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
▇▇▇▇▇ 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 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.
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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 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.
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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 their respective properties or assets, which
Violation, in the case of each of clauses (ii) or (iii), would have Material
Adverse Effect on Trenwick.
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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 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.
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(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 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.
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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
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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 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.
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(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 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.
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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 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).
10
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.
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(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.
(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.
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(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 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.
13
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.
14
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
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:
▇▇▇▇ ▇. ▇▇▇▇▇
Vice President and
Chief Financial Officer
Trenwick Group Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to LaSalle, to:
LaSalle Re Holdings Limited
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇
Bermuda
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
15
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.
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.
16
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.
17
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/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Chairman, President and Chief
Executive Officer
LASALLE RE HOLDINGS LIMITED
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer