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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
LASALLE RE HOLDINGS LIMITED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
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NOTICE OF ANNUAL GENERAL MEETING
January 6, 1998
Hamilton, Bermuda
TO THE SHAREHOLDERS OF LASALLE RE HOLDINGS LIMITED:
The Annual General Meeting of LaSalle Re Holdings Limited (the "Company")
will be held on Thursday, February 26, 1998 at 9:00 a.m., local time, at the
Elbow Beach Hotel, Paget, Bermuda, for the following purposes:
(1) To elect one director to hold office until 2000 and two directors to
hold office until 2001;
(2) To appoint KPMG Peat Marwick as the Company's independent auditors
for the fiscal year ending September 30, 1998 and authorize the Board of
Directors to set the fees for the independent auditors; and
(3) To approve amendments to the Company's Bye-laws as set forth in the
accompanying Proxy Statement.
The shareholders will also receive at the Annual General Meeting the
Company's financial statements for the fiscal year ended September 30, 1997 as
approved by the Company's Board of Directors.
Only shareholders of record, as shown by the transfer books (Register of
Members) of the Company, at the close of business on December 22, 1997 are
entitled to notice of, and to vote at, the Annual General Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE
PROPOSED AMENDMENTS TO THE COMPANY'S BYE-LAWS, THE USE OF THE PROXY AND OTHER
RELATED MATTERS, YOU ARE URGED TO READ THE PROXY STATEMENT CONTAINED ON THE
FOLLOWING PAGES.
By Order of the Board of Directors,
Victor H. Blake, O.B.E.
Chairman, Chief Executive Officer
and President
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LASALLE RE HOLDINGS LIMITED
25 CHURCH STREET
P.O. BOX HM 1502
HAMILTON HM FX BERMUDA
JANUARY 6, 1998
PROXY STATEMENT
The Board of Directors of LaSalle Re Holdings Limited (the "Company") is
soliciting the accompanying proxy to be voted at the Annual General Meeting of
the Company to be held at 9:00 a.m., local time, on February 26, 1998, at the
Elbow Beach Hotel, Paget, Bermuda, and any adjournments thereof. When the
proxy is properly executed and returned, the common shares of the Company, par
value U.S. $1.00 per share (the "Common Shares"), it represents will, subject
to any direction to the contrary, be voted at the meeting in favor of the
matters specified in the "Notice of Annual General Meeting" attached hereto.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy. However, such action must be taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
Shareholders of record as of the close of business on December 22, 1997 will
be entitled to vote at the meeting. As of December 22, 1997, there were
outstanding 15,133,915 Common Shares of the Company entitled to vote at the
meeting, with each Common Share entitling the holder of record on such date to
one vote.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the
affirmative vote of a majority of the votes cast at the Annual General
Meeting, provided there is a quorum (consisting of not less than two persons
present in person or by proxy holding at least 50% of the issued and
outstanding Common Shares entitled to vote at the Annual General Meeting). The
Company will appoint one or more inspectors of election to count votes cast in
person or by proxy. Common Shares owned by shareholders electing to abstain
from voting will be counted towards the presence of a quorum. However, such
Common Shares, and Common Shares owned by shareholders and not voted in person
or by proxy at the Annual General Meeting, will not be counted towards the
majority needed to elect a director or approve any other matter before the
shareholders and thus will have no effect on the outcome of those votes.
"Broker non-votes" will be counted towards the presence of a quorum, but will
not be counted towards the majority needed to elect a director or approve any
other matter before the shareholders and thus will have no effect on the
outcome of those votes.
The Company has enclosed a copy of its 1997 Annual Report to Shareholders
along with this Proxy Statement. This Proxy Statement, the attached Notice of
Annual General Meeting and the accompanying proxy card are first being mailed
to shareholders on or about January 6, 1998.
The Company knows of no specific matter to be brought before the Annual
General Meeting that is not referred to in the attached Notice of Annual
General Meeting and this Proxy Statement. If any such matter comes before the
meeting, including any shareholder proposal properly made (which must relate
to specific agenda items listed in the attached Notice of Annual General
Meeting), the proxy holders will vote proxies in accordance with their best
judgment with respect to such matters.
ELECTION OF DIRECTORS
(PROPOSAL 1 ON PROXY CARD)
The Company's Board of Directors consists of 13 directors and is divided
into three classes with the terms of office of each class ending in successive
years. The class of directors with terms expiring in 1998 consists of
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four directors, the class of directors with terms expiring in 1999 consists of
five directors and the class of directors with terms expiring in 2000 consists
of four directors. As a result of the resignations of Andrew Africk, Joseph
Haviv, Scott A. Schoen and David A. Stockman, the Board of Directors currently
has 9 incumbent directors. In addition, Jonathan H. Kagan, whose term expires
in 1998, has declined to stand for reelection.
The Board of Directors has recommended that the Company's Bye-laws be amended
to allow the Board of Directors to vary its size within a range of 2 to 13
directors. See "Bye-law Amendments Recommended by the Board of Directors--
Election of Directors." If the proposed amendment is approved, the Board of
Directors expects to reduce its size to 8 directors and to reduce the class of
directors with terms expiring in 1999 to three directors, the class of
directors with terms expiring in 2000 to three directors and the class of
directors with terms expiring in 2001 to two directors. The Board of Directors
has not nominated candidates to fill the 5 positions that will be eliminated if
the size of the Board of Directors is reduced as expected.
The Board of Directors has nominated Donald P. Koziol, Jr. and Peter J.
Rackley for election as directors of the Company to serve three-year terms to
expire at the Annual General Meeting in 2001 and until their respective
successors shall have been elected and qualified. The Board of Directors has
also nominated Tim I. Madden for election as a director of the Company to serve
the remaining portion of a three-year term to expire at the Annual General
Meeting in 2000 and until his successor shall have been elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
It is the intention of the persons named as proxies, subject to any direction
to the contrary, to vote in favor of the candidates nominated by the Board of
Directors. If any one or more of the nominees is unable or unwilling to serve,
the proxies will, subject to any direction to the contrary, be voted for such
other person or persons as the Board of Directors may recommend, or the size of
the Board of Directors may be reduced. The proxies cannot be voted for more
than three persons.
Certain information with respect to nominees for election as directors
proposed by the Board of Directors of the Company and the other directors whose
terms of office as directors will continue after the Annual General Meeting,
including their principal occupation for the past five years, is set forth
below.
NOMINEE FOR ELECTION TO TERM EXPIRING IN 2000
Tim I. Madden, age 41, has been a director of the Company and its subsidiary,
LaSalle Re Limited ("LaSalle Re"), since September 1997, when he was elected by
the Board of Directors to fill a vacancy created by the resignation of Harvey
G. Simons. Mr. Madden has 19 years of experience in the insurance industry,
concentrating primarily in reinsurance. Mr. Madden has acted as Executive Vice
President and Chief Underwriting Officer for the U.S. reinsurance operations of
CNA Re and has been Group Vice President of Continental Casualty Company
("CCC") since 1994. CNA Re includes CNA International Reinsurance Company Ltd.
("CNA Re London"), a leading property and casualty insurer operating in the
London market, and the U.S. reinsurance operations of CNA Financial Corporation
(together with its affiliates "CNA"). Mr. Madden was Vice President of CCC and
head of the CNA Reinsurance Division, Specialty Operations Department, from
1992 to 1994. Mr. Madden is a member of the board of the Brokers and
Reinsurance Markets Association/Reinsurance Association of America
("BRMA/RAA"). He is also co-chair of the placing committee of the BRMA/RAA
joint venture development of EDI Placing Messages.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2001
Donald P. Koziol, Jr., age 49, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since November 1995.
Mr. Koziol has been President since February 1997 of Aon Services Group (an
insurance firm formerly known as Aon Specialty Group), of which he was
Executive Vice President from January 1995 to February 1997. Mr. Koziol was
Chairman and Chief Executive Officer of Carvill America, Inc. (a reinsurance
brokerage firm) from 1984 until 1994.
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Peter J. Rackley, age 59, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since its
organization in October 1993. Mr. Rackley has been Chairman and Group Chief
Executive of Western International Financial Group Ltd. (a Bermuda-based
insurance business) since 1993. Prior to that, Mr. Rackley held senior
management executive positions in General Accident Fire & Life Assurance
Company plc and NZI Insurance Group. Mr. Rackley is also Chairman of Catlin
Westgen Holdings Limited, Westgen High Ridge Holdings Limited and CHA
Insurance Company Limited and Deputy Chairman of Commercial Risk Partners
Limited.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THIS MEETING
Directors Whose Terms Expire in 1999
William J. Adamson, Jr., age 44, has been Deputy Chairman and a director of
the Company since its organization in October 1995, a director of LaSalle Re
since its organization in October 1993 and Deputy Chairman of LaSalle Re since
November 1995. He also served as Chairman of LaSalle Re from October 1993 to
May 1994 and President of LaSalle Re from October 1993 to November 1995. Mr.
Adamson has 22 years of experience with CNA in the reinsurance industry in
Chicago and London. Mr. Adamson has acted as Chief Executive Officer of CNA Re
and has been Chief Executive Officer of CNA Re London and Senior Vice
President of CCC since November 1995. He acted as Chief Operating Officer of
CNA Re from its formation in April 1994 to November 1995. Mr. Adamson has been
the head of the Chicago-based reinsurance operations of CNA Re and President
of CNA Re London and CNA (Bermuda) Services Ltd. ("CNA Bermuda") since 1993.
Prior to his appointment as Senior Vice President of CCC, he was a Group Vice
President and a Vice President of CCC and its principal insurance
subsidiaries.
Ivan P. Berk, age 60, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since May 1997.
Previously, he had been an alternate director of LaSalle Re since its
organization in October 1993. He is a Senior Executive Director of Aon
Advisors, Inc., where he has been Manager of Equities since March 1993 and was
Senior Portfolio Manager from December 1990 until March 1993. Mr. Berk has 29
years of investment experience, including the formation of six insurance
related companies in the last four years.
Paul J. Zepf, age 32, has been a director of the Company and LaSalle Re
since May 1996. Previously, he had been an alternate director of LaSalle Re
since its organization in September 1993. He is a Managing Director of
Corporate Advisors, L.P. (an investment advisory services firm), which he
joined in 1989. Mr. Zepf is also a Managing Director of Centre Partners
Management llc, which manages Centre Capital Investors II, L.P. and related
investment funds. Mr. Zepf is a director of Firearms Training Systems, Inc.
and The Learning Company, Inc.
Directors Whose Terms Expire in 2000
Victor H. Blake, O.B.E., age 62, has been Chairman, Chief Executive Officer
and President of the Company since its organization in October 1995, Chairman
and Chief Executive Officer of LaSalle Re since May 1994 and President of
LaSalle Re since November 1995. Mr. Blake has 38 years of experience in the
insurance industry, concentrating primarily in reinsurance. Mr. Blake served
as Chairman and Chief Executive Officer of CNA Re London from its formation in
1976 until October 1995. In addition, he acted as the Chairman and Chief
Executive Officer of CNA Re from its formation in April 1994 until October
1995 and continues to act as non-executive Chairman of CNA Re. Mr. Blake is
also founder Chairman of LUC Holdings Ltd, the shareholders of the London
Underwriting Centre, a marketplace housing many of the London market insurers
and reinsurers. He served as a member of the Council of the London Insurance
and Reinsurance Market Association and its predecessor bodies from 1977 to
1996. Mr. Blake was awarded the Order of the British Empire in 1997.
Lester Pollack, age 64, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since its
organization in October 1993. Mr. Pollack was a Deputy Chairman of LaSalle Re
from October 1993 to November 1995. Mr. Pollack has been a Managing Director
of Centre Partners
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Management llc (an investment services firm) since 1995, Senior Managing
Director of Corporate Advisors, L.P. (an investment advisory services firm)
since 1988, Managing Director of Lazard Freres & Co. LLC (an investment banking
firm) since 1986 and Chief Executive Officer of Centre Partners, L.P. since
1986. Mr. Pollack is a director of Firearms Training Systems, Inc., Parlex
Corporation, SunAmerica Corporation and Tidewater Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended September 30, 1997, the Board of Directors met four
times, acted by written consent nine times and held sixteen committee meetings.
All directors continuing in office or standing for reelection attended at least
75% of the aggregate of such meetings of the Board of Directors and the
committees of the Board of Directors of which they were a member (or of such
meetings during such director's tenure on the Board of Directors), except for
Messrs. Kagan and Koziol. Mr. Kagan attended one meeting of the Board of
Directors and two committee meetings by proxy, as permitted under Bermuda law,
and on this basis attended in person or by proxy more than 75% of the aggregate
number of meetings of the Board of Directors and the committees of the Board of
Directors on which he served. The Board of Directors has established five
standing committees: Audit, Compensation, Investment, Nominating and
Underwriting/Actuarial.
Audit Committee
The Audit Committee is composed entirely of non-management directors and
reviews the adequacy and effectiveness of the Company's external auditors and
their audit report. The Audit Committee is comprised of Jonathan H. Kagan
(Chairman), Peter J. Rackley, and Paul J. Zepf. The Audit Committee met three
times in fiscal year 1997.
Compensation Committee
The Compensation Committee is composed entirely of non-management directors
and has responsibility for determining executive compensation. The Compensation
Committee is comprised of Lester Pollack (Chairman) and Peter J. Rackley. The
Compensation Committee met three times in fiscal year 1997.
Investment Committee
The Investment Committee approves guidelines that provide standards to ensure
portfolio liquidity and safety, approves investment managers and custodians for
portfolio assets and recommends asset allocation to the Board of Directors. The
Investment Committee is comprised of Ivan P. Berk (Chairman), William J.
Adamson, Victor H. Blake and Paul J. Zepf. The Investment Committee met three
times in fiscal year 1997.
Nominating Committee
The Nominating Committee reviews candidates for the Board of Directors and
makes recommendations to the Board of Directors. The Nominating Committee will
consider a shareholder's suggestion for candidates if mailed to: LaSalle Re
Holdings Limited, 25 Church Street, P.O. Box HM 1502, Hamilton HM FX Bermuda.
In addition, the Board of Directors has recommended amendments to the Company's
Bye-laws, setting forth procedures for the direct nomination by shareholders of
candidates for director at an Annual General Meeting of the Company. See "Bye-
law Amendments Recommended by the Board of Directors--Election of Directors."
The Nominating Committee is comprised of William J. Adamson, (Chairman), Ivan
P. Berk, Lester Pollack and Peter J. Rackley. The Nominating Committee met
three times in fiscal year 1997.
Underwriting/Actuarial Committee
The Underwriting/Actuarial Committee establishes guidelines for the Company's
underwriters and actuaries and periodically reviews underwriting decisions. The
Underwriting/Actuarial Committee is comprised of William J. Adamson (Chairman),
Jonathan H. Kagan, Donald P. Koziol, Tim I. Madden, Peter J. Rackley and Paul
J. Zepf. The Underwriting/Actuarial Committee met three times in fiscal year
1997.
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DIRECTOR COMPENSATION
Directors of the Company are currently not paid to serve on the Board of
Directors. Non-management directors receive reimbursement of their reasonable
cost for attendance at each meeting (including committee meetings).
CERTAIN TRANSACTIONS
Underwriting Services Agreement
Pursuant to an underwriting services agreement (the "Underwriting Services
Agreement") with CNA Bermuda, CNA Bermuda provides underwriting services and
underwrites all classes of insurance and reinsurance as agent for LaSalle Re.
The Underwriting Services Agreement expires on December 31, 1998 with a two
year extension at the option of the Company. Until December 31, 1995, the fees
for the underwriting services were as follows: (i) 2% for the first $150
million of gross written and collected premiums per fiscal year and 1.5%
thereafter and (ii) for periods during which the Company's loss ratio since
inception of LaSalle Re was 57% or less, subject to certain conditions, an
underwriting profit commission of 2.5% of the aggregate net underwriting
profits of LaSalle Re. Effective January 1, 1996, these fees are (i) 1.5% of
gross written and collected premiums per fiscal year and (ii) subject to the
same loss ratio test and conditions, an underwriting profit commission of 4.0%
of the aggregate net underwriting profits of LaSalle Re. The fees for
underwriting services were renegotiated in September 1995 by and approved by a
vote of directors of LaSalle Re who were not affiliated with either CNA or Aon
Corporation (together with its affiliates, "Aon"). The performance of CNA
Bermuda and the fees paid are periodically reviewed by the Board of Directors
of LaSalle Re.
