediately prior to such transfer. (F) No certificates or scrip representing fractional New Holdings Shares shall be issued upon the transfer of the Scheme Shares but in lieu thereof each holder otherwise entitled to a fractional New Holdings Share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive from the LaSalle Exchange Agent in accordance with the provisions of this section (F), a cash payment in lieu of such fractional New Holdings Share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price and the LaSalle Exchange Ratio. As soon as practicable after the determination of the amount of cash, if any, to be paid to the Scheme Shareholders in lieu of any fractional New Holdings Share, the LaSalle Exchange Agent shall promptly pay without interest to all Scheme Shareholders entitled thereto all such amounts. Holders of interests representing fractional New Holdings Shares shall not be entitled to vote such interests or to any other rights as a shareholder of New Holdings. (G) Each LaSalle Holdings Share that is issued and outstanding immediately prior to the Effective Time that is owned by LaSalle Re, Trenwick, New Holdings or any Subsidiary of any of the foregoing shall be cancelled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. (H) Trenwick, New Holdings and LaSalle Holdings have agreed to appear by Counsel at the hearing of the petition to sanction this Scheme of Arrangement and to undertake to the Court to be bound thereby and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed and done by them for the purpose of giving effect to this Scheme of Arrangement. (I) The primary purpose of this Scheme of Arrangement is that the Scheme Shareholders should receive New Holdings Shares in consideration, inter alia, for the transfer of the Scheme Shares to New Holdings on the basis of the LaSalle Exchange Ratio, with the result that LaSalle Holdings becomes a wholly-owned Subsidiary of New Holdings. C-7 215 THE SCHEME ------------------------ TRANSFER OF THE SCHEME SHARES 1. On the Effective Date: (a) subject to Section 1(b), each Scheme Share that is issued and outstanding immediately prior to the Effective Date shall be transferred to New Holdings. (b) No certificates or scrip representing fractional New Holding Shares shall be issued upon the transfer of Scheme Shares but in lieu thereof each holder otherwise entitled to a fractional New Holdings Share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive, from the LaSalle Exchange Agent in accordance with the provisions of this section 1(b), a cash payment in lieu of such fractional New Holdings Share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price and the LaSalle Exchange Ratio. As soon as practicable after the determination of the amount of cash, if any, to be paid to the Scheme Shareholders in lieu of any fractional New Holdings Share, the LaSalle Exchange Agent shall promptly pay without interest to all holders of Scheme Shareholders entitled thereto all such amounts. Holders of interests representing fractional New Holdings Shares shall not be entitled to vote such interests or to any other rights as a shareholder of New Holdings. (c) Each LaSalle Holdings Share that is issued and outstanding immediately prior to the Effective Time that is owned by LaSalle Re, Trenwick, New Holdings or any Subsidiary of either of the foregoing shall be cancelled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. (d) Each of the Scheme Shareholders shall be allotted and issued such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio times the number of Scheme Shares held by such holder immediately prior to such transfer. GENERAL 2. This Scheme shall become effective as soon as the Court sanctions this Scheme under Section 99 of the Companies Act 1981 of Bermuda and a copy of the Court order is delivered to the Registrar. 3. LaSalle Holdings may consent for and on behalf of the Scheme Shareholders to any non-material modification of, or addition to, this Scheme of Arrangement or to any condition which the Court may think fit to approve or impose. 4. All costs, charges and expenses of and incidental to this Scheme of Arrangement and the costs of carrying the same into effect shall be borne by LaSalle Holdings. 5. This Scheme shall be governed by and construed in accordance with the laws of Bermuda and the Scheme Shareholders hereby irrevocably submit to the exclusive jurisdiction of the courts of Bermuda. C-8 216 LASALLE RE LIMITED SCHEME OF ARRANGEMENT EXPLANATORY STATEMENT (IN COMPLIANCE WITH SECTION 100 OF THE COMPANIES ACT) INTRODUCTION LaSalle Re Limited ("LaSalle Re") proposes to effect an arrangement with the minority holders of 4,725,546 of its exchangeable non-voting common shares (the shares held by such holders being the "Scheme Shares") pursuant to a scheme of arrangement (the "Scheme") which will result in LaSalle Re becoming a wholly-owned subsidiary of Trenwick Group Ltd., a newly incorporated Bermuda exempted company ("New Holdings"). A list of these minority holders is attached as Schedule I to the Scheme document. The Scheme is part of a broader business combination between Trenwick Group Inc., a Delaware corporation ("Trenwick"), and LaSalle Re Holdings Limited ("LaSalle Holdings") by which these companies will combine their operations under New Holdings. LaSalle Re is a subsidiary of LaSalle Holdings which is itself proposing to effect a scheme of arrangement with certain of the holders of its common shares as part of the business combination with Trenwick. Under the Scheme, the Scheme Shares will be transferred to New Holdings and the holders thereof will be allotted and issued such number of fully paid and non-assessable New Holdings shares as is equal to the LaSalle Exchange Ratio multiplied by the number of Scheme Shares held by such holder immediately prior to such transfer. The LaSalle Exchange Ratio means an exchange of Scheme Shares for New Holdings shares on a one for one basis unless LaSalle Re incurs a Net Loss (as defined in the Scheme document) which exceeds $40,000,000 and is less than or equal to $100,000,000 in which case such ratio would be the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value minus 50% of the amount by which any Net Loss experienced by LaSalle Re exceeds $40,000,000 and is less than or equal to $60,000,000 and less 100% of the amount by which any Net Loss experienced by LaSalle Re exceeds $60,000,000 and is less than or equal to $100,000,000 divided by (B) the LaSalle Fair Market Value. The LaSalle Fair Market Value is the product of (i) the average of the closing sale price as reported on the New York Stock Exchange Composite Tape for the LaSalle Holdings shares for the thirty trading days immediately preceding the Effective Date multiplied by (ii) the aggregate number of issued and outstanding LaSalle Holdings shares on the Effective Date. For example, if the LaSalle Fair Market Value is $210.0 million and LaSalle Re experiences a $70.0 million Net Loss between 19 December, 1999 and the Effective Date, then each of the Scheme Shares automatically will be converted into the right to receive 0.90 of a share of Trenwick Group Ltd. (1.0 multiplied by the quotient of (A) $210.0 million less $10.0 million (which is half of $20.0 million, the Net Loss between $40.0 million and $60.0 million) and less another $10.0 million (which is 100% of the Net Loss between $60.0 million and $100.0 million), divided by (B) the LaSalle Fair Market Value). The purpose of this document is to explain the Scheme, the effect of the Scheme and the steps necessary for the implementation of the Scheme. 1. THE SCHEME OF ARRANGEMENT The Scheme comprises the following principal steps: (a) the transfer to New Holdings of all the Scheme Shares; and (b) the allotment and issue to the holders of the Scheme Shares of such number of fully paid and non-assessable New Holdings shares as is equal to the LaSalle Exchange Ratio multiplied by the number of Scheme Shares held by such holders immediately prior to such transfer. The 1,439,884 exchangeable non-voting common shares in LaSalle Re held by LaSalle Holdings will be unaffected by the Scheme. C-9 217 The Scheme will not be effective until all conditions to the Scheme are satisfied or waived. It is anticipated that all such conditions will have been satisfied or waived by the time of the Bermuda court hearing convened to sanction the Scheme which is expected to be scheduled for 27 September, 2000, which is two days after the date of LaSalle Re court meeting and special general meeting. For a discussion of the key regulatory approvals necessary for the Scheme, please see "Conditions of the Scheme" below. New Holdings will not issue certificates or scrip representing fractional New Holdings shares in exchange for the transfer of the Scheme Shares. Each holder otherwise entitled to a fractional New Holdings share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive from the LaSalle Exchange Agent a cash payment in lieu of such fractional New Holdings share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price (as defined in the Scheme document) and the LaSalle Exchange Ratio. A more detailed discussion of the consideration to be received pursuant to the Scheme is set out on pages 30 and 31 of the Proxy Statement to which this Explanatory Statement is attached (the "Proxy Statement"). 2. PURPOSE OF THE SCHEME The Scheme is part of a proposed business combination between Trenwick, a Delaware insurance holding company whose principal operating subsidiaries provide reinsurance and specialty insurance coverage to insurance companies in the United States, and globally and LaSalle Holdings, whose principal operating subsidiary, LaSalle Re, provides world wide speciality property and casualty reinsurance to insurance companies globally with an emphasis on catastrophe coverage. The board of directors of each of Trenwick and LaSalle Holdings believe that the business combination will enhance the value of both Trenwick and LaSalle Holdings and will provide their respective shareholders with an opportunity to participate in the growth of a larger, more diversified company with greater resources to compete in the evolving reinsurance and insurance market place. Further details about the reasons for the business combination and the recommendation of the LaSalle Board are set out on pages 25 through 29 of the Proxy Statement. The business combination involves the holders of the Scheme Shares and certain holders of LaSalle Holdings common shares becoming shareholders of New Holdings and LaSalle Holdings and LaSalle Re becoming subsidiaries of New Holdings pursuant to this Scheme and the Scheme of Arrangement of LaSalle Holdings. The business combination will also provide that the assets and liabilities of Trenwick will be transferred to New Holdings and that the shareholders of Trenwick will become shareholders of New Holdings. Pursuant to the business combination, approximately 16,288,082 shares in New Holdings will be issued to the holders of shares in Trenwick and 20,359,940 shares in New Holdings will be issued to the holders of the Scheme Shares and certain holders of LaSalle Holdings common shares. These shares will represent approximately 44.4% and 55.6% respectively of the outstanding common shares of New Holdings. The Proxy Statement contains selected consolidated historical financial data and unaudited proforma combined consolidated financial information with regard to Trenwick and LaSalle Holdings on pages 94 to 108. 3. CONDITIONS OF THE SCHEME The Scheme will become effective and binding on all holders of Scheme Shares ("Scheme Shareholders") if the following conditions are satisfied or, if permissible, waived: - Scheme Shareholders must approve the Scheme at the meeting convened for the purpose by order of the Bermuda court (the "Court Meeting"). - A Special General Meeting of the holders of the exchangeable non-voting common shares of LaSalle Re must approve and adopt at a Special General Meeting the Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization dated as of 20 March, 2000 by C-10 218 and among LaSalle Holdings, LaSalle Re, Trenwick and New Holdings (the "Business Combination Agreement") and the Trenwick stockholders must approve and adopt the Business Combination Agreement and approve and adopt the related plan of reorganization; - Trenwick and LaSalle Holdings must receive all approvals of any governmental authority, including Lloyd's and insurance regulatory approvals required to consummate the transactions contemplated by the Business Combination Agreement (the "Plans"), and such approvals may not be subject to conditions which would impose material and adverse limitations on the ability of New Holdings to conduct its business, require changes to be made to the Plans that would be material and adverse to New Holdings, LaSalle Holdings or Trenwick, or which would change the consideration payable to shareholders; - Trenwick and LaSalle Holdings must receive all consents and approvals required by any lender or equity provider required to consummate the Plans; - there must be no legal restriction which prohibits completion of the Plans imposed by any court or agency of competent jurisdiction or arising from any law, statute or regulation, provided that LaSalle Holdings and Trenwick will use all commercially reasonable efforts to prevent or appeal any such restriction; - the registration statement on Form S-4 filed with the United States Securities and Exchange Commission ("SEC") to register New Holdings common shares to be issued in the Plans of which this document is a part, must be declared effective under the United States Securities Act of 1933 and there must be no stop order suspending the effectiveness of such registration statement and no proceedings for that purpose initiated by the SEC; - any waiting period (or extension thereof) applicable to the business combination contemplated by the Plans under the United States Hart-Scott-Redino Act must expire or terminate; - the New Holdings common shares to be issued upon consummation of the Plans must be authorised for trading on the New York Stock Exchange; - New Holdings and LaSalle Holdings must receive a legal opinion stating that the scheme of arrangement will qualify as an exchange under Section 351 (a) of the United States Internal Revenue Code and that the holders of shares of LaSalle Holdings and the U.S. transferors of exchangeable non-voting common shares of LaSalle Re will not recognise any gain or loss for tax purposes upon the receipt of New Holdings shares, provided, in certain cases that such transferors take certain actions; and - New Holdings and Trenwick must receive a legal opinion that the U.S. transferors of shares of Trenwick will not recognise any gain or loss for tax purposes upon the receipt of New Holdings shares and the plan of reorganization described in the Business Combination Agreement will qualify as a tax-free reorganization within the meaning of Section 368(a) of the United States Internal Revenue Code. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF TRENWICK AND LASALLE HOLDINGS In addition, the obligations of Trenwick and LaSalle Holdings under the Plans are subject to the further satisfaction or waiver by each party of the following conditions: - the other party must have performed in all material respects all obligations and covenants required to be performed by it under the Business Combination Agreement at or prior to the Effective Date; - the representations and warranties of the other party set forth in the Business Combination Agreement must be true and correct both as of the date of the Business Combination Agreement and at and as of the Effective Date, as if made at and as of such time (unless the representation or warranty is made as of an earlier date, in which case it must be true as of that earlier date), except where the failure of those representations and warranties to be true and correct does not have, and C-11 219 is not likely to have, either individually or in the aggregate, a material adverse effect on the party making the representation; - Trenwick and LaSalle Holdings must receive the customary and satisfactory closing documents; - Trenwick and LaSalle Holdings must receive comfort letters from their respective accountants; - Trenwick and LaSalle Holdings must receive all required consents and approvals; - the board of directors of the other party must not have withdrawn or adversely modified its approval or recommendation of the Business Combination Agreement in order to approve and permit such other party to execute a definitive agreement relating to a superior proposal meeting the criteria described below, and must not have determined in good faith, after consultation with outside legal counsel, that the failure to take such action is reasonably likely to result in the breach of its fiduciary duties under applicable law; and - no material adverse change that relates to the other party will have occurred (this condition will not apply with respect to the other party after the Trenwick stockholders, LaSalle common Shareholders and the holders of the LaSalle Re exchangeable non-voting common shares approve and adopt the Business Combination Agreement and the related transactions). ADDITIONAL CONDITIONS TO TRENWICK'S OBLIGATIONS - New Holdings and Trenwick must receive a legal opinion dated the Effective Date of the Plans, stating that Trenwick shall treat the plan of reorganization described in the Business Combination Agreement as a taxable disposition of assets but that Trenwick will not be subject to U.S. federal income tax in excess of $60.0 million. 4. THE EFFECT OF THE SCHEME OF ARRANGEMENT As a result of the implementation of the Scheme, LaSalle Re will become, directly and indirectly through LaSalle Holdings, a wholly-owned subsidiary of New Holdings. 5. MATERIAL INTERESTS OF THE DIRECTORS OF LASALLE RE The material interests of the Directors and other members of the management of LaSalle Re and the effect of the Scheme on such persons is described in the Proxy Statement to which this Explanatory Statement is attached under the captions "Interests of Directors and Officers in the Transactions" (page 64), "Employment and Severance Arrangements" (pages 65 through 67), "Other Arrangements with Employees" (pages 67 and 68), and "Indemnification and Insurance" (pages 86 and 87). 6. THE SPECIAL GENERAL MEETING AND THE COURT MEETING The notice of the Special General Meeting of the holders of LaSalle Re exchangeable non-voting common shares to be convened on 25 September, 2000 to approve the Business Combination Agreement is set out in the Proxy Statement and the notice of the Court Meeting of the holders of the Scheme Shares to be convened on 25 September, 2000 to approve the Scheme is set out in the Proxy Statement. Assuming a quorum is present, the affirmative vote of the holders of a majority of the Non-Voting Shares present and voting at the Special General Meeting is necessary to approve and adopt the Business Combination Agreement. Approval of the Scheme at the Court Meeting requires the affirmative vote of 75% of the Scheme Shares that are represented and voted, either in person or by proxy, provided that those holders also constitute a majority of the record holders who are present and voting, either in person or by proxy, at the meeting. A further discussion of the Special General Meeting and the Court Meeting is contained on pages 20 and 21 of the Proxy Statement. C-12 220 IN THE SUPREME COURT OF BERMUDA CIVIL JURISDICTION ------------------------ IN THE MATTER OF LASALLE RE LIMITED AND IN THE MATTER OF SECTION 99 OF THE COMPANIES ACT 1981 ------------------------ SCHEME OF ARRANGEMENT BETWEEN LASALLE RE LIMITED AND THE HOLDERS OF THE SCHEME SHARES (AS HEREINAFTER DEFINED) ------------------------ PRELIMINARY ------------------------ (A) In this Scheme of Arrangement, unless inconsistent with the subject or context, the following expressions shall bear the following meanings: "Average Closing Price" means an amount equal to the average per share closing price of a share of common stock, par value $.10 per share, of Trenwick as reported on the NYSE for the ten (10) NYSE trading days immediately preceding the three (3) NYSE trading days prior to the Effective Date; "Court" means the Supreme Court of Bermuda; "Effective Date" means the date on which this Scheme becomes effective in accordance with clause 2 of this Scheme of Arrangement; "GAAP" means generally accepted accounting principles as in effect in the United States of America (as such principles may change from time to time); "LaSalle Consideration" means such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio; "LaSalle Exchange Agent" means the agent appointed for the purpose of exchanging certificates representing Scheme Shares for the New Holdings Shares; "LaSalle Exchange Ratio" means an exchange of Scheme Shares for New Holdings Shares on a one for one basis unless LaSalle Re incurs a Net Loss which exceeds $40,000,000 and is less than or equal to $100,000,000 in which case such ratio would be the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value minus 50% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $40,000,000 and is less than or equal to $60,000,000 and less 100% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $60,000,000 and is less than or equal to $100,000,000 divided by (B) the LaSalle Fair Market Value; "LaSalle Fair Market Value" means the product of (i) the average of the closing sale price as reported on the NYSE Composite Tape for the LaSalle Holdings Shares for the thirty (30) trading days immediately preceding the Effective Date multiplied by (ii) the aggregate number of issued and outstanding LaSalle Holdings Shares on the Effective Date; C-13 221 "LaSalle Holdings" means LaSalle Re Holdings Limited, a company organised under the laws of Bermuda which beneficially owns all the Voting Shares; "LaSalle Holdings Shares" means the common shares, par value $1.00 per share, of LaSalle Holdings. "LaSalle Re" means LaSalle Re Limited, a company organised under the laws of Bermuda and a majority owned Subsidiary of LaSalle Holdings; "Latest Practicable Date" means 21 August, 2000 being that latest practicable date prior to printing of the document sent to, inter alia, holders of Scheme Shares, in which this Scheme of Arrangement is contained; "Minority Shareholders" means the shareholders of LaSalle Re listed on Schedule I; "Net Loss" means, with respect to any Person, the estimated amount of all losses and loss adjustment expenses incurred or to be incurred by such a Person and its Subsidiaries in connection with the occurrence of a single natural catastrophe occurring between 19 December, 1999 and the Effective Date, net of all applicable reinsurance recoverables determined in accordance with GAAP and generally accepted actuarial standards of practice as applied in the insurance industry, each as in effect on the date of determination of such Net Loss. Net Loss shall be determined as soon as reasonably practicable following the occurrence of a natural catastrophe by the Settlement Auditor. In the event that there is more than one Person acting as the Settlement Auditor, Net Loss shall be determined by taking the average of the Net Loss determinations established by each Settlement Auditor. "New Holdings" means Trenwick Group Limited, a company organised under the laws of Bermuda; "New Holdings Shares" means the common shares, par value $1.00 per share, of New Holdings; "Non-Voting Shares" means the non-voting common shares, par value $1.00 per share, of LaSalle Re all of which are beneficially owned by LaSalle Holdings and the Minority Shareholders; "NYSE" means the New York Stock Exchange, Inc.; "Person" means any individual, company, corporation, estate, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organisation or government or any agency or political subdivision thereof or other entity; "Registrar" means the Registrar of Companies of Bermuda; "Scheme of Arrangement" means this scheme of arrangement in its present form or with or subject to any modification or addition or condition which the Court may approve or impose; "Scheme Shares" means the 4,725,546 Non-Voting Shares in the aggregate owned by the Minority Shareholders; "Scheme Shareholders" means the holders of Scheme Shares; "Settlement Auditor" means either Ernst & Young LLP or Paragon Risk Management Services, Inc., as shall be mutually agreed by LaSalle Holdings and Trenwick. In the event LaSalle Holdings and Trenwick are unable to agree upon a Settlement Auditor within 30 calendar days following the completion of a natural catastrophe, both Ernst & Young LLP and Paragon Risk Management Services, Inc. shall serve as the Settlement Auditor; "Subsidiary" means, with respect to a specified Person, each company, partnership or other entity in which the specified Person owns or controls, directly or indirectly through one or more intermediaries, fifty percent (50%) or more of the shares or other interests having general voting power in the election of directors or Persons performing similar functions or rights to fifty percent (50%) or more of any distributions; C-14 222 "Trenwick" means Trenwick Group Inc., a Delaware corporation; "Voting Shares" means the voting common shares, par value $1.00 per share, of LaSalle Re all of which are beneficially owned by LaSalle Holdings; "$" means United States dollars. (B) LaSalle Re was incorporated on 26th October, 1993 in Bermuda under the Companies Act 1981 of Bermuda with an authorised share capital of $15,000,000 divided into 15,000,000 shares, par value $1.00 per share, and as of the Latest Practicable Date had an authorised share capital of $45,000,000 divided into: 15,000,000 Voting Shares of which 14,194,510 have been issued and are fully paid or credited as fully paid; 23,000,000 Non-Voting Shares of which 6,165,430 have been issued and are fully paid or credited as fully paid; 3,000,000 Series A Preferred Shares of which 3,000,000 have been issued and are fully paid or credited as fully paid; 4,000,000 Series B Preferred Shares of which none has been issued. (C) The LaSalle Holdings Shares are listed on the New York Stock Exchange. (D) On the Effective Date, subject to Section (F), each Scheme Share that is issued and outstanding immediately prior to the Effective Date shall be transferred to New Holdings. (E) Each of the Scheme Shareholders shall be allotted and issued such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio times the number of Scheme Shares held by such holder immediately prior to such transfer. (F) No certificates or scrip representing fractional New Holdings Shares shall be issued upon the transfer of the Scheme Shares but in lieu thereof each holder otherwise entitled to a fractional New Holdings Share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive from the LaSalle Exchange Agent in accordance with the provisions of this section (F), a cash payment in lieu of such fractional New Holdings Share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price and the LaSalle Exchange Ratio. As soon as practicable after the determination of the amount of cash, if any, to be paid to the Scheme Shareholders in lieu of any fractional New Holdings Share, the LaSalle Exchange Agent shall promptly pay without interest to all Scheme Shareholders entitled thereto all such amounts. Holders of interests representing fractional New Holdings Shares shall not be entitled to vote such interests or to any other rights as a shareholder of New Holdings. (G) Trenwick, New Holdings and LaSalle Holdings have agreed to appear by Counsel at the hearing of the petition to sanction this Scheme of Arrangement and to undertake to the Court to be bound thereby and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed and done by them for the purpose of giving effect to this Scheme of Arrangement. (H) The primary purpose of this Scheme of Arrangement is that the Scheme Shareholders should receive New Holdings Shares in consideration, inter alia, for the transfer of the Scheme Shares to New Holdings on the basis of the LaSalle Exchange Ratio, with the result that LaSalle Re should be, directly and indirectly through LaSalle Holdings, a wholly-owned Subsidiary of New Holdings. C-15 223 THE SCHEME ------------------------ TRANSFER OF THE SCHEME SHARES 1. On the Effective Date:- (a) subject to Section 1(b), each Scheme Share that is issued and outstanding immediately prior to the Effective Date shall be transferred to New Holdings. (b) No certificates or scrip representing fractional New Holdings Shares shall be issued upon the transfer of Scheme Shares but in lieu thereof each holder otherwise entitled to a fractional New Holdings Share (after taking into account all Scheme Shares owned by such holder) shall be entitled to receive from the LaSalle Exchange Agent in accordance with the provisions of this section 1(b) a cash payment in lieu of such fractional New Holdings Share representing the value of such fraction, which for this purpose shall be calculated by multiplying such fraction by the product of the Average Closing Price and the LaSalle Exchange Ratio. As soon as practicable after the determination of the amount of cash, if any, to be paid to the Scheme Shareholders in lieu of any fractional New Holdings Share, the LaSalle Exchange Agent shall promptly pay without interest to all Scheme Shareholders entitled thereto all such amounts. Holders of interests representing fractional New Holdings Shares shall not be entitled to vote such interests or to any other rights as a shareholder of New Holdings. (c) Each of the Scheme Shareholders shall be allotted and issued such number of fully paid and nonassessable New Holdings Shares as is equal to the LaSalle Exchange Ratio times the number of Scheme Shares held by such holder immediately prior to such transfer. GENERAL 2. This Scheme shall become effective as soon as the Court sanctions this Scheme under Section 99 of the Companies Act 1981 of Bermuda and a copy of the Court's order is delivered to the Registrar. 3. LaSalle Re may consent for and on behalf of the Scheme Shareholders to any non-material modification of, or addition to, this Scheme of Arrangement or to any condition which the Court may think fit to approve or impose. 4. All costs, charges and expenses of and incidental to this Scheme of Arrangement and the costs of carrying the same into effect shall be borne by LaSalle Re. 5. This Scheme shall be governed by and construed in accordance with the laws of Bermuda and the Scheme Shareholders hereby irrevocably submit to the exclusive jurisdiction of the courts of Bermuda. C-16 224 SCHEDULE I COMBINED INSURANCE COMPANY OF AMERICA VIRGINIA SURETY COMPANY, INC. AON RISK CONSULTANTS (BERMUDA) LTD. CONTINENTAL CASUALTY COMPANY CNA (BERMUDA) SERVICES LIMITED 123 NEWCO, INC. C-17 225 APPENDIX D 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 Gowin 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 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 D-1 226 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). (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. D-2 227 5. Representations and Warranties of LaSalle. LaSalle hereby represents and warrants to Trenwick that (a) LaSalle is a corporation 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 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 company 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 D-3 228 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 memorandum of association 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. (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 D-4 229 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 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. D-5 230 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 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). D-6 231 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. 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 which Trenwick may propose to exercise the LaSalle Option shall be the Total Profit determined as of the date of the Exercise Notice assuming D-7 232 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. (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 D-8 233 (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 LaSalle'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 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 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 D-9 234 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. 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 certified mail (return receipt D-10 235 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: Alan L. Hunte Vice President and Chief Financial Officer Trenwick Group Inc. One Canterbury Green Stamford, CT 06901 Fax: (203) 353-5550 with a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Attention: James R. Cameron Fax: (212) 891-3835 If to LaSalle, to: LaSalle Re Holdings Limited Continental Building 25 Church Street Hamilton HM 12 Bermuda Fax: (441) 292-1501 with a copy to: Mayer, Brown & Platt 190 S. LaSalle Street Chicago, Illinois 60603 Attention: Richard W. Shepro Fax: (312) 701-7711 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 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. D-11 236 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. 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/ JAMES F. BILLETT, JR. ------------------------------------ Name: James F. Billett, Jr. Title: Chairman, President & Chief Executive Officer LASALLE RE HOLDINGS LIMITED By: /s/ GUY HENGESBAUGH ------------------------------------ Name: Guy Hengesbaugh Title: President & Chief Executive Officer D-12 237 APPENDIX E LASALLE STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of December 19, 1999 (the "Agreement") by and between Trenwick Group Inc., a Delaware corporation ("Trenwick" or the "issuer"), and LaSalle Re Holdings Limited, a company organized under the laws of Bermuda ("LaSalle"). 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 Gowin 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 LaSalle's willingness to enter into the Business Combination Agreement, LaSalle has requested that Trenwick agree, and Trenwick has so agreed, to grant to LaSalle an option to purchase up to 3,462,164 shares of common stock, par value $0.10 per share, of Trenwick ("Trenwick Common Stock"), together with any associated rights under the Rights Agreement dated as of September 24, 1997 between Trenwick and First Chicago Trust Company of New York ("Trenwick Common Stock"), in accordance with the terms and subject to the conditions set forth herein. NOW, THEREFORE, to induce LaSalle 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, Trenwick hereby grants to LaSalle an irrevocable option (the "Trenwick Option") to purchase up to 3,462,164 (as adjusted as set forth herein) shares (the "Option Shares") of Trenwick Common Stock (such number of Option Shares representing 19.9% of the Trenwick Common Stock issued and outstanding on the date hereof) in the manner set forth below at a price (the "Exercise Price") of $18.04 per Option Share (which price per share is equal to the average of the last sale prices of Trenwick Common Stock 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 Trenwick Option is exercisable exceed 19.9% of the number of issued and outstanding shares of Trenwick Common Stock. 2. Exercise of Option. The Trenwick Option may be exercised by LaSalle, in whole or in part, at any time or from time to time after the Business Combination Agreement becomes terminable by LaSalle under circumstances which would or could entitle LaSalle to receive the Trenwick Termination Fee pursuant to Section 7.4(b) 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 LaSalle wishes to exercise the Trenwick Option, LaSalle shall deliver to Trenwick a written notice (an "Exercise Notice") specifying the total number of Option Shares it wishes to purchase, and specify 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 LaSalle in an Exercise Notice delivered at least two (2) business days prior to the date of the Option Closing. The Trenwick Option shall terminate upon the earlier of: (i) the Effective Time; (ii) the termination of the Business Combination 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 Trenwick Option cannot be exercised by reason E-1 238 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 Trenwick Option may not be exercised if LaSalle 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 LaSalle to Trenwick 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, LaSalle shall be deemed to be the holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock transfer books of Trenwick shall then be closed or that certificates representing such Option Shares shall not then be actually delivered to LaSalle. 3. Conditions to Closing. The obligation of Trenwick to issue the Option Shares to LaSalle hereunder is subject to the conditions, which (other than the conditions described in clauses (i), (iii) and (iv) below) may be waived by Trenwick 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 LaSalle; 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, LaSalle shall pay to Trenwick 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 Trenwick Common Stock purchased pursuant to the exercise of the Trenwick Option in immediately available funds by wire transfer to a bank account designated in writing by Trenwick; provided, however, that failure or refusal of Trenwick to designate such account shall not preclude LaSalle from exercising the Trenwick Option. At LaSalle's option, in lieu of delivering the cash Exercise Price, LaSalle may instruct Trenwick in writing to deduct from the number of shares of Trenwick Common Stock that would otherwise be issued upon such exercise, a number of shares of Trenwick Common Stock equal to the quotient obtained from dividing: (x) the product obtained by multiplying (1) the number of shares of Trenwick Common Stock for which the Trenwick Option is being exercised and (2) the Exercise Price then in effect, by (y) the Fair Market Value of a share of Trenwick Common Stock. "Fair Market Value" shall have the meaning specified in Section 12(b)(v). (b) At any Option Closing, simultaneously with the delivery of immediately available funds as provided in Section 4(a), Trenwick will deliver to LaSalle a certificate or certificates representing the number of Option Shares to be purchased by LaSalle 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, Trenwick shall deliver a new option evidencing the rights of LaSalle thereof to purchase the balance of the shares purchasable hereunder and (ii) LaSalle will deliver to Trenwick a copy of this Agreement and a letter agreeing that LaSalle will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. If at the time of issuance of Option Shares pursuant to an exercise of the option hereunder, Trenwick shall not have redeemed the Trenwick Rights, or shall have issued any similar securities, then each Option Share issued pursuant to such exercise will also represent such a corresponding Trenwick Right or new rights with terms E-2 239 substantially the same as and at least as favorable to LaSalle as are provided in the Trenwick Rights Agreement or similar agreement then in effect. Trenwick 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 LaSalle or its designee. Trenwick shall use its reasonable best efforts to cause the Trenwick Common Stock 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 Trenwick. Trenwick hereby 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, (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, 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, (d) Trenwick has taken all necessary corporate action to authorize and reserve for issuance and to permit it to issue, upon exercise of the Trenwick Option, and at all times from the date hereof through the expiration of the Trenwick Option will have reserved, 3,462,164 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 LaSalle upon the exercise of the Trenwick Option, LaSalle will acquire the Option Shares free and clear of all claims, liens, charges, encumbrances and security interests of any nature whatsoever, (f) none of Trenwick, any of its affiliates or anyone acting on its or their behalf has issued, sold or offered any security of Trenwick 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 LaSalle contained in Section 6(d) are true and correct and based on LaSalle'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 Trenwick 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 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 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 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 Trenwick or any of its subsidiaries, pursuant to (i) any provision of the Trenwick By-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 Trenwick 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 Trenwick or any of its subsidiaries or any of the irrespective properties or assets, which Violation, in the case of each of clauses (ii) or (iii), would have Material Adverse Effect on Trenwick. 6. Representations and Warranties of LaSalle. LaSalle 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 and to carry out its obligations hereunder, (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 E-3 240 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 and 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, and (d) any Option Shares acquired upon exercise of the Trenwick Option will be acquired for LaSalle's own account, for investment purposes only and will not be, and the Trenwick Option is not being, acquired by LaSalle 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 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 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 LaSalle or any of its subsidiaries, pursuant to (i) any provision of the memorandum of association or bye-laws of LaSalle, (ii) any 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 any of their properties or assets are bound, or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to LaSalle, 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 LaSalle. 7. Restrictions on Transfer. (a) Restrictions on Transfer. Prior to the first anniversary of the date on which LaSalle purchases any Option Shares hereunder (the "Expiration Date"), LaSalle 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 LaSalle 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, LaSalle 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. (b) Permitted Sales. Following the termination of the Business Combination Agreement, LaSalle 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 Trenwick, by a majority of the members of the Board of Directors of Trenwick (which majority shall include a majority of directors who were directors prior to the announcement of such tender or exchange offer or merger). (c) Trenwick'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 Trenwick Common Stock pursuant to the Trenwick Option, if LaSalle shall desire to sell, assign, transfer or otherwise dispose of any shares of Trenwick Common Stock or other securities acquired by it pursuant to the Trenwick Option, LaSalle shall give Trenwick written notice of the proposed transaction (a "LaSalle Offer Notice"), identifying the proposed transferee, accompanied by a copy of a binding offer to purchase such Trenwick Common Stock or other securities signed by such transferee and setting forth the terms of the proposed transaction. A LaSalle Offer Notice shall be deemed an offer by LaSalle to Trenwick, which must be accepted, if at all, within five (5) business days of the receipt of such LaSalle Offer Notice, on the same terms and conditions and at the same price at which LaSalle is proposing to transfer such Trenwick Common Stock or other securities to such transferee. The purchase of any Trenwick Common Stock or other securities by Trenwick 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 LaSalle in immediately available funds. In the event of the failure or refusal of Trenwick to purchase all of the Trenwick Common Stock or other securities covered by a LaSalle Offer Notice, LaSalle may sell all, but not less than all, of E-4 241 such Trenwick Common Stock 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 LaSalle Offer Notice; provided that the provisions of this sentence shall not limit the rights LaSalle may otherwise have in the event Trenwick has accepted the offer contained in the LaSalle Offer Notice and wrongfully refuses to purchase the Trenwick Common Stock 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 Trenwick, (ii) any disposition of Trenwick Common Stock or other securities by a person to whom LaSalle has assigned its rights under the Trenwick Option with the consent of Trenwick, (iii) any sale by means of a public offering registered under the Securities Act, or (iv) any transfer to a wholly-owned subsidiary of LaSalle 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 LaSalle acquired Option Shares under this Agreement, LaSalle may by written notice (the "Registration Notice") to Trenwick ("Trenwick") request Trenwick to register under the Securities Act all or any part of the Restricted Shares beneficially owned by LaSalle (the "Registrable Securities") pursuant to a bona fide firm commitment underwritten public offering in which LaSalle 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 Trenwick on a fully diluted basis (a "Permitted Offering"). The Registration Notice shall include a certificate executed by LaSalle and 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. Trenwick (and/or any person designated by Trenwick) shall thereupon have the option exercisable by written notice delivered to LaSalle 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 Trenwick and (ii) the then Fair Market Value of such shares. Any such purchase of Registrable Securities by Trenwick (or its designee) hereunder shall take place at a closing to be held at the principal executive offices of Trenwick or at the offices of its counsel at any reasonable date and time designated by Trenwick 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 Trenwick 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) LaSalle shall not be entitled to more than an aggregate of two effective registration statements hereunder and (ii) Trenwick 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) Trenwick 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 Trenwick, such information would have to be disclosed if a registration statement were filed at that time; (B) Trenwick 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) Trenwick determines, in its reasonable judgment, that such registration would interfere with any financing, acquisition or other material transaction involving E-5 242 Trenwick or any of its affiliates. Trenwick 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 LaSalle may reasonably request and shall continue such registration or qualification in effect in such jurisdiction; provided, however, that Trenwick 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 LaSalle shall provide Trenwick 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 Trenwick, is necessary to enable Trenwick 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 Trenwick's expense, except for underwriting discounts and commissions and the fees and the expenses of counsel to LaSalle, and Trenwick 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 underwriters in the customary manner (provided that LaSalle shall only be required to indemnify other parties to such underwriting agreement for information relating to such LaSalle 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). Trenwick 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 Trenwick contained in this Agreement or in the Business Combination Agreement, in the event of any change in Trenwick Common Stock 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 Trenwick Option, and the Exercise Price per Option Share provided in Section 1, shall be adjusted appropriately to restore to LaSalle its rights hereunder, including the right to purchase from the Trenwick (or its successors) shares of Trenwick Common Stock representing 19.9% of the outstanding Trenwick Common Stock for the aggregate Exercise Price calculated as of the date of this Agreement as provided in Section 1. (b) In the event that Trenwick shall enter into an agreement: (i) to consolidate with merge or amalgamate into any person, other than LaSalle 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 LaSalle or one of its subsidiaries, to merge or amalgamate into Trenwick and Trenwick shall be the continuing or surviving corporation, but, in connection with such merger or amalgamation, the then-outstanding shares of Trenwick Common Stock shall be changed into or exchanged for stock or other securities of Trenwick 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 LaSalle 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 Trenwick Option, LaSalle shall be entitled to receive, for each share of Trenwick Common Stock with respect to which the Trenwick 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 Trenwick Common Stock (and, in the event of an election or similar arrangement with respect to the type of consideration to be received by the holders of Trenwick Common Stock, subject to the foregoing, proper provision shall be made so that the holder of the Trenwick Option would have the E-6 243 same election or similar rights as would the holder of the number of shares of Trenwick Common Stock for which the Trenwick Option is then exercisable). 10. Restrictive Legends. Each certificate representing shares of Trenwick Common Stock issued to LaSalle 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. 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 LaSalle has delivered to Trenwick 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 Trenwick 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 LaSalle's Total Profit (as hereinafter defined) exceed $15 million (such amount, the "Profit Limit") and, if it would otherwise exceed such amount, LaSalle, 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 Trenwick Termination Fee previously paid to LaSalle or reduce or waive the amount of any Trenwick Termination Fee payable to LaSalle pursuant to Section 7.4(b) of the Business Combination Agreement, or (iii) undertake any combination thereof, so that LaSalle'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 Trenwick pursuant to Section 12 hereof, and (iii) (x) the net cash amounts received by LaSalle 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) LaSalle's purchase price for such Option Shares. (b) Notwithstanding any other provision of this Agreement or the Business Combination Agreement, the Trenwick 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 Trenwick Option otherwise would exceed the Profit Limit, LaSalle, 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 Trenwick Option permitted hereby on any subsequent date at the Exercise Price set forth in Section 1 hereof. As used herein, the term "Notional E-7 244 Total Profit" with respect to any number of Option Shares as to which LaSalle may propose to exercise the Trenwick Option shall be the Total Profit determined as of the date of the Exercise Notice assuming that the Trenwick Option were exercised on such date for such number of Option Shares and assuming that such Option Shares, together with all other shares of Trenwick Common Stock held by LaSalle and its subsidiaries as of such date, were sold for cash at the closing market price for the Trenwick Common Stock on the NYSE Composite Tape at the close of business on the preceding trading day (less customary brokerage commissions). 12. Certain Repurchases. (a) LaSalle "Put". Subject to the limitations set forth in Section 11, upon delivery of written notice to Trenwick by LaSalle (the "Repurchase Notice"): (i) at any time during which the Trenwick Option is exercisable pursuant to Section 2 (the "Repurchase Period"), Trenwick and its successors in interest shall repurchase from LaSalle all or any portion of the Trenwick Option, as specified by LaSalle, 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, Trenwick and its successors in interest shall repurchase from LaSalle all or any portion of the Trenwick Common Stock purchased by LaSalle pursuant to the Trenwick Option, as specified by LaSalle, 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 Trenwick Common Stock as of the date of the applicable Repurchase Notice and the Exercise Price, multiplied by (B) the number of shares of Trenwick Common Stock purchasable pursuant to the Trenwick 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 Trenwick 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 Trenwick Common Stock as of such date. (iii) "Share Repurchase Price" shall mean the product of (A) the sum of (I) the Exercise Price paid by LaSalle per share of Trenwick Common Stock acquired pursuant to the Trenwick 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 Trenwick Common Stock 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 Trenwick as the target party during the Repurchase Period prior to the delivery by LaSalle of a notice of repurchase and (Y) the Fair Market Value of the Trenwick Common Stock 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. E-8 245 (c) Payment and Redelivery of Trenwick Options or Trenwick Common Stock. In the event that LaSalle exercises its rights under this Section 12, Trenwick shall, within ten (10) business days thereafter, pay the required amount to LaSalle in immediately available funds and LaSalle shall surrender to Trenwick the Trenwick Option or the certificate or certificates evidencing the Trenwick Common Stock purchased by LaSalle pursuant hereto, and LaSalle shall warrant that it has sole beneficial ownership of the Trenwick Option or such Trenwick Common Stock and that the Trenwick Option or such Trenwick Common Stock are then free and clear of all claims, liens, charges, encumbrances and security interests of any nature whatsoever. (d) Repurchase Price Reduced at LaSalle's Option. In the event that payment of the repurchase price specified in Section 12(a) would subject the repurchase of the Trenwick Option or the Trenwick Common Stock purchased by LaSalle pursuant to the Trenwick Option to a vote of the stockholders of Trenwick pursuant to applicable law, regulations, or requirements of a national securities exchange or national market system or the Trenwick By-Laws, then LaSalle may, at its election, reduce the repurchase price or the number of shares covered by the LaSalle repurchase request to an amount which would permit such repurchase without the necessity for such a vote. (e) Repurchase at the Election of Trenwick. (i) Except to the extent that LaSalle shall have previously exercised its rights under Section 12(a), at the written request of Trenwick during the six-month period immediately following the Repurchase Period, Trenwick may repurchase from LaSalle, and LaSalle shall sell to Trenwick, all (but not less than all) of the Trenwick Common Stock acquired by LaSalle pursuant hereto and with respect to which LaSalle 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) LaSalle'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 compensated for pursuant hereto or pursuant to the Business Combination Agreement) incurred by LaSalle 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 Trenwick'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 LaSalle to liability or disgorgement of profits pursuant to Section 16(b) of the Exchange Act. (ii) If Trenwick exercises its rights under this Section 12(e), Trenwick shall, within ten (10) business days pay the Section 12(e) Repurchase Consideration in immediately available funds and LaSalle shall surrender to Trenwick certificates evidencing the Trenwick Common Stock purchased hereunder with respect to which LaSalle then has beneficial ownership, and LaSalle shall warrant that it has sole beneficial ownership of such Trenwick Common Stock 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 Trenwick Common Stock on the NYSE for the ten (10) trading days immediately preceding the date of Trenwick'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 LaSalle for the Trenwick Common Stock purchased pursuant to the Trenwick 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 Trenwick Common Stock 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 E-9 246 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. 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 LaSalle is not permitted to acquire the full number of shares of Trenwick Common Stock provided in Section 1 hereof (as the same may be adjusted), it is the express intention of Trenwick to allow LaSalle 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 certified mail (return receipt E-10 247 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: Alan L. Hunte Vice President and Chief Financial Officer Trenwick Group Inc. One Canterbury Green Stamford, CT 06901 Fax: (203) 353-5550 with a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Attention: James R. Cameron Fax: (212) 891-3835 If to LaSalle, to: LaSalle Re Holdings Limited Continental Building 25 Church Street Hamilton HM 12 Bermuda Fax: (441) 292-1501 with a copy to: Mayer, Brown & Platt 190 S. LaSalle Street Chicago, Illinois 60603 Attention: Richard W. Shepro Fax: (312) 701-7711 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 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. E-11 248 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 Trenwick 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, Trenwick will execute and deliver to LaSalle 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 Trenwick, 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. 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/ JAMES F. BILLETT, JR. ------------------------------------ Name: James F. Billett, Jr. Title: Chairman, President and Chief Executive Officer LASALLE RE HOLDINGS LIMITED By: /s/ GUY HENGESBAUGH ------------------------------------ Name: Guy Hengesbaugh Title: President and Chief Executive Officer E-12 249 APPENDIX F SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT (this "Agreement") dated as of December 19, 1999, by and among Trenwick Group Inc., a Delaware corporation ("Trenwick"), and the other parties signatory hereto (each, a "Shareholder" and together, the "Shareholders"). RECITALS WHEREAS, simultaneously herewith Trenwick is entering into an Agreement, Scheme of Arrangement, Plan of Merger and Plan of Reorganization, dated as of December 19, 1999, by and among LaSalle Re Holdings, a company organized under the laws of Bermuda ("LaSalle Holdings"), LaSalle Re Limited, a company organized under the laws of Bermuda ("LaSalle Re"), Trenwick, Gowin Holdings International Limited, a company organized under the laws of Bermuda ("New Holdings") and Trenwick Group (Delaware) Inc., a Delaware corporation (the "Business Combination Agreement"); WHEREAS, the Business Combination Agreement provides that Trenwick and LaSalle Holdings will be entering into a series of transactions pursuant to which (i) New Holdings will become the holding company of such companies and (ii) shareholders of LaSalle Holdings and LaSalle Re and stockholders of Trenwick will become shareholders of New Holdings as set forth in such agreement; WHEREAS, each Shareholder owns that number of (i) LaSalle Holdings' common shares, par value $1.00 per share (the "Common Shares"), and (ii) LaSalle Re's exchangeable non-voting shares (the "Non-Voting Shares" and, together with the Common Shares, the "Shares", which term shall include Shares which are acquired or may be acquired upon the exercise of any and all options to acquire Common Shares and Non-Voting Shares ("Options"), whether such Options exist on the date hereof or otherwise) set forth next to such Shareholder's name on Exhibit A hereto; and WHEREAS, as a condition to its willingness to enter into the Business Combination Agreement, Trenwick has required that each Shareholder agree, and each Shareholder has agreed, among other things, to execute and deliver this Agreement with respect to the Shares owned (whether by conversion or otherwise) by such Shareholder, on the terms and conditions provided for herein. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: 1. Voting Agreement. At any meeting of the shareholders of LaSalle Holdings or LaSalle Re called to vote upon the Scheme of Arrangement or the Business Combination Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval of shareholders of LaSalle Holdings or LaSalle Re with respect to any of the other matters referred to below is sought, each Shareholder hereby agrees to vote (or cause to be voted) the Shares held of record or beneficially by such Shareholder as of the applicable record date (i) in favor of the Scheme of Arrangement, the execution and delivery by LaSalle Holdings and LaSalle Re of the Business Combination Agreement and the approval of the terms thereof and each of the other actions contemplated by the Business Combination Agreement, this Agreement and any actions required in furtherance hereof and thereof; (ii) against any action or agreement that would, to its knowledge, result in a breach of any covenant, representation or warranty or any other obligation or agreement of LaSalle Holdings or LaSalle Re under the Business Combination Agreement or this Agreement; and (iii) against the following actions (other than the Scheme and the transactions contemplated by the Business Combination Agreement): (1) any extraordinary corporate transaction, such as a merger, consolidation, amalgamation or other business combination involving LaSalle Holdings or any of its subsidiaries (including, without limitation, LaSalle Re); (2) a sale, lease or transfer of a material amount of assets of LaSalle Holdings or any of its subsidiaries(including, without limitation, LaSalle Re) or a reorganization, recapitalization, dissolution or liquidation of LaSalle Holdings or any of its subsidiaries (including, without limitation, LaSalle Re); (3) F-1 250 (a) any change in the majority of the Board of Directors of LaSalle Holdings or LaSalle Re; (b) any material change in the present capitalization of LaSalle Holdings or LaSalle Re or any material amendment of LaSalle Holdings' or LaSalle Re's Memorandum of Association and By-laws; (c) any other material change in LaSalle Holdings' or LaSalle Re's corporate structure or business; or (d) any other action which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or materially adversely affect the Scheme of Arrangement or the transactions contemplated by the Business Combination Agreement or this Agreement or the contemplated economic benefits of any of the foregoing. Each Shareholder hereby revokes any proxy previously granted by it with respect to the Shares. Each Shareholder hereby agrees, while this Agreement is in effect, and except as contemplated hereby, not to take any action that would make any representation or warranty of such Shareholder contained herein untrue or incorrect or have the effect of preventing or disabling such Shareholder from performing his or its obligations under this Agreement; provided, however, that nothing in this Agreement shall be deemed to prohibit or restrict in any manner any Shareholder from selling, transferring, or otherwise disposing of any Shares or Options to any person. The provisions of this Section 1 shall terminate and no longer bind the Shareholders at such time as the LaSalle Holdings Board of Directors either (A) withdraws or modifies its approval and recommendation of the Business Combination Agreement pursuant to clause (x) of the second sentence of Section 5.3(b)(ii) thereof or (B) terminates the Business Combination Agreement pursuant to clause (y) of the second sentence of Section 5.3(b)(ii) thereof. 2. Representations and Warranties of Trenwick. Trenwick hereby represents and warrants to each Shareholder that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Trenwick and no other corporate proceedings on the part of Trenwick are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Trenwick and constitutes a valid and binding agreement of Trenwick, enforceable against Trenwick in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) is subject to general principles of equity. 3. Representations and Warranties of the Shareholders. Each Shareholder hereby represents and warrants, severally and not jointly, to Trenwick as follows: (a) Ownership of Shares and Options. Such Shareholder, as of the date hereof, (i) is the owner of the number of Shares and Options set forth next to such Shareholder's name on Exhibit A hereto and (ii) has the sole power to vote (or to give any consent that may be required in respect of such Shares and Options) and dispose of such Shares and Options. (b) Power; Binding Agreement. Such Shareholder has the legal capacity, power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by such Shareholder will not violate any other agreement to which such Shareholder is a party including, without limitation, any voting agreement, shareholders agreement or voting trust. This Agreement has been duly and validly authorized, executed and delivered by such Shareholder and constitutes a valid and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) is subject to general principles of equity. (c) No Conflicts. (A) No filing by such Shareholder with, and no permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by such Shareholder and the consummation by such Shareholder of the transactions contemplated hereby F-2 251 and (B) neither the execution and delivery of this Agreement by such Shareholder nor the consummation by such Shareholder of the transactions contemplated hereby nor compliance by such Shareholder with any of the provisions hereof shall (1) conflict with or result in any breach of any provision of the certificate of incorporation, by-laws, trust or charitable instruments (or similar documents) of such Shareholder, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which such Shareholder is a party or by which he or it or any of his or its properties or assets may be bound or (3) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Shareholder or any of his or its properties or assets, except in the case of (A) or (B) for violations, breaches or defaults which would not in the aggregate materially adversely affect the ability of such Shareholder to perform its obligations hereunder. 4. Adjustments to Prevent Dilution, Etc. In the event of a stock dividend or distribution, or any change in LaSalle Holdings' or LaSalle Re's capital shares by reason of any share dividend, split-up, reclassification, recapitalization, combination or the exchange of shares, the term "Shares" shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares may be changed or exchanged. 5. Miscellaneous. (a) Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and may not be amended except by a writing signed by the parties. Except as specifically provided herein, this Agreement is not assignable by any of the parties, provided that none of the transactions described in Sections 2.1(b) and 2.1(c) of the Business Combination Agreement shall be considered an assignment by Trenwick. This Agreement shall be binding upon the respective successors of the parties and upon transferees of the Shares who are Affiliates of the transferring Shareholder. (b) Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to a Shareholder, to the address of such Shareholder indicated on Exhibit A hereto. If to Trenwick: Trenwick Group Inc. One Canterbury Green Stamford, Connecticut 06901 Attention: Steve Bensinger and John Del Col, Esq. Facsimile No.: (203) 353-5544 with a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Attention: James R. Cameron, Esq. Facsimile No.: (212) 891-3835 F-3 252 If to New Holdings: Gowin Holdings International Limited c/o Appleby Spurling & Kempe Cedar House 41 Cedar Avenue P.O. Box Hm 1179 Hamilton Bermuda HMEX Attention: Warren Cabral Facsimile No: (441) 292-8666 With a copy to: Baker & McKenzie 805 Third Avenue New York, New York 10022 Attention: James R. Cameron, Esq. Facsimile No.: (212) 891-3835 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. (c) Notification by Shareholder. Each Shareholder shall notify Trenwick from time to time, upon request, of the number of Shares beneficially owned by such Shareholder. (d) Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware without regard to any laws or regulations relating to choice of laws (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. (e) Cooperation. Subject to the terms and conditions of this Agreement, each of the parties hereby agrees to use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, rules and regulations to consummate and make effective the actions contemplated by this Agreement. In case at any time after the execution of this Agreement, further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each of the parties shall take all such necessary or desirable action. (f) Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore, each of the parties hereto agrees that in the event of any such breach the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same Agreement. (h) Definitions. Capitalized terms used but not defined herein shall have the meanings set forth in the Business Combination Agreement. (i) Descriptive Headings. The descriptive headings used 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. F-4 253 (j) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. (k) Termination. Unless earlier terminated as provided herein, this Agreement shall terminate, without further liability or obligation of the parties hereto, including liability for damages, upon the earlier of (i) the 180th calendar day following the termination of the Business Combination Agreement in accordance with its terms and (ii) consummation of the Scheme of Arrangement. IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of the parties hereto, all as of the date first above written. TRENWICK GROUP INC. By: /s/ JAMES F. BILLETT, JR. ------------------------------------ Name: James F. Billett, Jr. Title: Chairman, President and Chief Executive Officer SHAREHOLDERS: COMBINED INSURANCE COMPANY OF AMERICA By: /s/ MICHAEL A. CONWAY ------------------------------------ Name: Michael A. Conway Title: Senior Vice President VIRGINIA SURETY COMPANY, INC. By: /s/ MICHAEL A. CONWAY ------------------------------------ Name: Michael A. Conway Title: Senior Vice President F-5 254 AON RISK CONSULTANTS (BERMUDA) LTD. By: /s/ MICHAEL A. CONWAY ------------------------------------ Name: Michael A. Conway Title: Authorized Agent CONTINENTAL CASUALTY COMPANY By: /s/ ROBERT V. DEUTSCH ------------------------------------ Name: Robert V. Deutsch Title: Senior Vice President and Chief Financial Officer CNA (BERMUDA) SERVICES LIMITED By: /s/ ROBERT V. DEUTSCH ------------------------------------ Name: Robert V. Deutsch Title: Senior Vice President and Chief Financial Officer F-6 255 EXHIBIT A
NUMBER OF NUMBER OF COMMON EXCHANGEABLE SHARES OF LASALLE NON-VOTING SHARES OPTIONS AND/OR SHAREHOLDER NAME AND ADDRESS HOLDINGS OF LASALLE RE WARRANTS - ---------------------------- ----------------- ----------------- -------------- Combined Insurance Company of America 322,715 1,221,750 0 Virginia Surety Company, Inc. 322,715 1,221,750 0 Aon Risk Consultants (Bermuda) Ltd. 555,244 0 0 Continental Casualty Company 1,425,354 1,963,896 0 CNA (Bermuda) Services Limited 0 318,150 0
