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 Xxxxx Holdings International Limited, a company organized
under the laws of Bermuda ("New Holdings"), are entering into an Agreement,
Scheme of Arrangement, Plan of Merger and Plan of Reorganization dated as
of the date hereof (the "Business Combination Agreement"); and
WHEREAS, as a condition to 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
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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.
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
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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.
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
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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.
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
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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
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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.
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
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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 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.
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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
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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.
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
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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).
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).
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(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.
(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
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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.
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(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.
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.
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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 requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
If to Trenwick:
Xxxx X. Xxxxx
Vice President and
Chief Financial Officer
Trenwick Group Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
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If to LaSalle, to:
LaSalle Re Holdings Limited
Xxxxxxxxxxx Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx XX 00
Bermuda
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
19. Governing Law; Choice of Forum. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware without regard to the conflicts of law principles thereof. Each of
the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Delaware or any
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.
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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.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of
the date first above written.
TRENWICK GROUP INC.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
-------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
-------------------------------
Title: Chairman, President and CEO
-------------------------------
LASALLE RE HOLDINGS LIMITED
By: /s/ Xxx X. Xxxxxxxxxxx
--------------------------------------
Name: Xxx X. Xxxxxxxxxxx
--------------------------------------
Title: President & CEO
---------------------------------------
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