LaSalle Re accrued underwriting service fees to CNA Bermuda of $2,526,105 and
$3,081,245 for the years ended September 30, 1997 and 1996, respectively. In
addition, the Company incurred profit commissions to CNA Bermuda of $4,061,215
and $4,139,573 for the years ended September 30, 1997 and 1996, respectively.
Administrative Services Agreement
Pursuant to an administrative services agreement (the "Administrative
Services Agreement") with Aon Risk Consultants (Bermuda) Ltd. ("Aon Bermuda"),
Aon Bermuda provided LaSalle Re with actuarial and financial reporting,
accounting, office space and other administrative services until October 1,
1997, as of which date the Administrative Services Agreement was terminated by
mutual agreement. The fees for administrative services were $5,000,000 and
$7,000,000 for the 1995 and 1996 calendar years, respectively. For periods
beginning January 1, 1997, the fees for administrative services, and for the
claims administrator services formerly performed by Integrated Runoff Insurance
Services Corporation, an affiliate of Aon, were $3,300,000 per year, plus a
commission of 2.75% of the aggregate net underwriting profits of LaSalle Re,
for periods during which the Company's loss ratio was 57% or less, subject to
the same conditions applicable in the Underwriting Services Agreement. The fees
for administrative services were negotiated in September 1995 by and approved
by a vote of directors of LaSalle Re who were not affiliated with either CNA or
Aon.
Investment Management Agreement
Pursuant to an investment management agreement (the "Investment Management
Agreement") with Aon Advisors (UK) Limited ("Aon Advisors"), Aon Advisors
provides LaSalle Re with investment management services in accordance with the
investment guidelines set by the Board of Directors. The Investment Management
Agreement expires on September 30, 1998 with a one year extension at the option
of the Company. Pursuant to the terms of the Investment Management Agreement,
the Company pays Aon Advisors a fee equal to 0.16375% per annum of the assets
under management. Prior to July 1, 1997, the Company paid Aon Advisors a fee
equal to 0.35% per annum of the first $100 million of funds under management,
0.25% per annum of the next $100 million of funds under management and 0.15%
per annum of all funds managed in excess of $200 million. The fees for
investment management services were determined in arm's length commercial
negotiations. The
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performance of Aon Advisors and the fees paid are periodically reviewed by the
Investment Committee of the Board of Directors. LaSalle Re paid Aon Advisors
investment management fees of $1,055,666 and $1,027,685 for the years ended
September 30, 1997 and 1996, respectively.
Shareholders Agreement
Pursuant to the Amended and Restated Shareholders Agreement dated November
27, 1995 among the Company, LaSalle Re, each of the founding shareholders of
LaSalle Re (the "Founding Shareholders") and Mr. Blake (the "Shareholders
Agreement"), certain holders of Common Shares have the right to demand that the
Company register such shares with the Securities and Exchange Commission in an
underwritten or at the market public offering. Such shareholders also have the
right to have their Common Shares registered in connection with any
registration of securities by the Company. The demand right may be exercised at
any time, subject to limitations. In connection with the first four such
registrations, the Company is required to bear all registration and selling
expenses, other than underwriting fees and commissions. Pursuant to the
Shareholders Agreement, the Company also is (i) prevented from engaging in
certain activities without the consent of a majority of the holders of
exchangeable non-voting shares of LaSalle Re (the "Exchangeable Non-Voting
Shares"), (ii) prevented from incurring certain indebtedness without the
consent of a majority of the holders of Common Shares who are parties to the
Shareholders Agreement and (iii) prevented from changing the terms of the
Exchangeable Non-Voting Shares (other than as contemplated by a conversion
agreement among the Company, LaSalle Re and certain of the Founding
Shareholders) without the consent of a majority of both of (A) the outstanding
Exchangeable Non-Voting Shares and (B) the Common Shares held by certain
Founding Shareholders. In addition, upon a liquidation of LaSalle Re, holders
of Exchangeable Non-Voting Shares will be contractually obligated to the
parties to the Shareholders Agreement to transfer to holders of Common Shares
such amount so as to ensure that the proceeds of the liquidation will be shared
on a pro rata basis among the holders of Common Shares and the Exchangeable
Non-Voting Shares. Additionally, LaSalle Re may not knowingly sell reinsurance
so as to generate "related person insurance income" of 20% or more of its gross
insurance income without approval of 85% of the Board of Directors of LaSalle
Re. If LaSalle Re knowingly sells reinsurance so as to generate "related person
insurance income" of 20% or more of its gross insurance income, then any such
shareholder may exercise its registration rights regardless of the number of
Common Shares it holds or, at the option of the Company, the Company may
repurchase such shareholder's shares for their fair market value.
Excess Ownership Agreement
Pursuant to an excess ownership agreement dated November 27, 1995 among
LaSalle Re, the Company and certain Founding Shareholders, each such
shareholder will at the request of the Company (i) provide certain information
on its ownership to the Company, (ii) notify the Company of any change in its
ownership and (iii) inquire of each new partner or new 10% owner of the
shareholder if such party owns shares in the Company or any ownership interest
in any shareholder of the Company. Additionally, under certain circumstances
such Founding Shareholders will agree to dispose of all or part of their
respective shares of the Company or to exchange them for Exchangeable Non-
Voting Shares.
Reinsurance Transactions with Aon and CNA
In the years ended September 30, 1997 and 1996, the Company assumed premiums
totaling approximately $21,408,265 and $24,045,470, respectively, from a ceding
company related to CNA. Absent CNA's relationship with the Company, such
premiums may not have been written by the Company. In addition, during the same
periods the Company wrote premiums totaling approximately $28,450,000 and
$23,577,000, respectively, through brokers related to Aon; brokerage fees
incurred in respect of this business were approximately $2,845,000 and
$2,357,700, respectively, during the same periods. The terms of these
reinsurance transactions were negotiated between the parties and the Company
believes that such terms were at market rates.
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Loan to Executive Officer
In accordance with Mr. Blake's employment agreement, the Company loaned Mr.
Blake $695,000 to purchase a condominium in Bermuda. The loan is evidenced by
a promissory note. The Company has agreed to reimburse Mr. Blake for interest
paid on the loan. The loan is due at the time the condominium is sold or
otherwise transferred by Mr. Blake. Subject to Mr. Blake's right to repay the
loan upon termination of his employment, the sale of the condominium is
required within a reasonable time following termination of his employment. If
Mr. Blake elects to repay the loan upon termination of his employment, the
principal of, and any unpaid interest on, the loan will be due on the 50th day
after the termination date. If, as of the termination date, the fair market
value of the condominium has increased over the amount of the loan, Mr. Blake
shall also be required to pay the amount of the increase to the Company. If
the fair market value of the condominium has decreased to below the purchase
price, the amount due from Mr. Blake shall be reduced by the amount of the
decrease.
Other Transactions
In 1997, the Company entered into a $100 million multi-year Catastrophe
Equity Put ("CatEPut") option program for which the Company pays an annual
option premium of $2.35 million. The option was partly written by affiliates
of Aon and CNA. The transaction was negotiated at arm's length and approved by
the Board of Directors.
During 1997, the Company engaged the investment banking firm of Lazard
Freres & Co. LLC for services. Messrs. Pollack and Kagan, directors of the
Company, are both Managing Directors of Lazard Freres & Co. LLC. The Company
may engage Lazard Freres & Co. LLC or its affiliates during 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, officers and beneficial owners of more than 10 percent of any
class of equity securities of the Company are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended.
During the year ended 30 September 1997, Steven Given (Controller of the
Company until October 1997) was late in filing a Form 3 and in filing a Form 5
to report eight acquisitions of Common Shares pursuant to his participation in
the Company's Employee Stock Purchase Plan and Victor H. Blake was late in
reporting an acquisition of Common Shares. In addition, with respect to
certain transactions by entities of which they could be deemed to share
beneficial ownership, (i) Jonathan H. Kagan, Lester Pollack and David A.