F-7 256 APPENDIX G [Letterhead of Donaldson, Lufkin & Jenrette Securities Corporation] December 16, 1999 Board of Directors Trenwick Group Inc. One Canterbury Green Stamford, CT 06901 Dear Sirs: You have requested our opinion as to the fairness from a financial point of view to Trenwick Group Inc. (the "Company") of the Exchange Ratio, as defined below, pursuant to the terms of the Agreement, Scheme of Arrangement, Plan of Merger and Plan of Reorganization by and among LaSalle Re Holdings Limited ("LaSalle"), LaSalle Re Limited ("LaSalle Re"), the Company, Trenwick Group (Delaware) Inc. and Gowin Holdings International Limited ("New Holdings") to be dated as of December 17, 1999 (the "Agreement") pursuant to which each of the Company and LaSalle will become wholly-owned subsidiaries of New Holdings, a newly formed holding company (the "Proposed Transaction"). Pursuant to the Agreement, each common share of LaSalle, par value $1 per share ("LaSalle Common Stock"), each non-voting common share of LaSalle Re, par value $1 per share (other than those owned by LaSalle) and each common share of the Company ("Company Common Stock"), $0.10 par value per share, will be converted into the right to receive one share, subject to certain exceptions and adjustments set forth in the Agreement (the "Exchange Ratio"), of common stock of New Holdings. In arriving at our opinion, we have reviewed the draft dated December 16, 1999 of the Agreement and drafts dated December 16, 1999 of the Stock Option Agreements each, by and between the Company and LaSalle. We also have reviewed financial and other information that was publicly available or furnished to us by the Company and LaSalle including information provided during discussions with their respective managements. Included in the information provided during discussions with the respective managements were certain financial projections of LaSalle for the period beginning October 1, 1999 and ending September 30, 2000 prepared by the management of LaSalle, certain financial projections of LaSalle for the period beginning October 1, 2000 and ending December 31, 2010 prepared by the management of the Company based in part on the financial forecasts prepared by the management of LaSalle and certain financial projections of the Company for the period beginning January 1, 2000 and ending December 31, 2010 prepared by the management of the Company. In addition, we have compared certain financial and securities data of the Company and LaSalle with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of the Company Common Stock and LaSalle Common Stock, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. In rendering our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company and LaSalle or their respective representatives, or that was otherwise reviewed by us. In particular, we have relied upon the estimates of the Company's management of the operating synergies achievable as a result of the Proposed Transaction which estimates were based in part on their discussion of such synergies with the management of LaSalle. With respect to the financial projections supplied to us, we have relied on representations that they have been reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of the Company and LaSalle as to the future operating and financial performance of the Company and LaSalle. We have not assumed any responsibility for making any independent evaluation of any assets or liabilities or for making any independent verification of any of the information reviewed by us. We have assumed that the Proposed G-1 257 Transaction qualifies as a reorganization under provisions of Section 368(a) of the Internal Revenue Code of 1986 as amended and will not result in any material tax to Trenwick. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. We are expressing no opinion herein as to the prices at which the Company Common Stock or the common stock of New Holdings will actually trade at any time. Our opinion does not address the relative merits of the Proposed Transaction and the other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Proposed Transaction. Our opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote on the Proposed Transaction. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. DLJ has recently advised the Company in its acquisition of Chartwell Re Corporation and has been compensated for such services. In addition, DLJ is currently working with CNA Financial Corporation, an affiliate of LaSalle, on various matters unrelated to the Proposed Transaction. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the Exchange Ratio is fair to the Company from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ DAVID M. PLATTER ------------------------------------ David M. Platter Managing Director G-2 258 APPENDIX H [Letterhead of Lazard Freres & Co. LLC] December 19, 1999 The Board of Directors LaSalle Re Holdings Limited Continental Building 25 Church Street Hamilton HM 12 Bermuda Dear Members of the Board: We understand that LaSalle Re Holdings Limited (the "Company") and Trenwick Group Inc. (including successors, "Trenwick") have entered into an Agreement, Scheme of Arrangement, Plan of Merger and Plan of Reorganization, dated as of December 19, 1999 (the "Agreement"), pursuant to which the Company will become a subsidiary of, and the assets of Trenwick will be transferred to, a new holding company ("New Holdings") following a corporate reorganization of Trenwick (the "Transaction"). Pursuant to the Agreement, each issued and outstanding share of the Company, par value $1.00 per share ("Company Common Shares"), and each issued and outstanding non-voting share, par value $1.00 per share, of LaSalle Re Limited held by persons other than the Company will be converted, subject to certain exceptions and adjustments, into 1.00 (the "Exchange Ratio") common share of New Holdings ("New Holdings Common Shares"). In addition, pursuant to the Agreement, each issued and outstanding share of Trenwick, par value $.10 per share, will be converted, subject to certain exceptions and adjustments, into the right to receive 1.00 New Holdings Common Share. You have requested our opinion as to the fairness, from a financial point of view, to the holders of Company Common Shares (other than Trenwick and its affiliates) of the Exchange Ratio pursuant to the Agreement. In connection with this opinion, we have: (i) Reviewed the financial terms and conditions of the Agreement; (ii) Analyzed certain historical business and financial information relating to the Company and Trenwick and its predecessor companies; (iii) Reviewed various internal financial analyses and forecasts for the Company and Trenwick prepared by their respective managements, as well as certain additional forecasts for the Company and Trenwick prepared by their respective managements, and consultants and advisors working under management's supervision (based on management assumptions), including certain cost savings and operating synergies projected by the managements of the Company and Trenwick to result from the Transaction; (iv) Held discussions with members of the senior managements of the Company and Trenwick with respect to the businesses and prospects of the Company and Trenwick, respectively, the strategic objectives of each, and possible benefits which might be realized following the Transaction; (v) Reviewed public information with respect to certain other companies in lines of businesses that we believe to be generally comparable to the businesses of the Company and Trenwick; (vi) Reviewed the financial terms of certain business combinations involving companies in the reinsurance industry specifically and in other industries we believe to be generally comparable to those of the Company and Trenwick; H-1 259 (vii) Reviewed the historical stock prices and trading volumes of the Company's and Trenwick's common stock; and (viii) Conducted such other financial studies, analyses and investigations as we deemed appropriate. We have relied upon the accuracy and completeness of the foregoing information, and have not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of the Company or Trenwick, or concerning the solvency or fair value of either of the foregoing entities. With respect to financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company and Trenwick as to the future financial performance of the Company and Trenwick, respectively. As you are aware, Trenwick did not make available to us forecasts of expected future performance beyond fiscal year 2003; accordingly, our review with respect to such information was limited to information derivable from the year 2000-2003 forecasts provided to us. We assume no responsibility for and express no view as to the forecasts reviewed by us or the assumptions on which they are based; as to forecasts in the preparation of which we participated, the management of the Company and consultants working under management's supervision have confirmed to us their agreement with the underlying assumptions and methods of projection. We are not actuaries and our services did not include actuarial determinations or evaluations by us or an attempt to evaluate actuarial assumptions, including those used in developing the loss and loss adjustment appraisal of the assets and liabilities (including the loss and loss adjustment expense reserves) of the Company or Trenwick or any of their respective subsidiaries and we have not been furnished with any such evaluation or appraisal. In that regard, we express no opinion as to the adequacy of the loss and loss adjustment expense reserves of the Company or Trenwick or any of their respective subsidiaries. We have assumed that the Transaction qualifies as a tax-free reorganization, whereby the shareholders of the Company will incur no immediate taxation as a result of the Transaction. We are expressing no opinion herein as to the prices at which New Holdings Common Shares will actually trade at any time. Our opinion does not address the relative merits of the Transaction and any other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Transaction. Our opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote on the proposed transaction. Further, our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In rendering our opinion, we have assumed that the Transaction will be consummated on the terms described in the Agreement, without any waiver of any material terms or conditions by the Company and that (i) obtaining the necessary regulatory approvals for the Transaction and (ii) the corporate reorganization of Trenwick contemplated in connection with the Agreement will not have a material adverse effect on the Company, Trenwick or New Holdings. Lazard Freres & Co. LLC is acting as investment banker to the Company in connection with the Transaction and will receive a fee for our services. An affiliate of Lazard Freres & Co. LLC is a significant shareholder in the Company. Our engagement and the opinion expressed herein are for the benefit of the Company's Board of Directors. It is understood that this letter may not be disclosed or otherwise referred to without our prior consent, except as may otherwise be required by law or by a court of competent jurisdiction. H-2 260 Based on and subject to the foregoing, as of the date hereof, we are of the opinion that the Exchange Ratio is fair to holders of Company Common Shares (other than Trenwick and its affiliates) from a financial point of view. Very truly yours, LAZARD FRERES & CO. LLC By /s/ STEVEN J. NIEMCZYK ------------------------------------ Steven J. Niemczyk Managing Director H-3 261 APPENDIX I [Letterhead of Salomon Smith Barney Inc.] December 19, 1999 The Board of Directors LaSalle Re Holdings Limited Continental Building 25 Church Street P.O. Box HM Hamilton HM FX, Bermuda Members of the Board: You have requested our opinion as to the fairness, from a financial point of view, to the holders of the common shares of LaSalle Re Holdings Limited ("LaSalle Holdings") of the LaSalle Exchange Ratio (defined below) provided for in the Agreement, Scheme of Arrangement, Plan of Merger and Plan of Reorganization, dated as of December 19, 1999 (the "Agreement"), by and among LaSalle Holdings, LaSalle Re Limited, a majority owned subsidiary of LaSalle Holdings ("LaSalle Re" and, together with LaSalle Holdings, "LaSalle"), Trenwick Group Inc. ("Trenwick"), Trenwick Group (Delaware) Inc., a wholly owned subsidiary of Trenwick ("Trenwick Delaware"), and Gowin Holdings International Limited ("New Holdings"). As more fully described in the Agreement, (a) Trenwick will merge with and into Trenwick LLC, a wholly owned subsidiary of Trenwick Delaware (the "Merger"), pursuant to which each outstanding share of the common stock, par value $0.10 per share, of Trenwick ("Trenwick Shares") will be converted into the right to receive one share of the common stock, par value $0.10 per share, of Trenwick Delaware ("Trenwick Delaware Shares"); (b) New Holdings will acquire all of the assets and assume all of the liabilities of Trenwick Delaware (the "Reorganization") in exchange for which each holder of Trenwick Delaware Shares will receive that number of common shares of New Holdings ("New Holdings Shares") equal to the Trenwick Exchange Ratio (as defined in the Agreement); and (c) all of the issued common shares, par value $1.00 per share, of LaSalle Holdings (the "LaSalle Holdings Shares") and all of the issued non-voting common shares, par value $1.00 per share, of LaSalle Re (the "LaSalle Re Non-Voting Shares") not owned by LaSalle Holdings (the "Minority Shares") will be transferred to New Holdings (the "Arrangement" and, together with the Merger and the Reorganization, the "Transaction") as a result of which each outstanding LaSalle Holdings Share and each outstanding Minority Share will be exchanged into that number of New Holdings Shares equal to the product of (i) 1.0 multiplied by (ii) the quotient of (A) the LaSalle Fair Market Value (defined below) minus (1) 50% of the amount by which any Net Loss (defined below) experienced by LaSalle Holdings exceeds $40,000,000 and is less than or equal to $60,000,000 and (2) 100% of the amount by which any Net Loss experienced by LaSalle Holdings exceeds $60,000,000 and is less than or equal to $100,000,000, divided by (B) the LaSalle Fair Market Value. The Agreement provides that the "LaSalle Fair Market Value" will be the product of (i) the average of the closing sale price as reported on the New York Stock Exchange Composite Tape for LaSalle Holdings Shares for the 30 trading days immediately preceding the effective date of the Arrangement multiplied by (ii) the aggregate number of issued and outstanding voting common shares, par value $1.00 per share, of LaSalle Re (the "LaSalle Re Voting Shares") and LaSalle Re Non-Voting Shares on the effective date of the Arrangement (the number of New Holdings Shares into which each LaSalle Holdings Share and LaSalle Re Non-Voting Share will be so exchanged in the Arrangement, the "LaSalle Exchange Ratio"). The Agreement provides that the "Net Loss" will be the estimated amount of all losses and loss adjustment expenses incurred or to be incurred by LaSalle Holdings and its subsidiaries in connection with the occurrence of a single natural catastrophe occurring between the date of the Agreement and the later of the effective time of the Arrangement and the Reorganization, net of all applicable reinsurance recoverable, as more fully described in the Agreement. In arriving at our opinion, we reviewed the Agreement and certain related documents, and held discussions with certain senior officers, directors and other representatives and advisors of LaSalle and certain senior I-1 262 The Board of Directors LaSalle Re Holdings Limited December 19, 1999 Page 2 officers, representatives and advisors of Trenwick concerning the businesses, operations and prospects of LaSalle and Trenwick. We examined certain publicly available business and financial information relating to LaSalle and Trenwick as well as certain financial forecasts and other information and data for LaSalle and Trenwick which were provided to or otherwise discussed with us by the managements of LaSalle and Trenwick, including information relating to certain strategic implications and operational benefits anticipated to result from the Transaction and certain actuarial reserve analyses and valuations prepared by the independent and internal actuaries of LaSalle and Trenwick. We reviewed the financial terms of the Transaction as set forth in the Agreement in relation to, among other things: current and historical market prices and trading volumes of the LaSalle Holdings Shares and Trenwick Shares; the historical and projected earnings and other operating data of LaSalle and Trenwick; and the capitalization and financial condition of LaSalle and Trenwick. We considered, to the extent publicly available, the financial terms of certain other transactions recently effected which we considered relevant in evaluating the Transaction and analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in evaluating those of LaSalle and Trenwick. In connection with our engagement, we were requested to approach, and held discussions with, third parties to solicit indications of interest in the possible acquisition of or investment in LaSalle. In addition to the foregoing, we conducted such other analyses and examinations and considered such other financial, economic and market criteria as we deemed appropriate in arriving at our opinion. In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or furnished to or otherwise reviewed by or discussed with us. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us, we have been advised by the managements of LaSalle and Trenwick that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of LaSalle and Trenwick as to the future financial performance of LaSalle and Trenwick, the strategic implications and operational benefits anticipated to result from the Transaction and the other matters covered thereby. We also have been advised that the actuarial reserve analyses and valuations relating to LaSalle and Trenwick prepared by their respective independent and internal actuaries were reasonably prepared on bases reflecting the best currently available estimates and judgments of such actuaries as to the reserves of LaSalle and Trenwick. We have not made or, with the exception of certain actuarial reserve analyses and valuations prepared by the independent and internal actuaries of LaSalle and Trenwick, been provided with an independent evaluation or appraisal of the assets, liabilities (contingent or otherwise) or reserves of LaSalle or Trenwick nor have we made any physical inspection of the properties or assets of LaSalle or Trenwick. We are not actuaries and our services did not include any actuarial determinations or evaluations by us or an attempt to evaluate actuarial assumptions, nor are we expressing any view as to matters relating to the reserves of LaSalle or Trenwick, including, without limitation, the adequacy of such reserves. We have assumed, with your consent, that the Transaction will qualify as a tax-free reorganization for federal income tax purposes and that, in the course of obtaining the necessary regulatory or third party approvals for the Transaction, no limitations, restrictions or conditions will be imposed that would have a material adverse effect on LaSalle or Trenwick or the contemplated benefits to LaSalle of the Transaction. Our opinion, as expressed herein, relates to the relative values of LaSalle and Trenwick. We are not expressing any opinion as to what the value of the New Holdings Shares actually will be when issued pursuant to the Transaction or the prices at which the New Holdings Shares will trade or otherwise be transferable subsequent to the Transaction. We express no view as to, and our opinion does not address, the relative merits of the Transaction as compared to any alternative business strategies that might exist for LaSalle or the effect of any other transaction in which LaSalle might engage. Our opinion is I-2 263 The Board of Directors LaSalle Re Holdings Limited December 19, 1999 Page 3 necessarily based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. Salomon Smith Barney Inc. has been engaged to render financial advisory services to LaSalle Holdings in connection with the Transaction and will receive a fee for such services, a significant portion of which is payable upon consummation of the Transaction. We also will receive a fee upon delivery of this opinion. We have in the past provided investment banking services to LaSalle Holdings unrelated to the proposed Transaction, for which services we have received compensation. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of LaSalle Holdings and Trenwick for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with LaSalle, Trenwick and their respective affiliates. Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors in its evaluation of the proposed Transaction, and our opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote on any matters relating to the proposed Transaction. Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the opinion that, as of the date hereof, the LaSalle Exchange Ratio is fair, from a financial point of view, to the holders of LaSalle Holdings Shares. Very truly yours, /S/ SALOMON SMITH BARNEY INC. SALOMON SMITH BARNEY INC. I-3 264 TRENWICK GROUP INC. PROXY SOLICITED ON BEHALF OF THE MANAGEMENT OF TRENWICK GROUP INC. FOR THE SPECIAL MEETING OF STOCKHOLDERS ON SEPTEMBER 25, 2000 The undersigned hereby constitutes and appoints James F. Billett, Jr., Joseph D. Sargent and W. Marston Becker, and each of them, his/her true and lawful agents and proxies with full power of substitution in each to represent the undersigned at the Special Meeting of Stockholders of Trenwick Group Inc. to be held on September 25, 2000 at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870 at 9:00 a.m., local time, and at any postponement or adjournment thereof on all matters coming before the meeting. COMMENTS: (Change of Address) -------------------------------- -------------------------------- -------------------------------- (If you have written in the above space, please mark the corresponding box on the reverse side of this card.) You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The proxy holders cannot vote your shares unless you sign and return this card. 265 [X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE. This Proxy when properly executed will be voted in the manner directed herein. If no direction is made, this Proxy will be voted FOR Proposals 1 and 2. 1. To approve and adopt the Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of December 19, 1999, as amended and restated as of March 20, 2000, and amended as of June 28, 2000 by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. (formerly known as Gowin Holdings International Limited). [ ] FOR [ ] AGAINST [ ] ABSTAIN 2. To approve and adopt the related plan of reorganization pursuant to which Trenwick will transfer all of its assets to Trenwick Group Ltd. and Trenwick Group Ltd. will assume of all of the liabilities of Trenwick, pursuant to Section 271 of the Delaware General Corporation Law, in exchange for Trenwick Group Ltd.'s common shares which will be distributed to the holders of shares of Trenwick common stock in complete liquidation of Trenwick pursuant to Section 275 of the Delaware General Corporation Law, in a transaction intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code, as amended. [ ] FOR [ ] AGAINST [ ] ABSTAIN SIGNATURE(S) --------------------------------------------- DATE ----------, 2000 NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. Change of Address/Comments on Reverse Side [ ] 266 PROXY LASALLE RE HOLDINGS LIMITED THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Guy D. Hengesbaugh, Clare E. Moran and Clement S. Dwyer, or any of them, proxies with full power of substitution and each of them is hereby authorized to represent the undersigned and to vote all common shares of the Company held by the undersigned at the court meeting of certain holders of common shares of the Company convened by the Supreme Court of Bermuda pursuant to Section 99 of the Companies Act 1981 of Bermuda, to be held at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4 on September 25, 2000 at 2:00 p.m. local time, or at any adjournment or postponement thereof, on proposal 1 set forth herein in accordance with any directions given by the undersigned and, in their discretion, on all other matters that may properly come before the court meeting. The undersigned hereby constitutes and appoints Guy D. Hengesbaugh, Clare E. Moran and Clement S. Dwyer, or any of them, proxies with full power of substitution and each of them is hereby authorized to represent the undersigned and to vote all common shares of the Company held by the undersigned at the special general meeting of shareholders, to be held at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4 on September 25, 2000 at 2:15 p.m. local time, or at any adjournment or postponement thereof, on proposal 2 set forth herein in accordance with any directions given by the undersigned and, in their discretion, on all other matters that may properly come before the special general meeting. You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any box if you wish to vote in accordance with the Board of Directors' recommendations. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. (SEE REVERSE SIDE) 267 (Continued from other side) [X] Please mark your votes as in this example. This proxy, when properly executed, will be voted in the manner directed herein by the shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR BOTH PROPOSALS 1 AND 2, WHICH PROPOSALS ARE FULLY DESCRIBED IN THE NOTICE OF THE SPECIAL GENERAL MEETING AND COURT MEETING AND THE ACCOMPANYING PROXY STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED. The Board of Directors recommends a vote FOR both proposals 1 and 2. 1. TO APPROVE the proposed Scheme of Arrangement pursuant to Section 99 of the Companies Act 1981 of Bermuda between the Company and the holders of the Scheme Shares (as defined in the Scheme of Arrangement), providing for the transfer of the Scheme Shares to Trenwick Group Ltd., a Bermuda company, in exchange for common shares of Trenwick Group Ltd. [ [ [ ] FOR ] AGAINST ] ABSTAIN
2. TO APPROVE AND ADOPT the Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of December 19, 1999, as amended and restated as of March 20, 2000 and amended as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. (formerly Gowin Holdings International Limited). [ [ [ ] FOR ] AGAINST ] ABSTAIN
Please sign below exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. ----------------------------------- SIGNATURE(S) DATE ----------------------------------- SIGNATURE(S) DATE 268 PROXY LASALLE RE LIMITED THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints Guy D. Hengesbaugh, Clare E. Moran and Clement S. Dwyer, or any of them, proxies with full power of substitution and each of them is hereby authorized to represent the undersigned and to vote all common shares of the Company held by the undersigned at the court meeting of certain holders of common shares of the Company convened by the Supreme Court of Bermuda pursuant to Section 99 of the Companies Act 1981 of Bermuda, to be held at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4 on September 25, 2000 at 2:30 p.m. local time, or at any adjournment or postponement thereof, on proposal 1 set forth herein in accordance with any directions given by the undersigned and, in their discretion, on all other matters that may properly come before the court meeting. The undersigned hereby constitutes and appoints Guy D. Hengesbaugh, Clare E. Moran and Clement S. Dwyer, or any of them, proxies with full power of substitution and each of them is hereby authorized to represent the undersigned and to vote all common shares of the Company held by the undersigned at the special general meeting of shareholders, to be held at the Sheraton Gateway Hotel, Lester B. Pearson International Airport, Toronto, Ontario, Canada L5P 1C4 on September 25, 2000 at 2:45 p.m. local time, or at any adjournment or postponement thereof, on proposal 2 set forth herein in accordance with any directions given by the undersigned and, in their discretion, on all other matters that may properly come before the special general meeting. You are encouraged to specify your choices by marking the appropriate boxes (SEE REVERSE SIDE), but you need not mark any box if you wish to vote in accordance with the Board of Directors' recommendations. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. (SEE REVERSE SIDE) 269 (Continued from other side) [X] Please mark your votes as in this example. This proxy, when properly executed, will be voted in the manner directed herein by the shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR BOTH PROPOSALS 1 AND 2, WHICH PROPOSALS ARE FULLY DESCRIBED IN THE NOTICE OF THE SPECIAL GENERAL MEETING AND COURT MEETING AND THE ACCOMPANYING PROXY STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED. The Board of Directors recommends a vote FOR both proposals 1 and 2. 1. TO APPROVE the proposed Scheme of Arrangement pursuant to Section 99 of the Companies Act 1981 of Bermuda between the Company and the holders of the Scheme Shares (as defined in the Scheme of Arrangement), providing for the transfer of the Scheme Shares to Trenwick Group Ltd., a Bermuda company, in exchange for common shares of Trenwick Group Ltd. [ [ [ ] FOR ] AGAINST ] ABSTAIN
2. TO APPROVE AND ADOPT the Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of December 19, 1999, as amended and restated as of March 20, 2000 and amended as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. (formerly Gowin Holdings International Limited). [ [ [ ] FOR ] AGAINST ] ABSTAIN
Please sign below exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. ----------------------------------- SIGNATURE(S) DATE ----------------------------------- SIGNATURE(S) DATE 270 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under Bermuda law, a company is permitted to indemnify any officer or director, out of the funds of the company against (a) any liability incurred by him or her in defending any proceedings, whether civil or criminal, in which judgment is given in his or her favor, or in which he or she is acquitted, or in connection with any application under relevant Bermuda legislation in which relief from liability is granted to him or her by the court and (b) any loss or liability resulting from negligence, default, breach of duty or breach of trust, save for his or her fraud and dishonesty. The Bye-laws of Trenwick Group Ltd. provide for the indemnity of its officers and directors as well as their heirs, executors and administrators to the fullest extent permitted by law. Bermuda law does not permit indemnification of a person who is or may be found guilty of fraud or dishonesty. The Bye-laws of Trenwick Group Ltd. also provide that all reasonable expenses (including attorneys' fees) incurred by or on behalf of an officer or director of Trenwick Group Ltd. in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by Trenwick Group Ltd. in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by Trenwick Group Ltd. pursuant to Bermuda law. The Bye-laws of Trenwick Group Ltd. also provide that an officer or director of Trenwick Group Ltd. shall not be personally liable to Trenwick Group Ltd. or its shareholders for monetary damages for any breach of fiduciary duty as a director or officer, except to the extent that such limitation is prohibited by Bermuda law. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 2.1 Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of March 20, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Gowin Holdings International Limited (included as Appendix A to the Joint Proxy Statement/Prospectus contained in this Registration Statement). 2.2 Amendment No. 1 to Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. (formerly known as Gowin Holdings International Limited) (included as Appendix B to the Joint Proxy Statement/Prospectus contained in this Registration Statement). 3.1 Memorandum of Association of Gowin Holdings International Limited, dated as of December 10, 1999, as amended. 3.2(a) Certificate of Incorporation for Gowin Holdings International Limited, dated December 14, 1999. 3.2(b) Certificate of Incorporation on Change of Name from Gowin Holdings International Limited to Trenwick Group Ltd., dated as of March 27, 2000. 3.3 Bye-laws of Trenwick Group Ltd. 4.1 See Exhibits 3.1 through 3.3 for provisions of the Memorandum of Association and Bye-laws of Trenwick Group Ltd. defining the rights of holders of common shares of Trenwick Group Ltd.
II-1 271
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 4.2 Specimen Trenwick Group Ltd. common share certificate. 4.3 Form of Rights Agreement, by and among Trenwick Group Ltd. and First Chicago Trust Company of New York. 5.1 Opinion of Appleby Spurling & Kempe regarding the validity of securities being offered hereby. 8.1 Opinion of Baker & McKenzie regarding certain U.S. federal income tax matters. 8.2 Opinion of Baker & McKenzie regarding certain U.K. tax consequences. 8.3 Opinion of Mayer, Brown & Platt regarding certain federal income tax matters. 8.4 Opinion of Appleby Spurling & Kempe regarding certain Bermuda tax matters. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Deloitte & Touche. 23.3 Consent of KPMG. 23.4 Consent of Appleby Spurling & Kempe (included in Exhibits 5.1 and 8.4). 23.5 Consent of Baker & McKenzie (included in Exhibits 8.1 and 8.2). 23.6 Consent of Mayer, Brown & Platt (included in Exhibit 8.3). 24.1 Powers of Attorney (included on Pages II-4 and II-5 of this Registration Statement). 99.1 Form of Trenwick Group Inc. Proxy (included as the antepenultimate document of Part I of this Registration Statement). 99.2 Form of LaSalle Re Holdings Limited Proxy (included as the penultimate document of Part I of this Registration Statement). 99.3 Form of LaSalle Re Limited Proxy (included as the last document of Part I of this Registration Statement). 99.4 Trenwick Stock Option Agreement, dated December 19, 1999, between Trenwick Group Inc. and LaSalle Re Holdings Limited (included as Appendix D to the Joint Proxy Statement/Prospectus contained in this Registration Statement). 99.5 LaSalle Stock Option Agreement dated as of December 19, 1999, between Trenwick Group Inc. and LaSalle Re Holdings Limited (included as Appendix E to the Joint Proxy Statement/ Prospectus contained in this Registration Statement). 99.6 Consent of Donaldson, Lufkin & Jenrette Securities Corporation. 99.7 Consent of Lazard Freres & Co. LLC. 99.8 Consent of Salomon Smith Barney Inc.
(b) All financial statement schedules of Trenwick Group Inc. and LaSalle Re Holdings Limited which are required to be included herein are included in the Annual Report of Trenwick Group Inc. on Form 10-K for the year ended December 31, 1999 (File No. 1-15389) or the Amended Annual Report of LaSalle Re Holdings Limited on Form 10-K/A for the year ended September 30, 1999 (File No. 1- 12823), respectively, which are incorporated herein by reference. II-2 272 (c) The opinions of Donaldson, Lufkin & Jenrette Securities Corporation, Lazard Freres & Co. LLC and Salomon Smith Barney Inc. are included as Appendices F, G and H, respectively, to the Joint Proxy Statement/Prospectus contained in this Registration Statement. ITEM 22. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (5) That every prospectus: (i) that is filed pursuant to paragraph (4) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than II-3 273 the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (d) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-4 274 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hamilton, Bermuda on the day of August 23, 2000. TRENWICK GROUP LTD. By: /s/ JAMES F. BILLETT, JR. ------------------------------------ James F. Billett, Jr., Chairman of the Board, President and Chief Executive Officer ------------------------ POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, this Power of Attorney has been signed by the following persons in the capacities and on the dates indicated. By so signing, each of the undersigned, in his capacity as a director of Trenwick Group Ltd. (the "Registrant"), does hereby appoint James F. Billett, Jr. and Alan L. Hunte, and each of them severally, his true and lawful attorneys or attorney to execute in his name, place and stead, in his capacity as a director of the Registrant, this Registration Statement on Form S-4 and any subsequent registration statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended, which relates to this Registration Statement, and to file the same, and any and all amendments to said Registration Statements, with all exhibits thereto, and all instruments necessary or incidental in connection therewith, with the Securities and Exchange Commission (the "SEC"). Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of each of the undersigned, in his capacity as a director of the Registrant, every act whatsoever requisite or necessary to be done in the premises as fully and to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and approving the acts of said attorneys and each of them. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JAMES F. BILLETT, JR. Chairman of the Board, President and August 23, 2000 - ------------------------------------------ Chief Executive Officer and Director James F. Billett, Jr. /s/ COLEMAN D. ROSS Executive Vice President and Chief August 23, 2000 - ------------------------------------------ Financial Officer Coleman D. Ross /s/ ALAN L. HUNTE Vice President and Treasurer August 23, 2000 - ------------------------------------------ Alan L. Hunte /s/ W. MARSTON BECKER Director August 23, 2000 - ------------------------------------------ W. Marston Becker /s/ ANTHONY S. BROWN Director August 23, 2000 - ------------------------------------------ Anthony S. Brown /s/ RICHARD E. COLE Director August 23, 2000 - ------------------------------------------ Richard E. Cole
II-5 275
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROBERT M. DE MICHELE Director August 23, 2000 - ------------------------------------------ Robert M. DeMichele /s/ ROBERT V. DEUTSCH Director August 23, 2000 - ------------------------------------------ Robert V. Deutsch /s/ NEIL DUNN Director August 23, 2000 - ------------------------------------------ Neil Dunn /s/ CLEMENT S. DWYER, JR. Director August 23, 2000 - ------------------------------------------ Clement S. Dwyer, Jr. /s/ FRANK E. GRZELECKI Director August 23, 2000 - ------------------------------------------ Frank E. Grzelecki /s/ P. ANTHONY JACOBS Director August 23, 2000 - ------------------------------------------ P. Anthony Jacobs /s/ PETER J. RACKLEY Director August 23, 2000 - ------------------------------------------ Peter J. Rackley /s/ JOSEPH D. SARGENT Director August 23, 2000 - ------------------------------------------ Joseph D. Sargent /s/ FREDERICK D. WATKINS Director August 23, 2000 - ------------------------------------------ Frederick D. Watkins /s/ STEPHEN R. WILCOX Director August 23, 2000 - ------------------------------------------ Stephen R. Wilcox /s/ ALAN L. HUNTE Authorized Representative in the August 23, 2000 - ------------------------------------------ United States Alan L. Hunte
II-6 276 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 2.1 Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of March 20, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Gowin Holdings International Limited (included as Appendix A to the Joint Proxy Statement/Prospectus contained in this Registration Statement). 2.2 Amendment No. 1 to Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of June 28, 2000, by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick Group Inc. and Trenwick Group Ltd. (formerly known as Gowin Holdings International Limited) (included as Appendix B to the Joint Proxy Statement/Prospectus contained in this Registration Statement). 3.1 Memorandum of Association of Gowin Holdings International Limited, dated as of December 10, 1999, as amended. 3.2(a) Certificate of Incorporation for Gowin Holdings International Limited, dated December 14, 1999. 3.2(b) Certificate of Incorporation on Change of Name from Gowin Holdings International Limited to Trenwick Group Ltd., dated as of March 27, 2000. 3.3 Bye-laws of Trenwick Group Ltd. 4.1 See Exhibits 3.1 through 3.3 for provisions of the Memorandum of Association and Bye-laws of Trenwick Group Ltd. defining the rights of holders of common shares of Trenwick Group Ltd. 4.2 Specimen Trenwick Group Ltd. common share certificate. 4.3 Form of Rights Agreement, by and among Trenwick Group Ltd. and First Chicago Trust Company of New York. 5.1 Opinion of Appleby Spurling and Kempe regarding the validity of securities being offered hereby. 8.1 Opinion of Baker & McKenzie regarding certain U.S. federal income tax matters. 8.2 Opinion of Baker & McKenzie regarding certain U.K. tax consequences. 8.3 Opinion of Mayer, Brown & Platt regarding certain federal income tax matters. 8.4 Opinion of Appleby Spurling & Kempe regarding certain Bermuda tax matters. 23.1 Consent of PricewaterhouseCoopers LLP. 23.2 Consent of Deloitte & Touche. 23.3 Consent of KPMG. 23.4 Consent of Appleby Spurling & Kempe (included in Exhibits 5.1 and 8.4). 23.5 Consent of Baker & McKenzie (included in Exhibits 8.1 and 8.2). 23.6 Consent of Mayer, Brown & Platt (included in Exhibit 8.3). 24.1 Powers of Attorney (included on Pages II-4 and II-5 of this Registration Statement). 99.1 Form of Trenwick Group Inc. Proxy (included as the antepenultimate document of Part I of this Registration Statement). 99.2 Form of LaSalle Re Holdings Limited Proxy (included as the penultimate document of Part I of this Registration Statement). 99.3 Form of LaSalle Re Limited Proxy (included as the last document of Part I of this Registration Statement).
