<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1997
REGISTRATION NO. 333-23273
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
LASALLE RE HOLDINGS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BERMUDA NOT APPLICABLE
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
25 CHURCH STREET CT CORPORATION SYSTEM
P.O. BOX HM 1502 1633 BROADWAY
HAMILTON HM FX BERMUDA NEW YORK, NEW YORK 10019
(441) 292-3339 (212) 664-1666
(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE,
TELEPHONE NUMBER, INCLUDING AND TELEPHONE
AREA CODE, OF REGISTRANT'S PRINCIPAL NUMBER, INCLUDING AREA CODE, OF AGENT
EXECUTIVE OFFICES) FOR SERVICE)
COPIES TO:
RICHARD WARREN SHEPRO ALEXANDER M. DYE
MAYER, BROWN & PLATT LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
190 SOUTH LASALLE STREET 125 WEST 55TH STREET
CHICAGO, ILLINOIS 60603-3441 NEW YORK, NEW YORK 10019-5389
(312) 782-0600 (212) 424-8000
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 19, 1997
PROSPECTUS
3,000,000 SHARES
LASALLE RE HOLDINGS LIMITED
SERIES A PREFERRED SHARES
--------
All of the 3,000,000 Series A Preferred Shares, par value $1.00 per share
(the "Series A Preferred Shares"), offered hereby are being sold by LaSalle Re
Holdings Limited (the "Company"). Upon liquidation, holders of the Series A
Preferred Shares will be entitled to receive out of any surplus assets a
liquidation preference of $25.00 per share, plus accrued and unpaid dividends,
if any, to the date of liquidation. See "Description of Series A Preferred
Shares--Liquidation Rights."
Dividends on the Series A Preferred Shares will be cumulative from the date
of original issuance and will be payable quarterly on the first day of March,
June, September and December of each year, commencing June 1, 1997, in an
amount per share equal to % of the liquidation preference per annum
(equivalent to $ per share). See "Description of Series A Preferred Shares--
Dividends."
On and after March , 2007, the Series A Preferred Shares will be
redeemable, in whole or in part, at the option of the Company at any time, at a
redemption price of $25.00 per share, plus accrued and unpaid dividends, if
any, to the date of redemption. The Series A Preferred Shares have no stated
maturity and will not be subject to any sinking fund or mandatory redemption
and will not be convertible into any other securities of the Company. See
"Description of Series A Preferred Shares--Redemption."
The Company intends to make application to list the Series A Preferred Shares
on the New York Stock Exchange (the "NYSE"). If such application is approved,
trading in the Series A Preferred Shares is expected to commence within a 30-
day period after the initial delivery of the Series A Preferred Shares. See
"Underwriting."
SEE "RISK FACTORS" ON PAGE 14 FOR A DESCRIPTION OF CERTAIN MATTERS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SERIES A PREFERRED SHARES.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE COMPANY(1)(3)
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<S> <C> <C> <C>
Per Share.......................... $25.00 $ $
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Total.............................. $75,000,000 $ $
</TABLE>
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(1) Plus accrued dividends, if any, from the date of original issuance.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Before deducting expenses estimated at $575,000 payable by the Company.
--------
The Series A Preferred Shares are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the Series
A Preferred Shares offered hereby will be available for delivery on or about
March , 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
--------
SMITH BARNEY INC.
LAZARD FRERES & CO. LLC
MORGAN STANLEY & CO.
INCORPORATED
March , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SERIES A
PREFERRED SHARES OFFERED HEREBY, INCLUDING OVERALLOTMENT, ENTERING STABILIZING
BIDS, EFFECTING SYNDICATE SHORT COVERING TRANSACTIONS, AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY
OF THIS DOCUMENT. THE BUYER IN NORTH CAROLINA UNDERSTANDS THAT NEITHER THE
COMPANY NOR ITS SUBSIDIARIES ARE LICENSED IN NORTH CAROLINA PURSUANT TO
CHAPTER 58 OF THE NORTH CAROLINA GENERAL STATUTES, NOR COULD THEY MEET THE
BASIC ADMISSIONS REQUIREMENTS IMPOSED BY SUCH CHAPTER AT THE PRESENT TIME.
CONSENT UNDER THE EXCHANGE CONTROL ACT 1972 (AND REGULATIONS THEREUNDER) HAS
BEEN OBTAINED FROM THE BERMUDA MONETARY AUTHORITY FOR THE ISSUE OF THE SHARES
BEING OFFERED PURSUANT TO THIS OFFERING TO PERSONS NOT RESIDENT IN BERMUDA FOR
EXCHANGE CONTROL PURPOSES. IN ADDITION, A COPY OF THIS DOCUMENT HAS BEEN
DELIVERED TO THE REGISTRAR OF COMPANIES IN BERMUDA FOR FILING PURSUANT TO THE
COMPANIES ACT 1981 OF BERMUDA. IN GIVING SUCH CONSENT AND IN ACCEPTING THIS
PROSPECTUS FOR FILING, THE BERMUDA MONETARY AUTHORITY AND THE REGISTRAR OF
COMPANIES IN BERMUDA ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF
ANY PROPOSAL OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS
EXPRESSED HEREIN.
THESE SECURITIES MAY NOT BE OFFERED OR SOLD TO PERSONS IN THE UNITED KINGDOM
EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING,
HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE
PURPOSES OF THEIR BUSINESSES, OR OTHERWISE IN CIRCUMSTANCES WHICH DO NOT
CONSTITUTE AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF
THE PUBLIC OFFERS OF SECURITIES REGULATIONS 1995. ALL APPLICABLE PROVISIONS OF
THE FINANCIAL SERVICES ACT 1986 OF THE UNITED KINGDOM MUST BE COMPLIED WITH IN
RELATION TO ANYTHING DONE IN RELATION TO THESE SECURITIES IN, FROM OR
OTHERWISE INVOLVING THE UNITED KINGDOM. THIS DOCUMENT MAY NOT BE ISSUED OR
PASSED ON TO ANY PERSON IN THE UNITED KINGDOM UNLESS THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996 OR IS A PERSON TO WHOM THIS DOCUMENT
MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON.
In this Prospectus, references to "dollar" and "$" are to United States
currency, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
2
<PAGE>
ENFORCEMENT OF CIVIL LIABILITIES UNDER
UNITED STATES FEDERAL SECURITIES LAWS
The Company is a Bermuda company and certain of its officers and directors
are residents of various jurisdictions outside the United States. All or a
substantial portion of the assets of the Company and such officers and
directors, at any one time, are or may be located in jurisdictions outside the
United States. Therefore, it may be difficult for investors to effect service
of process within the United States on any of such persons or to enforce
against such persons judgments of United States courts predicated upon civil
liability provisions of the United States federal securities laws.
Notwithstanding the foregoing, the Company has appointed CT Corporation
System, 1633 Broadway, New York, New York 10019, its agent to receive service
of process with respect to actions against it arising out of or in connection
with the United States federal securities laws or out of violations of such
laws in any federal or state court in the United States relating to the
transactions covered by this Prospectus. The Company has been advised by
Conyers Dill & Pearman, its Bermuda counsel, that there is a doubt as to
whether the courts of Bermuda would enforce (i) judgments of United States
courts obtained in actions against such persons or the Company predicated upon
the civil liability provisions of the United States federal securities laws
and (ii) original actions brought in Bermuda against such persons or the
Company predicated solely upon United States federal securities laws. There is
no treaty in effect between the United States and Bermuda providing for such
enforcement, and there are grounds upon which Bermuda courts may not enforce
judgments of United States courts. Certain remedies available under the United
States federal securities laws would not be allowed in Bermuda courts as
contrary to that jurisdiction's public policy.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other information
with the United States Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company with the
Commission can be inspected without charge and copied, upon payment of
prescribed rates, at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven
World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2551. Copies of
such material and any part thereof are also available by mail from the Public
Reference Section of the Commission, at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Copies of such material are
also available and can be copied at the offices of the New York Stock
Exchange, 11 Wall Street, New York, New York 10005. In addition, the
Commission maintains a Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company.
The Company has filed with the Commission a registration statement (herein,
together with all amendments, exhibits and schedules thereto, referred to as
the "Registration Statement") under the United States Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Series A Preferred
Shares offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with rules and
regulations of the Commission. For further information with respect to the
Company and the Series A Preferred Shares, reference is hereby made to the
Registration Statement. Statements made in this Prospectus concerning the
contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to such exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company currently will be treated as a domestic corporation for purposes
of certain requirements of the Exchange Act, including the proxy rules,
because the Company currently does not fit the definition of a
3
<PAGE>
"foreign private issuer" within the meaning of Rule 3b-4 under the Exchange
Act. Pursuant to current Rule 3b-4, a "foreign private issuer" is any foreign
issuer other than a foreign government, except an issuer meeting the following
conditions: (i) more than 50% of the outstanding voting securities are held of
record by residents of the United States and (ii) any of the following: (1)
the majority of the executive officers or directors are United States citizens
or residents, (2) more than 50% of the assets are located in the United States
or (3) the business is administered principally in the United States. By
virtue of (i) and (ii)(1), the Company currently is not and does not expect
that it will become a "foreign private issuer," although there is no assurance
of such. If the Company were to become a "foreign private issuer," it would be
exempted from the proxy and short-swing profit rules under Sections 14 and 16
of the Exchange Act and, for reporting purposes under the Exchange Act, would
be subjected to rules applicable to "foreign private issuers."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1996, and the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1996, each filed pursuant to Section 13 of the Exchange Act
(file number 0-27216).
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Series A Preferred Shares (the "Offering") shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any subsequently filed
document which is incorporated or deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents.
Requests should be addressed to the principal executive offices of LaSalle Re
Holdings Limited, Attention: Investor Relations, P.O. Box HM 1502, Hamilton HM
FX, Bermuda (telephone (441) 292-3339, facsimile (441) 292-1501).
4
<PAGE>
NOTE ON FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Forward-looking statements are statements other than historical
information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as "believes,"
"anticipates," "intends" or "expects." The forward-looking statements
contained and incorporated by reference in this Prospectus are generally
located in the material set forth under the headings "Prospectus Summary,"
"Risk Factors" and "Business" but may be found in other locations as well.
These forward-looking statements relate to the plans and objectives of the
Company for future operations, including the Company's policy concerning
dividends. In light of the risks and uncertainties inherent in all future
projections, including but not limited to those set forth under the heading
"Risk Factors," the inclusion of forward-looking statements in this Prospectus
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. Many factors
could cause the Company's actual results to differ materially from those in
the forward-looking statements, including the following: (i) the occurrence of
catastrophic events with a frequency or severity exceeding the Company's
estimates; (ii) a decrease in the level of demand for property catastrophe
reinsurance; (iii) an increase in the supply of property catastrophe
reinsurance as a result of additional capital provided by recent or future
market entrants or by existing property catastrophe reinsurers; (iv) increased
competitive pressure from current reinsurers or future market entrants; (v) a
competitive disadvantage resulting from certain of the Company's principal
competitors having higher financial ratings than the Company, any future
decline in or loss of the Company's financial ratings or the Company's non-
admitted status in United States jurisdictions; (vi) a major decrease in the
cession of business from CNA Financial Corporation (together with its
affiliates, "CNA") to the Company; (vii) loss of the services of any of the
Company's executive officers; (viii) the occurrence of a single catastrophic
event affecting multiple geographic zones; (ix) actual loss expenses exceeding
the Company's loss reserve, which is necessarily based on actuarial and
statistical projections of ultimate loss expenses; (x) changing rates of
inflation and other economic conditions, which could have an adverse impact on
loss payments, investment returns and premiums; (xi) losses due to foreign
currency exchange rate fluctuations or the failure of a counterparty to
perform under any of the Company's foreign exchange contracts; (xii) the
termination of any of the Company's service agreements; (xiii) the passage of
federal or state legislation subjecting the Company to supervision or
regulation in the United States; (xiv) challenges by insurance regulators in
the United States or the United Kingdom to the Company's claim of exemption
from insurance regulation under current laws; and (xv) a contention by the
United States Internal Revenue Service (the "IRS") that the Company or its
insurance subsidiary, LaSalle Re Limited ("LaSalle Re"), is engaged in the
conduct of a trade or business within the U.S. The foregoing review of
important factors should not be construed as exhaustive and should be read in
conjunction with other cautionary statements that are included in this
Prospectus. The Company undertakes no obligation to release publicly the
results of any future revisions it may make to forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing or incorporated by reference
in this Prospectus. Unless otherwise indicated, all financial information
presented herein has been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"). Certain terms used herein are defined in
"Glossary of Selected Insurance and Reinsurance Terms." Unless the context
otherwise requires, references herein to the "Company" include LaSalle Re
Holdings Limited ("Holdings"), the issuer of the Series A Preferred Shares
offered hereby, LaSalle Re, the Company's insurance subsidiary, LaSalle Re
(Services) Limited ("LaSalle Re Services"), the Company's London representative
office, and LaSalle Re Corporate Capital Ltd. ("LaSalle Re Capital"), the
Company's subsidiary which is a corporate member of Lloyd's of London
("Lloyd's").
THE COMPANY
OVERVIEW
The Company writes high severity, low frequency reinsurance on a worldwide
basis through its subsidiary, LaSalle Re. The Company primarily writes property
catastrophe reinsurance and also writes selected other lines of reinsurance
when it believes that market conditions are favorable. These lines currently
include property risk excess, property pro rata treaty, casualty clash, marine,
crop hail, aviation and satellite. The Company believes that these other lines
will constitute a growing portion of the Company's total portfolio of
reinsurance business, helping to moderate the volatility of its property
catastrophe reinsurance exposures.
The Company has been successful in attaining a selective and geographically
diverse portfolio of property catastrophe reinsurance risks. In the year ended
September 30, 1996, 41.7% of the Company's net premiums written represented
U.S.-based risks, 11.6% represented continental Europe-based risks, 8.6%
represented U.K.-based risks and 36.2% represented risks located in a variety
of other geographic zones elsewhere in the world. As a result of long-term
relationships between the Company's management and certain clients and brokers,
the Company has developed a strong base of regional business in discrete zones
within the U.S. This business assists the Company in diversifying its U.S.-
based risks and makes more efficient use of its capital by limiting multi-zone
exposures. In the year ended September 30, 1996, this regional business
represented a significant component of the Company's U.S.-based net premiums
written.
At December 31, 1996, the Company had total shareholders' equity and minority
interest (together, "Combined Equity") of $503.1 million compared to $412.5
million at December 31, 1995. It achieved annualized returns on average
Combined Equity of 29.2% and 26.6%, respectively, and combined ratios of 46.0%
and 52.6%, respectively, for the years ended September 30, 1996 and 1995. In
addition, its loss and loss expense ratios were 26.4% and 35.5% for the same
periods. The Company wrote net premiums of $190.2 million and $201.9 million,
respectively, for the years ended September 30, 1996 and 1995. During the three
months ended December 31, 1996 and 1995, the Company wrote net premiums of $5.2
million and $12.6 million, respectively. There can be no assurance that the
Company will achieve similar results in the future.
DEVELOPMENT OF THE BUSINESS
In October 1993, Aon Corporation (together with its affiliates, "Aon"), CNA,
Corporate Partners, L.P. (together with its related parties, "Corporate
Partners") and certain other investors (together, the "Founding Shareholders")
formed LaSalle Re in Bermuda to take advantage of the supply and demand
imbalance that they believed existed in the property catastrophe reinsurance
market. Affiliates of Aon and CNA provide certain underwriting, investment
management and administrative services to the Company pursuant to service
agreements.
6
<PAGE>
In September 1995, Holdings was incorporated in Bermuda as a holding company
in connection with the Company's recapitalization and initial public offering.
Holdings owns 100% of the outstanding voting stock of LaSalle Re and, since
November 1995, has owned a majority of the outstanding capital stock of LaSalle
Re. The remaining outstanding capital stock of LaSalle Re is held by certain
Founding Shareholders in the form of exchangeable non-voting shares of LaSalle
Re ("Exchangeable Non-Voting Shares"). Exchangeable Non-Voting Shares are
exchangeable, at the option of the holder, on a one-for-one basis for common
shares of the Company, par value $1.00 per share ("Common Shares"), unless the
Company's Board of Directors (the "Board") determines that such exchange may
cause actual or potential adverse tax consequences to the Company or any
shareholder.
CAPITAL MANAGEMENT STRATEGY
Since its inception, the Company has endeavored to provide liquidity to
shareholders and to pursue a capital management strategy focused on balancing
capital levels with aggregate exposures while seeking to achieve strong returns
on shareholders' equity. Consistent with this strategy, in October 1996 the
Company adopted a dividend policy pursuant to which it intended to distribute
in each fiscal year 50% to 60% of its net income from the prior fiscal year, if
any, on a quarterly basis. As part of its capital management strategy, the
Company also announced its intention to repurchase up to $50 million of Common
Shares in open market or privately negotiated transactions from time to time
depending on market conditions and the Company's capital and liquidity
requirements.
The Company completed a secondary offering of 3,910,000 Common Shares in
December 1996 (the "Secondary Offering"). The Secondary Offering increased the
number of Common Shares owned by the public (i.e. persons not affiliated with
the Founding Shareholders) from 4,312,500 to 8,222,500 and reduced the
percentage of Common Shares owned by Founding Shareholders to approximately
50%. In addition, as a result of the exchange of certain Exchangeable Non-
Voting Shares in connection with the Secondary Offering, the Company increased
its ownership of the outstanding capital stock of LaSalle Re from 63% to 73%.
In order to reduce its earnings volatility, protect its capital base and
support its dividend policy, the Company purchased a multi-year excess of loss
reinsurance program effective January 1, 1997. The program is event-based,
providing up to $100 million of coverage in excess of the first $100 million of
losses for the first loss occurrence and $100 million of coverage in excess of
the first $150 million of losses for the second loss occurrence, with a $200
million aggregate coverage limit over a three-year period. The attachment point
is triggered by losses incurred by the Company rather than industry losses. The
reinsurance is provided by a company that holds a rating of "A+" (Superior)
from A.M. Best Company, Inc. ("A.M. Best") and a claims-paying ability rating
of "AA" from Standard & Poor's Rating Services ("S&P").
On February 27, 1997, the Board approved the Offering and, contingent on the
completion of the Offering, voted to expand the Company's planned share
repurchase program from the previously announced level of $50 million to a new
level of $125 million of Common Shares. Accordingly, following completion of
the Offering, the Company expects to make a public tender offer to repurchase
approximately $100 million of Common Shares (the "Tender Offer"). At a future
date, the Company also expects to repurchase up to $25 million of Common Shares
through open market or privately negotiated transactions (together with the
repurchases effected pursuant to the Tender Offer, the "Repurchases"). The
Board also confirmed the dividend policy pursuant to which the Company intends
to distribute as dividends to holders of Common Shares and Exchangeable Non-
Voting Shares in each fiscal year 50% to 60% of the amount by which its net
income (before minority interest) from the prior fiscal year exceeds the amount
of dividends payable on Series A Preferred Shares in the current fiscal year.
The Company believes that its capital management strategy is consistent with
its policy to actively manage its capital and its goal to increase shareholder
value. Following consummation of the Repurchases, the Company believes that its
cash, short-term investments and borrowing capacity, together with anticipated
cash flows from
7
<PAGE>
operations, will be adequate for its needs in the foreseeable future. However,
the Company's actual experience may differ from the expectations set forth in
the preceding sentence, due to future events that might have the effect of
reducing the Company's available cash balances (such as operating losses
following catastrophes or other adverse events) or that might reduce or
eliminate the availability of external financial resources. For a discussion of
some of the factors that could cause the Company's actual experience to differ
from expectations, prospective investors should refer to "Risk Factors" and
"Note on Forward-Looking Statements." The Company's capital management strategy
is subject to change at the discretion of the Board, as the Company's ability
to implement its capital management strategy will depend on various factors,
some of which are beyond its control.
OPERATING STRATEGIES
The Company pursues the following operating strategies which, in conjunction
with its capital management strategy, are intended to maximize return on
shareholders' equity:
Focus on Property Catastrophe Reinsurance. The Company concentrates on
writing property catastrophe reinsurance of risks located throughout the world.
For the years ended September 30, 1996 and 1995, the Company derived 86.5% and
88.4%, respectively, of its net premiums written from property catastrophe
reinsurance. The high level of severity and frequency of property catastrophe
losses from 1987 through 1992 precipitated a general increase in rates and
attachment points in this line of reinsurance. Although rates have declined
from their highs in 1993 and 1994, the Company believes that property
catastrophe reinsurance can still be significantly profitable for a reinsurer,
such as the Company, that has the financial strength, flexibility and
responsiveness needed to attract quality business and the high level of
technical underwriting judgment and skill necessary to price risks
appropriately.
Selectively Write Other Lines of Business. While property catastrophe
reinsurance is the Company's primary focus, the Company also seeks to take
advantage of pricing opportunities that may occur in other lines of
reinsurance. These lines generally are characterized by a relatively short
period between the collection of premium and the notification of loss. These
lines currently include property risk excess and pro rata treaty insurance,
which constituted 5.1% and 2.6% of the Company's net premiums written in the
years ended September 30, 1996 and 1995, respectively. The Company also writes
casualty clash, marine, crop hail, aviation and satellite reinsurance. For the
years ended September 30, 1996 and 1995, these coverages represented 6.5% and
6.0%, respectively, of the Company's net premiums written. The Company believes
that writing these types of reinsurance enhances the utilization of capital
because these lines generally do not create additional aggregate exposure for
the Company. In addition, the Company has formed LaSalle Re Capital to provide
capital support to selected Lloyd's syndicates. During the quarter ended
December 31, 1996, LaSalle Re Capital was accepted as a corporate member of
Lloyd's, and since January 1, 1997 LaSalle Re Capital has participated in three
Lloyd's syndicates. One of these syndicates writes direct and facultative
property insurance, one writes marine insurance and reinsurance, and one writes
professional indemnity and directors and officers' insurance and bankers
blanket bond business. LaSalle Re Capital provides capital support to the
syndicates through letters of credit.
Utilize a Disciplined Underwriting Approach. Underwriting decisions are made
following analysis of each reinsurance contract based on the expected
incremental return on equity in relation to the Company's overall portfolio of
reinsurance contracts. To assess its property catastrophe risks, the Company
uses a variety of underwriting techniques, including simulation models,
exposure ratings and experience ratings. The Company has developed its
proprietary L-CAM(TM) catastrophe analysis model to assess its risks in the
U.S. property catastrophe market. The Company controls and monitors its
aggregate exposures on a real-time basis using computer-based rating and
control systems. The Company is highly selective in accepting risks, extending
coverage on approximately 29% and 24% of the contract submissions it received
in the years ended September 30, 1996 and 1995, respectively.
8
<PAGE>
Maintain and Develop Long-Term Relationships with Clients and Brokers. The
Company seeks to maintain and develop long-term relationships with its clients
and brokers by providing a high level of service. The Company promptly responds
to underwriting submissions, designs customized programs, offers lead terms
when circumstances warrant and pays valid claims within an average of five
days. The Company retains a substantial portion of its clients from year to
year. Retention of clients permits the Company to use its experience regarding
a client's underwriting practices and risk management systems to underwrite its
own business with greater precision. In addition, the Company's relationships
with brokers permit it to obtain business and monitor developments in various
lines of reinsurance in order to increase its writings when market conditions
in those lines are favorable.
INDUSTRY TRENDS
The Company believes that an imbalance between the supply of and demand for
property catastrophe reinsurance existed in 1993 and resulted in an increase in
premiums from pre-1993 levels. As a result of the increased property
catastrophe reinsurance capacity since 1993, the Company believes that supply
and demand in the property catastrophe reinsurance market became more stable in
1994 and have remained relatively stable in succeeding years. The Company
believes that property catastrophe reinsurance capacity has increased further
since 1994. Based on the Company's marketing efforts, reinsurance contract
submissions and publicly available information, the Company believes that
property catastrophe rates generally remained at the substantially increased
1993 levels in 1994 and decreased somewhat in 1995 and further in 1996 from
1994 levels. In particular, rates have declined significantly in areas, such as
Japan and Europe, where there has been favorable loss experience, while in the
U.S. market, where the level of property catastrophe losses has generally been
higher than in international markets in recent years, rates have decreased to a
lesser degree. Notwithstanding these rate decreases, the Company believes that
current rates generally exceed 1992 levels. If and while favorable loss
experience continues and reinsurance capacity does not diminish, the Company
expects further downward pressure on rates during 1997, which it expects will
in turn put downward pressure on its premium levels. Based on the 1997 contract
renewals that have occurred to date, the Company estimates that it has
experienced overall rate decreases of approximately 15% compared to 1996. See
"Risk Factors--Business Considerations."
----------------
The Company's principal executive offices are located at 25 Church Street,
Hamilton HM FX Bermuda, and its phone number is (441) 292-3339.
9
<PAGE>
TERMS OF THE OFFERING
The description of the terms of the Series A Preferred Shares in this section
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the terms and provisions of the Certificate of
Designation relating to the Series A Preferred Shares (the "Certificate of
Designation") and the bye-laws of Holdings (the "Bye-Laws"). See "Description
of Series A Preferred Shares."
Securities Offered.. 3,000,000 Series A Preferred Shares.
Dividends...........
Dividends on the Series A Preferred Shares will be
cumulative from the date of original issuance and will be
payable quarterly in arrears on the first day of March,
June, September and December of each year (or, if such
date is not a business day, on the business day
immediately before such date), commencing June 1, 1997,
in an amount per share equal to % of the liquidation
preference per annum (equivalent to $ per share). See
"Description of Series A Preferred Shares--Dividends."
Liquidation Rights.. Upon liquidation, holders of the Series A Preferred
Shares will be entitled to receive out of any surplus
assets a liquidation preference of $25.00 per share, plus
accrued and unpaid dividends, if any, to the date of
liquidation. See "Description of Series A Preferred
Shares--Liquidation Rights."
Conversion.......... The Series A Preferred Shares are not convertible into or
exchangeable for any other securities of the Company.
Redemption.......... On and after March , 2007, the Series A Preferred
Shares will be redeemable, in whole or in part, at the
option of the Company at any time, at a redemption price
of $25.00 per share, plus accrued and unpaid dividends,
if any, to the date of redemption. At any time prior to
March , 2007, if the Company shall have submitted to the
holders of its Common Shares a proposal for amalgamation,
consolidation, merger or statutory share exchange, or any
proposal for any other matter that requires for its
validation or effectuation an affirmative vote of the
holders of the Series A Preferred Shares at the time
outstanding, acting as a single class, the Company, at
its option upon not less than 30 nor more than 90 days'
written notice, may redeem all of the outstanding Series
A Preferred Shares at a redemption price of $26.00 per
share, plus accrued and unpaid dividends, if any, to the
date of redemption. The Series A Preferred Shares have no
stated maturity and will not be subject to any sinking
fund or mandatory redemption. See "Description of Series
A Preferred Shares--Redemption."
Special
Representation and
Voting Rights...... Generally, the holders of Series A Preferred Shares will
not have any voting rights. Whenever dividends on the
Series A Preferred Shares or any class or series of
capital shares ranking on a parity with the Series A
Preferred Shares with respect to the payment of dividends
and amounts upon liquidation, dissolution or winding up
("Parity Shares") are in arrears in an amount equivalent
to dividends for six full dividend periods (whether or
not consecutive), holders of the Series A Preferred
Shares (voting together as a class with the holders of
Parity Shares) will have the right to elect two special
representatives (the "Special Representatives") who will
be entitled to receive notice of all Board meetings and
to take part in Board meetings, with the privilege of
voice but not vote, until such dividend arrearage is
eliminated. At all times when the holders of the Series A
Preferred Shares and any Parity Shares have the right to
be represented by Special Representatives at the
10
<PAGE>
Company Board level, the Company shall be obligated to
cause, to the extent permitted under Bermuda law, the
election of two additional directors of LaSalle Re who
shall be designated by the Special Representatives. These
rights will allow the holders of Series A Preferred
Shares and any Parity Shares to exercise, in effect,
voting rights through board members at the LaSalle Re
board level under such circumstances. In addition,
certain changes that would vary the rights of holders of
Series A Preferred Shares cannot be made without the
approval of the holders of 75% of the Series A Preferred
Shares. See "Description of Series A Preferred Shares--
Special Representation and Voting Rights; Relationship to
Preferred Shares of LaSalle Re."
Ranking............. The Series A Preferred Shares will rank senior to the
Common Shares with respect to payment of dividends and
amounts upon liquidation, dissolution or winding up. See
"Description of Series A Preferred Shares--Dividends" and
"Description of Series A Preferred Shares--Liquidation
Rights." However, the Company is a holding company with
no operations or significant assets other than its
ownership of a majority of the capital stock of LaSalle
Re. See "Risk Factors--Holding Company Structure."
Limitations on
Transfer and
Ownership..........
The Certificate of Designation provides that no person
may acquire ownership of more than 9.9% of the
outstanding Series A Preferred Shares, and that the
Company shall repurchase any shares owned by a person in
excess of such 9.9% limitation within 20 days of becoming
aware of such excess ownership. The Board may exempt from
the foregoing requirement any person who has provided
evidence that such ownership will cause no adverse tax,
legal or regulatory consequences to the Company, any of
its subsidiaries or any of its shareholders. The Bye-Laws
provide for additional limitations on transfer and
ownership of capital stock of the Company. See
"Description of Series A Preferred Shares--Limitations on
Transfer and Ownership" and "Certain Tax Considerations--
Taxation of Shareholders."
NYSE Listing........ The Company intends to make application to list the
Series A Preferred Shares on the NYSE. If such
application is approved, trading in the Series A
Preferred Shares is expected to commence within a 30-day
period after the initial delivery of the Series A
Preferred Shares. See "Underwriting."
Ratings.............
The Series A Preferred Shares have been assigned ratings
of by S&P and by Moody's Investors Service,
Inc. ("Moody's"). These ratings have been obtained with
the understanding that S&P and Moody's will continue to
monitor the credit rating of the Company and will make
future adjustments to the extent warranted. A rating
reflects only the views of S&P or Moody's, as the case
may be, and is not a recommendation to buy, sell or hold
the Series A Preferred Shares. There is no assurance that
any such rating will be retained for any given period of
time or that it will not be revised downward or withdrawn
entirely by S&P or Moody's, as the case may be, if, in
their respective judgments, circumstances so warrant. See
"Risk Factors--Competition; Ratings; Non-Admitted
Status."
Use of Proceeds..... The Company intends to use all of the net proceeds from
the sale of the Series A Preferred Shares to repurchase
Common Shares in accordance with the Company's capital
management strategy. See "Business--Capital Management
Strategy." Pending such repurchase, proceeds from the
sale of the Series A Preferred Shares may be temporarily
invested.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The historical consolidated financial data presented below as of and for the
periods ended September 30, 1996, 1995 and 1994 were derived from and should be
read in conjunction with the Company's audited consolidated financial
statements and related notes incorporated by reference in this Prospectus. The
historical consolidated financial data presented below as of and for the
periods ended December 31, 1996 and 1995, except as indicated below, were
derived from and should be read in conjunction with the Company's unaudited
consolidated financial statements which management believes incorporate all of
the adjustments necessary for the fair presentation of the financial condition
and results of operations for such periods. The pro forma consolidated
financial data presented below are unaudited and reflect adjustments necessary
to give effect to the Offering and the Tender Offer, and should be read in
conjunction with the Pro Forma Condensed Consolidated Financial Data and
related notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD
THREE MONTHS ENDED YEAR ENDED OCTOBER 26,
DECEMBER 31, SEPTEMBER 30, 1993 TO
------------------------ -------------------------- SEPTEMBER 30,
1996 1995 1996 1995(1) 1994(1)
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net premiums written... $ 5,237 $ 12,619 $ 190,151 $ 201,916 $ 133,327
Net premiums earned.... 43,123 49,444 195,141 170,370 76,989
Net investment income
(net of realized
losses/gains)......... 8,179 6,203 26,428 25,066 15,739
Loss and loss expenses
incurred.............. 10,837 15,881 51,477 60,397 49,801
Underwriting expenses.. 7,115 6,498 27,268 22,988 8,686
Operating expenses(2).. 5,303 3,868 13,373 7,603 4,342
Income before minority
interest.............. 28,047 29,400 129,451 104,448 29,899
Minority interest(3)... 6,907 11,109(4) 47,966 38,774 10,958
Net income............. 21,140 18,291(4) 81,485 65,674 18,941
Net income per
share(5).............. 1.16 1.23 5.40 4.51 1.31
Weighted average shares
outstanding(6)........ 24,263,620 23,900,115 23,967,870 23,170,680 22,852,910
Dividend per Common
Share(7).............. $ 0.71 $ 1.10 $ 1.85 $ 4.62 $ --
OTHER DATA
Loss and loss expense
ratio(8).............. 25.1% 32.1% 26.4% 35.5% 64.7%
Expense ratio(8)....... 24.3% 18.1% 19.6% 17.1% 16.6%
Combined ratio(8)...... 49.4% 50.2% 46.0% 52.6% 81.3%
Return on average
Combined Equity(9).... 22.7% 28.9% 29.2% 26.6% 9.3%
Total statutory capital
and surplus(10)....... $ 495,959 $ 404,816 $ 475,580 $ 390,683 $ 376,414
BALANCE SHEET DATA (AT
END OF PERIOD)
Total investments and
cash.................. $ 552,049 $ 445,635 $ 537,504 $ 522,425 $ 409,738
Reinsurance balances
receivable............ 45,845 60,210 70,625 86,146 50,307
Total assets........... 620,842 531,129 634,374 636,547 481,424
Reserve for losses and
loss expenses......... 45,981 60,887 49,875 66,654 37,789
Reserve for unearned
premiums.............. 45,008 51,058 82,894 87,885 56,338
Minority interest(3)... 137,462 151,999 179,470(4) 147,389 140,838
Total shareholders'
equity................ 365,599 260,478 307,448(4) 253,422 243,446
Book value per
share(11)............. 22.13 18.15 21.42 17.64 16.91
PRO FORMA DATA
Income before minority
interest.............. $ 27,378 -- $ 127,801 -- --
Minority interest(12).. 6,188 -- 33,522 -- --
Net income............. 21,191 -- 94,279 -- --
Net income per
share(5).............. 1.24 -- 5.92 -- --
Weighted average shares
outstanding(6)........ 20,815,065 -- 20,519,315 -- --
Dividends on Series A
Preferred Shares...... $ 1,594 -- $ 6,375 -- --
Minority interest(12).. 105,722 -- -- -- --
Total shareholders'
equity................ 372,339 -- -- -- --
Book value per
share(13)............. 20.91 -- -- -- --
</TABLE>
12
<PAGE>
(1) In October 1995, LaSalle Re changed its fiscal year end from December 31
to September 30, effective September 30, 1995. All prior periods have been
adjusted to reflect a fiscal year end of September 30.
(2) Includes operating expenses, corporate expenses, interest payable and
foreign exchange gains and losses.
(3) Minority interest represents shares of LaSalle Re that are held as
Exchangeable Non-Voting Shares. These shares currently constitute
approximately 27% of the capital stock of LaSalle Re. Exchangeable Non-
Voting Shares are held by certain Founding Shareholders and are
exchangeable, at the option of the holder, for Common Shares on a one-for-
one basis, unless the Board determines that such exchange may cause actual
or potential adverse tax consequences to the Company or any shareholder.
See "Certain Tax Considerations."
(4) The amounts indicated have been restated on a different accounting basis
from the corresponding amounts in the Company's Quarterly Report on Form
10-Q for the period ended December 31, 1996 (the "10-Q"). In the 10-Q,
these amounts were restated by accounting for the exchange of certain
Exchangeable Non-Voting Shares for Common Shares in connection with the
Secondary Offering as if it were a pooling of interests. The amounts
presented here for the same periods instead account for such exchange as a
conversion of equity securities, which is the accounting treatment the
Company intends to use with respect to further exchanges initiated by
holders of Exchangeable Non-Voting Shares. The numbers reported for the
quarter ended December 31, 1996 are unchanged from the 10-Q.
(5) Net income per share equals income before minority interest divided by
weighted average shares outstanding.
(6) Weighted average shares outstanding include Common Shares and Exchangeable
Non-Voting Shares as common stock equivalents and the dilutive effect of
stock options and stock appreciation rights using the treasury stock
method.
(7) Dividend per Common Share is based on outstanding Common Shares of
16,517,111 and 14,397,720 as at December 31, 1996 and 1995 respectively
and 14,397,720, 14,397,720, 14,395,710 as at September 30, 1996, 1995 and
1994, respectively.
(8) The loss and loss expense ratio is calculated by dividing the losses and
loss expenses incurred by net premiums earned. The expense ratio is
calculated by dividing underwriting expenses and certain operational
expenses by net premiums earned. The combined ratio is the sum of the loss
and loss expense ratio and the expense ratio.
(9) Return on average Combined Equity is calculated by dividing income before
minority interest by the average of the opening and closing sum of
shareholders' equity and minority interest. The adjustment in respect of
minority interest reflects the exchangeable nature of the Exchangeable
Non-Voting Shares. Closing shareholders' equity and minority interest
reflects any dividends declared or paid during such periods, with the
average not adjusted to reflect the timing of dividends declared or paid.
(10) Total statutory capital and surplus of LaSalle Re is calculated in
accordance with the provisions of The Insurance Act 1978 of Bermuda,
amendments thereto and related regulations.
(11) Book value per share is calculated based on Combined Equity divided by the
total of Common Shares and Exchangeable Non-Voting Shares of 22,727,291
and 22,727,010 as at December 31, 1996 and 1995 respectively and
22,727,010, 22,727,010, 22,725,000, as at September 30, 1996, 1995 and
1994, respectively.
(12) Pro forma minority interest represents approximately 26% of the capital
stock of LaSalle Re.
(13) Pro forma book value per share is based on Combined Equity (excluding
equity represented by Series A Preferred Shares) divided by the total of
Common Shares and Exchangeable Non-Voting Shares of 19,278,736 as at
December 31, 1996.
13
<PAGE>
RISK FACTORS
Prospective investors in the Series A Preferred Shares offered hereby should
consider carefully the matters set forth below, as well as the other
information set forth in this Prospectus.
LIMITED OPERATING HISTORY
LaSalle Re commenced operations in November 1993 and has a limited operating
and claims history. The financial data included herein are not necessarily
indicative of the financial condition or results of operations of the Company
in the future. In addition, the Company's limited operating and claims history
may make it more difficult for the Company to assess the risks it underwrites
based on its own historical loss experience. See "Prospectus Summary--Selected
Consolidated Financial Data" and "Business."
VOLATILITY OF FINANCIAL RESULTS; ABILITY OF THE COMPANY TO PAY PREFERRED
DIVIDENDS
The Company primarily underwrites property catastrophe reinsurance, which
covers unpredictable events such as hurricanes, windstorms, hailstorms,
earthquakes, fires, industrial explosions, freezes, riots, floods and other
man-made or natural disasters. Because the Company has large aggregate
exposures to man-made and natural disasters, the Company expects that its
claims experience will be characterized by relatively low frequency and high
severity. The occurrence of claims from catastrophic events is likely to
result in substantial volatility in the Company's financial results for any
fiscal quarter or year, and therefore, in the timing and amount of any
dividend paid. The Company endeavors to manage its exposures to catastrophic
events by limiting the amount of its exposure in each geographic zone
worldwide and requiring that its property catastrophe contracts provide for
aggregate limits and attachment points. Nonetheless, a single catastrophic
event could affect multiple geographic zones or the frequency or severity of
catastrophic events could exceed the Company's estimates. The occurrence of
these events could have a material adverse effect on the Company's financial
condition and results of operations and its ability to write new business and
to pay dividends. Catastrophic events of significant magnitude historically
have been relatively infrequent, although the Company believes that the
property catastrophe reinsurance market has experienced a high level of
worldwide catastrophic losses in terms of both frequency and severity from
1987 to the present as compared with prior years. The Company expects that
increases in the values and concentrations of insured property and the effects
of inflation will increase the severity of such occurrences per year in the
future.
Pursuant to its capital management strategy, the Company intends to
distribute as dividends to holders of Common Shares and Exchangeable Non-
Voting Shares in each fiscal year 50% to 60% of the amount by which its net
income (before minority interest) from the prior fiscal year exceeds the
amount of dividends payable on Series A Preferred Shares in the current fiscal
year. The Company's credit facility currently restricts dividends to a maximum
of 50% of net income from the prior fiscal year. In order to pay dividends in
excess of 50% of net income, the Company would have to renegotiate certain
terms of its credit facility. Since the Board is authorized to issue
additional classes or series of Parity Shares without the consent of any
holder of Series A Preferred Shares, the Company could incur obligations in
the future to pay preferred dividends in addition to, and ranking on a parity
with, the dividends on Series A Preferred Shares. As part of its capital
management strategy, the Company expects to repurchase approximately $100
million of Common Shares in the Tender Offer following successful completion
of the Offering. At a future date, the Company also expects to repurchase up
to $25 million of Common Shares by means of open market or privately
negotiated transactions, depending on market conditions and the Company's
capital and liquidity requirements. See "Business--Capital Management
Strategy." The payment of dividends and the Repurchases will result in the
Company having less capital available to sustain losses than would otherwise
be the case. If substantial losses were to occur, the ability of the Company
to pay dividends, including dividends on the Series A Preferred Shares, could
be adversely affected.
The Series A Preferred Shares have been assigned ratings of by S&P and
by Moody's. These ratings have been obtained with the understanding
that S&P and Moody's will continue to monitor the credit rating of the Company
and will make future adjustments to the extent warranted. A rating reflects
only the views
14
<PAGE>
of S&P or Moody's, as the case may be, and is not a recommendation to buy,
sell or hold the Series A Preferred Shares. There is no assurance that any
such rating will be retained for any given period of time or that it will not
be revised downward or withdrawn entirely by S&P or Moody's, as the case may
be, if, in their respective judgments, circumstances so warrant.
RELIANCE ON CNA AND AON; TRANSACTIONS WITH AFFILIATES; CONFLICTS OF INTEREST
The Company's day-to-day operations are performed by affiliates of CNA and
Aon pursuant to service agreements with the Company (the "Service
Agreements"). The Service Agreements consist of: (i) an underwriting services
agreement (the "Underwriting Services Agreement") with CNA (Bermuda) Services
Ltd. ("CNA Bermuda") pursuant to which CNA Bermuda provides underwriting
services and underwrites all classes of insurance and reinsurance for LaSalle
Re; (ii) an administrative services agreement (the "Administrative Services
Agreement") with Aon Risk Consultants (Bermuda) Ltd. ("Aon Bermuda") pursuant
to which Aon Bermuda provides LaSalle Re with claims administration, actuarial
and financial reporting, accounting, office space and other administrative
services; and (iii) an investment management agreement (the "Investment
Management Agreement") with Aon Advisors (UK) Limited ("Aon Advisors")
pursuant to which Aon Advisors provides LaSalle Re with investment management
services in accordance with the investment guidelines set by the Board of
Directors of LaSalle Re. The Service Agreements terminate on December 31, 1998
with a two-year extension at the option of the Company. The Company and Aon
have agreed in principle, subject to execution of a definitive agreement and
to Board approval, to terminate the Administrative Services Agreement as of
mid-1997, after which the Company anticipates that all of the personnel
currently assigned to the Company by Aon Bermuda would become employees of the
Company. There can be no assurance that the Company will be able to retain all
such employees. While a number of other organizations offer the services
provided to the Company by affiliates of CNA, there can be no assurance that
if the Underwriting Services Agreement were to terminate, the Company would be
able to successfully perform such services for itself or obtain such services
from persons which are not affiliates of CNA on substantially similar terms.
In particular, the termination of the Underwriting Services Agreement could
have a material adverse effect on the Company.
In the 1996 and 1995 fiscal years, CNA ceded to the Company a portion of its
existing book of property catastrophe reinsurance business. The terms of these
cessions to the Company were negotiated between the parties and the Company
believes that they are at market rates. This ceded business represented 12.7%
and 14.3% of the Company's net premiums written and 12.9% and 15.6% of net
premiums earned in 1996 and 1995, respectively. Such cessions assisted the
Company in establishing a geographic diversification of exposures that might
have been difficult for a newly organized reinsurer to establish on its own.
Excluding the business ceded by CNA, for the year ended September 30, 1996,
47.8% of the Company's net premiums written represented U.S.-based risks and
the remaining 52.2% was spread in other territories around the world. Although
the Company expects the level of such cessions to continue to decrease, if CNA
were to suddenly cease ceding business to the Company, the geographical
diversity of the Company's portfolio of property catastrophe risks and the
Company's results of operations could be materially adversely affected.
The Service Agreements and other transactions between CNA or Aon and the
Company may give rise to potential conflicts of interest between CNA or Aon,
on the one hand, and the Company, on the other hand. However, as provided
under Bermuda law, directors who have an interest in any matter are permitted
under the Bye-Laws and LaSalle Re's bye-laws to vote with respect to such
matters as long as they have disclosed their interest. A director of Holdings
or LaSalle Re who is directly or indirectly interested in a proposed contract
or other matter with such company must declare the nature of such interest to
the Board or the Board of Directors of LaSalle Re, as the case may be. Each of
the Service Agreements has been approved by a vote of the Board of Directors
of LaSalle Re at a meeting at which all directors present who are affiliated
with CNA or Aon recused themselves. CNA competes with the Company for property
catastrophe and other lines of reinsurance underwritten by the Company. CNA,
Aon and other Founding Shareholders have sponsored and may in the future
sponsor or otherwise participate in other insurance ventures with other
entities engaged in or intending to engage in insurance and reinsurance
underwriting, some of which compete and may in the future compete with
15
<PAGE>
the Company. Conflicts of interest could also arise with respect to business
opportunities that could be advantageous to CNA, Aon or other Founding
Shareholders, on the one hand, and the Company, on the other hand. CNA and Aon
also have entered into agreements and maintain relationships with numerous
companies that may compete with the Company. No agreement or understanding
exists regarding the resolution of any of these potential conflicts of
interest.
DEPENDENCE ON MANAGEMENT
The Company's success depends on the efforts and abilities of its Chairman,
Chief Executive Officer and President, Victor H. Blake, its Executive Vice
President and Chief Underwriting Officer, Guy D. Hengesbaugh, its Chief
Financial Officer and Treasurer, Andrew Cook, and its Senior Vice President,
Terry J. Alfuth. The Company has entered into employment agreements with Mr.
Blake and Mr. Cook. The Company receives the services of Mr. Hengesbaugh and
Mr. Alfuth pursuant to the terms of the Underwriting Services Agreement and the
Administrative Services Agreement, respectively, and does not have employment
agreements with them. The Company does not maintain key-man life insurance on
any of its executive officers.
Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may not
engage in any gainful occupation in Bermuda without the specific permission of
the appropriate Bermuda government authority. Such permission, or a work permit
for a specific period of time, can be granted upon showing that, after proper
public advertisement, no Bermudian or spouse of a Bermudian is available who
meets the minimum standards for the advertised position. Of the Company's
executive officers, Victor H. Blake, Guy D. Hengesbaugh, Andrew Cook and Terry
J. Alfuth are working under work permits. There can be no assurance that the
work permits of such executive officers will be extended or that, if such
executive officers were to leave the Company, work permits for new executive
officers would be granted.
BUSINESS CONSIDERATIONS
Based on the Company's marketing efforts, reinsurance contract submissions
and publicly available information, the Company believes that property
catastrophe rates decreased somewhat in 1995 and further in 1996 from 1994
levels. In particular, rates have declined significantly in areas, such as
Japan and Europe, where there has been favorable loss experience, while in the
U.S. market, where the level of property catastrophe losses has generally been
higher than in international markets in recent years, rates have decreased to a
lesser degree. Notwithstanding these rate decreases, the Company believes that
current rates generally exceed 1992 levels. If and while favorable loss
experience continues and reinsurance capacity does not diminish, the Company
expects further downward pressure on rates during 1997. Based on the 1997
contract renewals that have occurred to date, the Company estimates that it has
experienced overall rate decreases of approximately 15% compared to 1996. As
rates decline, the Company expects net premiums written from property
catastrophe reinsurance to decline in 1997. However, based on its current
perception of market opportunities, the Company expects that growth in its
other lines of business will partially offset the decline in its property
catastrophe premiums. There can be no assurance that the present level of
demand will continue, that the present level of supply of reinsurance will not
increase as a result of capital provided by recent or future market entrants or
by existing property catastrophe reinsurers or that rates will not decline
further. See "Business--Industry Trends."
LOSS RESERVES
The Company establishes loss reserves for the ultimate settlement costs of
all loss and loss expenses incurred with respect to business written by it.
Loss reserves represent estimates derived from actuarial and statistical
projections of the Company's expectations of ultimate loss and loss expenses
for incurred losses at a given time. Under GAAP, the Company is not permitted
to establish loss reserves with respect to its property catastrophe reinsurance
until an event occurs that may give rise to a claim. As a result, only loss
reserves applicable to losses incurred up to the reporting date may be set
aside, with no allowance for the provision of a contingency reserve to account
for expected future losses. Reserve estimates by new property catastrophe
reinsurers, such as the Company, may be inherently less reliable than the
reserve estimates of reinsurers with
16
<PAGE>
stable volumes of business and an established claims history. Although the
Company's own historical loss experience by itself may be inadequate for
estimating reserves, the Company utilizes loss data generally available
through various trade associations and draws on the experience of both CNA and
Aon. See "--Reliance on CNA and Aon; Transactions with Affiliates; Conflicts
of Interest." The Company believes that its loss reserves to date have been
adequate. In contrast to casualty property losses, which frequently can be
determined only through lengthy, unpredictable litigation, non-casualty
property losses tend to be reported promptly and usually are settled within a
shorter period. Nevertheless, actual losses and loss expenses paid may
deviate, perhaps substantially, from the reserve estimates reflected in the
Company's financial statements. The Company's loss reserves are reviewed
regularly by the Company's actuaries and executive officers and the Board of
Directors of LaSalle Re, and as they develop upward or downward, the results
are reflected in the net income in the period in which the reserve deficiency
or redundancy is evaluated. If the Company's loss reserves are determined to
be inadequate, the Company will be required to increase loss reserves with a
corresponding reduction in the Company's net income in the period in which the
deficiency is identified. There can be no assurance that the final loss
settlements will not exceed the Company's loss reserve and have a material
adverse effect on the Company's financial condition and results of operations
in a particular period.
COMPETITION; RATINGS; NON-ADMITTED STATUS
The property catastrophe reinsurance industry is highly competitive. The
Company competes, and will continue to compete, with major U.S. and non-U.S.
insurers and property catastrophe reinsurers, including other Bermuda-based
property catastrophe reinsurers and CNA, some of which have greater financial
and organizational resources than the Company. There may be established
companies or new companies of which the Company is not aware which may be
planning to enter the property catastrophe reinsurance market or existing
property catastrophe reinsurers which may be planning to raise additional
capital. In addition, Lloyd's began to allow capital from corporate investors
in 1994. Competition in the types of reinsurance that the Company underwrites
is based on many factors, including rates and other terms and conditions
offered, services provided, ratings assigned by independent rating agencies,
speed of claims payment, perceived financial strength of the reinsurer and
reputation and experience of the reinsurer in the line of reinsurance to be
written.
LaSalle Re currently is rated by A.M. Best and S&P. In April 1996, LaSalle
Re received an initial rating from A.M. Best of "A-" (Excellent). Prior to
that time, LaSalle Re was not rated by any rating agency. The rating received
by LaSalle Re represents the fourth highest in the rating scale used by A.M.
Best. In October 1996, LaSalle Re received an initial rating of its claims
paying ability from S&P of "A" (Good). The rating received by LaSalle Re
represents the sixth highest in the rating scale used by S&P. Such ratings are
based on factors of concern to cedents and brokers and are not directed toward
the protection of investors. Such ratings are neither a rating of securities
nor a recommendation to buy, hold or sell such securities. While the Company
believes that its new ratings will not be a major competitive advantage or
disadvantage, some of the Company's principal competitors have higher ratings
than the Company. Insurance ratings are one factor used by brokers and cedents
as a means of assessing the financial strength and quality of reinsurers. In
addition, a cedent's own rating may be adversely affected by the lack of a
rating of its reinsurer. Therefore, a cedent may elect to reinsure with a
competitor of the Company that has a higher insurance rating. Similarly, the
lowering or loss of a rating in the future could adversely affect the
Company's ability to compete.