Stockman (a director of the Company until October 1997) were late in filing a
report concerning an acquisition and disposition of Common Shares in
connection with the underwriters' exercise of their overallotment option in
the Company's initial public offering in December 1995 and (ii) Mr. Stockman
was late in reporting seven acquisitions and dispositions of Common Shares;
none of these transactions involved personal trades by the directors noted.
All such transactions have now been reported.
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BENEFICIAL OWNERSHIP OF COMMON SHARES
DIRECTORS, OFFICERS AND OTHER BENEFICIAL OWNERS
The following table sets forth information, as of December 22, 1997, with
respect to the beneficial ownership of Common Shares and Exchangeable Non-
Voting Shares by (i) Victor H. Blake, the Company's Chairman, Chief Executive
Officer and President, (ii) each of the Company's other executive officers
whose salary and bonus for the 1997 fiscal year exceeded $100,000, (iii) each
of the Company's directors and nominees for the position of director, (iv) all
directors, nominees for director and executive officers of the Company as a
group and (v) each shareholder who is known by the Company to beneficially own
more than five percent of the outstanding Common Shares or Exchangeable Non-
Voting Shares. Unless otherwise indicated, the named individual or entity has
sole voting and investment power over the Common Shares set forth below.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
COMMON
PERCENT NUMBER OF PERCENT OF SHARES AND
NUMBER OF OF EXCHANGEABLE EXCHANGEABLE EXCHANGEABLE
COMMON COMMON NON-VOTING NON-VOTING NON-VOTING
NAME OF BENEFICIAL OWNER SHARES SHARES SHARES SHARES SHARES
- ------------------------ --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Victor H. Blake(1)...... 82,129 * 0 -- *
William J. Adamson...... 1,000 * 0 -- *
Ivan P. Berk............ 300 * 0 -- *
Andrew Cook(2).......... 15,200 * 0 -- *
Guy Hengesbaugh(3)...... 20,374 * 0 -- *
Jonathan H. Kagan(4).... 911,917 6.03% 0 -- 4.76%
Donald P. Koziol, Jr.... 0 -- 0 -- --
Tim I. Madden........... 0 -- 0 -- --
Lester Pollack(4)....... 911,917 6.03 0 -- 4.76
Peter J. Rackley........ 0 -- 0 -- --
Paul J. Zepf(5)......... 912,417 6.03 0 -- 4.76
All directors and
executive officers as a
group (11 persons)(6).. 1,031,420 6.79 0 -- 5.37
Aon Corporation(7)...... 556,500 3.68 2,443,500 60.81% 15.66
123 North Wacker Drive
Chicago, IL 60606
Continental Casualty
Company(8)............. 1,425,354 9.42 1,574,646 39.19 15.66
CNA Plaza
Chicago, IL 60685
Corporate Partners(4)... 911,917 6.03 0 -- 4.76
30 Rockefeller Plaza
Suite 5050
New York, NY 10020
SDI, Inc. .............. 974,710 6.44 0 -- 5.09
232 Court Street
Reno, NV 89501
Schafer Capital
Management(9).......... 916,420 6.06 0 -- 4.78
101 Carnegie Center
Princeton, NJ 08540
</TABLE>
- --------
*Less than 1%
(1) Includes options to purchase 34,087 Common Shares.
(2) Includes options to purchase 13,200 Common Shares.
8
<PAGE>
(3) Includes options to purchase 18,000 Common Shares.
(4) Of these 911,917 shares, approximately 85%, 6% and 9% are owned by
Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State
Board Administration of Florida ("SBA"), respectively, which are the
registered shareholders of the Common Shares. Corporate Advisors, as the
general partner of Corporate Partners, L.P. and Corporate Offshore
Partners, L.P., has sole voting and investment power as to the shares held
by them. Corporate Advisors serves as investment manager over a certain
investment management account for SBA and has sole voting and dispositive
power with respect to the Common Shares held by SBA. All shares listed in
the table as being beneficially owned by Messrs. Pollack and Kagan are
beneficially owned by Corporate Advisors. Mr. Pollack may be deemed to
share voting and investment power over such shares as the Chairman and
Treasurer and as a Director of LFCP Corp. and Senior Managing Director of
Corporate Advisors. Mr. Kagan may be deemed to share voting and investment
power over such shares as the President of LFCP Corp. and Managing
Director of Corporate Advisors. LFCP Corp. is the sole general partner of
Corporate Advisors and a wholly owned subsidiary of Lazard Freres & Co.
LLC. Mr. Pollack and Mr. Kagan are both Managing Directors of Lazard
Freres & Co. LLC. Each of Messrs. Pollack and Kagan disclaims beneficial
ownership of such shares. Excludes options to purchase 454,500
Exchangeable Non-Voting Shares.
(5) Of these 912,417 shares, 911,917 are owned by Corporate Partners, L.P.,
Corporate Offshore Partners, L.P. and SBA. Corporate Advisors, as the
general partner of Corporate Partners, L.P. and Corporate Offshore
Partners, L.P., has sole voting and investment power as to the shares held
by them. Corporate Advisors serves as investment manager over a certain
investment management account for SBA and has sole voting and dispositive
power with respect to the Common Shares held by SBA. Mr. Zepf may be
deemed to share voting and investment power over such shares as a Managing
Director of Corporate Advisors. Mr. Zepf disclaims beneficial ownership of
such shares. Excludes options to purchase 454,500 Exchangeable Non-Voting
Shares.
(6) Includes options to purchase 65,287 Common Shares.
(7) Of these 556,500 shares, approximately 50% are owned by each of Combined
Insurance Company of America and Virginia Surety Company, Inc., which are
the registered shareholders of the Common Shares and wholly-owned
subsidiaries of Aon. Excludes options to purchase 909,000 Exchangeable
Non-Voting Shares.
(8) All of these shares are owned by Continental Casualty Company, the
registered shareholder of the Common Shares and a wholly-owned subsidiary
of CNA Financial Corporation. At December 31, 1996, approximately 84% of
the outstanding voting securities of CNA Financial Corporation were owned
by Loews Corporation. Excludes options to purchase 454,500 Exchangeable
Non-Voting Shares.
(9) Of these 916,420 shares, approximately 81% are owned by Schafer Capital
Management, Inc. (a registered investment adviser) and approximately 19%
are owned by Schafer Cullen Capital Management, Inc. (a registered
investment adviser and an "affiliate," as defined by the Investment
Advisers Act of 1940, as amended, of Schafer Capital Management, Inc.),
which are the registered shareholders of the Common Shares. Each of
Schafer Capital Management, Inc. and Schafer Cullen Capital Management,
Inc. has sole voting and investment power as to the shares held by it.
MANAGEMENT
COMPENSATION
The following table sets forth, in summary form, the compensation earned by
Victor H. Blake, the Company's Chairman, Chief Executive Officer and
President, and each of the Company's other executive officers whose salary and
benefits for periods presented exceeded $100,000.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS (#) COMPENSATION
------------------ ------ -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Victor H. Blake......... 1995 $262,500(2) $90,421 $146,992(3) -- $ 22,695(4)
Chief Executive Officer 1996 529,038 525,500 136,590(3) 85,218 852,308(5)
and President 1997 575,000 581,877 209,124(3) 85,218 $308,644(6)
Guy D. Hengesbaugh(7)... 1995 $170,000 $45,000 $ 71,783(8) -- $ 5,950(9)
Executive Vice
President and 1996 200,000 100,000 104,756(8) 45,000 7,788(9)
Chief Operating Officer 1997 230,000 115,000 241,419(8) 45,000 9,660(9)
Andrew Cook(10)......... 1995 $ 97,333 $19,000 $ 30,835(11) -- $ 7,740(12)
Senior Vice President
and 1996 161,231 75,000 76,077(11) 33,000 13,701(13)
Chief Financial Officer 1997 185,000 125,000 90,322(11) 33,000 18,500(13)
Terry J. Alfuth(15)..... 1997 $170,000 $85,000 $197,809(14) 25,000 $ 4,512(16)
Senior Vice President
</TABLE>
- --------
(1) In fiscal 1997, Messrs. Blake, Hengesbaugh and Cook elected to use
$143,757, $28,746 and $24,760, respectively, of the bonus shown in this
column to purchase Common Shares at a discount pursuant to the Company's
Employee Stock Purchase Plan. Such Common Shares are subject to
restrictions on disposition for two years.