277
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 99.4 Trenwick Stock Option Agreement, dated December 19, 1999, between Trenwick Group Inc. and LaSalle Re Holdings Limited (included as Appendix D to the Joint Proxy Statement/ Prospectus contained in this Registration Statement). 99.5 LaSalle Stock Option Agreement dated as of December 19, 1999, between Trenwick Group Inc. and LaSalle Re Holdings Limited (included as Appendix E to the Joint Proxy Statement/ Prospectus contained in this Registration Statement). 99.6 Consent of Donaldson, Lufkin & Jenrette Securities Corporation. 99.7 Consent of Lazard Freres & Co. LLC. 99.8 Consent of Salomon Smith Barney Inc.
EX-3.1 2 ex3-1.txt MEMORANDUM OF ASSOCIATION 1 EXHIBIT 3.1 FORM NO. 2 [BERMUDA LOGO] THE COMPANIES ACT 1981 MEMORANDUM OF ASSOCIATION OF COMPANY LIMITED BY SHARES (SECTION 7(1) AND (2)) MEMORANDUM OF ASSOCIATION OF GOWIN HOLDINGS INTERNATIONAL LIMITED - -------------------------------------------------------------------------------- (hereinafter referred to as "the Company") 1. The liability of the members of the Company is limited to the amount (if any) for the time being unpaid on the shares respectively held by them. 2. We, the undersigned, namely,
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF STATUS SHARES (YES/NO) SUBSCRIBED Brian J. Patterson Cedar House, 41 Cedar Avenue Hamilton, HM 12, Bermuda Yes British 1 Ruby L. Rawlins Cedar House, 41 Cedar Avenue Hamilton HM 12, Bermuda Yes British 1 Antoinette Simmons Cedar House, 41 Cedar Avenue Hamilton HM 12, Bermuda Yes British 1 Bernett Cox Cedar House, 41 Cedar Avenue Hamilton HM 12, Bermuda Yes British 1
do hereby respectively agree to take such number of shares of the Company as may be allotted to us respectively by the provisional directors of the Company, not exceeding the number of shares for which we have respectively subscribed, and to satisfy such calls as may be made by the directors, provisional directors or promoters of the Company in respect of the shares allotted to us respectively. 3. The Company is to be an exempted Company as defined by the Companies Act 1981. 2 4. The Company, with the consent of the Minister of Finance, has power to hold land situate in Bermuda not exceeding in all, including the following parcels- Not Applicable 5. The authorised share capital of the Company is $12,000.00 divided into 120,000 shares of U.S. ten cents each. The minimum subscribed share capital of the Company is $12,000.00 in United States currency. 6. The objects for which the Company is formed and incorporated are - As set forth in paragraphs (b) to (n) and (p) to (u) inclusive of the Second Schedule to The Companies Act, 1981. 7. The Company has the powers set out in the Schedule annexed hereto. 3 Signed by each subscriber in the presence of at least one witness attesting the signature thereof: /s/ BRIAN J. PATTERSON /s/ ANGELA BROWNE - -------------------------------------------- -------------------------------------------- /s/ RUBY RAWLINS /s/ ANGELA BROWNE - -------------------------------------------- -------------------------------------------- /s/ ANTOINETTE SIMMONS /s/ ANGELA BROWNE - -------------------------------------------- -------------------------------------------- /s/ BERNETT COX /s/ ANGELA BROWNE - -------------------------------------------- -------------------------------------------- (Subscribers) (Witnesses)
SUBSCRIBED this 10th day of December 1999 4 STAMP DUTY (To be affixed) Not Applicable 5 THE SCHEDULE (referred to in Clause 7 of the Memorandum of Association) (a) to borrow and raise money in any currency or currencies and to secure or discharge any debt or obligation in any manner and in particular (without prejudice to the generality of the foregoing) by mortgages of or charges upon all or any part of the undertaking, property and assets (present and future) and uncalled capital of the company or by the creation and issue of securities; (b) to enter into any guarantee, contract of indemnity or suretyship and in particular (without prejudice to the generality of the foregoing) to guarantee, support or secure, with or without consideration, whether by personal obligation or by mortgaging or charging all or any part of the undertaking, property and assets (present and future) and uncalled capital of the company or by both such methods or in any other manner, the performance of any obligations or commitments of, and the repayment or payment of the principal amounts of and any premiums, interest, dividends and other moneys payable on or in respect of any securities or liabilities of, any person, including (without prejudice to the generality of the foregoing) any company which is for the time being a subsidiary or a holding company of the company or another subsidiary of a holding company of the company or otherwise associated with the company; (c) to accept, draw, make, create, issue, execute, discount, endorse, negotiate and deal in bills of exchange, promissory notes, and other instruments and securities, whether negotiable or otherwise; (d) to sell, exchange, mortgage, charge, let on rent, share of profit, royalty or otherwise, grant licences, easements, options, servitudes and other rights over, and in any other manner deal with or dispose of, all or any part of the undertaking, property and assets (present and future) of the company for any consideration and in particular (without prejudice to the generality of the foregoing) for any securities; (e) to issue and allot securities of the company for cash or in payment or part payment for any real or personal property purchased or otherwise acquired by the company or any services rendered to the company or as security for any obligation or amount (even if less than the nominal amount of such securities) or for any other purpose; (f) to grant pensions, annuities, or other allowances, including allowances on death, to any directors, officers or employees or former directors, officers or employees of the company or any company which at any time is or was a subsidiary or a holding company or another subsidiary of a holding company of the company or otherwise associated with the company or of any predecessor in business of any of them, and to the relations, connections or dependants of any such persons, and to other persons whose service or services have directly or indirectly been of benefit to the company or whom the company considers have any moral claim on the company or to their relations connections or dependants, and to establish or support any associations, institutions, clubs, schools, building and housing schemes, funds and trusts, and to make payment towards insurance or other arrangements likely to benefit any such persons or otherwise advance the interests of the company or of its members or for any national, charitable, benevolent, educational, social, public, general or useful object; (g) subject to the provisions of Section 42 of the Companies Act 1981, to issue preference shares which at the option of the holders thereof are to be liable to be redeemed; (h) to purchase its own shares in accordance with the provisions of Section 42A of the Companies Act 1981. 6 THE COMPANIES ACT 1981 FIRST SCHEDULE (section 11(1)) A company limited by shares, or other company having a share capital, may exercise all or any of the following powers subject to any provision of law or its memorandum - (1) [repealed by 1992:51] (2) to acquire or undertake the whole or any part of the business, property and liabilities of any person carrying on any business that the company is authorized to carry on; (3) to apply for, register, purchase, lease, acquire, hold, use, control, licence, sell, assign or dispose of patents, patent rights, copyrights, trade marks, formulae, licences, inventions, processes, distinctive marks and similar rights; (4) to enter into partnership or into any arrangement for sharing of profits, union of interests, co-operation, joint venture, reciprocal concession or otherwise with any person carrying on or engaged in or about to carry on or engage in any business or transaction that the company is authorized to carry on or engage in or any business or transaction capable of being conducted so as to benefit the company; (5) to take or otherwise acquire and hold securities in any other body corporate having objects altogether or in part similar to those of the company or carrying on any business capable of being conducted so as to benefit the company; (6) subject to section 96 to lend money to any employee or to any person having dealings with the company or with whom the company proposes to have dealings or to any other body corporate any of whose shares are held by the company; (7) to apply for, secure or acquire by grant, legislative enactment, assignment, transfer, purchase or otherwise and to exercise, carry out and enjoy any charter, licence, power, authority, franchise, concession, right or privilege, that any government or authority or any body corporate or other public body may be empowered to grant, and to pay for, aid in and contribute toward carrying it into effect and to assume any liabilities or obligations incidental thereto; (8) to establish and support or aid in the establishment and support of associations, institutions, funds or trusts for the benefit of employees or former employees of the company or its predecessors, or the dependants or connections of such employees or former employees, and grant pensions and allowances, and make payments towards insurance or for any object similar to those set forth in this paragraph, and to subscribe or guarantee money for charitable, benevolent, educational or religious objects or for any exhibition or for any public, general or useful objects; (9) to promote any company for the purpose of acquiring or taking over any of the property and liabilities of the company or for any other purpose that may benefit the company; (10) to purchase, lease, take in exchange, hire or otherwise acquire any personal property and any rights or privileges that the company considers necessary or convenient for the purposes of its business; (11) to construct, maintain, alter, renovate and demolish any buildings or works necessary or convenient for its objects; (12) to take land in Bermuda by way of lease or letting agreement for a term not exceeding twenty-one years, being land bona fide required for the purposes of the business of the company and with the consent of the Minister granted in his discretion to take land in Bermuda by way of lease or letting agreement for a similar period in order to provide accommodation or recreational facilities for its officers and employees and when no longer necessary for any of the above purposes to terminate or transfer the lease or letting agreement; (13) except to the extent, if any, as may be otherwise expressly provided in its incorporating Act or memorandum and subject to this Act every company shall have power to invest the moneys of the Company by way of mortgage of real or personal property of every description in Bermuda or elsewhere 7 and to sell, exchange, vary, or dispose of such mortgage as the company shall from time to time determine; (14) to construct, improve, maintain, work, manage, carry out or control any roads, ways, tramways, branches or sidings, bridges, reservoirs, watercourses, wharves, factories, warehouses, electric works, shops, stores and other works and conveniences that may advance the interests of the company and contribute to, subsidize or otherwise assist or take part in the construction, improvement, maintenance, working, management, carrying out or control thereof; (15) to raise and assist in raising money for, and aid by way of bonus, loan, promise, endorsement, guarantee or otherwise, any person and guarantee the performance or fulfilment of any contracts or obligations of any person, and in particular guarantee the payment of the principal of and interest on the debt obligations of any such person; (16) to borrow or raise or secure the payment of money in such manner as the company may think fit; (17) to draw, make, accept, endorse, discount, execute and issue bills of exchange, promissory notes, bills of lading, warrants and other negotiable or transferable instruments; (18) when properly authorized to do so, to sell, lease, exchange or otherwise dispose of the undertaking of the company or any part thereof as an entirety or substantially as an entirety for such consideration as the company thinks fit; (19) to sell, improve, manage, develop, exchange, lease, dispose of, turn to account or otherwise deal with the property of the company in the ordinary course of its business; (20) to adopt such means of making known the products of the company as may seem expedient, and in particular by advertising, by purchase and exhibition of works of art or interest, by publication of books and periodicals and by granting prizes and rewards and making donations; (21) to cause the company to be registered and recognized in any foreign jurisdiction, and designate persons therein according to the laws of that foreign jurisdiction or to represent the company and to accept service for and on behalf of the company of any process or suit; (22) to allot and issue fully-paid shares of the company in payment or part payment of any property purchased or otherwise acquired by the company or for any past services performed for the company; (23) to distribute among the members of the company in cash, kind, specie or otherwise as may be resolved, by way of dividend, bonus or in any other manner considered advisable, any property of the company, but not so as to decrease the capital of the company unless the distribution is made for the purpose of enabling the company to be dissolved or the distribution, apart from this paragraph, would be otherwise lawful; (24) to establish agencies and branches; (25) to take or hold mortgages, hypothecs, liens and charges to secure payment of the purchase price, or of any unpaid balance of the purchase price, of any part of the property of the company of whatsoever kind sold by the company, or for any money due to the company from purchasers and others and to sell or otherwise dispose of any such mortgage, hypothec, lien or charge; (26) to pay all costs and expenses of or incidental to the incorporation and organization of the company; (27) to invest and deal with the moneys of the company not immediately required for the objects of the company in such manner as may be determined; (28) to do any of the things authorized by this Schedule and all things authorized by its memorandum as principals, agents, contractors, trustees or otherwise, and either alone or in conjunction with others; (29) to do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the company. Every company may exercise its powers beyond the boundaries of Bermuda to the extent to which the laws in force where the powers are sought to be exercised permit. 2 8 The Companies Act 1981 SECOND SCHEDULE (section 11(2)) A company may by reference include in its memorandum any of the following objects that is to say the business of -- (a) insurance and re-insurance of all kinds; (b) packaging of goods of all kinds; (c) buying, selling and dealing in goods of all kinds; (d) designing and manufacturing of goods of all kinds; (e) mining and quarrying and exploration for metals, minerals, fossil fuels and precious stones of all kinds and their preparation for sale or use; (f) exploring for, the drilling for, the moving, transporting and refining petroleum and hydro carbon products including oil and oil products; (g) scientific research including the improvement, discovery and development of processes, inventions, patents and designs and the construction, maintenance and operation of laboratories and research centres; (h) land, sea and air undertakings including the land, ship and air carriage of passengers, mails and goods of all kinds; (i) ships and aircraft owners, managers, operators, agents, builders and repairers; (j) acquiring, owning, selling, chartering, repairing or dealing in ships and aircraft; (k) travel agents, freight contractors and forwarding agents; (l) dock owners, wharfingers, warehousemen; (m) ship chandlers and dealing in rope, canvas oil and ship stores of all kinds; (n) all forms of engineering; (o) developing, operating, advising or acting as technical consultants to any other enterprise or business; (p) farmers, livestock breeders and keepers, graziers, butchers, tanners and processors of and dealers in all kinds of live and dead stock, wool, hides, tallow, grain, vegetables and other produce; (q) acquiring by purchase or otherwise and holding as an investment inventions, patents, trade marks, trade names, trade secrets, designs and the like; [Third Schedule to 1991:39 paragraph 1(1) provides: Any reference to a trade mark in a provision to which this paragraph applies shall include a reference to a service mark and accordingly any reference to a registered trade mark includes a reference to a registered service mark.] (r) buying, selling, hiring, letting and dealing in conveyances of any sort; and (s) employing, providing, hiring out and acting as agent for artists, actors, entertainers of all sorts, authors, composers, producers, directors, engineers and experts or specialists of any kind; Inserted by 1984 : 36 (t) to acquire by purchase or otherwise and hold, sell, dispose of and deal in real property situated outside Bermuda and in personal property of all kinds wheresoever situated; Inserted by 1992 : 51 (u) to enter into any guarantee, contract of indemnity or suretyship and to assure, support or secure with or without consideration or benefit the performance of any obligations of any person or persons and to guarantee the fidelity of individuals filling or about to fill situations of trust or confidence. 1 9 FORM NO. 7A REGISTRATION NO. 27492 [BERMUDA LOGO] CERTIFICATE OF DEPOSIT OF MEMORANDUM OF INCREASE OF SHARE CAPITAL THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital of GOWIN HOLDINGS INTERNATIONAL LIMITED was delivered to the Registrar of Companies on the 5TH day of JANUARY, 2000 in accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act"). [Seal of Bermuda Registrar of Companies] Given under my hand and Seal of the REGISTRAR OF COMPANIES this 26TH day of JANUARY, 2000. /s/ PAMELA ADAMS for REGISTRAR OF COMPANIES Capital prior to increase: US$ 12,000.00 Amount of increase: US$149,988,000.00 Present Capital: US$150,000,000.00 10 FORM NO. 7 [BERMUDA LOGO] THE COMPANIES ACT 1981 MEMORANDUM OF INCREASE OF SHARE CAPITAL OF GOWIN HOLDINGS INTERNATIONAL LIMITED - -------------------------------------------------------------------------------- (hereinafter referred to as "the Company") DEPOSITED in the office of the Registrar of Companies on the 5 January 2000 in accordance with the provisions of section 45(3) of the Companies Act 1981. Minimum Share Capital of the Company US$ 12,000.00 Authorized Share Capital of the Company US$ 12,000.00 Increase of Share Capital as authorized by a resolution passed at a Statutory Meeting of the Company on the 14/12/99 US$149,988,000.00 ----------------- AUTHORIZED SHARE CAPITAL AS INCREASE US$150,000,000.00 -----------------
DULY STAMPED in the amount of BD$NIL being the stamp duty payable on the amount of increase of share capital of the Company in accordance with the provisions of the Stamp Duties Act, 1976. /s/ RUBY RAWLINS 11 FORM NO. 17A REGISTRATION NO. 27492 [BERMUDA LOGO] NOTIFICATION OF DIMINUTION OF AUTHORISED BUT UNISSUED SHARE CAPITAL THIS IS TO CERTIFY that a Diminution of Authorised but Unissued Share Capital of TRENWICK GROUP LTD. was delivered to the Registrar of Companies on the 27TH day of MARCH, 2000 in accordance with section 45(1)(f) of THE COMPANIES ACT 1981 ("the Act"). [Seal of Bermuda Registrar of Companies] Given under my hand and Seal of the REGISTRAR OF COMPANIES this 24TH day of APRIL, 2000. /s/ CYNTHIA THOMAS for REGISTRAR OF COMPANIES Authorised Share Capital before Cancellation: US$150,000,000.00 Share Capital after Cancellation: US$15,000,000.00 12 FORM NO. 17 [BERMUDA LOGO] THE COMPANIES ACT 1981 MEMORANDUM OF DIMINUTION OF AUTHORISED BUT UNISSUED SHARE CAPITAL OF GOWIN HOLDINGS INTERNATIONAL LIMITED - -------------------------------------------------------------------------------- (hereinafter referred to as "the Company") DEPOSITED in the office of the Registrar of Companies on the 27 day of March 2000 in accordance with the provisions of section 45(1)(f) of the Companies Act 1981. Minimum Share Capital of the Company US$ 12,000.00 Authorised Share Capital of the Company US$150,000,000.00 Issued Share Capital of the company US$ 12,000.00 Cancellation of Share Capital as authorised by a resolution passed at a Special General Meeting of the Company on 14th day of December, 1999 which shares have not been taken or agreed to be taken at the said date of the passing of the resolution. US$135,000,000.00 AUTHORIZED SHARE CAPITAL AFTER CANCELLATION US$ 15,000,000.00
EX-3.2.A 3 ex3-2_a.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2(A) FORM NO. 6 REGISTRATION NO. 27492 [BERMUDA LOGO] CERTIFICATE OF INCORPORATION I hereby in accordance with section 14 of THE COMPANIES ACT 1981 issue this Certificate of Incorporation and do certify that on the 14TH day of DECEMBER, 1999. GOWIN HOLDINGS INTERNATIONAL LIMITED was registered by me in the Register maintained by me under the provisions of the said section and that the status of the said company is that of an EXEMPTED company. [Seal of Bermuda Registrar of Companies] Given under my hand and Seal of the REGISTRAR OF COMPANIES this 14TH day of DECEMBER, 1999. /s/ CYNTHIA THOMAS for REGISTRAR OF COMPANIES EX-3.2.B 4 ex3-2_b.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2(B) FORM NO. 3A REGISTRATION NO. 27492 [BERMUDA LOGO] CERTIFICATE OF INCORPORATION ON CHANGE OF NAME I HEREBY CERTIFY that in accordance with section 10 of THE COMPANIES ACT 1981 GOWIN HOLDINGS INTERNATIONAL LIMITED by resolution and with the approval of the Registrar of Companies that changed its name and was registered as TRENWICK GROUP LTD. on the 27th day of March, 2000. [Seal of Bermuda Registrar of Companies] Given under my hand and the Seal of the REGISTRAR OF COMPANIES this 3RD day of APRIL, 2000. /s/ CYNTHIA THOMAS for REGISTRAR OF COMPANIES EX-3.3 5 ex3-3.txt BYE-LAWS OF TRENWICK GROUP LTD 1 EXHIBIT 3.3 B Y E - L A W S OF TRENWICK GROUP LTD. (formerly Gowin Holdings International Limited) I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-Laws of TRENWICK GROUP LTD. approved by Written Resolution of the Shareholder adopted with effect as of 22nd March 2000 in place of those originally adopted on the 14th day of December 1999. /s/ JEANINE WELLMAN Secretary PREPARED BY MESSRS APPLEBY SPURLING & KEMPE CEDAR HOUSE 41 CEDAR AVENUE HAMILTON, BERMUDA [Seal of Bermuda Registrar of Companies] 2 TABLE OF CONTENTS
PAGE 1. Interpretation.............................................. 1 BOARD OF DIRECTORS.......................................... 3 2. Board of Directors.......................................... 3 3. Management of the Company................................... 3 Power to appoint managing director or chief executive 4. officer..................................................... 3 5. Power to authorize specific actions......................... 3 6. Power to appoint attorney................................... 3 7. Power to appoint and dismiss employees...................... 3 8. Power to delegate to a committee............................ 4 9. Power to borrow and charge property......................... 4 10. Election of Directors....................................... 4 11. Nominations proposed by Members............................. 5 12. Defects in appointment of Directors......................... 5 13. Removal of Directors........................................ 5 14. Vacancies on the Board...................................... 5 15. Notice of meetings of the Board............................. 6 16. Meetings of the Board....................................... 6 17. Unanimous written resolutions............................... 7 18. Contracts and disclosure of Directors' interests............ 7 19. Remuneration of Directors................................... 7 20. Other interests of Directors................................ 7 OFFICERS.................................................... 7 21. Officers of the Company..................................... 7 22. Duties of Officers.......................................... 8 23. Chairman of meetings........................................ 8 24. Register of Directors and Officers.......................... 8 MINUTES..................................................... 8 25. Obligations of Board to keep minutes........................ 8 INDEMNITY................................................... 8 Indemnification and exculpation of Directors and Officers of 26. the Company................................................. 8 MEETINGS.................................................... 10 27. Notice of annual general meeting............................ 10 28. Notice of special general meeting........................... 11 29. Accidental omission of notice of general meeting............ 11 30. Meeting called on requisition of Members.................... 11 31. Short notice................................................ 11 32. Postponement of meetings.................................... 11 33. Quorum for general meeting.................................. 11 34. Adjournment of meetings..................................... 11 35. Attendance at meetings...................................... 12 36. Written resolutions......................................... 12
3 TABLE OF CONTENTS (CONTINUED)
PAGE 37. Attendance of Directors..................................... 12 38. Voting at meetings.......................................... 12 39. Decision of chairman........................................ 12 40. Demand for a poll........................................... 12 41. Seniority of joint holders voting........................... 13 42. Instrument of proxy......................................... 13 43. Representation of corporations at meetings.................. 13 SHARE CAPITAL AND SHARES.................................... 13 44. Rights of shares............................................ 13 45. Power to issue shares....................................... 14 46. Repurchase of shares by Company or its assignee(s).......... 15 47. Variation of rights and alteration of share capital......... 17 48. Registered holder of shares................................. 17 49. Death of a joint holder..................................... 17 50. Share certificates.......................................... 17 REGISTER OF MEMBERS......................................... 18 51. Contents of Register of Members............................. 18 52. Inspection of Register of Members........................... 18 CLOSING REGISTER OF MEMBERS OR SETTING RECORD DATE.......... 18 53. Closing Register of Members................................. 18 54. Setting of record date...................................... 18 TRANSFER OF SHARES.......................................... 19 55. Instrument of transfer...................................... 19 56. Restrictions on transfer.................................... 19 TRANSMISSION OF SHARES...................................... 19 57. Representative of deceased Member........................... 19 58. Registration on death or bankruptcy......................... 20 59. Successors of Members....................................... 20 DIVIDENDS AND OTHER DISTRIBUTIONS........................... 20 60. Declaration of dividends by the Board....................... 20 61. Other distributions......................................... 20 62. Reserve fund................................................ 20 63. Deduction of amounts due to the Company..................... 21 64. Unclaimed dividends......................................... 21 65. Interest on dividend........................................ 21 CAPITALIZATION.............................................. 21 66. Capitalization.............................................. 21 ACCOUNTS AND FINANCIAL STATEMENTS........................... 21
ii 4 TABLE OF CONTENTS (CONTINUED)
PAGE 67. Record of account........................................... 21 68. Financial year end.......................................... 21 69. Financial statements........................................ 21 AUDIT....................................................... 22 70. Appointment of Auditor...................................... 22 71. Remuneration of Auditor..................................... 22 72. Vacation of office of Auditor............................... 22 73. Access to books of the Company.............................. 22 74. Report of the Auditor....................................... 22 NOTICES..................................................... 22 75. Notices to Members of the Company........................... 22 76. Notices to joint Members.................................... 22 77. Service and delivery of notice.............................. 23 REGISTERED OFFICE........................................... 23 78. Registered office........................................... 23 SEAL OF THE COMPANY......................................... 23 79. The seal.................................................... 23 80. Manner in which seal is to be affixed....................... 23 WINDING-UP.................................................. 23 81. Determination to liquidate.................................. 23 82. Winding-up/distribution by liquidator....................... 23 ALTERATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS................................................ 23 83. Alteration of memorandum of association and byelaws......... 23 SCHEDULE - FORM A........................................... 24 SCHEDULE - FORM B........................................... 25 SCHEDULE - FORM C........................................... 26
iii 5 B Y E - L A W S OF TRENWICK GROUP LTD. 1. Interpretation (1) In these Bye-laws the following words and expressions shall, where not inconsistent with the context, have the following meanings respectively: (a) "Act" means the Companies Act 1981 of Bermuda as amended from time to time; (b) "Auditor" includes any individual or partnership; (c) "Board" means the Board of Directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the Directors present at a meeting of Directors at which there is a quorum; (d) "Code" means the United States Internal Revenue Code of 1986, as amended, or any United States federal statute then in effect that has replaced such statute, and a reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such replacement United States federal statute; (e) "Company" means the company for which these Bye-laws are approved and confirmed; (f) "Common Shares" as defined in Bye-Law 44; (g) "Controlled Shares" in reference to any person means: (i) all Common Shares directly, indirectly, or constructively owned by such person within the meaning of section 958 of the Code (the "Code Formula"); and (ii) all Common Shares directly, indirectly or constructively owned as a result of voting power held or shared by any person or "group" of persons within the meaning of section 13(d)(3) of the Exchange Act and the rules and regulations promulgated thereunder (the "13(d) Formula"). For the purposes of the application of the 13(d) Formula, "person" means any individual, firm, partnership, company, association or other entity or any "group" of persons with respect to the exercise of voting power within the meaning of section 13(d)(3) of Exchange Act and the rules and regulations thereunder. (h) "Director" means a director of the Company; (i) "Exchange Act" means the United States Securities Exchange Act of 1934, as amended, or any United States federal statute then in effect that has replaced such statute, and a reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such replacement United States federal statute; (j) "Fair Market Value" means, with respect to a repurchase of any shares of the Company in accordance with these Bye-laws, (i) if such shares are listed on a securities exchange, the average closing sale price of such shares on such exchange, or, if such shares are listed on more than one exchange, the average closing sale price of the shares on the principal securities exchange on which such shares are then traded, or, if such shares are not then listed on a securities exchange but are traded in the over-the-counter market, the average of the latest bid and asked quotations for such shares in such market, in each case for the last five trading days immediately preceding the day on which notice of the repurchase of such shares is sent pursuant to these Bye-laws or (ii) if no such closing sales prices or quotations are available because such shares are not publicly traded or otherwise, the fair value of such shares as determined by one independent nationally recognized investment banking firm chosen by the Company and reasonably satisfactory to the Member whose shares are to be so repurchased by the Company. The calculation of the Fair Market Value of the 1 6 shares made by such appointed investment banking firm (i) shall not include any discount relating to the absence of a public trading market for, or any transfer restrictions on, such shares, and (ii) such calculation shall be final and the fees and expenses stemming from such calculation shall be borne by the Company or its assignee, as the case may be; (k) "Member" means the person registered in the Register of Members as the holder of shares and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons as the context so requires; (l) "notice" means written notice as further defined in these Bye-laws unless otherwise specifically stated; (m) "Officer" means any person appointed by the Board to hold an office in the Company; (n) "person" means an individual, a trust, estate, partnership, association, company, corporation or other legal entity; (o) "Register of Directors and Officers" means the Register of Directors and Officers referred to in Bye-law 25; (p) "Register of Members" means the Register of Members referred to in Bye-law 52; (q) "Secretary" means the person appointed to perform any or all the duties of secretary of the Company and includes any deputy or assistant secretary; (r) "Securities Act" means the United States Securities Act of 1933, as amended, or any United States federal statute then in effect that has replaced such statute, and a reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such replacement United States federal statute; (s) "United States" shall the United States of America and dependent territories or any part thereof; (t) "U.S. Person", except as otherwise indicated, means an individual who is a citizen or resident of the United States, a corporation or partnership created or organized under the laws of the United States or any state thereof, or an estate or trust, all of the income of which is includable in gross income for United States federal income tax purposes, regardless of its source. (2) In these Bye-laws, where not inconsistent with the context: (a) words denoting the plural number include the singular number and vice versa; (b) words denoting the masculine gender include the feminine gender; (c) the word: (i) "may" shall be construed as permissive; (ii) "shall" shall be construed as imperative; and (iii) unless otherwise provided herein words or expressions defined in the Act shall bear the same meaning in these Bye-laws. (3) Expressions referring to writing or written shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in a visible form. (4) Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof. 2 7 BOARD OF DIRECTORS 2. Board of Directors The business of the Company shall be managed and conducted by the Board. 3. Management of the Company In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by these Bye-laws, required to be exercised by the Company in general meeting subject, nevertheless, to these Bye-laws, the provisions of any statute and to such regulations as may be prescribed by the Company in general meeting. No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made. The Board may procure that the Company pays all expenses incurred in promoting and incorporating the Company. The Board may exercise all the powers of the Company to discontinue the Company to a named country or jurisdiction outside Bermuda pursuant to Section 132G of the Act. 4. Power to appoint managing director or chief executive officer The Board may from time to time appoint one or more Directors to the office of managing director or chief executive officer of the Company who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company. 5. Power to authorize specific actions The Board may from time to time and at any time authorize any Director, Officer or other person to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument on behalf of the Company. 6. Power to appoint attorney The Board may from time to time and at any time by power of attorney appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit and may also authorize any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney. Such attorney may, if so authorized under the seal of the Company, execute any deed or instrument under such attorney's personal seal with the same effect as the affixation of the seal of the Company. 7. Power to appoint and dismiss employees The Board may appoint, suspend or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties. 3 8 8. Power to delegate to a committee The Board may appoint one or more Board committees and may delegate any of its powers to any such committee. Without limiting the foregoing, such committees may include: (a) an Executive Committee which shall have the power of the Board between meetings of the Board; (b) an Underwriting and Actuarial Committee, which shall, among other things, advise the Board with respect to underwriting policies for the Company, review underwriting decisions made by the Company, monitor any appointed underwriting services provider, advise the Board with respect to actuarial and pricing services, review actuarial decisions and monitor any provider of actuarial services; (c) an Investment Committee, which shall, among other things, review and monitor the Company's financial affairs and the conformity of the Company's financial and investment activities with the business strategy for the Company established by the Board; (d) an Audit Committee, which shall, among other things, advise the Board with respect to the Company's financial reporting responsibilities and related matters; (e) a Nominating Committee, which shall, among other things, propose to the Members or to continuing Directors, before any election of Directors by Members or the filling of any vacancy by the Board, a slate of director candidates equal in number to the vacancies to be filled. The Nominating Committee shall have neither more nor less than three members; and (f) a Compensation Committee, which shall, among other things, advise the Board with respect to compensation of Officers. All Board committees shall conform to such directions as the Board shall impose on them, provided that each member shall have one (1) vote, and each committee shall have the right as it deems appropriate to retain outside experts. Each committee may adopt rules for the conduct of its affairs, including rules governing the adoption of resolutions by unanimous written consent, and the place, time, and notice of meetings, as shall be advisable and as shall not be inconsistent with these Bye-laws or with any applicable resolution adopted by the Board. Each committee shall cause minutes to be made of all meetings of such committee and of the attendance thereat and shall cause such minutes and copies of resolutions adopted by unanimous consent to be promptly inscribed or incorporated by the Secretary in the minute book. 9. Power to borrow and charge property The Board may exercise all the powers of the Company to borrow money, to assume, guarantee or otherwise become directly or indirectly liable for indebtedness for borrowed money, and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party. 10. Election of Directors The number of Directors constituting the Board shall be not less than two (2) nor more than twenty (20), the exact number to be determined from time to time by resolution adopted by the affirmative vote of more than fifty percent (50%) of the Directors then in office; provided, however, that if no such resolution shall be in effect the number of Directors shall be twenty (20). The Board shall be divided into three classes, with the term of the office of one class expiring each year. Each class shall consist, as nearly as possible, of one-third of the total number of Directors constituting the entire Board. Upon the adoption of this Bye-law, Class I Directors shall be those Directors elected to hold office for a term expiring at the next annual general meeting; Class II Directors shall be those Directors elected to hold office for a term expiring at the next annual general meeting in the year after the Class I Directors' terms expire; and Class III Directors shall be those Directors elected to hold office for a term expiring at 4 9 the next annual general meeting in the year after the Class II Directors' terms expire. At each annual general meeting of Members, successors to Directors whose terms expire at that annual general meeting shall be of the same class as the Directors they succeed and shall be elected to hold office for a full three (3) year term. If the number of Directors is altered by resolution of the Board pursuant to this Bye-law, such resolution shall apportion any increase or decrease among the classes so as to maintain the number of Directors in each class as equal as possible, but in no case shall a decrease in the number of Directors shorten the term of any incumbent Director. Notwithstanding any other provision of this Bye-law [10], no person shall be elected as a Director, other than persons nominated by the Board or a committee thereof, unless advance notice of the nomination of such person shall have been given to the Company in the manner provided in Bye-law 11. 