The Company is not licensed or admitted as an insurer in any jurisdiction
other than Bermuda and has no plans to become so licensed or admitted;
however, LaSalle Re Capital is a corporate member of Lloyd's and is authorized
to write business for the 1997 year of account up to a maximum premium income
of (Pounds)16.3 million. Because jurisdictions in the United States do not
permit cedents to take credit for reinsurance obtained from unlicensed or non-
admitted reinsurers on their statutory financial statements unless security is
posted, the Company's reinsurance contracts with United States cedents
generally require it to post a letter of credit or provide other security for
outstanding claims and/or unearned premiums. In order to post these letters of
credit, the Company generally is required to provide the issuing banks with
collateral equal to 115% of such amounts. As a result of the size of the
Company's capitalization, the Company does not believe that its non-admitted
status
17
<PAGE>
in any jurisdiction has, or should have, a material adverse effect on its
ability to compete or obtain business in the property catastrophe reinsurance
market in which it operates, principally because many of the Company's
competitors are not admitted or licensed in United States jurisdictions.
However, there can be no assurance that increased competitive pressure from
current reinsurers and future market entrants or the Company's non-admitted
status will not adversely affect the Company.
REGULATION
LaSalle Re is registered as an insurer and is subject to regulation and
supervision in Bermuda under The Insurance Act 1978 (together with amendments
thereto and related regulations, the "Insurance Act"). The Insurance Act
generally is designed to protect insureds and ceding insurance companies
rather than shareholders. Among other things, the Insurance Act requires
LaSalle Re to maintain minimum levels of capital and surplus, prescribes
solvency margins that must be maintained and requires periodic examinations of
LaSalle Re and its financial condition. These provisions may, in effect,
restrict the ability of LaSalle Re to write new business or distribute funds
to the Company, which, as a holding company, will depend on such distributions
as its principal source of funds. Other relevant Bermuda statutes and
regulations may also limit transfers of ownership of LaSalle Re's capital
stock and may impede the Company's ability to effect a business combination
involving a substantial change in the ownership or control of LaSalle Re or
the Company.
LaSalle Re is not registered or licensed as an insurance company in any
jurisdiction other than Bermuda. For the year ended September 30, 1996, 41.7%
of the Company's net premiums written represented U.S.-based risks. The
insurance laws of each state of the United States do not directly regulate the
sale of reinsurance to insurance companies domiciled or licensed therein by
alien reinsurers, such as the Company. Nevertheless, the sale of reinsurance
by alien reinsurers, such as the Company, to insurance companies domiciled or
licensed in United States jurisdictions is indirectly regulated by state
"credit for reinsurance" laws that operate to deny financial statement credit
to ceding insurers unless the non-admitted alien reinsurer posts acceptable
security for ceded liabilities and agrees to certain contract provisions
(e.g., insolvency and intermediary clauses). Although the insurance laws of
United States jurisdictions generally exempt the business of reinsurance from
"doing business" laws, the Company conducts its business at its principal
offices in Bermuda and does not maintain an office in the United States, and
its personnel do not solicit, advertise, settle claims or conduct other
insurance activities in the United States. All policies are issued and
delivered and premiums are received outside the United States. The Company
does not believe that it is subject to the insurance laws of any state in the
United States. Nevertheless, there can be no assurance that inquiries or
challenges to the insurance activities of the Company will not be raised in
the future.
From time to time, there have been congressional and other initiatives in
the United States regarding the supervision and regulation of the insurance
industry, including proposals to supervise and regulate alien reinsurers.
While none of these proposals has been adopted to date on either the federal
or state level, there can be no assurance that federal or state legislation
will not be enacted subjecting the Company to supervision and regulation in
the United States, which could have a material adverse effect on the Company.
In addition, no assurance can be given that if the Company were to become
subject to any laws of the United States or any state thereof or of any other
country at any time in the future, it would be in compliance with such laws.
Despite the importance of its policyholders domiciled in the United States,
the Company does not believe that conducting its business through its offices
in Bermuda and its inability to conduct any insurance operations in the United
States have materially affected its operations to date. However, no assurance
can be given that these factors will not materially affect its operations in
the future.
LaSalle Re Services maintains an office in London in order to introduce
prospective customers to the Company. LaSalle Re Services is not registered as
an insurer in England or in any other jurisdiction. Although the Company
believes that LaSalle Re Services is not required to be so registered and also
believes that the impact of other U.K. regulation on the Company's business is
minimal, no assurance can be given that U.K. regulation will not materially
affect its operations in the future.
18
<PAGE>
LaSalle Re Capital is subject as a corporate member of Lloyd's to Lloyd's
regulation and its ability to continue to underwrite as such in future years
may be affected by changes in such regulation. The volume of business which can
be written from one year of account to the next will also be dependent on the
level of funds made available by the Company to support such underwriting.
Based on its corporate membership in Lloyd's, LaSalle Re Capital is also
registered in Bermuda under the Insurance Act as a "member of a recognised
association of underwriters."
HOLDING COMPANY STRUCTURE
Holdings is a holding company with no operations or significant assets other
than its ownership of a majority of the capital stock of LaSalle Re. Holdings
relies on cash dividends and other permitted payments from LaSalle Re to pay
expenses, to make principal and interest payments on outstanding indebtedness
of Holdings, if any, and to pay dividends to its shareholders. The payment of
dividends by LaSalle Re to Holdings is limited under Bermuda law and
regulations, including Bermuda insurance law. Under the Insurance Act, LaSalle
Re is prohibited from paying dividends of more than 25% of its opening
statutory capital and surplus unless it files an affidavit stating that it will
continue to meet the required solvency margin and minimum liquidity ratio
requirements and from declaring or paying any dividends without the approval of
the Minister of Finance if it failed to meet its required margins in the
previous fiscal year. Based on the foregoing regulation, LaSalle Re is entitled
to pay dividends of up to $118.9 million during the current fiscal year. The
Insurance Act also requires LaSalle Re to maintain a minimum solvency margin
and minimum liquidity ratio and prohibits dividends which would result in a
breach of these requirements. In addition, LaSalle Re is prohibited under the
Insurance Act from reducing its opening total statutory capital by more than
15% without the approval of the Minister of Finance. Because the Company is a
holding company, the right of the Company, and hence the right of creditors and
shareholders of the Company, to participate in any distribution of assets of
any subsidiary, including LaSalle Re, upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of the Company itself as a
creditor of the subsidiary may be recognized. There can be no assurance that
Holdings will have sufficient funds to pay dividends to holders of the Series A
Preferred Shares.
TAX MATTERS
Holdings and LaSalle Re are Bermuda corporations. The Company believes that
neither Holdings nor LaSalle Re will be required to pay U.S. corporate income
tax (other than withholding tax on certain U.S. source income) because they
will continue to operate their business in a manner that will cause them not to
be engaged in the conduct of a trade or business within the U.S. However,
because there are no definitive standards provided by the Internal Revenue Code
of 1986, as amended (the "Code"), existing or proposed regulations thereunder
or judicial precedent, and as the determination is inherently factual, there
can be no assurance that the IRS could not successfully contend that Holdings
or LaSalle Re is engaged in such a trade or business. If the IRS did so
contend, Holdings and LaSalle Re would (unless exempted from tax by the U.S.-
Bermuda income tax treaty (the "Bermuda Treaty")) be subject to U.S. corporate
income tax on that portion of its net income treated as effectively connected
with a U.S. trade or business, as well as the U.S. branch profits tax. Even if
the IRS were to contend successfully that LaSalle Re was engaged in a U.S.
trade or business, if LaSalle Re were entitled to benefits under the Bermuda
Treaty, the Bermuda Treaty would preclude the U.S. from taxing LaSalle Re on
its business income except to the extent that such income were attributable to
a permanent establishment maintained by LaSalle Re in the U.S. Although the
Company believes that LaSalle Re does not have a permanent establishment in the
U.S., there can be no assurance that, in the event that LaSalle Re were
entitled to the Bermuda Treaty benefits, the IRS would not successfully contend
that LaSalle Re has such an establishment and therefore is subject to taxation.
If Holdings were considered to be engaged in a U.S. trade or business and/or
if LaSalle Re were considered to be engaged in a U.S. trade or business through
a permanent establishment located therein (or if it were considered not
entitled to the benefits of the permanent establishment clause of the Bermuda
Treaty and LaSalle Re were considered to be engaged in the conduct of a U.S.
trade or business) and, thus, subject to U.S. income tax, the Company's results
of operations and cash flows could be materially adversely affected. LaSalle Re
19
<PAGE>
Capital is a corporate member of Lloyd's. Pursuant to a Closing Agreement
between Lloyd's and the IRS, LaSalle Re Capital will be treated as engaged in
business in the U.S. and is subject to U.S. corporate income tax on its net
income from U.S. sources. See "Certain Tax Considerations--Taxation of the
Company and its Subsidiaries--United States."
Generally, the U.S. shareholders of the Company will not be subject to any
U.S. tax until they receive a distribution from the Company or dispose of
their Common Shares or Series A Preferred Shares. However, special provisions
of the Code may apply to U.S. citizens, residents, domestic corporations,
partnerships, estates or trusts, who through their ownership of Common Shares
or Series A Preferred Shares, directly, indirectly or by attribution, own 10%
or more of the total combined voting power of all classes of stock of
Holdings, LaSalle Re and/or LaSalle Re Capital. Under those provisions, such a
holder of Common Shares or Series A Preferred Shares may be required to
include in its income its pro rata share of the Company's subpart F income as
earned, even if not distributed. All of the Company's income is expected to be
subpart F income. Such shareholders that are taxed currently on their pro rata
share of the Company's subpart F income will not be taxed on dividends
actually distributed by the Company that are allocable to such income. The
Company has attempted to avoid being considered a "controlled foreign
corporation" under the Code by requiring prior Board approval for any transfer
of shares that results in any shareholder (other than a registered investment
company under the U.S. Investment Company Act of 1940, as amended (an
"Investment Company")) beneficially owning more than 5.0% of the outstanding
capital stock of Holdings or any shareholder holding "Controlled Shares"
(defined as all shares that a person is deemed to own directly, indirectly or
by attribution within the meaning of Section 958 of the Code) in excess of
9.9% of the outstanding capital stock of Holdings. The Bye-Laws provide that
any such transfer without prior Board approval shall not be registered in the
share register of Holdings and shall be void and of no effect. The Bye-Laws
also provide that if the Board in its absolute discretion determines that
share ownership by any shareholder may result in adverse tax, regulatory or
legal consequences to Holdings, any of its subsidiaries or any other
shareholder, then Holdings will have the option, but not the obligation, to
repurchase at fair market value all or part of the shares held by such
shareholder to the extent the Board determines it is necessary to avoid such
adverse or potential adverse consequences. In addition, the Certificate of
Designation provides that no person may acquire ownership of more than 9.9% of
the outstanding Series A Preferred Shares, and that the Company shall
repurchase any shares owned by a person in excess of such 9.9% limitation
within 20 days of becoming aware of such excess ownership. The Board may
exempt from the foregoing requirement any person who has provided evidence
that such ownership will cause no adverse tax, legal or regulatory
consequences to the Company, any of its subsidiaries or any of its
shareholders. See "Description of Series A Preferred Shares--Limitations on
Transfer and Ownership."