(2) The compensation indicated relates to Mr. Blake's part-time service. See
"Management--Employment Agreements."
(3) Includes housing expenses of $123,541 for fiscal 1995, $116,346 for fiscal
1996 and $108,269 for fiscal 1997. For fiscal 1997 also includes a $60,179
discount on 5,806 Common Shares that Mr. Blake elected to purchase using a
portion of his annual bonus pursuant to the Company's Employee Stock
Purchase Plan. See Note (1).
(4) Consists of amounts paid for life insurance covering Mr. Blake.
(5) Consists of $489,061 paid in connection with certain pension benefits for
services rendered in fiscal 1996 and prior periods, $249,863 paid in
connection with certain pension benefits for future services, $88,096 paid
for monthly pension contributions, $22,032 paid for life insurance covering
Mr. Blake and $3,256 paid for permanent health insurance covering Mr.
Blake.
(6) Consists of $126,085 paid for monthly pension contributions, $99,999 paid
in connection with certain pension benefits for services rendered in fiscal
1997, $48,285 paid in respect of pension and compensation consulting
services, $23,705 paid for life insurance covering Mr. Blake and $10,570
paid for permanent health insurance covering Mr. Blake.
(7) The compensation indicated was paid by CNA Bermuda pursuant to the
Underwriting Services Agreement. See "Election of Directors--Certain
Transactions--Underwriting Services Agreement."
(8) Includes housing expenses and overseas allowances of $66,106 for fiscal
1995, $97,607 for fiscal 1996 and $218,840 for fiscal 1997. For fiscal 1997
also includes a $12,034 discount on 1,161 Common Shares that Mr.
Hengesbaugh elected to purchase using a portion of his annual bonus
pursuant to the Company's Employee Stock Purchase Plan. See Note (1).
(9) Consists of contributions to a 401(k) Plan.
(10) The compensation indicated for fiscal 1995 was paid by Aon Bermuda
pursuant to the Administrative Services Agreement. See "Election of
Directors--Certain Transactions--Administrative Services Agreement."
(11) Includes housing expenses of $28,800 for fiscal 1995, $60,462 for fiscal
1996 and $60,000 for fiscal 1997. For fiscal 1997 also includes a $10,365
discount on 1,000 Common Shares that Mr. Cook elected to purchase using a
portion of his annual bonus pursuant to the Company's Employee Stock
Purchase Plan. See Note (1).
(12) Consists of $5,740 paid in connection with a noncontributory pension plan
and $2,000 paid in connection with a Company savings plan.
10
<PAGE>
(13) Consists of $13,701 paid in connection with a noncontributory pension plan
for fiscal 1996 and $18,500 paid in connection with a noncontributory
pension plan for fiscal 1997.
(14) Includes a relocation allowance of $75,000 and housing expenses of
$76,700.
(15) The compensation indicated was paid by Aon Bermuda pursuant to the
Administrative Services Agreement. See "Election of Directors--Certain
Transactions--Administrative Services Agreement."
(16) Consists of $4,512 paid in connection with a noncontributory pension plan.
The following table sets forth information concerning stock options granted
to Victor H. Blake, the Company's Chairman, Chief Executive Officer and
President, and each of the Company's other executive officers whose salary and
benefits during the year ended September 30, 1997 exceeded $100,000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES IN OR BASE PRESENT
NAME GRANTED(1) FISCAL YEAR PRICE(2) EXPIRATION DATE(3) VALUE(4)
- ---- ---------- ------------ -------- ---------------------------- --------
<S> <C> <C> <C> <C> <C>
Victor H. Blake......... 85,218 30.1% $27.33 May 19, 2008 to May 19, 2010 $712,422
Guy D. Hengesbaugh...... 45,000 15.9% $27.33 May 19, 2008 to May 19, 2012 $344,250
Andrew Cook............. 33,000 11.7% $27.33 May 19, 2008 to May 19, 2012 $252,450
Terry J. Alfuth......... 25,000 8.8% $27.33 May 19, 2008 to May 19, 2012 $191,250
</TABLE>
- --------
(1) The options vest ratably in five annual installments over five years from
the date of grant, except those granted to Mr. Blake, which vest ratably in
three annual installments over three years from the date of grant.
(2) The exercise price is subject to an antidilution provision whereby the
amount of any dividend declared which, when added to the value of dividends
previously declared within the same fiscal year, exceeds 5% of the average
book value per share for the prior four quarters is deducted from the
exercise price.
(3) The options can be exercised over a 10-year period, commencing on the
exercise date.
(4) The fair value of the options at the grant date has been estimated using
the Black-Sholes option pricing model with the following assumptions:
dividend yield of 0% per annum, expected volatility of 10%, expected life
of 10 years and a risk-free rate of 5.6%.
The following table sets forth information for Victor H. Blake, the Company's
Chairman, President and Chief Executive Officer, and each of the Company's
other executive officers whose salary and benefits during the year ended
September 30, 1997 exceeded $100,000, with regard to the number of Common
Shares underlying unexercised stock options and SARs, and the value of such
stock options and SARs, in each case at September 30, 1997. No stock options or
SARs have been exercised by any of the executive officers.
AGGREGATE OPTIONS/SAR EXERCISES IN FISCAL YEAR 1996 AND 1996 FISCAL YEAR-END
OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SEPTEMBER 30, 1997 AT SEPTEMBER 30, 1997
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Victor H. Blake(1).......... 85,218 / 426,090 $2,082,299 / $8,993,484
Guy D. Hengesbaugh.......... 9,000 / 81,000 $ 160,155 / $ 991,395
Andrew Cook................. 6,600 / 59,400 $ 117,447 / $ 727,023
Terry J. Alfuth............. 0 / 25,000 0 / $ 194,875
</TABLE>
- --------
(1) Of the exercisable securities underlying Mr. Blake's options/SARs, 68,174
pertain to SARs and 17,044 to stock options. These are valued at $1,779,001
and $303,298, respectively. Of the unexercisable securities
11
<PAGE>
underlying Mr. Blake's options/SARs, 272,698 pertain to SARs and 153,392 to
stock options. These are valued at $7,116,054 and $1,877,430, respectively.
The future exercisability of Mr. Blake's SARs will depend on the Company's
financial performance. Assuming that the Company's financial performance
continues at historical levels through December 31, 1998, only 44,314 of
Mr. Blake's 272,698 currently unexercisable SARs will ever become
exercisable. If the remaining 228,384 of Mr. Blake's unexercisable SARs are
excluded from the calculations in the table, he has 197,706 unexercisable
options/SARs, which are valued at $3,033,804.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, as amended, with
Victor H. Blake, pursuant to which he serves as Chairman of the Board of
Directors, Chief Executive Officer and President of the Company. The agreement
provides for an annual base salary of $575,000, effective October 1, 1996. In
addition, Mr. Blake is entitled to an annual non-discretionary bonus based on
the amount, if any, by which LaSalle Re's return on equity for that year
exceeds 15% per annum, subject to a maximum of $862,500 (which he would
receive at a 35% rate of return). In addition, Mr. Blake has been awarded
340,872 stock appreciation rights ("SARs") with respect to Common Shares. Of
these SARs, 68,174 became exercisable on January 1, 1997. Additional portions
of these SARs may become exercisable on January 1, 1998 and January 1, 1999
based upon the amount, if any, by which the Company's compound annual rate of
return exceeds 18% per annum for the entire measurement period. Once
exercisable, each SAR may be exercised on or before March 30, 2004 or, if
earlier, two years after Mr. Blake's termination of employment, for an amount
equal to the fair market value of a Common Share, minus an amount equal to
$16.67 minus dividend adjustments. The current exercise price is $9.03. The
Company's dividend policy will likely result in substantial downward
adjustments to this exercise price. Alternatively, at the Company's sole
discretion, the SARs will entitle Mr. Blake to either (i) the number of
special non-voting shares, par value U.S. $1.00 per share, which were issued
by LaSalle Re in connection with the formation and capitalization of LaSalle
Re (the "Special Non-Voting Shares") equal to the aggregate value of the SARs
divided by the fair market value of a Common Share at the exercise date or
(ii) upon payment of the base value for each SAR, the number of Special Non-
Voting Shares equal to the number of SARs exercised. The SARs may also become
exercisable upon the occurrence of an "extraordinary transaction" involving a
change in control of the Company. The agreement also provides Mr. Blake with
certain benefits, including certain disability, pension and life insurance
benefits, use of an automobile, certain club memberships and reimbursement of
expenses incurred on a basis appropriate to an individual holding the position
of chairman of a company such as the Company. In addition, the Company has
loaned $695,000 to Mr. Blake in order to finance the purchase of a condominium
in Bermuda. The agreement expires on March 31, 2000, but provides for
automatic annual one-year renewals thereafter unless notice of non-renewal is
provided by either party at least 18 months prior to the expiration of the
agreement.