11. Nominations proposed by Members If a Member desires to nominate one or more persons for election as Directors at any general meeting duly called for the election of Directors, written notice of such Member's intent to make such a nomination must be received by the Secretary at the registered office of the Company not less than 60 days nor more than 120 days before such general meeting. Such notice shall set forth (i) the name and address, as it appears in the Register of Members, of the Member who intends to make such nomination; (ii) a representation that the Member is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make such nomination; (iii) the class and number of shares of the Company which are held by the Member; (iv) the name and address of each person to be nominated; (v) a description of all arrangements or understandings between the Member and any such nominee and any other person or persons (naming such person or persons) pursuant to which such nomination is to be made by the Member; (vi) such other information regarding any such nominee proposed by such Member as would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Exchange Act, whether or not the Company is then subject to such Regulation; and (vii) the consent of any such nominee to serve as a Director, if so elected. The Chairman of such general meeting shall, if the facts warrant, refuse to acknowledge a nomination that is not made in compliance with the procedure specified in this Bye-law 11, and any such nomination not properly brought before the meeting shall not be considered. 12. Defects in appointment of Directors All acts done bona fide by any meeting of the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director. 13. Removal of Directors Subject to any provisions to the contrary in these Bye-laws, the Members, at an annual general meeting or a special general meeting called for that purpose, may remove any Director or the entire Board, provided that (i) the notice of any such meeting shall contain a statement of the intention so to do and be served on such Director not less than fourteen (14) days before the meeting and (ii) at such meeting such Director shall be entitled to be heard on the motion for such Director's removal. 14. Vacancies on the Board The Board shall have the power from time to time and at any time, by the affirmative vote of more than fifty percent (50%) of the Directors then in office, to appoint any person as a Director to fill a vacancy on the Board occurring as the result of the death, disability, disqualification or resignation of any Director or, to the extent authorized by these Bye-laws, to fill a vacancy on the Board occurring as a result of the removal of a Director by the Members pursuant to these Bye-laws. A Director so appointed shall hold 5 10 office until the next annual general meeting or until such Director's successor is elected or appointed or such Director's office is otherwise vacated. The Board may act notwithstanding any vacancy in its number but, if and for so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may act only for the purpose of (i) summoning a general meeting of the Company or (ii) preserving the assets of the Company. The office of Director shall be vacated if the Director: (a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law; (b) is or becomes bankrupt or makes any arrangement or composition with his creditors generally; (c) is or becomes of unsound mind or dies; or (d) resigns his or her office by notice in writing to the Company. 15. Notice of meetings of the Board The Chairman or Deputy Chairman, or any two (2) Directors may, and the Secretary on the requisition of the Chairman, Deputy Chairman, or any two (2) Directors shall, at any time summon a meeting of the Board by not less than five (5) days' notice in writing to each Director. Notice of a meeting of the Board shall specify the general nature of the business to be considered at such meeting and shall be deemed to be duly given to a Director if it is given to such Director in person or otherwise communicated or sent to such Director by mail, courier service, cable, telex, telecopier, facsimile or other mode of representing words in a legible and non-transitory form at such Director's address in the Register of Directors and Officers or to such other address given by such Director to the Company for this purpose, in each case, not less than five (5) days' prior to the meeting to which such notice relates. If such notice is sent by next-day courier, cable, telex, telecopier or facsimile it shall be deemed to have been given the day following sending and, if by registered mail, five days following the sending. A Board meeting shall, notwithstanding that it is called by shorter notice than that specified in this Bye-law, be deemed to have been properly called if it is so agreed in writing by all the Directors, whether present or not at the meeting. Meetings of the Directors may be held within or outside of Bermuda. 16. Meetings of the Board (a) The Board shall hold regular quarterly meetings although it may specially meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit. The quorum necessary for the transaction of business may be fixed by the affirmative vote of more than fifty percent (50%) of the Directors then in office and unless so fixed shall be the lesser of six (6) or fifty percent (50%) of the Directors then in office. (b) Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting. (c) The Directors shall elect one of their number to be Chairman of the Board and another to be Deputy Chairman of the Board. (d) A resolution put to the vote at a meeting of the Board shall be carried by the affirmative vote of more than fifty percent (50%) of the votes of the Directors present at a duly constituted meeting at which a quorum is present and acting throughout unless otherwise provided by these Bye-laws or by Bermuda law. 6 11 17. Unanimous written resolutions A resolution in writing signed by all the Directors, which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted. Such resolution shall be deemed to be adopted at the place where, and at the time when, the last signature of a Director is affixed thereto. 18. Contracts and disclosure of Directors' interests Any Director, or any Director's firm, partner or any company with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Director's firm, partner or such company shall be entitled to remuneration for professional services as if such Director were not a Director, provided that nothing herein contained shall authorize a Director or Director's firm, partner or such company to act as Auditor of the Company. A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act. Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or arrangement or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting. 19. Remuneration of Directors The remuneration (if any) of the Directors shall be determined by the Board and shall be deemed to accrue from day to day. The Directors shall be reimbursed for all travel, hotel and other expenses which are reasonable and properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally. A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period on such terms as to remuneration and otherwise as the Directors may determine. 20. Other interests of Directors A Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as member or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company. The Directors may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as the Board thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company. OFFICERS 21. Officers of the Company The Officers, who shall be appointed by the Board, shall consist of a Chairman, President, one or more Deputy Chairmen, one or more Vice Presidents, a Treasurer, a Secretary and such other Officers as the Board may from time to time determine to be necessary or advisable in the conduct of the affairs of the Company. The same person may hold two (2) or more offices in the Company, except no person may hold the offices of President and Secretary, Chairman and Deputy Chairman or President and Vice- President at the same time. The Deputy Chairman shall not by virtue of such office have any executive 7 12 authority on behalf of the Company. The Officers shall receive such remuneration as the Board may from time to time determine. 22. Duties of Officers The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time. 23. Chairman of meetings Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the Chairman shall act as chairman at all meetings of the Members and of the Board at which such person is present. In his absence a Deputy Chairman, if present, shall act as chairman and in the absence of all of them a chairman shall be appointed or elected by those present at the meeting and entitled to vote. 24. Register of Directors and Officers The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act. The Register of Directors and Officers shall be open to inspection by Members and other entitled persons at the office of the Company on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two (2) hours in each business day is allowed for inspection. MINUTES 25. Obligations of Board to keep minutes The Board shall cause minutes to be duly entered in books provided for the purpose: (a) of all elections and appointments of Officers; (b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and (c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board, meetings of managers and meetings of committees appointed by the Board. INDEMNITY 26. Indemnification and exculpation of Directors and Officers of the Company (a) The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including all appeals (other than an action, suit or proceeding by or in the right of the Company) by reason of the fact that he is or was a Director, Officer or advisory committee member, or is or was serving at the request of the Company as a director or officer of another company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including, without limitation, reasonable professional fees, expert witness fees and attorneys' fees), judgments, decrees, fines, penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe his conduct was unlawful except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable for fraud or dishonesty in the performance of his duty to the Company. The termination of any action, suit or proceeding by 8 13 judgment, order, settlement, -conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action, suit or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, including all appeals, by or in the right of the Company to procure a judgment in its favour by reason of the fact that he is or was a Director, Officer or advisory committee member, or is or was serving at the request of the Company as a director or officer of another company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including, without limitation, reasonable professional fees, expert witness fees and attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable for fraud or dishonesty in the performance of his duty to the Company unless and only to the extent that the court in which such action, suit or proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. (c) The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, including all appeals, by or in the right of the Company to procure a judgment in its favour by reason of the fact that he is or was a Director, Officer or advisory committee member, or is or was serving at the request of the Company as a director or officer of another company, corporation, partnership, joint venture, trust or other enterprise, against judgments, decrees, fines, penalties and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, but only to the extent that a court determines upon application that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity. (d) The purpose of this Bye-law as a whole is to provide the broadest indemnity allowable at law, and to the extent any indemnification hereunder is prohibited, unenforceable or not authorized under applicable law, it is the intent of this Bye-law that such indemnification be interpreted as broadly as possible without invalidating the remaining provisions hereof. Specifically, to the extent prohibited by Bermuda law, these Bye-laws shall not result in indemnification of any person to the extent he engaged in fraud or dishonesty. (e) If any person has been successful on the merits or otherwise in defense of any action, suit or proceeding for which he is entitled to indemnification pursuant to Bye-law 26(a), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (f) Any indemnification under Bye-law 26(a), unless ordered by a court, shall be made by the Company only as authorized in the specific case upon a determination that indemnification of such person is proper in the circumstances because he has met the applicable standard of conduct set forth in Bye-law 26(a). Such determination shall be made (1) by the Board by a majority vote of Directors who were not parties to such action, suit or proceeding, or (2) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the Members. If any person is entitled to indemnification under Bye-law 26(a) for a portion of the expenses (including attorneys' fees), judgments, decrees, fines, penalties and amounts paid in settlement actually and reasonably incurred by him in connection with an action, suit or proceeding, the Company shall indemnify such person only as to the portion to which he is entitled. 9 14 (g) Expenses (including attorneys' fees) actually and reasonably incurred by any person in defending any civil, criminal, administrative or investigative action, suit or proceeding or threat thereof referred to in Bye-law 26(a) shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Company as authorized in these Bye-Laws or otherwise pursuant to applicable law; provided, however, that if it is determined by either (1) a majority vote of Directors who were not parties to such action, suit or proceeding, or (2) if a majority of the disinterested directors so directs, by independent legal counsel in a written opinion, that there is no reasonable basis to believe that such person is entitled to be indemnified by the Company as authorized in these Bye-Laws or otherwise pursuant to applicable law, then no expense shall be advanced in accordance with this Bye-law 26(d). (h) The indemnification and advancement of expenses provided in these Bye-Laws shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may now or hereafter be entitled under any statute, agreement, vote of Members or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. (i) The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, Officer or advisory committee member, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of these Bye-Laws or under law. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Bye-law shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to hold the position for which he is entitled to be indemnified or advanced expenses and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) In order to induce persons to serve as Directors, Officers or advisory committee members, or at the request of the Company as directors or officers of another company, corporation, partnership, joint venture, trust or other enterprise, each Member waives any claim or right of action it might have, whether individually or by or in the right of the Company, against any such person on account of any action taken by such person, or the failure of such person to take any action, in the performance of his duties with or for the Company or such other company, corporation, partnership, joint venture, trust or other enterprise; provided, however, that such waiver shall not apply to any claims or rights of action arising out of the fraud or dishonesty of such person or to recover any gain, personal profit or advantage to which such person is not legally entitled. MEETINGS 27. Notice of annual general meeting The annual general meeting of the Company shall be held at such time and place as the Chairman or any two (2) Directors or any Director and the Secretary or the Board shall appoint. No annual general meeting shall take place in the United States. Written notice of such meeting stating the date, place and time at which the meeting is to be held, that the election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting shall be given to each Member not less than five (5) days before the date of such meeting. 10 15 28. Notice of special general meeting The Chairman or any two (2) Directors or any Director and the Secretary or the Board may convene a special general meeting of the Company whenever in their judgment such a meeting is necessary. No special general meeting shall take place in the United States. Written notice of such meeting stating the date, place and the time at which the meeting is to be held and the general nature of the business to be considered at the meeting shall be given to each Member not less than five (5) days before the date of such meeting. 29. Accidental omission of notice of general meeting The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting. 30. Meeting called on requisition of Members Notwithstanding anything herein, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of section 74 of the Act shall apply. 31. Short notice A general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than ninety-five percent (95%) of the total issued and outstanding Common Shares. 32. Postponement of meetings The Board may postpone any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under these Bye-laws) provided that notice of postponement is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member in accordance with the provisions of these Bye-laws. 33. Quorum for general meeting At any general meeting of the Company, two (2) or more persons present in person and representing in person or by proxy in excess of fifty percent (50%) of the total issued and outstanding Common Shares throughout the meeting shall form a quorum for the transaction of business, provided that if the Company shall at any time have only one (1) Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one (1) week later, at the same time and place or to such other day, time or place as the Board may determine. 34. Adjournment of meetings The chairman of a general meeting may, with the consent of the Members at any general meeting at which a quorum is present (and shall if so directed), adjourn the meeting. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws. 11 16 35. Attendance at meetings Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting. 36. Written resolutions (a) A resolution in writing signed by all Members, which may be in counterparts, shall be as valid as if it had been passed by a General Meeting duly called and constituted, such resolution to be effective on the date on which the last Member signs the resolution. (b) A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of sections 81 and 82 of the Act. (c) This Bye-law shall not apply to (i) a resolution passed pursuant to section 89(5) of the Act or (ii) a resolution passed for the purpose of removing a Director before the expiration of his term of office under these Bye-laws or Section 93 of the Act. 37. Attendance of Directors The Directors of the Company shall be entitled to receive notice of and to attend and be heard at any general meeting. 38. Voting at meetings Subject to the provisions of the Act and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative vote of more than fifty percent (50%) of the votes cast in accordance with the provisions of these Bye-laws. 39. Decision of chairman At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Bye-laws, be conclusive evidence of that fact. 40. Demand for a poll (a) Notwithstanding the provisions of the immediately preceding Bye-law, at any general meeting of the Company, in respect of any question proposed for the consideration of the Members, a poll may be demanded by any of the following persons: (1) the chairman of such meeting; (2) at least three (3) Members present in person or represented by proxy; (3) any Member or Members present in person or represented by proxy and holding between them not less than one-tenth of the total voting power of all the Members having the right to vote at such meeting; or (4) any Member or Members present in person or represented by proxy holding Common Shares for which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Common Shares. (b) Where, in accordance with the provisions of subparagraph (a) of this Bye-law, a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares and subject to the provisions of these Bye-laws, every Member present in person or by proxy at such 12 17 meeting shall have one (1) vote for each Common Share of which such person is the holder or for which such person holds a proxy and such votes shall be counted in the manner set out in subparagraph (d) of this Bye-law or in the case of a general meeting at which one (1) or more Members are present by telephone in such manner as the chairman of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter. (c) A poll demanded in accordance with the provisions of subparagraph (a) of this Bye-law, for the purpose of electing a chairman or on a question of adjournment, shall be taken forthwith, and a poll demanded on any other question shall be taken in such manner and at such time at such meeting as the chairman may direct, and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll. (d) Where a vote is taken by poll, each Member present in person or by proxy and entitled to vote shall be furnished with a ballot on which such person shall record his or her vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. At the conclusion of the poll, the ballot papers shall be examined and counted by a committee of not less than two (2) Members or proxy holders appointed by the chairman for the purpose and the result of the poll shall be declared by the chairman. 41. Seniority of joint holders voting In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. 42. Instrument of proxy The instrument appointing a proxy shall be in writing in the form, or as near thereto as circumstances admit, of Form "A" in the Schedule hereto, under the hand of the appointor or of the appointor's attorney duly authorized in writing, or if the appointor is a corporation, either under its seal or under the hand of a duly authorized officer or attorney. The decision of the chairman of any general meeting as to the validity of any instrument of proxy shall be final. 43. Representation of corporations at meetings A corporation which is a Member may, by written instrument, authorize such person as it thinks fit to act as its representative at any meeting of the Members and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member. SHARE CAPITAL AND SHARES 44. Rights of shares (a) The share capital of the Company shall be US$15,000,000 divided into two (2) classes of shares consisting of 150,000,000 shares of par value U.S.$0.10 divided into (i) common shares (the "Common Shares") and (ii) preferred shares (the "Preferred Shares"). 13 18 (b) Subject to the provisions of these Bye-laws, the holders of Common Shares shall: (1) be entitled to one (1) vote per Common Share; (2) be entitled to such dividends as the Board may from time to time declare; (3) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company; and (4) generally be entitled to enjoy all of the rights attaching to shares. (c) The Board is authorized, subject to limitations prescribed by law, to issue the Preferred Shares in series, to establish from time to time the number of Preferred Shares to be included in each such series, and to fix the designation, powers, preferences and rights of the Preferred Shares of each such series and the qualifications, limitations or restrictions thereof. The terms of any series of Preferred Shares shall be set forth in a Certificate of Designation in the minutes of the Company. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (1) The number of Preferred Shares constituting that series and the distinctive designation of that series; (2) The rate of dividend, and whether (and if so, on what terms and conditions) dividends shall be cumulative (and, if so, whether unpaid dividends shall compound or accrue interest) or shall be payable in preference or in any other relation to the dividends payable on any other class or classes of shares or any other series of the Preferred Shares; (3) Whether that series shall have voting rights in addition to the voting rights provided by law and, if so, the terms and extent of such voting rights; (4) Whether the Preferred Shares may be redeemed and, if so, the terms and conditions on which they may be redeemed (including, without limitation, the dates upon or after which they may be redeemed and the price or prices at which they may be redeemed, which price or prices may be different in different circumstances or at different redemption dates); (5) Whether the Preferred Shares shall be issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange (including without limitation the price or prices or the rate or rates of conversion or exchange or any terms for adjustment thereof); (6) The amounts, if any, payable upon the Preferred Shares in the event of voluntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether the Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances; (7) The amounts, if any, payable upon the Preferred Shares in the event of involuntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether the Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances; (8) Sinking fund provisions, if any, for the redemption or purchase of the Preferred Shares (the term "sinking fund" being understood to include any similar fund, however designated); and (9) Any other relative rights, preferences, limitations and powers of that series. 45. Power to issue shares (a) Subject to the provisions of these Bye-laws, the unissued shares of the Company (whether forming part of the original share capital or any increased share capital) shall be at the disposal of the 14 19 Board, which may issue, offer, allot, exchange or otherwise dispose of shares, or options, warrants or other rights to purchase shares or securities convertible into or exchangeable for shares (including any employee benefit plan providing for the issuance of shares or options or rights in respect thereof), at such times, for such consideration and on such terms and conditions as it may determine (including, without limitation, such preferred or other special rights or restrictions with respect to dividend, voting, liquidation or other rights of the shares as may be determined by the Board). (b) The Board shall, in connection with the issue of any share, have the power to pay such commissions and brokerage fees and charges as may be permitted by law. (c) The Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of a purchase or subscription made or to be made by any person of or for any shares, but nothing in this Bye-law shall prohibit transactions mentioned in Sections 39A, 39B and 39C of the Act. 46. Repurchase of shares by Company or its assignee(s) (a) Exercise of power to repurchase shares of the Company The Board may exercise all the powers of the Company to purchase all or any part of its own shares pursuant to Sections 42 and 42A of the Act. (b) Over-the-Threshold Common Shareholders Every Member of record present in person or by proxy shall have one vote for each Common Share registered in such Member's name in the Register, PROVIDED that, if and so long as the Controlled Shares of any person would, upon giving effect to the principle that holders of Common Shares shall have one vote for each Common Share so registered, confer upon any such person ten percent (10%) or more of the votes that may be cast by all holders of Common Shares of the Company (any such person being referred to as an "Over-the-Threshold Common Shareholder"), each issued share comprised in such Controlled Shares shall confer only a fraction of a vote according to the following formula (the "Cut-back Formula"): [(D divided by 10)-1] divided by B Where: 1. "A" is equal to the number of outstanding Common Shares. 2. "B" is equal to the number of Controlled Shares of such person. 3. "C" is equal to [(A divided by 10)-1] divided by A. 4. "D" is equal to (A minus B) divided by (1.00 minus C). If there is more than one person who is an "Over-the-Threshold Common Shareholder", the Cut-back Formula shall be applied to each such person, taking into consideration any reduction in the voting rights of any other person or persons under the Cut-back Formula. If the application of the Cut-back Formula results in any person becoming an "Over-the-Threshold Common Shareholder, then the Cut-back Formula shall be applied again, and repeated, until no "Over-the-Threshold Common Shareholder" remains with Controlled Shares with ten percent (10%) or more of the votes that may be cast by all holders of Common Shares of the Company after application of the Cut-back Formula. The Board shall have the power and authority to make all determinations that may be required to effectuate the provisions of this Bye-law 46(b), including any required determination of the number of Common Shares that may be deemed to be held by any person, and such determinations shall be conclusive. All record and beneficial owners of Common Shares shall be deemed to have agreed, by virtue of their ownership thereof, to provide to the Board, at such times and in such detail as the Board may reasonably request, any information that the Board may require to make such determinations. 15 20 (c) Unilateral repurchase right Subject to Section 42A of the Act, if the Board in its absolute and unfettered discretion, on behalf of the Company, determines that share ownership by any Member (with or without the application of bye-law 46(b)) may result in adverse tax, regulatory or legal consequences to the Company, any of its subsidiaries or any of the Members, the Company will have the option, but not the obligation, to repurchase all or part of the shares held by such Member to the extent the Board, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences for immediately available funds in an amount equal to the Fair Market Value of such shares on the date the Company sends the Repurchase Notice (the "Repurchase Price"); provided that the Board will use its best efforts to exercise this option equally among similarly situated Members (to the extent possible under the circumstances). Such right to repurchase shall not be limited to repurchases from an Over-the-Threshold Common Shareholder nor to the number of shares held by any Over-the-Threshold Common Shareholder sufficient to reduce its shareholdings to the maximum number of shares such that it will no longer be considered an Over-the-Threshold Common Shareholder. In that event, the Company will also be entitled to assign its repurchase right to a third party or parties including the other Members, with the consent of such assignee. Each Member shall be bound by the determination by the Company to repurchase or assign its right to repurchase such Member's shares and, if so required by the Company, shall sell the number of shares that the Company requires it to sell. In the event that the Company or its assignee(s) determines to repurchase any such shares, the Company shall provide each Member concerned with written notice of such determination ("Repurchase Notice") at least seven (7) calendar days prior to such repurchase or such shorter period as each such Member may authorize, specifying the date on which any such shares are to be repurchased and the Repurchase Price. The Company may revoke the Repurchase Notice at any time before it (or its assignee) pays for the shares. Neither the Company nor its assignee(s) shall be obliged to give general notice to the Members of any intention to purchase or the conclusion of any purchase of shares. Payment of the Repurchase Price by the Company or its assignee(s) shall be by wire transfer and made at a closing to be held no less than seven (7) calendar days after receipt of the Repurchase Notice by the Member. (d) Unilateral repurchase right in the event of involuntary transfer If a Member shall be involuntarily dissolved or liquidated or shall have entered in respect of it an order for relief under the United States Bankruptcy Code (or any similar law of any applicable jurisdiction) or shall otherwise be required to transfer involuntarily any or all of its shares pursuant to a court order, foreclosure, tax lien, government seizure, death or otherwise, and, in any such case as a result thereof, any or all of such Member's shares (the "Involuntary Transfer Shares") shall be actually or purportedly transferred or otherwise disposed of (the "Involuntary Transfer"), such Member, or its legal representative or successor, shall promptly give notice to the Company of such transfer and the Company will have the option, but not the obligation, to repurchase all or part of the Involuntary Transfer Shares held by such Member for immediately available funds in an amount equal to the Fair Market Value of such shares. In that event, the Company will also be entitled to assign its repurchase right to a third party or parties including the other Members, with the consent of such assignee. Each Member shall be bound by the determination by the Company to repurchase or assign its right to repurchase the Involuntary Transfer Shares and, if so required by the Company, shall sell the number of Involuntary Transfer Shares that the Board requires it to sell. In the event that the Company or its assignee(s) determines to repurchase any Involuntary Transfer Shares, the Company or its assignee(s) shall provide each Member concerned with written notice at least thirty (30) calendar days prior to such repurchase or such shorter period as each such Member may authorize, specifying the date on which any such Involuntary Transfer Shares are to be repurchased and the Repurchase Price. Neither the Company nor its assignee(s) shall be obliged to give general notice to the Members of any intention to purchase or the conclusion of any purchase of 16 21 the Involuntary Transfer Shares. Payment of the Fair Market Value of the Involuntary Transfer Shares by the Company or its assignee(s) shall be by wire transfer and made at a closing to be held no later than the later to occur of (i) thirty (30) calendar days after the date the Repurchase Notice is sent to the Member or (ii) fifteen (15) calendar days after the date that the final governmental approval or consent to the consummation of the purchase, if required, is obtained. 47. Variation of rights and alteration of share capital (a) If the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of not less than seventy-five percent (75%) of the issued and outstanding shares of that class, or with the sanction of a resolution passed by the holders of not less than seventy-five percent (75%) of the issued and outstanding shares of that class at a separate general meeting of the holders of the shares of the class held in accordance with Section 47(7) of the Act. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. (b) The Company may from time to time by resolution of the Members change the currency denomination of, increase, alter or reduce its share capital in accordance with the provisions of Sections 45 and 46 of the Act, provided, however, that any resolution of the Members to alter or reduce its share capital shall be by the affirmative vote of Members representing not less than seventy five percent (75%) of the votes conferred by the issued and outstanding Common Shares entitled to vote. Where, on any alteration of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit including, without limitation, the issue to Members, as appropriate, of fractions of shares and/or arranging for the sale or transfer of the fractions of shares of Members. 48. Registered holder of shares (a) Except as ordered by a court of competent jurisdiction or as required by law, no person shall be recognized by the Company as holding any share unless such person is the registered holder, and the Company shall not be bound by or required in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or any other right in respect of any share except an absolute right to the entirety thereof in the registered holder. (b) Any dividend, interest or other monies payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the Member at such Member's address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct. If two (2) or more persons are registered as joint holders of any shares, any one (1) can give an effectual receipt for any dividend paid in respect of such shares. 49. Death of a joint holder Where two (2) or more persons are registered as joint holders of a share or shares, then in the event of the death of any joint holder or holders, the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognize no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders. 50. Share certificates (a) Every Member shall be entitled to a certificate under the seal of the Company (or a facsimile thereof) specifying the number and, where appropriate, the class of shares held by such Member 17 22 and whether the same are fully paid up and, if not, how much has been paid thereon. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means. (b) The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom such shares have been allotted. (c) If any such certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid or destroyed the Board may cause a new certificate to be issued and request an indemnity for the lost certificate if it sees fit. REGISTER OF MEMBERS 51. Contents of Register of Members The Board shall cause to be kept in one (1) or more books a Register of Members and shall enter therein the following particulars: (a) the name and address of each Member, the number and the class of shares held by such Member and the amount paid or agreed to be considered as paid on such shares; (b) the date on which each person was entered in the Register of Members; (c) the date on which any person ceased to be a Member for one (1) year after such person so ceased; and (d) the country where such Member is resident. 52. Inspection of Register of Members The Register of Members shall be open to inspection by Members or other entitled persons at the registered office of the Company on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two (2) hours in each business day is allowed for inspection. The Register of Members may, after notice has been given by advertisement in an appointed newspaper to that effect, be closed for any time or times not exceeding in the whole thirty (30) days in each year. CLOSING REGISTER OF MEMBERS OR SETTING RECORD DATE 53. Closing Register of Members For the purpose of determining Members who are holders of shares entitled to notice of or to vote at any general meeting of Members or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of Members for any other proper purpose, the Directors may provide that the Register of Members shall be closed for transfers for a stated period but not to exceed in any case thirty (30) days. If the Register of Members shall be so closed for the purpose of determining Members entitled to notice of or to vote at a general meeting of Members, such Register shall be so closed for at least ten (10) days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the Register of Members. 54. Setting of record date In lieu of or apart from closing the Register of Members, the Directors may fix any date as the record date for: (a) determining the Members entitled to receive any dividend; and (b) determining the Members entitled to receive notice of and to vote at any general meeting of the Company. 