Certain special subpart F provisions of the Code could apply to U.S. persons
who either directly or indirectly through their ownership of Common Shares or
Series A Preferred Shares own shares of LaSalle Re if (A) 25% or more of the
value or voting power of the capital stock of LaSalle Re is owned directly,
indirectly or by attribution by U.S. persons that own such stock directly or
indirectly through foreign entities, as will be the case; and (B) (i) 20% or
more of either the voting power or the value of the capital stock of LaSalle
Re is owned directly or indirectly through entities by U.S. persons insured or
reinsured by LaSalle Re or by persons related to them and (ii) LaSalle Re has
gross related person insurance income ("RPII") equal to 20% or more of its
gross insurance income. Similar considerations will apply to U.S. persons who
indirectly through their ownership of Common Shares or Series A Preferred
Shares own shares of LaSalle Re Capital. RPII is income (investment income and
premium income) from the direct or indirect insurance or reinsurance of (x)
the risk of any U.S. person who owns Common Shares or Series A Preferred
Shares (directly or indirectly through foreign entities) or (y) the risk of a
person related to such a U.S. person. The Company currently anticipates that
less than 20% of the gross insurance income of each of LaSalle Re and LaSalle
Re Capital for any taxable year will constitute RPII. However, there can be no
assurance that the IRS will not assert that 20% or more of LaSalle Re's or
LaSalle Re Capital's gross income is RPII or that a taxpayer will be able to
meet its burden of proving otherwise.
Generally, a U.S. shareholder will realize capital gain or loss on the sale
or exchange of Common Shares or Series A Preferred Shares. However, upon a
U.S. shareholder's sale or exchange of Common Shares or Series A
20
<PAGE>
Preferred Shares at a gain, the IRS could contend that an amount of such gain
equal to the allocable untaxed earnings and profits of the Company or LaSalle
Re will be taxed as a dividend. For individuals, this would mean taxation of
such amount at the rates applicable to ordinary income rather than the lower
rates applicable to long-term capital gain. See "Certain Tax Considerations--
Taxation of Shareholders--United States Taxation of U.S. and Non-U.S.
Shareholders."
LIMITATIONS ON TRANSFER AND OWNERSHIP
The Certificate of Designation provides that no person may acquire ownership
of more than 9.9% of the outstanding Series A Preferred Shares, and that the
Company shall repurchase any shares owned by a person in excess of such 9.9%
limitation within 20 days of becoming aware of such excess ownership. The
Board may exempt from the foregoing requirement any person who has provided
evidence that such ownership will cause no adverse tax, legal or regulatory
consequences to the Company, any of its subsidiaries or any of its
shareholders. Under the Bye-Laws, any transfer of shares that results in any
shareholder (other than an Investment Company) beneficially owning more than
5.0% of the outstanding capital stock of Holdings or any shareholder holding
Controlled Shares in excess of 9.9% of the outstanding capital stock of
Holdings, in each case without the Board's prior approval, shall not be
registered in the share register of Holdings and shall be void and of no
effect. The Bye-Laws also provide that if the Board in its absolute discretion
determines that share ownership by any shareholder may result in adverse tax,
regulatory or legal consequences to Holdings, any of its subsidiaries or any
other shareholder, then Holdings will have the option, but not the obligation,
to repurchase all or part of the shares held by such shareholder to the extent
the Board determines it is necessary to avoid such adverse or potential
adverse consequences. The price to be paid for such shares will be the fair
market value of such shares. See "Description of Series A Preferred Shares--
Limitations on Transfer and Ownership."
LIMITED PRIOR PUBLIC MARKET
The Company intends to make application to list the Series A Preferred
Shares on the NYSE. However, there can be no assurance that an active trading
market for the Series A Preferred Shares will develop or continue upon
completion of the Offering or that the market price of the Series A Preferred
Shares will not decline below the price to public set forth on the cover page
of this Prospectus.
SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS
The Company is a Bermuda company and certain of its officers and directors
are residents of various jurisdictions outside the United States. All or a
substantial portion of the assets of the Company and such officers and
directors, at any one time, are or may be located in jurisdictions outside the
United States. Although the Company has appointed an agent in New York, New
York to receive service of process with respect to actions against it arising
out of violations of the United States federal securities laws in any federal
or state court in the United States relating to the transactions covered by
this Prospectus, it may be difficult for investors to effect service of
process within the United States on directors and officers of the Company who
reside outside the United States or to enforce against the Company or such
directors and officers judgments of United States courts predicated upon civil
liability provisions of the United States federal securities laws.
21
<PAGE>
USE OF PROCEEDS
The Company intends to use all of the net proceeds from the sale of the
Series A Preferred Shares to repurchase Common Shares in accordance with the
Company's capital management strategy. See "Business--Capital Management
Strategy." Pending such repurchase, proceeds from the sale of the Series A
Preferred Shares may be temporarily invested.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
For the purpose of computing the following ratios, (i) "earnings" consist of
earnings from operations before minority interest plus fixed charges and (ii)
"fixed charges" consist of annual agency fees, commitment fees and interest on
any borrowed funds under the Company's credit facility. The pro forma ratios
give effect to the issuance of the Series A Preferred Shares.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED PERIOD
ENDED SEPTEMBER 30, OCTOBER 26, 1993
DECEMBER 31, ------------- TO SEPTEMBER 30,
1996 1996 1995(1) 1994(1)
------------ ----- ------- ----------------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges. 419.6 584.1 -- --
Pro forma ratio of earnings to
fixed charges and preferred share
dividends......................... 16.5 19.4 -- --
</TABLE>
- --------
(1) The Company incurred no fixed charges in the year ended September 30, 1995
and the period from October 26, 1993 to September 30, 1994.
22
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The net proceeds to the Company from the Offering are estimated to be
approximately $73 million after deducting the underwriting discounts and
commissions and estimated offering expenses. The Company intends to use all of
the net proceeds of the Offering, together with excess capital of
approximately $25 million, to repurchase Common Shares in the Tender Offer.
In the Tender Offer, the Company may repurchase (i) Common Shares that are
currently issued and outstanding, (ii) Common Shares issuable upon the
exercise of options, (iii) Common Shares issuable upon the exchange of
Exchangeable Non-Voting Shares and (iv) Common Shares issuable upon the
exercise of options to purchase Exchangeable Non-Voting Shares and the
exchange of the Exchangeable Non-Voting Shares so acquired. Any exchanges of
Exchangeable Non-Voting Shares that are made in connection with the Tender
Offer will reduce the minority interest in LaSalle Re.
The following pro forma condensed consolidated balance sheet data, as of
December 31, 1996, give effect to the Offering and the Tender Offer as if they
had occurred as of such date. The following pro forma condensed consolidated
income statement data for the three-month period ended December 31, 1996 and
the year ended September 30, 1996 present consolidated operating results as if
the Offering and the Tender Offer had occurred on the first day of the periods
presented. All of the pro forma condensed consolidated financial data assume,
for purposes of illustration only, that the price per Common Share at which
shares are purchased in the Tender Offer will be $28.375, which was the
closing price per Common Share on the Nasdaq National Market on March 3, 1997.
Such pro forma condensed consolidated financial data do not give effect to any
future repurchases other than the Tender Offer and do not purport to represent
what the Company's financial position or results of operations actually would
have been had the Offering and the Tender Offer in fact occurred on the dates
indicated, or to project the Company's financial position or results of
operations for any future date or period.
23
<PAGE>
LASALLE RE HOLDINGS LIMITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............. $ 48,819 $ 0 $ 48,819
Investments held as available for
sale................................. 503,230 (25,000)(1) 478,230
Accrued investment income............. 15,150 0 15,150
Reinsurance balances receivable....... 45,845 0 45,845
Deferred acquisition costs............ 6,084 0 6,084
Other assets.......................... 1,714 0 1,714
-------- -------- --------
TOTAL ASSETS........................ $620,842 $(25,000) $595,842
======== ======== ========
LIABILITIES
Reserve for losses and loss expenses.. 45,981 0 45,981
Unearned premium reserve.............. 45,008 0 45,008
Dividend payable...................... 11,728 0 11,728
Other liabilities..................... 15,064 0 15,064
-------- -------- --------
TOTAL LIABILITIES................... 117,781 0 117,781
-------- -------- --------
MINORITY INTEREST....................... 137,462 (31,740)(2) 105,722
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock....................... 0 3,000 (3) 3,000
Common stock.......................... 16,517 (2,295)(2)(4) 14,222
Additional paid in capital............ 254,645 34,389 (2)(3)(5) 289,034
Unrealized gain on investments........ 935 14 (2) 949
Retained earnings..................... 93,502 (28,368)(2)(6) 65,134
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY.......... 365,599 6,740 372,339
-------- -------- --------
TOTAL LIABILITIES, SHAREHOLDERS'
EQUITY AND MINORITY INTEREST....... $620,842 $(25,000) $595,842
======== ======== ========
</TABLE>
24
<PAGE>
LASALLE RE HOLDINGS LIMITED
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT
FOR SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Earned premiums......................... $ 43,123 $ 43,123
Net investment income................... 8,179 $ (369)(7) 7,810
---------- ---------- ----------
Total revenue......................... 51,302 (369) 50,933
---------- ---------- ----------
EXPENSES
Losses and loss expenses incurred....... 10,837 10,837
Underwriting and operational expenses... 11,512 11,512
Corporate expenses...................... 839 300 (8) 1,139
Interest expense........................ 67 67
---------- ---------- ----------
Total expenses........................ 23,255 300 23,555
---------- ---------- ----------
Net income before minority interest....... 28,047 (669) 27,378
Minority interest......................... 6,907 (719)(9) 6,188
---------- ---------- ----------
Net income after minority interest........ 21,140 50 21,190
---------- ---------- ----------
Dividends on preferred stock.............. 0 1,594 (10) 1,594
---------- ---------- ----------
Weighted average common shares............ 24,263,620 (3,448,555)(11) 20,815,065
========== ========== ==========
Earnings per share........................ $1.16 $0.08 (12) $1.24
========== ========== ==========
</TABLE>
25
<PAGE>
LASALLE RE HOLDINGS LIMITED
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT FOR
SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Earned premiums......................... $ 195,141 $ 195,141
Net investment income................... 26,428 $ (1,350)(7) 25,078
---------- ---------- ----------
Total revenue......................... 221,569 (1,350) 220,219
---------- ---------- ----------
EXPENSES
Losses and loss expenses incurred....... 51,477 51,477
Underwriting and operational expenses... 39,508 39,508
Corporate expenses...................... 911 300 (8) 1,211
Interest expense........................ 222 222
---------- ---------- ----------
Total expenses........................ 92,118 300 92,418
---------- ---------- ----------
Net income before minority interest....... 129,451 (1,650) 127,801
Minority interest......................... 47,966 (14,444)(9) 33,522
---------- ---------- ----------
Net income after minority interest........ 81,485 12,794 94,279
---------- ---------- ----------
Dividends on preferred stock.............. 0 6,375 (10) 6,375
---------- ---------- ----------
Weighted average common shares............ 23,967,870 (3,448,555)(11) 20,519,315
========== ========== ==========
Earnings per share........................ $ 5.40 $ 0.52 (12) $ 5.92
========== ========== ==========
</TABLE>
26
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(1) Relates to the use of excess capital as partial funding for the Tender
Offer.