Mr. Blake has agreed that, during the Non-Competition Period (as defined
below), he will not directly or indirectly (i) provide goods or perform
services for the benefit of any client, except with respect to goods provided
or services performed for the benefit of the Company or CNA by the Company
during the period in which Mr. Blake is employed by the Company or (ii)
solicit, attempt to solicit, or endeavor to procure engagement, for himself or
for any business, the opportunity to provide such goods or perform services
for any person (a) to whom the Company has provided such goods or performed
such services for the benefit of the Company or CNA in the 12-month period
prior to Mr. Blake's termination date or (b) to whom, during the six-month
period prior to Mr. Blake's termination date, the Company has devoted material
efforts to obtaining as a purchase of its goods or services. Mr. Blake has
also agreed that, during the Non-Competition Period, he will not directly or
indirectly, divert or attempt to divert any business from the Company. For
purposes of the agreement, the "Non-Competition Period" means (i) if Mr.
Blake's employment is terminated because of his permanent disability, for
cause or if Mr. Blake resigns, the period commencing on the date Mr. Blake's
employment is terminated and continuing for 24 months following such
termination date and (ii) if Mr. Blake terminates his employment following a
breach of the agreement by the Company or if Mr. Blake's employment is
otherwise terminated by the Company, the period commencing on the date Mr.
Blake's employment is terminated and continuing until the earlier to occur of
the last day of the agreement term or 24 months following the termination
date; provided that, for purposes of clause (ii), the Company may extend the
Non-Competition
12
<PAGE>
Period beyond the end of the agreement term to a specified date not later than
24 months following the termination date upon continuation of Mr. Blake's then
applicable base salary.
The Company has entered into an employment agreement with Andrew Cook
pursuant to which he serves as Senior Vice President and Chief Financial
Officer of both the Company and LaSalle Re. The agreement is for a three-year
term and provides for an annual base salary of $185,000, effective October 1,
1996. In addition, Mr. Cook is entitled to an annual partially discretionary
bonus based in part on LaSalle Re's return on equity, subject to a maximum of
$185,000. The agreement provides Mr. Cook with certain benefits, including
disability and pension benefits, use of an automobile, club membership,
housing and living allowance and reimbursement of reasonable business
expenses. The agreement also includes a non-competition clause that is similar
to the non-competition clause contained in Mr. Blake's employment agreement
and described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Pollack and Rackley, and prior to May 21, 1997 also included Joseph Haviv and
Scott A. Schoen, who resigned from the Board of Directors effective on that
date. No member of the Compensation Committee is or was an officer or employee
of the Company or served as a director or a member of the compensation
committee of any other company, one of whose executive officers served as a
member of the Board of Directors or a member of the Compensation Committee of
the Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is composed solely of
independent outside directors. Where appropriate, the Committee reviews and
considers the recommendations of management before determining compensation
policy. In addition, the Committee has employed outside consultants with
respect to certain compensation-related issues. The Company's compensation
programs are designed to be tied closely to Company performance and
shareholder value, and to enable the Company to attract and retain the best
possible executive talent.
In general, the compensation of the Company's executive officers is paid
pursuant to employment and service contracts previously approved by the
Compensation Committee or the Board of Directors. The relation between Company
performance and compensation is embodied in part in the bonus provisions
contained in those contracts. Messrs. Blake and Cook have been employees of
the Company since October 1, 1995. Prior to 1995, Messrs. Blake, Hengesbaugh
and Cook were officers of LaSalle Re and the compensation of Mr. Cook was paid
by Aon Bermuda pursuant to the Administrative Services Agreement. Mr.
Hengesbaugh is employed by CNA Bermuda and his compensation is paid by CNA
Bermuda pursuant to the Underwriting Service Agreement. For the 1997 fiscal
year, Mr. Alfuth was an employee of Aon Bermuda and his compensation was paid
by Aon Bermuda pursuant to the Administrative Services Agreement. Mr. Alfuth
ceased being an officer of the Company in November 1997. See "Election of
Directors--Certain Transactions."
With respect to chief executive compensation, Mr. Blake's compensation
during the year was based on an amended and restated employment agreement
effective October 1, 1995. For the 1997 fiscal year, the contract provided for
a fixed annual salary and an annual non-discretionary performance-based bonus.
The measure of performance for purposes of the annual non-discretionary bonus
is LaSalle Re's return on equity for the year in question. Based on LaSalle
Re's return on equity for the 1997 fiscal year, this bonus amounted to
$581,877. A one-time award of SARs was previously granted under the contract,
a portion of which becomes exercisable based on the Company's compound annual
rate of return since the inception of the Company. See "Management--Employment
Agreements." Upon re-negotiation of the agreement in 1995, the Compensation
Committee and the Board of Directors took into account, among other things,
(1) their desire to compensate officers competitively with other companies in
the property catastrophe business, (2) Mr. Blake's past compensation and (3)
their view that, for purposes of determining compensation, the portion of
compensation tied to performance should be measured both on an annual basis,
as is done with the non-discretionary performance-based bonus, and on a long-
term basis in the form of equity or equity equivalents, as is done with the
SARs and stock options.
13
<PAGE>
Mr. Cook's compensation during the 1997 fiscal year was based on an
employment agreement. Based solely on LaSalle Re's return on equity for the
year, Mr. Cook qualified for a non-discretionary bonus of $71,034 provided
under the contract. On the recommendation of the Chief Executive Officer,
based on the achievement of financial and personal performance objectives and
the complexity and success of the financial transactions undertaken by the
Company during the year, the Committee approved awarding him a discretionary
bonus of $53,966, resulting in a total bonus for the fiscal year of $125,000.
In line with the Company's general compensation policies and the goal of
encouraging alignment of management and shareholder interests through equity
participation, the September 1997 option grants pursuant to the Company's
Long-Term Incentive Plan for the Company's three executive officers were based
on an analysis of the compensation offered by publicly traded Bermuda-based
property catastrophe companies and the performance of the named executive
officers as it related to the success of the Company during the year.
The Company is not a U.S. taxpayer, and therefore Section 162(m) of the U.S.
Internal Revenue Code (which restricts the deductibility of certain
compensation under U.S. tax rules) is inapplicable to the Company's
compensation payments.
COMPENSATION COMMITTEE
Lester Pollack, Chairman
Peter J. Rackley
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns, including reinvestment of dividends, on the Company's Common Shares
to such return for the New York Stock Exchange ("NYSE") composite index and
the NYSE Financials index for the period beginning on October 1, 1996 and
ending on September 30, 1997, assuming $100 was invested on October 1, 1996.
Each measurement point on the graph represents the cumulative shareholder
return as measured by the last reported sale price at the end of each quarter
during the relevant period.
<TABLE>
<CAPTION>
Normalized
Comparative Return
NYSE Composite NYSE Financials
------------------ ---------------
Date LSH Index Index
---- --- ----- -----
<S> <C> <C> <C>
1/10/96 100.00 100.00 100.00
10/31/96 124.47 102.11 105.60
11/30/96 112.67 108.87 114.23
12/31/96 128.59 107.41 112.35
1/31/97 118.97 112.94 119.78
2/28/97 126.39 114.14 123.90
3/31/97 126.39 109.70 115.97
4/30/97 125.12 114.91 122.98
5/31/97 125.12 122.00 128.97
6/30/97 133.01 127.91 136.36
7/31/97 153.68 136.96 150.70
8/31/97 161.74 130.51 142.07
9/30/97 161.74 138.17 152.86
</TABLE>
14
<PAGE>
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2 ON PROXY CARD)
The Company's independent auditors are appointed each year at the Annual
General Meeting of shareholders pursuant to the Board of Directors'
recommendation, which in turn is based on the recommendation of the Audit
Committee. In making its recommendation, the Audit Committee reviews both the
audit scope and estimate fees for professional services for the coming year.