18 23 TRANSFER OF SHARES 55. Instrument of transfer (a) Subject to the Act and to such of the restrictions contained in these Bye-laws or elsewhere as may be applicable, any Member may transfer all or any of his shares by an instrument of transfer as specified herein. (b) An instrument of transfer shall be in the form or as near thereto as circumstances admit of Form "B" in the Schedule hereto or in such other common form as the Board may accept. Such instrument of transfer shall be signed by or on behalf of the transferor and transferee provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members. (c) The Board may refuse to recognize any instrument of transfer unless it is accompanied by the certificate in respect to the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer. 56. Restrictions on transfer (a) Any transfer of shares (or any interest therein) that results in a Member becoming an Over-the-Threshold Common Shareholder without the approval of more than 50% of the Directors then in office shall not be registered in the share register of the Company and shall be void and of no effect. (b) Any transfer of shares (or any interest therein) that results in a Member (other than a Member which is a registered "Investment Company" under the United States Investment Company Act of 1940, as amended) directly, indirectly or beneficially owning (within the meaning of Section 13(d) of the Exchange Act) more than 5% of the outstanding capital stock of the Company without the approval of more than 50% of the Directors then in office shall not be registered in the share register of the Company and shall be void and of no effect. (c) Without limiting the foregoing, the Board shall decline to approve or register a transfer of shares unless all applicable consents, authorisations, permissions or approvals of any governmental body or agency in Bermuda, the United States or any other applicable jurisdiction required to be obtained prior to such transfer shall have been obtained. (d) If the Board declines to approve or register a transfer, it shall, within ten (10) days after the date on which the Company received notice of the transfer, send to the transferor and transferee notice of such refusal. (e) The restrictions on transfer authorized by this Bye-law shall not be imposed in any circumstances in a way that would interfere with the settlement of trades or transactions entered into through the facilities of the New York Stock Exchange, Inc.; provided, however, that the Company may decline to register transfers in accordance with these Bye-laws and resolutions of the Board after a settlement has taken place. TRANSMISSION OF SHARES 57. Representative of deceased Member In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member's interest in the shares. Subject to the provisions of Section 52 of the Act, for the purpose of this Bye-law, "legal personal representative" means the executor or administrator of a deceased Member or 19 24 such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the shares of a deceased Member. 58. Registration on death or bankruptcy Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in the form, or as near thereto as circumstances admit, of Form "C" in the Schedule hereto. On the presentation thereof to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor and such other information as the Board shall deem necessary or appropriate, and the transferee shall be registered as a Member but the Board shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member's death or bankruptcy, as the case may be. If the person so becoming entitled shall elect to be registered as a holder, such person shall deliver or send to the Company a notice in writing signed by such person stating that it so elects. 59. Successors of Members A person becoming entitled to a share by reason of the death or bankruptcy of the holder (or in any other case than by transfer) shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a holder in respect of the share, be entitled in respect of it to exercise any right conferred by virtue of being a holder in relation to meetings of the Company, provided, however, that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share and if the notice is not complied with within ninety (90) days the Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the share until the requirements of the notice have been complied with. DIVIDENDS AND OTHER DISTRIBUTIONS 60. Declaration of dividends by the Board Subject to any rights or restrictions at the time lawfully attached to any class of shares and subject to the provisions of these Bye-laws, the Board may, in accordance with Section 54 of the Act, by the affirmative vote of more than fifty percent (50%) of the votes of the Directors then in office, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets. 61. Other distributions The Board may, by the affirmative vote of more than fifty percent (50%) of the votes of the Directors then in office, declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company. 62. Reserve fund The Board may from time to time before declaring a dividend set aside, out of the surplus or profits of the Company, such sum as it thinks proper as a reserve fund to be used to meet contingencies or for equalising dividends or for any other special purpose. 20 25 63. Deduction of amounts due to the Company The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company. 64. Unclaimed dividends Any dividend unclaimed for a period of six (6) years from the date of declaration of such dividend shall be forfeited and shall revert to the Company and the payment by the Board of any unclaimed dividend, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof. 65. Interest on dividend No dividend or distribution shall bear interest against the Company. CAPITALIZATION 66. Capitalization The Board may resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid shares pro rata to the Members. The Company may capitalise any sum standing to the credit of a reserve account or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution. ACCOUNTS AND FINANCIAL STATEMENTS 67. Record of account The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to: (a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates; (b) all sales and purchases of goods by the Company; and (c) the assets and liabilities of the Company. Such records of account shall be kept at the registered office of the Company or, subject to Section 83(2) of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. 68. Financial year end The financial year end of the Company may be determined by resolution of the Board and failing such resolution shall be December 31 in each year. 69. Financial statements Subject to any rights to waive laying of accounts pursuant to Section 88 of the Act, financial statements as required by the Act shall be laid before the Members in general meeting. 21 26 AUDIT 70. Appointment of Auditor Subject to Section 88 of the Act, at the annual general meeting or at a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company. Such Auditor may be a Member but no Director, Officer or employee of the Company shall, during his or her continuance in office, be eligible to act as an Auditor of the Company. 71. Remuneration of Auditor The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine. 72. Vacation of office of Auditor If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor's services are required, the Board may fill the vacancy thereby created. 73. Access to books of the Company The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company. 74. Report of the Auditor (a) Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be audited at least once in every year. (b) The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting. (c) The generally accepted auditing standards referred to in subparagraph (b) of this Bye-law may be those of a country or jurisdiction other than Bermuda or which have been appointed pursuant to section 90 of the Act. If so, the financial statements and the report of the Auditor must disclose this fact and identify the generally accepted auditing standards used. NOTICES 75. Notices to Members of the Company A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member's address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by mail, courier service, cable, telex, telecopier, facsimile or other mode of representing words in a legible and non-transitory form. If such notice is sent by next-day courier it shall be deemed to have been given the day following sending and, if by registered mail, five days following the sending. 76. Notices to joint Members Any notice required to be given to a Member shall, with respect to any shares held jointly by two (2) or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares. 22 27 77. Service and delivery of notice Any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or to the cable company or transmitted by telex, facsimile or other method as the case may be. REGISTERED OFFICE 78. The registered office of the Company shall be at such address as the Board may fix from time to time by resolution. SEAL OF THE COMPANY 79. The seal The seal of the Company shall be in such form as the Board may from time to time determine. The Board may adopt one or more duplicate seals for use outside Bermuda. 80. Manner in which seal is to be affixed The seal of the Company shall not be affixed to any instrument except attested by the signature of a Director and the Secretary or any two Directors, or any person appointed by the Board for the purpose, provided that any Director, or Officer, may affix the seal of the Company attested by such Director or Officer's signature only to any authenticated copies of these Bye-laws, the incorporating documents of the Company, the minutes of any meetings or any other documents required to be authenticated by such Director or Officer. Any such signature may be printed or affixed by mechanical means on any share certificate, debenture stock certificate or other security certificate. WINDING-UP 81. Determination to liquidate The Company shall be wound up voluntarily by resolution of the Members. 82. Winding-up/distribution by liquidator If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members, divide among the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability. ALTERATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS 83. Alteration of Memorandum of Association and Bye-Laws Except as required by the Act, neither the Memorandum of Association of the Company nor any Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Directors and confirmed by a resolution of the Members. 23 28 SCHEDULE-FORM A TRENWICK GROUP LTD. PROXY of the holder of share(s) in the above-named Company hereby appoint ____________ or failing him/her____________or failing him/her ____________ as my proxy to vote on my behalf at the General Meeting of the Company to be held on the day of , 20 , and at any adjournment thereof. Dated this day of , 20 Signed by the above-named ____________________________________ ____________________________________ Witness 24 29 SCHEDULE-FORM B TRANSFER OF A SHARE OR SHARES FOR VALUE RECEIVED __________________ [amount] ________________________ [transferor] hereby sell(s), assign(s) and transfer(s) unto ________________________ [transferee] of ________________________ [address] with residence in [country], [number of shares] shares of TRENWICK GROUP LTD. Dated __________________ ________________________ (Transferor) In the presence of: ________________________ (Witness) ________________________ (Transferee) In the presence of: ________________________ (Witness) 25 30 SCHEDULE-FORM C TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH OF A MEMBER I/We having become entitled in consequence of the death of [name of the deceased Member] to [number] share(s) numbered [number in figures] standing in the register of members of TRENWICK GROUP LTD. in the name of the said [name of deceased Member] instead of being registered myself/ourselves request to have [name of transferee] (the "Transferee") registered as a transferee of such share(s), and I/we do hereby accordingly transfer the said share(s), to the Transferee to hold the same unto the Transferee, his or her executors, administrators and assigns, subject to the conditions on which the same were held at the time of the execution thereof; and the Transferee does hereby agree to take the said share(s) subject to the same conditions. WITNESS our hands this __ day of ____________, 20__ Signed by the above-named ) [person or persons entitled] ) in the presence of: ) Signed by the above-named ) [transferee] ) in the presence of: ) 26 EX-4.2 6 ex4-2.txt SPECIMEN COMMON SHARE CERTIFICATE 1 EXHIBIT 4.2 NUMBER SHARES 1 100 INCORPORATED UNDER THE LAWS OF BERMUDA TRENWICK GROUP LTD. PAR VALUE OF SHARES US$0.10 EACH THIS IS TO CERTIFY THAT [ ], [ ] IS THE REGISTERED HOLDER OF ONE HUNDRED FULLY PAID COMMON SHARES OF THE PAR VALUE OF US $0.10 EACH IN THE ABOVE-NAMED COMPANY, SUBJECT TO THE MEMORANDUM OF ASSOCIATION AND BYE-LAWS THEREOF. GIVEN UNDER THE COMMON SEAL OF THE COMPANY THIS [ ] DAY OF [ ], 2000. SPECIMEN CERTIFICATE -------------------------------------- DIRECTOR -------------------------------------- SECRETARY EX-4.3 7 ex4-3.txt FORM OF RIGHTS AGREEMENT 1 EXHIBIT 4.3 - -------------------------------------------------------------------------------- TRENWICK GROUP LTD. and FIRST CHICAGO TRUST COMPANY OF NEW YORK Rights Agent ------------------------ Rights Agreement Dated as of August __, 2000 - -------------------------------------------------------------------------------- 2 Table of Contents
Section Page - ------- ---- Section 1. Certain Definitions......................................... 1 Section 2. Appointment of Rights Agent................................. 4 Section 3. Issue of Rights Certificates................................ 4 Section 4. Form of Rights Certificates................................. 5 Section 5. Countersignature and Registration........................... 6 Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights 6 Certificates................................................ Section Exercise of Rights; Purchase Price; Expiration Date of 7........ Rights...................................................... 7 Section 8. Cancellation and Destruction of Rights Certificates......... 8 Section 9. Reservation and Availability of Capital Shares.............. 9 Section 10. Series A Preferred Shares Record Date....................... 10 Section Adjustment of Purchase Price, Number and Kind of Shares or 11....... Number of Rights............................................ 10 Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................................................... 16 Section Consolidation, Amalgamation or Sale or Transfer of Assets or 13....... Earning Power............................................... 16 Section 14. Fractional Rights and Fractional Shares..................... 18 Section 15. Rights of Action............................................ 19 Section 16. Agreement of Rights Holders................................. 19 Section 17. Rights Certificate Holder Not Deemed a Shareholder.......... 19 Section 18. Concerning the Rights Agent................................. 20 Section 19. Merger or Consolidation or Change of Name of Rights Agent... 20 Section 20. Duties of Rights Agent...................................... 20 Section 21. Change of Rights Agent...................................... 22 Section 22. Issuance of New Rights Certificates......................... 22 Section 23. Redemption and Termination.................................. 23 Section 24. Exchange.................................................... 23 Section 25. Notice of Proposed Actions.................................. 24 Section 26. Notices..................................................... 25 Section 27. Supplements, Deletions and Amendments....................... 25 Section 28. Successors.................................................. 26 Section 29. Determinations and Actions by the Board, etc................ 26 Section 30. Benefits of this Agreement.................................. 26 Section 31. Severability................................................ 26 Section 32. Governing Law............................................... 26 Section 33. Counterparts................................................ 27 Section 34. Descriptive Headings........................................ 27 Exhibit A -- Certificate of Designation; Preferences and Rights of Series A First Preference Shares Exhibit B -- Form of Rights Certificate Exhibit C -- Summary of Rights of Series A First Preference Shares
i 3 TABLE OF DEFINED TERMS
TERM DEFINED SECTION - ------------ ------- Acquiring Person 1(a) Act 1(b) Adjustment Shares 11(a)(ii) Affiliate 1(c) Agreement Intro Associate 1(c) Beneficial Owner 1(d) Board Intro Business Day 1(e) Close of Business 1(f) Common Shares 1(g) Common Share Equivalents 11(a)(iii) Company (Trenwick Group Ltd.) Intro Company (Following a sec. 13(a) Event) 13(a) Current Market Price of the Common Shares 11(d)(i) Current Market Price of the Series A Preferred Shares 11(d)(ii) Current Value 11(a)(iii) Distribution Date 3(a) Equivalent Series A Preferred Shares 11(b) Exchange Act 1(c) Exchange Ratio 24(a) Expiration Date 7(a) Final Expiration Date 7(a) Grandfathered Percentage 1(o) Grandfathered Person 1(p) NASDAQ 11(d)(i) Original Rights 1(d)(i) Person 1(q) Series A Preferred Shares 1(aa) Principal Party 13(b) Purchase Price 4(a) Purchase Price (after a sec. 11(a) Event) 11(a)(ii) Purchase Price (after a sec. 13 Event) 13(a) Record Date 1(t) Redemption Price 23(a) Rights Intro Rights Agent Intro Rights Certificates 3(a) Rights Dividend Declaration Date Intro Section 11(a)(ii) Event 1(y)
ii 4
TERM DEFINED SECTION - ------------ ------- Section 11(a)(ii) Trigger Date 1(z) Section 13 Event 1(aa) Spread 11(a)(iii) Share Acquisition Date 1(dd) Subsidiary 1(ee) Substitution Period 11(a)(iii) Summary of Rights 3(b) Trading Day 11(d)(i) Triggering Event 1(ii)
iii 5 RIGHTS AGREEMENT RIGHTS AGREEMENT, dated as of August __, 2000 (the "Agreement"), between TRENWICK GROUP LTD., a company organized under the laws of Bermuda (the "Company"), and FIRST CHICAGO TRUST COMPANY OF NEW YORK, a New York corporation (the "Rights Agent"). W I T N E S S E T H: WHEREAS, on August , 2000 the Board of Directors of the Company (the "Board") approved this Rights Agreement, and authorized and declared a dividend distribution of one Right (a "Right") for each Common Share, $.10 par value per share, of the Company (the "Common Shares") to be issued at the close of business on the Record Date (as hereinafter defined) and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each Common Share issued between the Record Date (whether originally issued or delivered from the Company's treasury) and the Distribution Date (as hereinafter defined), each Right initially representing the right to purchase one one-hundredth of a Series A First Preference Share, $.10 par value per share, of the Company having the rights, powers and preferences set forth in the Certificate of Designation, Preference and Rights of Series A First Preference Shares attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, on August __, 2000 the sole shareholder of the Company approved the Company's adoption of this Rights Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of ten percent (10%) or more of the Common Shares then issued and outstanding: provided, that Acquiring Person shall not include: (i) the Company; (ii) any Subsidiary of the Company; (iii) any employee benefit plan of the Company or of any Subsidiary of the Company; (iv) any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan; (v) any Grandfathered Person, unless such Grandfathered Person after the Record Date becomes the Beneficial Owner of more than the Grandfathered Percentage of the Common Shares then issued and outstanding. Any Grandfathered Person who after the Record Date becomes the Beneficial Owner of less than ten percent (10%) of the Common Shares then issued and outstanding shall cease to be a Grandfathered Person. (vi) any Person who becomes the Beneficial Owner of ten percent (10%) or more of the Common Shares then outstanding as a result of a reduction in the number of Common Shares outstanding due to the repurchase of Common Shares by the Company unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of ten percent (10%) or more of the then outstanding Common Shares, acquires beneficial ownership of additional Common Shares representing one percent (1%) or more of the Common Shares then outstanding; or (vii) any such Person who has reported or is required to report such ownership (but less than twenty percent (20%)) on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the 1 6 management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the Common Shares) and, within ten (10) Business Days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person acquired Common Shares in excess of 9.9% inadvertently or without knowledge of the terms of the Rights and who, together with all Affiliates and Associates, thereafter does not acquire additional Common Shares while the Beneficial Owner of ten percent (10%) or more of the Common Shares then outstanding; provided, however, that if the Person requested to so certify fails to do so within ten (10) Business Days, then such Person shall become an Acquiring Person immediately after such ten (10) Business Day Period. (b) "Act" shall mean the Securities Act of 1933, as amended. (c) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any voting securities of the Company; provided, however, that nothing in this paragraph (d) shall cause a person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition. 2 7 (e) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York or the Islands of Bermuda are authorized or obligated by law or executive order to close. (f) "Close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day. (g) "Common Shares" shall have the meaning set forth in the first WHEREAS clause at the beginning of this Agreement, except that "Common Shares" when used with reference to any Person other than the Company shall mean the capital shares of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (h) "Common Share Equivalents" shall have the meaning set forth in Section 11(a)(iii) hereof. (i) "Current Market Price" shall have the meaning set forth in Section 11(d)(i) hereof. (j) "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. (k) "Distribution Date" shall have the meaning set forth in Section 3(a) hereof. (l) "Exchange Act" shall have the meaning set forth in Section 1(c) hereof. (m) "Expiration Date" shall have the meaning set forth in Section 7(a) hereof. (n) "Final Expiration Date" shall mean the close of business on August __, 2010. (o) "Grandfathered Percentage" means, with respect to any Grandfathered Person, the percentage of the Common Shares then in issue that such Grandfathered Person, together with all Affiliates and Associates of such Grandfathered Person, beneficially owns as of the Record Date; provided, that, in the event that the percentage of Common Shares then in issue that a Grandfathered Person beneficially owns shall decrease (whether due to the sale, transfer or other disposition of Common Shares by the Grandfathered Person or due to the dilution of the Grandfathered Person's interest in Common Shares as a result of the issuance of additional Common Shares) after the Record Date, the Grandfathered Percentage, with respect to such Grandfathered Person, shall mean, subsequent to such sale, transfer, disposition or dilution, the percentage of Common Shares then in issue that such Grandfathered Person, together with all Affiliates and Associates of such Grandfathered Person, beneficially owns immediately following such sale, transfer, disposition or dilution. (p) "Grandfathered Person" means any Person who, together with all Affiliates and Associates of such Person is, as of the Record Date, the Beneficial Owner of ten percent (10%) or more of the Common Shares then in issue. (q) "Person" shall mean any individual, firm, corporation, partnership or other entity. (r) "Principal Party" shall have the meaning set forth in Section 13(b) hereof. (s) "Purchase Price" shall have the meaning set forth in Section 4(a) hereof. (t) "Record Date" shall be the same date on which the Effective Time shall occur of the Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of March 20, 2000, by and among LaSalle Re Holdings Limited ("LaSalle Holdings"), a company organized under the laws of Bermuda, LaSalle Re Limited, a company organized under the laws of Bermuda and a majority-owned subsidiary of LaSalle Holdings, Trenwick Group Inc., a Delaware corporation, and Trenwick Group Ltd. (formerly known as Gowin Holdings International Limited). (u) "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. (v) "Rights" shall have the meaning set forth in the first WHEREAS clause at the beginning of the Agreement. 3 8 (w) "Rights Agent" shall have the meaning set forth in the parties clause at the beginning of this Agreement. (x) "Rights Certificates" shall have the meaning set forth in Section 3(a) hereof. (y) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) hereof. (z) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii) hereof. (aa) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (bb) "Series A Preferred Shares" shall mean shares of Series A First Preference Shares, $.10 par value per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A First Preference Shares authorized to permit the full exercise of the Rights, any other series of preferred shares of the Company designated for such purpose containing terms substantially similar to the terms of the Series A First Preference Shares. (cc) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. (dd) "Share Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act or any comparable or successor report) by the Company or an Acquiring Person that an Acquiring Person has become such. (ee) "Subsidiary" shall mean, with reference to any Person, any corporation of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person. (ff) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. (gg) "Summary of Rights" shall have the meaning set forth in Section 3(b) hereof. (hh) "Trading Day" shall have the meaning set forth in Section 11(d)(i) hereof. (ii) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as rights agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable. If the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine. Section 3. Issue of Rights Certificates. (a) Until the earlier of (i) the close of business on the tenth day after the Share Acquisition Date, or (ii) the close of business on the tenth Business Day (or such later date as the Board shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, or any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be the Beneficial Owner of ten percent (10%) or more of the Common Shares then outstanding (the earlier of (i) and (ii) being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Shares registered in the names of the holders of the Common Shares (which certificates for Common Shares shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying Common Shares (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Share as of the close of 4 9 business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more right certificates, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each Common Share so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has been made pursuant to Section 11(p) hereof, at the time of distribution of the Right Certificates, the Company shall make, and notify the Rights Agent of, the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. (b) The Company will make available a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"), to any holder of Rights who may so request from time to time. With respect to certificates for the Common Shares outstanding as of the Record Date or which were issued subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will be evidenced by such certificates for the Common Shares and the registered holders of the Common Shares shall also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date (as hereinafter defined), the transfer of any certificates representing Common Shares in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such Common Shares. (c) Rights shall be issued in respect of all Common Shares which are issued (whether originally issued or from the Company's treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date. Certificates representing such Common Shares shall also be deemed to be certificates for Rights, and shall bear the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Trenwick Group Ltd. (the "Company") and the Rights Agent thereunder (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Shares shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Shares represented by such certificates. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the 5 10 holders thereof to purchase such number of one one-hundredths of a Series A Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. Section 5. Countersignature and Registration. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates that may have been exchanged pursuant to Section 24) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a 6 11 Series A Preferred Share (or, following a Triggering Event, Common Shares, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a) (iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agents at the principal office or offices, of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-hundredths of a share (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earlier of (i) the close of business on August __, 2010 (the "Final Expiration Date"), or (ii) the time at which the Rights are redeemed as provided in Sections 23 and 24 hereof (the earlier of (i) and (ii) being herein referred to as the "Expiration Date"). (b) The Purchase Price for each one one-hundredth of a Series A Preferred Share pursuant to the exercise of a Right shall initially be $________, and shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of a Series A Preferred Share (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)(A) requisition from any transfer agent of the Series A Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-hundredths of a Series A Preferred Share to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of Series A Preferred Shares issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one 7 12 one-hundredths of a Series A Preferred Share as are to be purchased (in which case certificates for the Series A Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue other securities (including Common Shares) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole Series A Preferred Shares would be issued. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 6 and Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the 8 13 exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Shares. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Series A Preferred Shares (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares and/or other securities or out of its authorized and issued shares held in its treasury), the number of Series A Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights. (b) So long as the Series A Preferred Shares (and, following the occurrence of a Triggering Event, Common Shares and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a) (iii) hereof, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof is not permitted under applicable law or a registration statement has not been declared effective. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-hundredths of a Series A Preferred Share (and, following the occurrence of a Triggering Event, Common Share and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and non-assessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-hundredths of a Series A Preferred Share (or Common Share and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a Series A Preferred Share (or Common Share and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing 9 14 Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-hundredths of a Series A Preferred Share (or Common Share and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Series A Preferred Shares Record Date. Each person in whose name any certificate for a number of one one-hundredths of a Series A Preferred Share (or Common Shares and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional Series A Preferred Shares (or Common Shares and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares (or Common Shares and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Series A Preferred Shares (or Common Shares and/or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Series A Preferred Shares payable in Series A Preferred Shares, (B) subdivide the outstanding Series A Preferred Shares, (C) combine the outstanding Series A Preferred Shares into a smaller number of shares, or (D) issue any of its capital shares in a reclassification of the Series A Preferred Shares (including any such reclassification in connection with a consolidation, amalgamation or combination in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of Series A Preferred Shares or capital shares, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of Series A Preferred Shares or capital shares, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Series A Preferred Shares transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event any Person, alone or together with its Affiliates and Associates, shall, at any time after the Record Date, becomes an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, or is an acquisition of shares of Common Shares pursuant to a tender offer or an exchange offer for all outstanding shares of Common Shares at a price and on terms determined by at least a majority of the Board who are not officers of the Company and who are not representatives, nominees, Affiliates or Associates of an Acquiring Person, after receiving advice from one or more investment banking firms, to be (A) at a 10 15 price that is not inadequate (taking into account all factors which such members of the Board deem relevant including, without limitation, prices which could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value) and (B) otherwise in the best interests of the Company and its shareholders, then, promptly following the occurrence of such event, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-hundredths of a Series A Preferred Share, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a Series A Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by fifty percent (50%) of the Current Market Price (determined pursuant to Section 11(d) hereof) per Common Share on the date of such first occurrence (such number of shares, the "Adjustment Shares"). (iii) In the event that the number of Common Shares which are authorized by the Company's certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or other equity securities of the Company (including, without limitation, preferred shares, or units of preferred shares, such as the Series A Preferred Shares, which the Board has deemed to have the same value or economic rights as Common Shares (such preferred shares being referred to as "Common Share Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein is the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Common Shares (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. For purposes of the preceding sentence, the term "Spread" shall mean the excess of (i) the Current Market Value over (ii) the Purchase Price. If the Board determines in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the "Substitution Period"). To the extent that action is to be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such shareholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per 11 16 Common Share on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Share Equivalent shall be deemed to equal the Current Market Value per Common Share on such date. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Series A Preferred Shares entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Series A Preferred Shares (or shares having the same rights, privileges and preferences as the Series A Preferred Shares ("Equivalent Preferred Shares")) or securities convertible into Series A Preferred Shares or Equivalent Preferred Shares at a price per Series A Preferred Share or per Equivalent Preferred Share (or having a conversion price per share, if a security convertible into Series A Preferred Shares or Equivalent Preferred Shares) less than the Current Market Price (as determined pursuant to Section 11(d) hereof) per Series A Preferred Share on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Series A Preferred Shares outstanding on such record date, plus the number of Series A Preferred Shares which the aggregate offering price of the total number of Series A Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of Series A Preferred Shares outstanding on such record date, plus the number of additional Series A Preferred Shares and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Series A Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of Series A Preferred Shares (including any such distribution made in connection with a consolidation, amalgamation or combination in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Series A Preferred Shares, but including any dividend payable in shares other than Series A Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price (as determined pursuant to Section 11(d) hereof) per Series A Preferred Share on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Series A Preferred Share and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d) hereof) per Series A Preferred Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (d)(i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per Common Share on any date shall be deemed to be the average of the daily closing prices per share of such Common Shares for the thirty (30) consecutive Trading Days (as hereinafter defined) immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per Common Share on any date shall be deemed to be the average of the daily closing prices per share of 12 17 such Common Shares for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the Current Market Price per Common Share is determined during a period following the announcement by the issuer of such Common Shares of (A) a dividend or distribution on such Common Shares payable in such Common Shares or securities convertible into such Common Shares (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Shares, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Board. If on any such date no market maker is making a market in the Common Shares, the fair value of such shares on such date as determined in good faith by the Board shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open for the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Shares is not publicly held or not so listed or traded, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (ii) For the purpose of any computation hereunder, the Current Market Price per Series A Preferred Share shall be determined in the same manner as set forth above for the Common Share in clause (i) of this Section 11(d) (other than the last sentence thereof). If the Current Market Price per Series A Preferred Share cannot be determined in the manner provided above or if the Series A Preferred Share is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per Series A Preferred Share shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as share splits, share dividends and recapitalizations with respect to the Common Shares occurring after the date of this Agreement) multiplied by the Current Market Price per Common Share. If neither the Common Shares nor the Series A Preferred Shares is publicly held or so listed or traded, Current Market Price per Series A Preferred Share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or other share or one-millionth of a Series A Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall 13 18 be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any share capital other than Series A Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Series A Preferred Shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Series A Preferred Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Series A Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Series A Preferred Share (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-hundredths of a Series A Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredth of a Series A Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Series A Preferred Share issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a 14 19 share and the number of one one-hundredths of a share which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then stated value, if any, of the number of one one-hundredths of a Series A Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable such number of one one-hundredths of a Series A Preferred Share at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a Series A Preferred Share and other share capital or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a Series A Preferred Share and other share capital or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board shall determine to be advisable in order that any (i) consolidation or subdivision of the Series A Preferred Shares, (ii) issuance wholly for cash of any Series A Preferred Shares at less than the Current Market Price, (iii) issuance wholly for cash of Series A Preferred Shares or securities which by their terms are convertible into or exchangeable for Series A Preferred Shares, (iv) share dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Series A Preferred Shares shall not be taxable to such shareholders. (n) The Company covenants and agrees that it shall not, without shareholder approval, at any time after the Distribution Date, (i) consolidate, amalgamate or otherwise combine under any applicable law with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (ii) sell or otherwise transfer (and/or permit any of its Subsidiaries to sell or otherwise transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, amalgamation, combination or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, amalgamation, combination or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof and to the extent necessary with required shareholder approval, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Record Date (i) declare a dividend on the outstanding Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding 15 20 Common Shares into a smaller number of shares, the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated with each Common Share immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of Common Shares outstanding immediately following the occurrence of such event. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly deliver to the Rights Agent, the registrar of the Company and each transfer agent for the Series A Preferred Shares and the Common Shares, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing Common Shares) in the manner set forth in Section 26 thereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have actually received such certificate. Section 13. Consolidation, Amalgamation or Sale or Transfer of Assets or Earning Power. (a) In the event that, following the Share Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, amalgamate, or otherwise combine with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation, amalgamation or combination, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall under any applicable law amalgamate or otherwise combine with or into, the Company, and the Company shall be the continuing or surviving corporation of such amalgamation or combination and, in connection with such amalgamation or combination, all or part of the outstanding Common Shares shall be changed into or exchanged for shares or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case (except as may be contemplated by Section 13(d) hereof), proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a Series A Preferred Share for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-hundredths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (2) fifty percent (50%) of the Current Market Price (determined pursuant to Section 11(d)(i) 16 21 hereof) per Common Share of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which Common Shares of the Company are converted in such amalgamation or combination, and if no securities are so issued, the Person that is the other party to such amalgamation or combination; and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Shares of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person, the Common Shares of which is and has been so registered, "Principal Party" shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Shares having the greatest aggregate market value. (c) The Company shall not, without shareholder approval, consummate any such consolidation, amalgamation, combination, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Shares which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, amalgamation, combination or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; and (ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive amalgamations or combinations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is 17 22 consummated with a Person or Persons who acquired Common Shares pursuant to a tender offer or exchange offer for all outstanding Common Shares which complies with the provisions of Section 11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or Persons), (ii) the price per Common Share offered in such transaction is not less than the price per Common Share paid to all holders of Common Shares whose shares were purchased pursuant to such tender offer or exchange offer and (iii) the form of consideration being offered to the remaining holders of Common Shares pursuant to such transaction is the same as the form of consideration paid pursuant to such tender offer or exchange offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire. Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of any such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates, with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date shall be as determined in good faith by the Board. The Company shall promptly notify the Rights Agent of any such determination of current market value. (b) The Company shall not be required to issue fractions of Series A Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a share of Series A Preferred Shares upon exercise of the Rights or to distribute certificates which evidence fractional Series A Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a share of Series A Preferred Shares). In lieu of fractional Series A Preferred Shares, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a share of Series A Preferred Shares. For purposes of this Section 14(b), the current market value of one one-hundredth of a Series A Preferred Share shall be one one-hundredth of the closing price of a share of Series A Preferred Share (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares. In lieu of fractional Common Shares, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) Common Share. For purposes of this Section 14(c), the current market value of one Common Share shall be the closing price of one Common Share (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. 18 23 (d) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of the benefits of the Rights evidenced by this Agreement, except the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of certificates representing the Common Shares); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of any certificate representing of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Shares; (b) after the Distribution Date, the Right Certificates are transferable only on the record books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, a certificate representing Common Shares) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or certificate representing Common Shares made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or of a beneficial interest in a Right other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a Series A Preferred Share or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until 19 24 the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the execution and/or administration of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement or the exercise or performance of its duties hereunder, including the costs and expenses of defending against any claim of liability. The indemnity provided for herein shall survive the expiration of the Rights and the termination of the Agreement. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with the administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any Rights Certificate or certificate for Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. 20 25 (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature thereof), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of Common Shares or Series A Preferred Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Common Shares or Series A Preferred Shares will, when so issued, be validly authorized and issued, fully paid and non-assessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of its obligations under the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken, suffered or omitted to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided that reasonable care was exercised in the selection and continued employment thereof. 21 26 (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company, the registrar of the Company and to each transfer agent of the Common Shares and Series A Preferred Shares, by registered or certified mail, and, subsequent to the Distribution Date, to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent, as the case may be, upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, the registrar of the Company and to each transfer agent of the Common Shares and Series A Preferred Shares, by registered or certified mail, and subsequent to the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a legal business entity organized and doing business under the laws of the United States or any State thereof, in good standing, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $25,000,000 or (b) an affiliate of a legal business entity described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent the registrar of the Company and each transfer agent of the Common Shares and the Series A Preferred Shares, and, subsequent to the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property issuable upon exercise of the Rights made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of share options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, 22 27 issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. (a) The Company may, at its option, at any time prior to the earlier of (i) the close of business on the Share Acquisition Date, or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any share subdivision or consolidation, dividend of shares or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, Common Shares (based on the Current Market Price, as defined in Section 11(d)(i) hereof, of the Common Shares at the time of redemption) or any other form of consideration deemed appropriate by the Board. (b) In deciding whether or not to exercise the Company's right of redemption hereunder, the Board shall act in good faith, in a manner they reasonably believe to be in the best interests of the Company and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances, and they may consider the long-term and short-term effects of any action upon employees, customers and creditors of the Company and upon communities in which offices or other establishments of the Company are located, and all other pertinent factors. (c) Immediately upon the action of the Board ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly following such action of the Board ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. (d) Notwithstanding the provisions of Section 23(a) hereof, in the event that a majority of the Board is elected by shareholder action by written consent, or is comprised of persons elected at a meeting of shareholders who were not nominated by the Board in office immediately prior to such meeting, then for a period of one hundred and eighty (180) days following the effectiveness of such election the Rights shall not be redeemed if such redemption is reasonably likely to have the purpose or effect of allowing any Person to become an Acquiring Person or otherwise facilitating the occurrence of a Triggering Event or a transaction with an Acquiring Person. Section 24. Exchange. (a) The Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any share split, share dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board shall not be empowered to effect such 23 28 exchange at any time after any person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the Common Shares then outstanding. (b) Immediately upon the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute Series A Preferred Shares (or Equivalent Preferred Shares, as such term is defined in paragraph (b) of Section 11 hereof) for Common Shares exchangeable for rights, at the initial rate of one one-hundredth of a Series A Preferred Share (or Equivalent Preferred Shares) for each Common Share, as appropriately adjusted to reflect share splits, share dividends and other similar transactions after the date hereof. (d) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall use its best efforts to authorize additional Common Shares for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Common Shares would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Common Share. For the purposes of this subsection (e), the Current Market Value of a whole Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. Notice of Proposed Actions. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in share of any class to the holders of Series A Preferred Shares or to make any other distribution to the holders of Series A Preferred Shares (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Series A Preferred Shares rights or warrants to subscribe for or to purchase any additional Series A Preferred Shares or shares of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Series A Preferred Shares (other than a reclassification involving only the subdivision of outstanding Series A Preferred Shares), or (iv) to effect under any applicable law any consolidation or amalgamation into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect and/or to permit one or more of its subsidiaries to effect any sale or other transfer, in one transaction or a series of related transactions, of more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder 24 29 of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such share dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, amalgamation, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Series A Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the Series A Preferred Shares for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Series A Preferred Shares, whichever shall be the earlier. The failure to give notice required by this Section or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. (b) Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date a public filing by the Company with the United States Securities and Exchange Commission shall constitute sufficient notice to the holders of securities of the Company, including the rights, for purposes of this Agreement and no other notice need be given to such holders. (c) If a Triggering Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, and to the Rights Agent, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) or 13, as the case may be, and (ii) all references in Section 25(a) to Series A Preferred Shares shall be deemed thereafter to refer to Common Shares and/or, if appropriate, other securities. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the following registered office of the Company or such other address as the Company shall specify in writing to the Rights Agent: Trenwick Group Ltd. Continental Building 25 Church Street Hamilton HM112 Bermuda Attention: Corporate Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the following address or such other address as the Rights Agent shall specify in writing to the Company (until another address is filed in writing with the Company) as follows: First Chicago Trust Company of New York 525 Washington Boulevard, Suite 4660 Jersey City, New Jersey 07310 Attention: Tenders and Exchange Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing Common Shares) shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the address of such holder shown on the share register of the Company. Section 27. Supplements, Deletions and Amendments. Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement, remove or amend any provision of this Agreement without the approval of any holders of certificates representing Common Shares. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement, remove or amend this Agreement without the approval of any holders of Rights 25 30 Certificates in order (i) to cure any ambiguity, (ii) to correct, remove or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change, remove or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which, in the opinion of the Company shall not adversely affect the interests of the holders of Rights Certificates (other then an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided that, from and after the Distribution Date, this Agreement may not be supplemented or amended to lengthen any time period hereunder, pursuant to clause (iii) of this sentence unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Shares. Notwithstanding anything contained herein to the contrary, this Agreement may not be amended at a time when the rights are not redeemable. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board, etc. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding of Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Shares). Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, such and if the right of redemption set forth in Section 23 hereof shall at that time not be capable of exercise pursuant to the terms thereof, right of redemption shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board. Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be governed by and construed in accordance with the laws of Bermuda, and the parties 26 31 hereto consent to service and jurisdiction in the courts of Bermuda with respect to any action arising out of or relating to the Agreement, a Right or a Rights Certificate issued hereunder. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are included for convenience of reference only, do not constitute part of this Agreement and shall be ignored in the construction and interpretation of any of the provisions hereof. 27 32 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: TRENWICK GROUP LTD. By: By: - ----------------------------------------------------- ----------------------------------------------------- Name: John V. Del Col Name: James F. Billett, Jr. Title: Corporate Secretary Title: Chairman, President and Chief Executive Officer Attest: FIRST CHICAGO TRUST COMPANY OF NEW YORK By: By: - ----------------------------------------------------- ----------------------------------------------------- Name: Michael Duncan Name: Michael Duncan Title: Director Title: Director
33 Exhibit A CERTIFICATE OF DESIGNATION; PREFERENCES AND RIGHTS OF SERIES A FIRST PREFERENCE SHARES OF TRENWICK GROUP LTD. $.10 PAR VALUE PER SHARE Pursuant to Section 44 of the Bye-laws of Trenwick Group Ltd. We, James F. Billett, Jr., Chairman of the Board, and John V. Del Col, Corporate Secretary, of Trenwick Group Ltd., a company organized under the Companies Act, 1981 of the Islands, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Bye-laws of the Company, the said Board of Directors on August __, 2000, adopted the following resolution creating a series of ____________ Preferred Shares designated as Series A First Preference Shares: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Company in accordance with the provisions of its Bye-laws, a series of Preferred Shares of the Company be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A First Preference Shares" and the number of shares constituting such series shall be ____________. Section 2. Dividends and Distributions. (A) Holders of any Series A Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first business day of January, April, July and October of each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a Series A Preferred Share, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Common Shares or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared on the Common Shares, $.10 par value per share, of the Company (the "Common Shares") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A First Preference Shares. In the event the Company shall at any time after __________, 2000 (the "Record Date") (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount to which holders of shares of Series A First Preference Shares were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series A First Preference Shares as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares); provided that, in the event no dividend or distribution shall have been declared on the Common Shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of A-1 34 $1.00 per share on the Series A First Preference Shares shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A First Preference Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A First Preference Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A First Preference Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A First Preference Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A First Preference Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A First Preference Shares shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A First Preference Shares shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Company. In the event the Company shall at any time after the Record Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A First Preference Shares were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A First Preference Shares and the holders of Common Shares shall vote together as one class on all matters submitted to a vote of shareholders of the Company. (C) (i) If at any time dividends on any Series A First Preference Shares shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A First Preference Shares then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Shares (including holders of the Series A First Preference Shares) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A First Preference Shares may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of shareholders, and thereafter at annual meetings of shareholders, provided that such voting right shall not be exercised unless the holders of ten percent (10%) in number of Preferred Shares outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Shares shall not affect the exercise by the holders of Preferred Shares of such voting right. At any meeting at which the holders of Preferred Shares shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is A-2 35 exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Shares shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Shares shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Shares as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A First Preference Shares. (iii) Unless the holders of Preferred Shares shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any shareholder or shareholders owning in the aggregate not less than ten percent (10%) of the total number of Preferred Shares outstanding, irrespective of series, may request, the calling of special meeting of the holders of Preferred Shares, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Company. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Preferred Shares by mailing a copy of such notice to him at his last address as the same appears on the books of the Company. Such meeting shall be called for a time not earlier than twenty (20) days and not later than sixty (60) days after such order or request or in default of the calling of such meeting within sixty (60) days after such order or request, such meeting may be called on similar notice by any shareholder or shareholders owning in the aggregate not less than ten percent (10)% of the total number of Preferred Shares outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called during the period within sixty (60) days immediately preceding the date fixed for the next annual meeting of the shareholders. (iv) In any default period, the holders of Common Shares, and other shares of the Company if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Shares shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Shares shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of shares which elected the Director whose office shall have become vacant. References in this Paragraph (C) to Directors elected by the holders of a particular class of shares shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Shares as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Shares as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the memorandum of association or bye-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A First Preference Shares shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A First Preference Shares as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid A-3 36 dividends and distributions, whether or not declared, on shares of Series A First Preference Shares outstanding shall have been paid in full, the Company shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A First Preference Shares; (ii) declare or pay dividends on or make any other distributions on any shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A First Preference Shares, except dividends paid ratably on the Series A First Preference Shares and all such parity shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A First Preference Shares, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for any shares of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A First Preference Shares; (iv) purchase or otherwise acquire for consideration any shares of Series A First Preference Shares, or any shares of stock ranking on a parity with the Series A First Preference Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A First Preference Shares purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued Preferred Shares and may be reissued as part of a new series of Preferred Shares to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Subject to the prior and superior rights of holders of any shares of any series of Preferred Shares ranking prior and superior to the shares of Series A First Preference Shares with respect to liquidation, dissolution or winding up rights, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A First Preference Shares unless, prior thereto, the holders of shares of Series A First Preference Shares shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A First Preference Shares unless, prior thereto, the holders of Common Shares shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in sub paragraph (C) below to reflect such events as share splits, share dividends and recapitalizations with respect to the Common Shares) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A First Preference Shares and Common Shares, respectively, holders of Series A First Preference Shares and holders of Common Shares shall receive their ratable and proportionate share of the remaining A-4 37 assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Shares and Common Shares, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred shares, if any, which rank on a parity with the Series A First Preference Shares, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Shares. (C) In the event the Company shall at any time after the Record Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. Section 7. Consolidation, Amalgamation, etc. In case the Company shall enter into any consolidation, amalgamation, combination or other transaction in which the Common Shares are exchanged for or changed into other shares or securities, cash and/or any other property, then in any such case the Series A First Preference Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged. In the event the Company shall at any time after the Record Date (i) declare any dividend on Common Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the outstanding Common Shares into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A First Preference Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A First Preference Shares shall not be redeemable. Section 9. Ranking. The Series A First Preference Shares shall rank junior to all other series of the Company's Preferred Shares as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Amendment. The Bye-laws of the Company shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A First Preference Shares so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A First Preference Shares, voting separately as a class. Section 11. Fractional Shares. Series A First Preference Shares may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A First Preference Shares. A-5 38 IN WITNESS WHEREOF, we have executed and subscribed this Extract from the Minutes of the Meeting of the Board of Directors of Trenwick Group Ltd. creating the Series A First Preference Shares and do affirm the foregoing as true under the penalties of perjury this ____ day of ____________ , 2000. James F. Billett, Jr. Chairman of the Board, President and Chief Executive Officer Attest: John V. Del Col Corporate Secretary A-6 39 Exhibit B [Form of Rights Certificate] Certificate No. R- ________Rights NOT EXERCISABLE AFTER THE EARLIER OF AUGUST __, 2010 AND THE DATE ON WHICH THE RIGHTS EVIDENCED HEREBY ARE REDEEMED BY THE COMPANY AS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.](1) Rights Certificate TRENWICK GROUP LTD. This certifies that ________________ or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of August __, 2000 (the "Rights Agreement"), between Trenwick Group Ltd., a company organized under the laws of Bermuda (the "Company"), and First Chicago Trust Company of New York, a New York corporation (the "Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on August __, 2010 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series A First Preference Shares (the "Series A Preferred Shares") of the Company, at a purchase price of $____ per one one-hundredth of a share (the "Purchase Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of August __, 2000, based on the Series A Preferred Shares as constituted at such date. The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole Series A Preferred Shares will be issued. Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event. As provided in the Rights Agreement, the Purchase Price and the number and kind of Series A Preferred Shares or other securities, which may be purchased upon the exercise of the Rights evidenced by - --------------- (1) The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence. B-1 40 this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent. This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a share of Series A Preferred Shares as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.01 per Right at any time prior to the earlier of the close of business on (i) the tenth day following the Share Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. The foregoing notwithstanding, the Rights generally may not be redeemed for one hundred eighty (180) days following a change in a majority of the Board as a result of a proxy contest. No fractional Series A Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than, except that the possible requirement that prior to the occurrence of a Triggering Event only whole Series A Preferred Shares be issued, fractions which are integral multiples of one one-hundredth of a Series A Preferred Share, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Series A Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. B-2 41 This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ____________, 20__ ATTEST: TRENWICK GROUP LTD. By: ---------------------------------------------------- Title:
Secretary Countersigned: FIRST CHICAGO TRUST COMPANY OF NEW YORK By: - ----------------------------------- Authorized Signature B-3 42 [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate.) FOR VALUE RECEIVED - -------------------------------------------------------------------------------- hereby sells, assigns and transfers unto ------------------------------------------------------------------------ (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________ Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution. Dated: , 20__ Signature Signature Guaranteed: B-4 43 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: , 20__ Signature Signature Guaranteed: B-5 44 NOTICE The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. B-6 45 FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights represented by the Rights Certificate.) To: TRENWICK GROUP LTD.: The undersigned hereby irrevocably elects to exercise ______ Rights represented by this Rights Certificate to purchase the Series A Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: Please insert social security or other identifying number (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Rights Certificate a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number (Please print name and address) Dated: ____________, 20__ Signature Signature Guaranteed: B-7 46 Certificate The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: ____________, 20__ Signature Signature Guaranteed: NOTICE The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever. B-8 47 Exhibit C SUMMARY OF RIGHTS TO PURCHASE SERIES A PREFERRED SHARES On August __, 2000 the board of Directors of Trenwick Group Ltd. (the "Company") approved the Rights Agreement and authorized and declared a dividend distribution of one Right for each Common Share, $.10 par value per share, of the Company to be issued at the close of business on August __, 2000 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A First Preference Shares, par value $.10 per share (the "Preferred Shares"), at a Purchase Price of $______, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and First Chicago Trust Company of New York, as Rights Agent. Initially, the Rights will be attached to all Common Share certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. The Rights will separate from the Common Shares and a Distribution Date will occur upon the earlier of (i) ten (10) days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of ten percent (10%) or more of the outstanding Common Shares (the "Share Acquisition Date"), other than as a result of repurchases of shares by the Company or certain inadvertent actions by institutional or certain other shareholders, or (ii) ten (10) business days (or such later date as the Board shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning ten percent (10%) or more of such outstanding Common Shares. Until the Distribution Date, (i) the Rights will be evidenced by the Common Share certificates and will be transferred with and only with such Common Share certificates, (ii) new Common Share certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Common Shares outstanding will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. Pursuant to the Rights Agreement, the Company reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so that only whole Preferred shares will be issued. The Rights are not exercisable until the Distribution Date and will expire at the close of business on August __, 2010, unless earlier redeemed by the Company as described below. As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise determined by the Board, only Common Shares issued prior to the Distribution Date will be issued with Rights. In the event that a Person becomes an Acquiring Person (except pursuant to an offer for all outstanding Common Shares which the independent directors determine not to be inadequate to and otherwise in the best interests of the Company and its shareholders), each holder of a Right will thereafter have the right to receive, upon exercise, Common Shares (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable following the occurrence of the event set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. For example, at an exercise price of $____ per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $____ worth of Common Shares (or other consideration, as noted above) for $____. C-1 48 Assuming that the Common Shares had a per share value of $36.50 at such time, the holder of each valid Right would be entitled to purchase approximately 6.8 Common Shares for $________. In the event that, at any time following the Share Acquisition Date, (i) the Company is acquired in a consolidation, amalgamation or other business combination transaction in which the Company is not the surviving corporation (other than a consolidation, amalgamation or combination which follows an offer described in the second preceding paragraph), or (ii) fifty percent (50%) or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common shares of the acquiring company having a value equal to two times the exercise price of the Right. The events set forth in this paragraph and in the second preceding paragraph are referred to as the "Triggering Events." At any time after a person becomes an Acquiring Person and prior to the acquisition by such person or group of fifty percent (50%) or more of the outstanding Common Shares, the Board may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one Common Share, or one one-hundredth of a Preferred Share (or of a share of a class of series of the Company's preferred shares having equivalent rights, preferences and privileges), per Right (subject to adjustment). Generally, at any time until ten (10) days following the Share Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (payable in cash, Common Shares or other consideration deemed appropriate by the Board). Immediately upon the action of the Board ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $.01 redemption price. The foregoing notwithstanding, the Rights generally may not be redeemed for one hundred eighty (180) days following a change in a majority of the Board as a result of a proxy contest. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to shareholders or to the Company, shareholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Shares (or other consideration) of the Company or for common shares of the acquiring company as set forth above. Any of the provisions of the Rights Agreement may be amended by the Board prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights, or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment may be made at such time as the Rights are not redeemable. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. C-2 EX-5.1 8 ex5-1.txt OPINION RE VALIDITY 1 [APPLEBY SPURLING & KEMPE LETTERHEAD] EXHIBIT 5.1 Trenwick Group Ltd. Continental Building 23 August 2000 25 Church Street Hamilton HM 12 Bermuda Ladies and Gentlemen: We have acted as legal counsel in Bermuda to Trenwick Group Ltd., a company organised under the laws of Bermuda (the "Company") and this opinion as to Bermuda law is addressed to you in connection with the registration under the Securities Act of 1933, as amended, of the United States (the "Securities Act"), by the Company of the Company's (i) 36,743,467 common shares, US$0.10 per share (the "Shares"), and (ii) related Series A First Preference Share Purchase Rights (the "Rights") (collectively, the "Securities"), issuable in connection with the transactions contemplated by the Business Combination Agreement (as defined below). The documents include: (i) The Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of 20 March 2000 and amended as of 28 June 2000 (the "Business Combination Agreement"), by and among LaSalle Re Holdings Limited ("LaSalle Re Holdings"), LaSalle Re Limited ("LaSalle Re"), Trenwick Group Inc. ("Trenwick") and the Company (formerly known as Gowin Holdings International Limited). (ii) The Joint Proxy Statement/Prospectus dated 22 August 2000 (the "Joint Proxy Statement/Prospectus") of Trenwick, LaSalle Re Holdings and LaSalle Re as filed with the Securities and Exchange Commission, Washington D.C. (the "SEC"). (iii) The registration statement on Form S-4 of the Company relating to the Securities to be filed with the SEC (the "Registration Statement"). (The Business Combination Agreement, the Joint Proxy Statement/Prospectus and the Registration Statement are hereinafter collectively referred to as the "Subject Agreements".) For the purposes of this opinion we have examined and relied upon the documents listed in the Schedule to this opinion (the "Documents"). Unless otherwise defined herein, capitalised terms have the meanings assigned to them in the Joint Proxy Statement/Prospectus. ASSUMPTIONS In stating our opinion we have assumed: (a) the authenticity, accuracy and completeness of all Documents submitted to us as originals and the conformity to authentic original Documents of all Documents submitted to us as certified, conformed, notarised, faxed or photostatic copies; (b) the genuineness of all signatures on the Documents; (c) the authority, capacity and power of each of the persons signing the Documents (other than the Company in respect of the Subject Agreements); (d) that any representation, warranty or statement of fact or law, other than as to the laws of Bermuda, made in any of the Documents is true, accurate and complete; (e) that the Subject Agreements constitute the legal, valid and binding obligations of each of the parties thereto, other than the Company, under the laws of its jurisdiction of incorporation or its jurisdiction of formation; 2 (f) that the Subject Agreements have been or will be validly authorised, executed and delivered by each of the parties thereto, other than the Company, and the performance thereof is within the capacity and powers of each such party thereto, and that each such party to which the Company purportedly delivered any of the Subject Agreements to date has actually received and accepted delivery of such Subject Agreements; (g) that the Subject Agreements will effect, and will constitute legal, valid and binding obligations of each of the parties thereto, other than the Company, enforceable in accordance with their terms, under the laws of the jurisdictions by which they are expressed to be governed; (h) that the Subject Agreements are in the proper legal form to be admissible in evidence and enforced in the courts of the jurisdictions named therein and in accordance with the laws of such jurisdictions; (i) that there are no provisions of the laws or regulations of any jurisdiction other than Bermuda which would be contravened by the execution or delivery of the Subject Agreements or which would have any implication in relation to the opinion expressed herein and that, in so far as any obligation under, or action to be taken under, the Subject Agreements is required to be performed or taken in any jurisdiction outside Bermuda, the performance of such obligation or the taking of such action will constitute a valid and binding obligation of each of the parties thereto under the laws of that jurisdiction and will not be illegal by virtue of the laws of that jurisdiction; (j) that the records which were the subject of the Company Search were complete and accurate at the time of such search and disclosed all information which is material for the purposes of this opinion and such information has not since the date of the Company Search been materially altered; (k) that the records which were the subject of the Litigation Search were complete and accurate at the time of such search and disclosed all information which is material for the purposes of this opinion and such information has not since the date of the Litigation Search been materially altered; (l) that the Resolutions are in full force and effect and have not been rescinded, either in whole or in part, and accurately record the resolutions adopted by all the Directors of the Company as unanimous written resolutions of the Board and that there is no matter affecting the authority of the Directors to enter into the Subject Agreements, not disclosed by the Constitutional Documents or the Resolutions, which would have any adverse implication in relation to the opinions expressed herein; (m) that the form of Subject Agreements which we have examined for the purposes of this opinion do not or will not differ in any material respect from those agreements approved by the Board of Directors pursuant to the Resolutions, and that, when executed and delivered, the Subject Agreements will be in a form which does not differ in any material respect from the drafts which we have examined for the purposes of this opinion; (n) that the parties to the Subject Agreements, other than the Company, have no express or constructive knowledge of any circumstance whereby any Director of the Company, when the Board of Directors of the Company adopted the Resolutions, failed to discharge his fiduciary duty owed to the Company and to act honestly and in good faith with a view to the best interests of the Company; (o) that the Company has entered into its obligations under the Subject Agreements in good faith for the purpose of carrying on its business and that, at the time it did so, there were reasonable grounds for believing that the transactions contemplated by the Subject Agreements would benefit the Company; and (p) that each transaction to be entered into pursuant to the Subject Agreements is entered into in good faith and for full value and will not have the effect of preferring one creditor over another. 