The Board of Directors has recommended the engagement of KPMG Peat Marwick as
the Company's independent auditors for the year ended September 30, 1998. KPMG
Peat Marwick has had responsibility for examining the consolidated financial
statements of the Company and its subsidiaries since 1993.
Representatives of KPMG Peat Marwick will attend the Annual General Meeting
and will have an opportunity to make a statement if they wish. They will also
be available to answer questions at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF AND
AUTHORIZATION OF FEES FOR KPMG PEAT MARWICK AS THE COMPANY'S INDEPENDENT
AUDITORS.
BYE-LAW AMENDMENTS RECOMMENDED BY THE BOARD OF DIRECTORS
(PROPOSAL 3 ON PROXY CARD)
INTRODUCTION
The Company's Bye-laws were last amended in 1995 in connection with the
Company's initial public offering and the consequent listing of its Common
Shares on the Nasdaq National Market. Since that time, the Company has grown
and matured, and its stock is now traded on the New York Stock Exchange.
Taking into account the Company's current needs, the Board of Directors has
carefully reviewed the Company's Bye-laws and has recommended a set of
proposed amendments. The Board of Directors believes that these amendments,
which are detailed below along with an explanation of each proposed change,
further the best interests of the Company and its shareholders. (Following the
law of Bermuda, where the Company is organized, the term "Members" is used in
the Bye-laws to refer to the Company's shareholders.)
Approval of this proposal to amend the Company's Bye-laws requires the
affirmative vote of a majority of the votes cast thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING AMENDMENTS TO THE
COMPANY'S BYE-LAWS.
ELECTION OF DIRECTORS
. Bye-law 11 shall be amended to read as follows:
"11. Election of Directors
"The number of Directors constituting the Board shall be not less
than two (2) nor more than thirteen (13), the exact number to be
determined from time to time by resolution adopted by the affirmative
vote of more than fifty percent (50%) of the Directors then in office;
provided, however, that if no such resolution shall be in effect the
number of Directors shall be thirteen (13). The Board shall be divided
into three classes, with the term of the office of one class expiring
each year. Each class shall consist, as nearly as possible, of one-
third of the total number of Directors constituting the entire Board.
Upon the adoption of this Bye-law, Class I Directors shall be those
Directors elected to hold office for a term expiring at the annual
general meeting in the year 1998; Class II Directors shall be those
Directors elected to hold office for a term expiring at the annual
general meeting in the year 1999; and Class III Directors shall be
those Directors elected to hold office for a term expiring at the
annual general meeting in the year 2000. At each annual general meeting
of Members, successors to
15
<PAGE>
Directors whose terms expire at that annual general meeting shall be of
the same class as the Directors they succeed and shall be elected to
hold office for a full three (3) year term. If the number of Directors
is altered by resolution of the Board pursuant to this Bye-law, such
resolution shall apportion any increase or decrease among the classes
so as to maintain the number of Directors in each class as equal as
possible, but in no case shall a decrease in the number of Directors
shorten the term of any incumbent Director.
"Notwithstanding any other provision of this Bye-law 11, no person
shall be elected as a Director, other than persons nominated by the
Board or a committee thereof, unless advance notice of the nomination
of such person shall have been given to the Company in the manner
provided in Bye-law 11A."
Explanation
The first paragraph of the proposed amended Bye-law 11 would allow the Board
of Directors to vary its size within a range of 2 to 13 directors. Approval of
this amendment would thus grant the Board of Directors additional flexibility
in managing its affairs and the business of the Company. The Board of Directors
would continue to be divided into three classes, with the terms staggered over
a three-year period. However, the size of each class would no longer be fixed
but would vary depending on the total number of directors. Under Bye-law 14,
which will not be affected by the proposed amendments, when a vacancy occurs on
the Board of Directors, a majority of the Board of Directors may fill that
vacancy by appointing a new director, but that new director may hold office
only until the next annual general meeting, unless reelected by the Company's
shareholders.
The second paragraph of the proposed amended Bye-law 11, which requires
shareholders to give the Company advance notice of nominations of candidates
for director in accordance with proposed Bye-law 11A (discussed below), is
designed to ensure an orderly nominating process and adequate time for
deliberation and gathering of information about all candidates for the Board of
Directors. It should be noted that these provisions could deter the nomination
of candidates by shareholders who are seeking to obtain control of the Company
through a proxy contest and are unwilling to make their intentions known at
least 60 days in advance of the general meeting or to satisfy the disclosure
requirements of the proposed new Bye-law 11A.
. A new Bye-law 11A shall be adopted to read as follows:
"11A. Nominations Proposed by Members
"(a) If a Member desires to nominate one or more persons for election
as Directors at any general meeting duly called for the election of
Directors, written notice of such Member's intent to make such a
nomination must be received by the Secretary at the registered office
of the Company not less than 60 days nor more than 120 days before such
general meeting. Such notice shall set forth (i) the name and address,
as it appears in the Register of Members, of the Member who intends to
make such nomination; (ii) a representation that the Member is a holder
of record of shares of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to make such
nomination; (iii) the class and number of shares of the Company which
are held by the Member; (iv) the name and address of each person to be
nominated; (v) a description of all arrangements or understandings
between the Member and any such nominee and any other person or persons
(naming such person or persons) pursuant to which such nomination is to
be made by the Member; (vi) such other information regarding any such
nominee proposed by such Member as would be required to be included in
a proxy statement filed pursuant to Regulation 14A under the Exchange
Act, whether or not the Company is then subject to such Regulation; and
(vii) the consent of any such nominee to serve as a Director, if so
elected. The Chairman of such general meeting shall, if the facts
warrant, refuse to acknowledge a nomination that is not made in
compliance with the procedure specified in this Bye-law 11A, and any
such nomination not properly brought before the meeting shall not be
considered.
"(b) Notwithstanding anything contained in these Bye-laws to the
contrary, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares entitled to
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vote, voting together as a single class, shall be required to amend or
repeal, or adopt any provision inconsistent with, the last sentence of
Bye-law 11 or any provision of this Bye-law 11A."
Explanation
The adoption of Bye-law 11A would require any shareholder who wished to
nominate a candidate for the Board of Directors to disclose certain basic
information about the nominating shareholder and the proposed candidate. The
chairman of a general meeting of shareholders would be required to refuse to
acknowledge any nomination made in violation of this procedure. This proposed
amendment would increase the visibility of, and would give all shareholders
greater access to information concerning, candidates for the Board of Directors
who are nominated by other shareholders.
DETERMINATION OF QUORUM
. Paragraph (a) of Bye-law 16 shall be amended to read as follows:
"(a) The Board shall hold regular quarterly meetings although it may
specially meet for the transaction of business, adjourn and otherwise
regulate its meetings as it sees fit. The quorum necessary for the
transaction of business may be fixed by the affirmative vote of more
than fifty percent (50%) of the Directors then in office and unless so
fixed shall be the lesser of six (6) or fifty percent (50%) of the
Directors then in office."
Explanation
Under the current Bye-laws, at least 6 directors must be present to
constitute a quorum of the Board of Directors. The Board of Directors believes
that a quorum of 6 directors was appropriate when the total number of directors
was fixed at 13 but that, in light of the proposed amended Bye-law 11
(discussed above) that would permit the Board of Directors to determine the
total number of directors within a specified range, it is appropriate to allow
the Board of Directors to make corresponding adjustments to the size of the
quorum. The proposed amendment to Bye-law 16 gives the Board of Directors this
flexibility. In the event that the Board of Directors failed to determine the
size of the quorum, the quorum would be 6 directors or 50% of the directors
then in office, whichever is less.
COMPENSATION OF DIRECTORS
. Paragraph (a) of Bye-law 19 shall be amended to read as follows:
"(a) The remuneration (if any) of the Directors shall be determined
by the Board and shall be deemed to accrue from day to day. The
Directors shall be reimbursed for all travel, hotel and other expenses
which are reasonable and properly incurred by them in attending and
returning from meetings of the Board, any committee appointed by the
Board, general meetings of the Company, or in connection with the
business of the Company or their duties as Directors generally."
Explanation
The foregoing amendment would permit the Board of Directors to set director
compensation, which is the standard practice of companies that have publicly
traded stock and are subject to the disclosure requirements of the U.S.
securities laws and regulations. Any director compensation determined by the
Board of Directors will be disclosed to shareholders as required under the U.S.
securities laws and regulations. Under the current Bye-law 19, all director
compensation other than reimbursement of expenses requires action by the
shareholders at an Annual or Special General Meeting. The Board of Directors
believes that having greater flexibility to design director compensation
packages will enhance its ability to recruit qualified candidates to serve on
the Board of Directors.
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RESTRICTIONS ON TRANSFER OF THE COMPANY'S STOCK
. A new Paragraph (e) of Bye-law 57 shall be adopted to read as follows:
"(e) The restrictions on transfer authorized by this Bye-law shall
not be imposed in any circumstances in a way that would interfere with
the settlement of trades or transactions entered into through the
facilities of the New York Stock Exchange, Inc.; provided, however,
that the Company may decline to register transfers in accordance with
these Bye-laws and resolutions of the Board after a settlement has
taken place."
Explanation
Bye-law 57 imposes certain transfer restrictions to ensure that the Company
does not inadvertently become subject to U.S. federal income taxation and to
prevent any shareholder from acquiring more than 5% of the Company's
outstanding capital stock without the approval of the Board of Directors. In
connection with, and as a condition to, the listing of the Company's stock on
the NYSE, the Company gave an undertaking to the NYSE that it would seek an
amendment to Bye-law 57 to make clear that such transfer restrictions would not
be imposed in a way that would interfere with the settlement of trades or
transactions entered into through the NYSE. The Company would retain the right
to decline to register transfers after a settlement has taken place.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
. Bye-law 27 shall be amended by deleting the words "wilful negligence, wilful
default" in subparagraphs (i), (ii), and (iv) of paragraph (a) and in
paragraph (h).
Explanation
At the time Bye-law 27 was adopted in its current form, Section 98 of the
Companies Act 1981 of Bermuda (the "Act") prohibited the indemnification of
directors and officers for conduct involving "wilful negligence, wilful
default, fraud or dishonesty." In conformity with the Act, Bye-law 27 excluded
these four types of conduct from the scope of its indemnification provisions.
However, Section 98 of the Act has recently been amended to prohibit the
indemnification of directors and officers only for conduct involving "fraud or
dishonesty." The Bermuda legislature deleted the terms "wilful negligence" and
"wilful default" from the Act because the inherent ambiguity of these terms had
led to several arguably frivolous lawsuits against boards of directors. The
foregoing amendment would bring Bye-law 27 into conformity with Section 98 of
the Act, as amended. If this amendment is adopted, indemnification would no
longer be prohibited for conduct involving "wilful negligence" or "wilful
default" but would still be prohibited for conduct involving "fraud or
dishonesty." This would provide the Company's directors and officers with the
broadest indemnification permitted by current Bermuda law and would minimize
the grounds for frivolous lawsuits against them. Reducing the risk of frivolous
litigation against the Company's directors and officers benefits the Company
and its shareholders by encouraging highly qualified individuals to serve the
Company in those capacities.
GENERALLY ACCEPTED AUDITING STANDARDS
. Paragraph (c) of Bye-law 75 shall be amended to read as follows:
"(c) The generally accepted auditing standards referred to in
subparagraph (b) of this Bye-law may be those of a country or jurisdiction
other than Bermuda or which have been appointed pursuant to section 90 of
the Act. If so, the financial statements and the report of the Auditor must
disclose this fact and identify the generally accepted auditing standards
used."
Explanation
Current Bye-law 75 permits audits to be conducted in accordance with the
generally accepted auditing standards of a country or jurisdiction other than
Bermuda, as permitted by Section 90 of the Act. However, Section 90 of the Act
was recently amended to allow the Bermuda Minister of Finance to appoint the
use of generally accepted auditing standards promulgated by an audit standard
setting body other than that of a specific
18
<PAGE>
country or jurisdiction. The foregoing amendment would conform Bye-law 75 to
Section 90 of the Act, as amended, and give the Company's auditors the
flexibility to use generally accepted auditing standards appointed by the
Minister of Finance as well as generally accepted auditing standards of a
country or jurisdiction other than Bermuda.
MISCELLANEOUS NON-SUBSTANTIVE AMENDMENTS
. In Bye-law 15(b) the term "Register of Directors" shall be deleted and the
term "Register of Directors and Officers" substituted therefor.
. Bye-laws 25(a) and (b) shall be deleted in their entirety, the following
shall be substituted therefor and Bye-law 25(c) shall be renumbered as Bye-
law 25(b):
"(a) The Board shall cause to be kept in one or more books at the
registered office of the Company a Register of Directors and
Officers and shall enter therein the particulars required by the
Act."
. In Bye-law 41(c) the words "at such time and place" shall be deleted and the
words "at such time at such meeting" substituted therefor.
. In Bye-law 81 the words "or some other person appointed by the Board" shall
be deleted and the words "or any person appointed by the Board" substituted
therefor.
Explanation
The foregoing amendments, which have been recommended by Conyers Dill &
Pearman, Bermuda counsel to the Company, are secretarial in nature and would
not have a substantive legal effect upon the interests of the shareholders or
the operations of the Company.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals must be received no later than September 8, 1998 and
must otherwise comply with the rules of the Securities and Exchange Commission
to be eligible for inclusion in the 1999 Annual General Meeting proxy
statement.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by the Company by mail, and may be made by directors,
officers and employees personally or by telephone or telegram. Proxy cards and
materials also will be distributed to beneficial owners of Common Shares
through brokers, custodians, nominees and other like parties, and the Company
expects to reimburse such parties for their charges and expenses. Corporate
Investor Communications, Inc., of Carlstadt, New Jersey, has been retained to
assist the Company in the solicitation of proxies at a fee estimated not to
exceed $5,000.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters that may
be presented at the Annual General Meeting other than those specifically set
forth in the attached Notice Of Annual General Meeting. If any other matters
come before the meeting or any adjournment thereof, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their best judgment with respect to such matters.
By Order of the Board of Directors,
Victor H. Blake, O.B.E.
Chairman, Chief Executive Officer
and President
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PROXY
LASALLE RE HOLDINGS LIMITED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Andrew Cook and T.W. Tucker
Hall, or either of them, proxies with full power of substitution and each of
them is hereby authorized to represent the undersigned and to vote all shares of
the Company held by the undersigned at the Annual General Meeting of
shareholders to be held at the Elbow Beach Hotel, Paget, Bermuda on February 26,
1998 at 9:00 a.m. local time, or at any adjournment or postponement thereof, on
the matters set forth below in accordance with any directions given by the
undersigned and, in their discretion, on all other matters that may properly
come before the Annual General Meeting.
(1) TO ELECT DIRECTORS:
Tim I. Madden (to hold office until 2000)
Donald P. Koziol, Jr. (to hold office until 2001)
Peter J. Rackley (to hold office until 2001)
(2) TO APPOINT KPMG Peat Marwick as the Company's independent auditors for
1998, and authorize the Board of Directors to set the fees for the
independent auditors.
(3) TO APPROVE amendments to the Company's Bye-laws as set forth in the
Company's Proxy Statement.
You are encouraged to specify your choices by marking the appropriate boxes (SEE
REVERSE SIDE), but you need not mark any box if you wish to vote in accordance
with the Board of Directors' recommendations. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE>
[X] Please mark your votes as in this example. 6820
----
This proxy, when properly executed, will be voted in the manner directed
herein by the shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 and 3.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1, 2 and 3.
- --------------------------------------------------------------------------------
1. Election of Directors. (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. TO APPOINT KPMG Peat Marwick as the Company's independent auditors for
1998, and authorize the Board of Directors to set the fees for the
independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To APPROVE amendments to the Company's Bye-laws as set forth in the Proxy
Statement.
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
Please sign below exactly as name(s) appears
hereon. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such.
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SIGNATURE(S) DATE
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SIGNATURE(S) DATE
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