2 3 OPINION Based upon and subject to the foregoing and subject to the reservations set out below and to any matters not disclosed to us, we are of the opinion that: (1) All necessary action required to be taken by the Company pursuant to Bermuda law has been taken by or on behalf of the Company and all the necessary authorisations and approvals of Governmental authorities in Bermuda have been duly obtained for the issue by the Company of the Securities. (2) When duly issued and paid for pursuant to and in accordance with the terms of the Subject Agreements and the Resolutions the Shares will be validly issued, fully paid, non-assessable shares of the Company. (3) When duly issued and paid for and when executed and delivered pursuant to and in accordance with the terms of the Subject Agreements and the Resolutions, the Rights will be validly issued, valid and binding obligations of the Company. (4) The issue of the Shares and the issue of the Rights do not and will not violate, conflict with or constitute a default under (i) any requirement of any law or any regulation of Bermuda or (ii) the Constitutional Documents as that term is defined in paragraph 7 of the Schedule to this opinion. RESERVATIONS We have the following reservations: (a) The term "enforceable" as used in this opinion means that there is a way of ensuring that each party performs an agreement or that there are remedies available for breach. (b) We express no opinion as to the availability of equitable remedies such as specific performance or injunctive relief, or as to any matters which are within the discretion of the courts of Bermuda in respect of any obligations of the Company as set out in the Subject Agreements. Further, we express no opinion as to the validity or binding effect of any waiver of or obligation to waive either any provision of law (whether substantive or procedural) or any right or remedy. (c) Enforcement of the obligations of the Company under the Subject Agreements may be limited or affected by applicable laws from time to time in effect relating to bankruptcy, insolvency or liquidation or any other laws or other legal procedures affecting generally the enforcement of creditors' rights. (d) Enforcement of the obligations of the Company may be the subject of a statutory limitation of the time within which such proceedings may be brought. (e) We express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law as applied by the Courts of Bermuda at the date hereof. (f) Where an obligation is to be performed in a jurisdiction other than Bermuda, the courts of Bermuda may refuse to enforce it to the extent that such performance would be illegal under the laws of, or contrary to public policy of, such other jurisdiction. (g) We express no opinion as to the validity, binding effect or enforceability of any provision incorporated into any of the Subject Agreements by reference to a law other than that of Bermuda, or as to the availability in Bermuda of remedies which are available in other jurisdictions. (h) Where a person is vested with a discretion or may determine a matter in his or its opinion, such discretion may have to be exercised reasonably or such an opinion may have to be based on reasonable grounds. (i) Any provision in the Subject Agreements that certain calculations or certificates will be conclusive and binding will not be effective if such calculations or certificates are fraudulent or erroneous on their face and will not necessarily prevent juridical enquiries into the merits of any claim by an aggrieved party. (j) Any reference in this opinion to shares being "non-assessable" shall mean, in relation to fully-paid shares of the Company and subject to any contrary provision in any agreement in writing between such 3 4 Company and the holder of shares, that: no shareholder shall be obliged to contribute further amounts to the capital of the Company, either in order to complete payment for their shares, to satisfy claims of creditors of the Company, or otherwise; and no shareholder shall be bound by an alteration of the Memorandum of Association or Bye-Laws of the Company after the date on which he became a shareholder, if and so far as the alteration requires him to take, or subscribe for additional shares, or in any way increases his liability to contribute to the share capital of, or otherwise to pay money to, the Company. (k) In paragraph (1) above, the term "good standing" means that the Company has received a Certificate of Compliance from the Registrar of Companies. (l) Searches of the Register of Companies at the office of the Registrar of Companies and of the Supreme Court Causes Book at the Registry of the Supreme Court are not conclusive and it should be noted that the Register of Companies and the Supreme Court Causes Book do not reveal: (i) whether an application to the Supreme Court for a winding up petition or for the appointment of a receiver or manager has been prepared but not yet been presented or has been presented but does not appear in the Causes Book at the date and time the Search is concluded; (ii) whether any arbitration or administrative proceedings are pending or whether any proceedings are threatened, or whether any arbitrator has been appointed; (iii) details of matters which have been lodged for filing or registration which as a matter of general practice of the Registrar of Companies would have or should have been disclosed on the public file but have not actually been registered or to the extent that they have been registered have not been disclosed or do not appear in the public records at the date and time the search is concluded; (iv) details of matters which should have been lodged for registration but have not been lodged for registration at the date the search is concluded; or (v) whether a receiver or manager has been appointed privately pursuant to the provisions of a debenture or other security, unless notice of the fact has been entered in the Register of Charges in accordance with the provisions of the Act. Furthermore, in the absence of a statutorily defined system for the registration of charges created by companies incorporated outside Bermuda ("overseas companies") over their assets located in Bermuda, it is not possible to determine definitively from searches of the Register of Charges maintained by the Registrar of Companies in respect of such overseas companies what charges have been registered over any of their assets located in Bermuda or whether any one charge has priority over any other charge over such assets. (m) In order to issue this opinion we have carried out the Company Search as referred to in the Schedule to this opinion and have not enquired as to whether there has been any change since the date of such search. (n) In order to issue this opinion we have carried out the Litigation Search as referred to in the Schedule to this opinion and have not enquired as to whether there has been any change since the date of such search. DISCLOSURE This opinion is addressed to you in connection with the registration of the Shares and the Rights with the Securities and Exchange Commission and is not to be made available to, or relied on by any other person or entity, or for any other purpose, without our prior written consent. We consent to the filing of this opinion as an exhibit to the Registration Statement of the Company. We also consent to the reference to our Firm under the captions "Legal Matters" in the Joint Proxy Statement/Prospectus which forms a part of the Registration Statement. 4 5 This opinion is addressed to you solely for your benefit and is neither to be transmitted to any other person, nor relied upon by any other person or for any other purpose nor quoted or referred to in any public document nor filed with any governmental agency or person, without our prior written consent, except as may be required by law or regulatory authority. Further, this opinion speaks as of its date and is strictly limited to the matters stated herein and we assume no obligation to review or update this opinion if applicable laws or the existing facts or circumstances should change. This opinion is governed by and is to be construed in accordance with Bermuda law. It is given on the basis that it will not give rise to any legal proceedings with respect thereto in any jurisdiction other than Bermuda. Yours faithfully, /s/ APPLEBY SPURLING & KEMPE - -------------------------------------- Appleby Spurling & Kempe 5 6 SCHEDULE 1. A copy of the Business Combination Agreement. 2. A copy of the Joint Proxy Statement/Prospectus. 3. A copy of the Registration Statement. 4. The entries and filings shown in respect of the Company on the file of the Company maintained in the Register of Companies at office of the Registrar of Companies in Hamilton, Bermuda, as revealed by a search on 21 July 2000 (the "Company Search"). 5. The entries and filings shown in respect of the Company in the Supreme Court Causes Book maintained at the Registry of the Supreme Court in Hamilton, Bermuda, as revealed by a search on 21 July 2000 in respect of the Company (the "Litigation Search"). 6. Certified copies of the minutes of the meetings of the board of directors of the Company held on 16 December 1999 and 15 March 2000 (the "Resolutions"). 7. Originals of the Certificate of Incorporation, the Memorandum of Association, the Certificate of Incorporation on Change of Name and the revised Bye-laws (adopted 22 March 2000) for the Company (collectively referred to as the "Constitutional Documents"). 8. A Certificate of Compliance, dated 20 July 2000 issued by the Ministry of Finance in respect of the Company. 9. The original "Foreign Exchange Letter", dated 14 December 1999, issued by the Bermuda Monetary Authority, Hamilton Bermuda in relation to the Company. 10. The original "Tax Assurance Letter", dated 13 January 2000, issued by the Registrar of Companies for the Minister of Finance in relation to the Company. 11. The original Register of Directors and Officers in respect of the Company. 6 EX-8.1 9 ex8-1.txt OPINION RE TAX MATTERS 1 EXHIBIT 8.1 [BAKER & MCKENZIE LETTERHEAD] Trenwick Group Inc. August 23, 2000 One Canterbury Green Stamford, Connecticut 06901 Trenwick Group Ltd. Continental Building 25 Church St. Hamilton HM 12 Bermuda Re: U.S. Federal Income Tax Consequences of the Acquisition of the Assets and the Assumption of the Liabilities of Trenwick Group Inc. by Trenwick Group Ltd. Ladies and Gentlemen: We have acted as your counsel, in connection with the acquisition of the assets and the assumption of the liabilities (the "Reorganization") of Trenwick Group, Inc., a Delaware corporation ("Trenwick") by Gowin Holdings International Limited, a newly formed Bermuda holding company which has changed its name to Trenwick Group Ltd. ("TGL"), pursuant to the Amended and Restated Agreement, Scheme of Arrangement and Plan of Reorganization by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick and TGL dated as of March 20, 2000 and amended as of June 28, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization, each share of common stock, $0.10 par value per share, of Trenwick (the "Trenwick Shares") shall be converted into the right to receive 1 common share, $0.10 par value per share, of TGL (the "TGL Shares") subject to adjustment in accordance with Section 2.7 of the Reorganization Agreement. You have requested certain opinions regarding the U.S. federal income tax treatment of the Reorganization. In providing these opinions, we have relied on and assumed the accuracy of (without any independent investigation or review thereof) (i) the description of the transaction as set forth in the Reorganization Agreement and the exhibits thereto, (ii) the description of the transaction as set forth in the joint proxy statement and prospectus on Schedule 14A (file no. 1-15389) (the "Registration Statement"), (iii) the representations provided by Trenwick concerning certain facts underlying and relating to the Reorganization, and (iv) the representations provided by TGL concerning certain facts underlying and relating to the Reorganization. Based upon and subject to the foregoing, it is our opinion that: (i) no gain or loss will be recognized by United States shareholders of Trenwick upon the receipt of solely TGL Shares pursuant to the Reorganization Agreement (except with respect to cash received in lieu of a fractional share interest in TGL shares); (ii) the Reorganization will qualify as a tax-free reorganization within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); (iii) Trenwick will be required to recognize gain, but not loss, with respect to each asset it transfers to TGL pursuant to the Reorganization under section 367(a) of the Code; and (iv) the discussions of the material United States federal income tax consequences to Trenwick and its shareholders and to TGL and the subsidiaries and the shareholders of TGL set forth in the Proxy Statement under the captions "The Transactions -- Material Income Tax Consequences of the Transactions -- Taxation of the Transactions -- United States," "The Transactions -- Material Income Tax Consequences of the Transactions -- Taxation of Trenwick Group Ltd. and Its Subsidiaries after the 2 Transactions -- United States," and "The Transactions -- Material Income Tax Consequences of the Transactions -- Taxation of Shareholders of Trenwick Group Ltd. -- United States" are complete and accurate in all material respects, but are limited by the qualifications set forth in the Proxy Statement section captioned "The Transactions -- Material Income Tax Consequences of the Transactions." This opinion is based on current provisions of the Code, the Treasury regulations promulgated thereunder, and the interpretation of the Code and such regulations by the courts and the Internal Revenue Service, as they are in effect and exist at the date of this opinion. It should be noted that statutes, regulations, judicial decisions and administrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. A material change that is made after the date hereof in any of the foregoing bases for our opinion could adversely affect our conclusions. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to all references to this firm under the headings "The Transaction -- Material Income Tax Consequences of the Transactions" and "Legal Matters". In giving this consent, this firm does not thereby admit that it comes within the category of person whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Sincerely, /s/ BAKER & MCKENZIE -------------------------------------- Baker & McKenzie EX-8.2 10 ex8-2.txt OPINION RE UK TAX CONSEQUENCES 1 EXHIBIT 8.2 [BAKER & MCKENZIE LETTERHEAD] August 23, 2000 Trenwick Group Inc. One Canterbury Green Stamford, Connecticut 06901 Trenwick Group Ltd. Continental Building 25 Church Street Hamilton HM 12 Bermuda Re: United Kingdom Tax Consequences described in the Joint Proxy Statement and Prospectus Ladies and Gentlemen: We have acted as counsel to Trenwick Group Inc., a Delaware corporation ("Trenwick"), and Gowin Holding International Limited, a newly formed Bermuda holding company which has changed its name to Trenwick Group Ltd. ("TGL"), in connection with the filing with the Securities and Exchange Commission of a Joint Proxy Statement and Prospectus on Schedule 14A (file no. 1-15389) (the "Registration Statement") under the Securities Act of 1934, as amended, concerning the Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization by and among LaSalle Re Holdings Limited, LaSalle Re Limited, Trenwick and TGL dated as of March 20, 2000 and amended as of June 28, 2000. We have made such inquiries and examined such records and documents, including the Proxy Statement and representations provided by Trenwick and TGL, as we have deemed relevant and necessary, as the basis of our opinion set forth below. On the basis of the forgoing, in our opinion, under present United Kingdom tax law and practice as in effect as of the date hereof, the discussions of the United Kingdom tax consequences of the schemes of arrangement and plan of reorganization to Trenwick, TGL and their United Kingdom resident subsidiaries set forth in the Proxy Statement under the captions "The Transactions -- Material Income Tax Consequences of the Transactions -- Taxation of the Transactions -- United Kingdom," and "The Transactions -- Material Income Tax Consequences of the Transactions -- Taxation of Trenwick Group Ltd. and Its Subsidiaries after the Transactions -- United Kingdom," as summaries are accurate in all material respects. This opinion is limited by the qualifications set forth in the Proxy Statement section captioned "The Transactions -- Material Income Tax Consequences of the Transactions." It is possible that contrary positions may be taken by the Inland Revenue and that a court may agree with such contrary positions. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and all references to this firm under the headings "The Transaction -- Material Income Tax Consequences of the Transaction" and "Legal Matters". In giving this consent, this firm does not thereby admit that it comes within the category of person whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Very truly yours, /s/ BAKER & MCKENZIE -------------------------------------- Baker & McKenzie EX-8.3 11 ex8-3.txt OPINION RE TAX MATTERS 1 EXHIBIT 8.3 [LETTERHEAD OF MAYER, BROWN & PLATT] August 23, 2000 LaSalle Re Holdings Limited Continental Building 25 Church Street Hamilton, HM 12, Bermuda Ladies and Gentlemen: We have acted as your counsel in connection with: (i) the proposed schemes of arrangement (the "Schemes") of LaSalle Re Holdings Limited ("LaSalle") and LaSalle Re Limited ("LaSalle Re"), pursuant to which existing common shareholders of LaSalle and holders of exchangeable non-voting common shares of LaSalle Re (other than LaSalle) will receive common shares of Trenwick Group Ltd. ("TGL") in exchange for their LaSalle and LaSalle Re shares; (ii) the simultaneous proposed reorganization of Trenwick Group Inc. (the "Reorganization") in which TGL will acquire the assets of Trenwick Group Inc.; and (iii) the preparation and filing of the related Joint Proxy Statement/Prospectus (the "Proxy Statement") and the Registration Statement on Form S-4 of which the Proxy Statement forms a part (the "Registration Statement"), filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Capitalized terms used but not defined herein shall have the meaning given to such terms in the Proxy Statement. Pursuant to the Schemes, the common shareholders of LaSalle and the holders of exchangeable non-voting common of LaSalle Re (collectively, the "Exchanging Shareholders") will receive one TGL common share (a "TGL Share") (subject to adjustments) in exchange for each LaSalle common share or exchangeable non-voting common share of LaSalle Re. TGL will not issue fractional TGL common shares. Therefore, the Exchanging Shareholders will receive cash with respect to any fractional shares of TGL due them. You have requested our opinion concerning certain United States federal income tax consequences of the Schemes and Reorganization. In providing this opinion, we have relied on and assumed the accuracy of (without any independent investigation or review thereof): (i) the description of the Schemes and Reorganization as set forth in the Schemes and the exhibits thereto, including the representations and covenants of LaSalle, LaSalle Re and TGL contained therein; (ii) the description of the Schemes and Reorganization as set forth in the Proxy Statement and the exhibits thereto; and (iii) representations provided by LaSalle, LaSalle Re and TGL concerning certain facts underlying and relating to the Schemes and Reorganization. In addition, we have assumed that: (i) the Schemes and Reorganization will be reported by LaSalle, LaSalle Re and TGL in a manner consistent with the opinion set forth below; (ii) any representation or statement that is anticipated to be true or that is made "to the best of knowledge" or is similarly qualified is correct without such qualification; (iii) the Schemes will be valid under the laws of Bermuda; (iv) as to all matters as to which any person or entity represents that it is not a party to, does not have, or is not aware of any plan, intention, understanding or agreement, there is in fact no such plan, intention, understanding or agreement; and (v) officers of LaSalle, LaSalle Re and TGL who have signed the representations on behalf of those respective entities are knowledgeable concerning the matters and are authorized to make all of the representations set forth therein. For purposes of this opinion, a "U.S. Holder" is a beneficial owner of common shares of LaSalle or exchangeable non-voting common of LaSalle Re (collectively, the "LaSalle Shares") who is: (i) a citizen or resident of the United States for federal income tax purposes; (ii) a corporation (or other entity taxable as a corporation) or a partnership, organized under the laws of the United States or any state thereof; (iii) an estate the income of which is subject to United States federal income taxation regardless of source; or (iv) a 2 trust if a United States court is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust. To the extent that this opinion addresses the federal income tax consequences of the Schemes to Exchanging Shareholders, this opinion only addresses such consequences to Exchanging Shareholders who hold their LaSalle Shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). In addition, the conclusions set forth in this opinion may not be fully applicable to shareholders subject to special treatment under United States federal income tax law, such as financial institutions, insurance companies, tax-exempt entities, dealers in securities, certain United States expatriates, persons holding LaSalle Shares as part of an integrated investment, U.S. holders whose functional currency is not the U.S. dollar, non-U.S. Holders, shareholders who hold LaSalle Shares through a pass- through entity, and shareholders who acquired LaSalle Shares through exercise of employee stock options or otherwise as compensation. This opinion is based on current provisions of the Code, the Treasury regulations promulgated thereunder, the Bermuda-U.S. Convention for the Elimination of Double Taxation (the "Tax Treaty") and the interpretation of the Code, such regulations and the Tax Treaty by the courts and the Internal Revenue Service (the "IRS"), as they are in effect and exist at the date of this opinion. It should be noted that statutes, regulations, judicial decisions and administrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. A material change that is made after the date hereof in any of the foregoing bases for our opinion could adversely affect our conclusion. Based upon and subject to the foregoing, it is our opinion that, for U.S. federal income tax purposes: (1) The Schemes and Reorganization, taken together, will constitute a corporate organization described in Section 351 of the Code; (2) Neither LaSalle nor LaSalle Re will recognize income, gain or loss as a result of the Schemes and Reorganization; (3) A U.S. Holder owning 5% or more of the total shares of TGL by vote or value after the Schemes and Reorganization (i.e., a "Five Percent Shareholder") will be required under Section 367(a) of the Code to recognize gain (to the extent that the fair market value of the TGL Shares received exceeds the basis of LaSalle Shares surrendered therefor) but not loss upon the exchange of LaSalle Shares for TGL shares, unless such Five Percent Shareholder enters into a valid gain recognition agreement with the Internal Revenue Service; (4) A U.S. Holder owning less than 5% of the total shares of TGL by vote or value after the Schemes and Reorganization (i.e., an Exchanging Shareholder that is not a Five Percent Shareholder) will recognize no gain or loss upon the exchange of LaSalle Shares for TGL shares, other than with respect to cash in lieu of fractional shares as described below; (5) A U.S. Holder's basis in the TGL Shares received will equal the U.S. Holder's basis in its LaSalle Shares exchanged therefor, increased by any gain recognized (in the case of a Five-Percent Shareholder not entering into a valid gain recognition agreement) with respect to the exchange; (6) Other than with respect to a Five Percent Shareholder not entering into a gain recognition agreement, a U.S. Holder's holding period in its TGL Shares will include such shareholder's holding period in the LaSalle Shares exchanged therefor; (7) A U.S. Holder receiving cash in lieu of fractional shares of TGL will be treated as if such holder received the fractional TGL share in the Schemes and then exchanged the fractional share for cash in a redemption by TGL; (8) A U.S. Holder receiving cash in lieu of a fractional TGL share generally will recognize gain or loss equal to the cash amount received for the fractional TGL share reduced by the portion of the holder's tax basis in the LaSalle Shares that is allocable to the fractional TGL share; and 3 (9) Gain or loss from the receipt of cash in lieu of a fractional TGL share will be long-term capital gain or loss if the U.S. Holder's holding period in the fractional TGL share (taking into account the holding period of the LaSalle Shares exchanged in the Schemes) is more than one year. This opinion is rendered to you in connection with the Schemes and Reorganization. This opinion may not be used or relied upon by any other person or for any other purpose without our prior written consent. We consent, however, to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the captions "Material Income Tax Consequences of the Transaction" and "Legal Matters" in the Proxy Statement. This opinion is based on facts and circumstances existing on the date hereof, and assumes no change in material facts prior to the closing date. The opinion is further conditioned on the representations of LaSalle, LaSalle Re and TGL being reconfirmed as of the closing date. Sincerely, /s/ GEORGE W. CRAVEN -------------------------------------- MAYER, BROWN & PLATT EX-8.4 12 ex8-4.txt OPINION RE BERMUDA TAX MATTERS 1 EXHIBIT 8.4 [APPLEBY SPURLING & KEMPE LETTERHEAD] 23 August 2000 TRENWICK GROUP LTD. Continental Building 25 Church Street Hamilton HM 12 Bermuda Ladies and Gentlemen: TRENWICK GROUP LTD. We have acted as legal counsel in Bermuda to Trenwick Group Ltd., a company organised under the laws of Bermuda (the "Company") and this opinion as to Bermuda law is addressed to you in connection with the registration under the Securities Act of 1933, as amended, of the United States (the "Securities Act"), by the Company of the Company's (i) 36,743,467 common shares, US$0.10 per share (the "Shares"), and (ii) related Series A First Preference Share Purchase Rights (the "Rights") (collectively, the "Securities"), issuable in connection with the transactions contemplated by the Business Combination Agreement (as defined below). The documents include: (i) The Amended and Restated Agreement, Schemes of Arrangement and Plan of Reorganization, dated as of 20 March 2000 and amended as of 28 June 2000 (the "Business Combination Agreement"), by and among LaSalle Re Holdings Limited ("LaSalle Re Holdings"), LaSalle Re Limited ("LaSalle Re"), Trenwick Group Inc. ("Trenwick") and the Company (formerly known as Gowin Holdings International Limited). (ii) The Joint Proxy Statement/Prospectus dated 22 August 2000 (the "Joint Proxy Statement/Prospectus") of Trenwick, LaSalle Re Holdings and LaSalle Re as filed with the Securities and Exchange Commission, Washington D.C. (the "SEC"). (iii) The registration statement on Form S-4 of the Company relating to the Securities to be filed with the SEC (the "Registration Statement"). (The Business Combination Agreement, the Joint Proxy Statement/Prospectus and the Registration Statement are hereinafter collectively referred to as the "Subject Agreements".) For the purposes of this opinion we have examined and relied upon the documents listed in the Schedule to this opinion (the "Documents"). Unless otherwise defined herein, capitalised terms have the meanings assigned to them in the Joint Proxy Statement/Prospectus. ASSUMPTIONS In stating our opinion we have assumed: (a) the authenticity, accuracy and completeness of all Documents submitted to us as originals and the conformity to authentic original Documents of all Documents submitted to us as certified, conformed, notarised, faxed or photostatic copies; (b) the genuineness of all signatures on the Documents; 2 (c) The authority, capacity and power of each of the persons signing the Documents (other than the Company in respect of the Subject Agreements); (d) that any representation, warranty or statement of fact or law, other than as to the laws of Bermuda, made in any of the Documents is true, accurate and complete; (e) that there are no provisions of the laws or regulations of any jurisdiction other than Bermuda which would be contravened by the execution or delivery of the Subject Agreements or which would have any implication in relation to the opinion expressed herein and that, in so far as any obligation under, or action to be taken under, the Subject Agreements is required to be performed or taken in any jurisdiction outside Bermuda, the performance of such obligation or the taking of such action will constitute a valid and binding obligation of each of the parties thereto under the laws of that jurisdiction and will not be illegal by virtue of the laws of that jurisdiction; and (f) that the Subject Agreements when filed, will be in a form which does not differ in any material respect from the drafts which we have examined for the purposes of this opinion. OPINION Based upon and subject to the foregoing and subject to the reservations set out below and to any matters not disclosed to us, we are of the opinion that the statements in the Registration Statement under the headings "Taxation of the Transactions -- Bermuda", "Taxation of Shareholders of Trenwick Group Ltd. -- Bermuda", "Trenwick Group Ltd. after Completion of the Transactions", "Description of Trenwick Group Ltd. Share Capital" and "Comparison of Rights of Trenwick Stockholders, Trenwick Group Ltd. Shareholders and LaSalle Shareholders", insofar as such statements constitute a summary of the Bermuda law or Bermuda legal conclusions referred to therein, are accurate in all material aspects and fairly present the information with respect to such Bermuda legal matters and conclusions and fairly summarise the Bermuda legal matters referred to therein. RESERVATIONS We have the following reservations: (a) We express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction except Bermuda. This opinion is limited to Bermuda law as applied by the Courts of Bermuda at the date hereof. (b) Where an obligation is to be performed in a jurisdiction other than Bermuda, the courts of Bermuda may refuse to enforce it to the extent that such performance would be illegal under the laws of, or contrary to public policy of, such other jurisdiction. (c) We express no opinion as to the validity, binding effect or enforceability of any provision incorporated into any of the Subject Agreements by reference to a law other than that of Bermuda, or as to the availability in Bermuda of remedies which are available in other jurisdictions. DISCLOSURE This opinion is addressed to you in connection with the registration of the Shares and the Rights with the SEC and is not to be made available to, or relied on by any other person or entity, or for any other purpose, without our prior written consent. We consent to the filing of this opinion as an exhibit to the Registration Statement of the Company. We also consent to the reference to our Firm under the captions "Material Income Tax Consequences of the Transactions" and "Legal Matters" in the Joint Proxy Statement/Prospectus which forms a part of the Registration Statement. This opinion is addressed to you solely for your benefit and is neither to be transmitted to any other person, nor relied upon by any other person or for any other purpose nor quoted or referred to in any public document nor 2 3 filed with any governmental agency or person, without our prior written consent, except as may be required by law or regulatory authority. Further, this opinion speaks as of its date and is strictly limited to the matters stated herein and we assume no obligation to review or update this opinion if applicable laws or the existing facts or circumstances should change. This opinion is governed by and is to be construed in accordance with Bermuda law. It is given on the basis that it will not give rise to any legal proceedings with respect thereto in any jurisdiction other than Bermuda. Yours faithfully, /s/ APPLEBY SPURLING & KEMPE - --------------------------------------------------------- Appleby Spurling & Kempe 3 4 SCHEDULE 1. A copy of the Business Combination Agreement. 2. A copy of the Joint Proxy Statement/Prospectus. 3. A copy of the Registration Statement. 4. Originals of the Certificate of Incorporation, the Memorandum of Association, the Certificate of Incorporation on Change of Name and the revised Bye-laws (adopted 22 March 2000) for the Company (collectively referred to as the "Constitutional Documents"). 5. A Certificate of Compliance, dated [20 July 2000/11 August 2000] issued by the Ministry of Finance in respect of the Company. 6. The original "Foreign Exchange Letter", dated 14 December 1999, issued by the Bermuda Monetary Authority, Hamilton Bermuda in relation to the Company. 7. The original "Tax Assurance Letter", dated 13 January 2000, issued by the Registrar of 4 EX-23.1 13 ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 [PRICEWATERHOUSECOOPERS LETTERHEAD] CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of Trenwick Group Ltd. of our report dated February 29, 2000, except as to Note 19, which is as of March 1, 2000, relating to the financial statements, which appears in Trenwick Group Inc.'s 1999 Annual Report to Shareholders, which is incorporated by reference in its Annual Report on Form 10-K/A for the year ended December 31, 1999. We also consent to the incorporation by reference of our report dated February 29, 2000 relating to the financial statement schedules, which appears in such Annual Report on Form 10-K/A. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/PRICEWATERHOUSECOOPERS LLP ---------------------------------------------------- PricewaterhouseCoopers LLP August 22, 2000 5 EX-23.2 14 ex23-2.txt CONSENT OF DELOITTE AND TOUCHE LLP 1 EXHIBIT 23.2 [LETTERHEAD OF DELOITTE & TOUCHE] INDEPENDENT AUDITORS' CONSENT We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of Trenwick Group Ltd. of our report dated November 5, 1999 (July 13, 2000 as to Note 2(p) which expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement described in Note 2(p)), relating to the consolidated balance sheet of LaSalle Re Holdings Limited and subsidiaries as of September 30, 1999, and the related consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for the year ended September 30, 1999, which report appears in the September 30, 1999 annual report on Form 10-K of LaSalle Re Holdings Limited, and to the reference to our firm under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE & TOUCHE - --------------------------------- DELOITTE & TOUCHE Chartered Accountants Hamilton, Bermuda August 22, 2000 EX-23.3 15 ex23-3.txt CONSENT OF KPMG 1 EXHIBIT 23.3 [LETTERHEAD OF KPMG] The Board of Directors LaSalle Re Holdings Limited We consent to the incorporation by reference in this Registration Statement on Form S-4 of Trenwick Group Ltd. of our report dated October 26, 1998, except as to Note 2(p), which is as of July 13, 2000 relating to the consolidated balance sheet of LaSalle Re Holdings Limited and subsidiaries as of September 30, 1998, and the related consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for each of the years in the two-year period ended September 30, 1998, and all related schedules, which report appears in the amended annual report on Form 10-K/A for the year ended September 30, 1999 of LaSalle Re Holdings Limited, and to the reference to our firm under the heading "Experts" in such registration statement. /s/ KPMG - --------------------------------- KPMG Chartered Accountants Hamilton, Bermuda August 22, 2000 EX-99.6 16 ex99-6.txt OPINION OF OF DONALDSON LUFKIN & JENRETTE 1 [LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION] EXHIBIT 99.6 CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION We hereby consent to (i) the inclusion of our opinion letter, dated December 16, 1999, to the Board of Directors of Trenwick Group Inc. (the "Company") as Appendix G to the Proxy Statement of the Company relating to the merger with LaSalle Re Holdings Limited and (ii) all references to DLJ in the sections captioned "SUMMARY -- Opinions of Financial Advisors", "THE TRANSACTIONS -- Background of the Agreement", "THE TRANSACTIONS -- Reasons for the Transactions; Recommendations of the Boards of Directors", and "THE TRANSACTIONS -- Opinion of Trenwick's Financial Advisor" of the Proxy Statement of Trenwick Group Inc. which forms a part of this Registration Statement on Form S-4. In giving such consent, we do not admit that we come within the category of persons whose consent is required under, and we do not admit that we are "experts" for purposes of, the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ LEANDRO S. GALBAN, JR. ------------------------------------ Leandro S. Galban, Jr. Managing Director New York, New York August 17, 2000 EX-99.7 17 ex99-7.txt OPNIONT OF LAZARD FRERES & CO LLC 1 EXHIBIT 99.7 [LETTERHEAD OF LAZARD FRERES & CO. LLC] August 15, 2000 LaSalle Re Holdings Limited Continental Building 25 Church Street Hamilton HM 12 Bermuda We hereby consent to the reference to the opinion of our Firm in the Proxy Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, LAZARD FRERES & CO. LLC By /s/ ERIC S. HANSON ------------------------------------ Eric S. Hanson Managing Director EX-99.8 18 ex99-8.txt CONSENT OF SALOMON SMITH BARNEY INC 1 EXHIBIT 99.8 [LETTERHEAD OF SALOMON SMITH BARNEY INC.] The Board of Directors LaSalle Re Holdings Limited Continental Building 25 Church Street P.O. Box HM Hamilton HM FX, Bermuda Members of the Board: We hereby consent to the inclusion of our opinion letter dated December 19, 1999 as Appendix H to, and to the reference thereto under the caption "SUMMARY -- Opinions of Financial Advisors -- Opinions of LaSalle's Financial Advisors" and "THE TRANSACTIONS -- Opinions of LaSalle's Financial Advisors" in, the Joint Proxy Statement/Prospectus of LaSalle Re Holdings Limited ("LaSalle") and Trenwick Group Inc. ("Trenwick") relating to the proposed business combination involving LaSalle and Trenwick, which Joint Proxy Statement/Prospectus is part of the Registration Statement on Form S-4 of Trenwick. By giving such consent, we do not thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "expert" as used in, or that we come within the category of persons whose consent is required under, the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. By /s/ SALOMON SMITH BARNEY INC. ------------------------------------ SALOMON SMITH BARNEY INC. New York, New York August 22, 2000 -----END PRIVACY-ENHANCED MESSAGE-----