(2) Relates to the reduction in minority interest due primarily to the Tender
Offer. In addition, as part of the Tender Offer, it is assumed that
certain Founding Shareholders will exchange some of their Exchangeable
Non-Voting Shares for Common Shares. On that basis, the Tender Offer will
reduce the minority interest in LaSalle Re, with the Company increasing
its ownership of the outstanding stock of LaSalle Re from approximately
73% to approximately 74%. The Company has continually owned 100% of the
outstanding voting stock of LaSalle Re.
(3) Relates to the Offering. Because the shares are issued with a par value
of $1.00, the pro forma statements show $3,000,000 as preferred stock
with the balance, net of underwriting discounts and commissions, credited
to additional paid-in capital.
(4) Relates to the issue of Common Shares in connection with the exchange of
Exchangeable Non-Voting Shares by certain Founding Shareholders and the
repurchase of Common Shares in the Tender Offer.
(5) Relates to the elimination of the original additional paid-in capital on
the Common Shares repurchased in the Tender Offer.
(6) Relates to the funding of the difference between the price paid for
Common Shares repurchased in the Tender Offer and the original additional
paid-in capital and par value on those Common Shares.
(7) Relates to the interest income foregone on the excess capital of
approximately $25 million used as partial funding for the Tender Offer.
(8) Relates to an estimate of costs associated with the Offering and the
Tender Offer.
(9) Relates to the change in minority interest due to the exchange of
Exchangeable Non-Voting Shares for Common Shares. With respect to the
fiscal year ended September 30, 1996, the minority interest has been
further reduced by the exchange of certain Exchangeable Non-Voting Shares
in connection with the Secondary Offering.
(10) Relates to the dividends payable on the Series A Preferred Shares
calculated, for illustrative purposes only, at an assumed rate of 8.50%.
(11) Relates to the change in the weighted average number of Common Shares
outstanding due to the repurchase of Common Shares in the Tender Offer.
(12) Relates to the change in the weighted average number of Common Shares
outstanding due to the repurchase of Common Shares in the Tender Offer
and the deduction of the dividends on Series A Preferred Shares from net
income.
27
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1996, (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the
Company after giving effect to the Offering; and (iii) the pro forma
capitalization of the Company after giving effect to the Offering and the
Tender Offer. The table should be read in conjunction with the Company's
Consolidated Financial Statements and related notes appearing elsewhere or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
AS FURTHER
AS ADJUSTED ADJUSTED FOR
ACTUAL FOR OFFERING TENDER OFFER
-------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Minority interest(1)................... $137,462 $137,462 $105,722
-------- -------- --------
Shareholders' equity
Common Share capital................. 16,517 16,517 14,222
Series A Preferred Share capital..... 0 3,000 3,000
Additional paid-in capital........... 254,645 324,498 289,034
Retained earnings.................... 93,502 93,502 65,134
Net unrealized gain on investments... 935 935 949
-------- -------- --------
Total shareholders' equity......... 365,599 438,452 372,339
-------- -------- --------
Total capitalization............... $503,061 $575,914 $478,061
======== ======== ========
</TABLE>
- --------
(1) Minority interest represents those shares of LaSalle Re that are held as
Exchangeable Non-Voting Shares. Following the Tender Offer, these shares
will constitute approximately 26% of the capital stock of LaSalle Re.
Exchangeable Non-Voting Shares are held by certain Founding Shareholders
and are exchangeable, at the option of the holder, for Common Shares of
Holdings on a one-for-one basis, unless the Board determines that such
exchange may cause actual or potential adverse tax consequences to the
Company or any shareholder. See "Certain Tax Considerations."
28
<PAGE>
BUSINESS
OVERVIEW
The Company writes high severity, low frequency reinsurance on a worldwide
basis through its subsidiary, LaSalle Re. The Company primarily writes
property catastrophe reinsurance and also writes selected other lines of
reinsurance when it believes that market conditions are favorable. These lines
currently include property risk excess, property pro rata treaty, casualty
clash, marine, crop hail, aviation and satellite. The Company believes that
these other lines will constitute a growing portion of the Company's total
portfolio of reinsurance business, helping to moderate the volatility of its
property catastrophe reinsurance exposures.
The Company has been successful in attaining a selective and geographically
diverse portfolio of property catastrophe reinsurance risks. In the year ended
September 30, 1996, 41.7% of the Company's net premiums written represented
U.S.-based risks, 11.6% represented continental Europe-based risks, 8.6%
represented U.K.-based risks and 36.2% represented risks located in a variety
of other geographic zones elsewhere in the world. As a result of long-term
relationships between the Company's management and certain clients and
brokers, the Company has developed a strong base of regional business in
discrete zones within the U.S. This business assists the Company in
diversifying its U.S.-based risks and makes more efficient use of its capital
by limiting multi-zone exposures. In the year ended September 30, 1996, this
regional business represented a significant component of the Company's U.S.-
based net premiums written.
At December 31, 1996, the Company had Combined Equity of $503.1 million
compared to $412.5 million at December 31, 1995. It achieved annualized
returns on average Combined Equity of 29.2% and 26.6%, respectively, and
combined ratios of 46.0% and 52.6%, respectively, for the years ended
September 30, 1996 and 1995. In addition, its loss and loss expense ratios
were 26.4% and 35.5% for the same periods. The Company wrote net premiums of
$190.2 million and $201.9 million, respectively, for the years ended September
30, 1996 and 1995. During the three months ended December 31, 1996 and 1995,
the Company wrote net premiums of $5.2 million and $12.6 million,
respectively. There can be no assurance that the Company will achieve similar
results in the future.
DEVELOPMENT OF THE BUSINESS
In October 1993, the Founding Shareholders formed LaSalle Re in Bermuda to
take advantage of the supply and demand imbalance that they believed existed
in the property catastrophe reinsurance market. Affiliates of Aon and CNA
provide certain underwriting, investment management and administrative
services to the Company pursuant to service agreements.
In September 1995, Holdings was incorporated in Bermuda as a holding company
in connection with the Company's recapitalization and initial public offering.
Holdings owns 100% of the outstanding voting stock of LaSalle Re and, since
November 1995, Holdings has owned a majority of the outstanding capital stock
of LaSalle Re. The remaining outstanding capital stock of LaSalle Re is held
by certain Founding Shareholders in the form of Exchangeable Non-Voting
Shares. Exchangeable Non-Voting Shares are exchangeable, at the option of the
holder, on a one-for-one basis for Common Shares, unless the Company's Board
determines that such exchange may cause actual or potential adverse tax
consequences to the Company or any shareholder.
CAPITAL MANAGEMENT STRATEGY
Since its inception, the Company has endeavored to provide liquidity to
shareholders and to pursue a capital management strategy focused on balancing
capital levels with aggregate exposures while seeking to achieve strong
returns on shareholders' equity. Consistent with this strategy, in October
1996 the Company adopted a dividend policy pursuant to which it intended to
distribute in each fiscal year 50% to 60% of its net income from the prior
fiscal year, if any, on a quarterly basis. As part of its capital management
strategy, the Company also announced its intention to repurchase up to $50
million of Common Shares in open market or privately negotiated transactions
from time to time depending on market conditions and the Company's capital and
liquidity requirements.
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<PAGE>
The Company completed a secondary offering of 3,910,000 Common Shares in
December 1996. The Secondary Offering increased the number of Common Shares
owned by the public (i.e. persons not affiliated with the Founding
Shareholders) from 4,312,500 to 8,222,500 and reduced the percentage of Common
Shares owned by Founding Shareholders to approximately 50%. In addition, as a
result of the exchange of certain Exchangeable Non-Voting Shares in connection
with the Secondary Offering, the Company increased its ownership of the
outstanding capital stock of LaSalle Re from 63% to 73%.
In order to reduce its earnings volatility, protect its capital base and
support its dividend policy, the Company purchased a multi-year excess of loss
reinsurance program effective January 1, 1997. The program is event-based,
providing up to $100 million of coverage in excess of the first $100 million
of losses for the first loss occurrence and $100 million of coverage in excess
of the first $150 million of losses for the second loss occurrence, with a
$200 million aggregate coverage limit over a three-year period. The attachment
point is triggered by losses incurred by the Company rather than industry
losses. The reinsurance is provided by a company that holds a rating of "A+"
(Superior) from A.M. Best and a claims-paying ability rating of "AA" from S&P.
On February 27, 1997, the Board approved the Offering and, contingent on the
completion of the Offering, voted to expand the Company's planned share
repurchase program from the previously announced level of $50 million to a new
level of $125 million of Common Shares. Accordingly, following completion of
the Offering, the Company expects to make a public tender offer to repurchase
approximately $100 million of Common Shares. At a future date, the Company
also expects to repurchase up to $25 million of Common Shares through open
market or privately negotiated transactions. The Board also confirmed the
dividend policy pursuant to which the Company intends to distribute as
dividends to holders of Common Shares and Exchangeable Non-Voting Shares in
each fiscal year 50% to 60% of the amount by which its net income (before
minority interest) from the prior fiscal year exceeds the amount of dividends
payable on Series A Preferred Shares in the current fiscal year.
The Company believes that its capital management strategy is consistent with
its policy to actively manage its capital and its goal to increase shareholder
value. Following consummation of the Repurchases, the Company believes that
its cash, short-term investments and borrowing capacity, together with
anticipated cash flows from operations, will be adequate for its needs in the
foreseeable future. However, the Company's actual experience may differ from
the expectations set forth in the preceding sentence, due to future events
that might have the effect of reducing the Company's available cash balances
(such as operating losses following catastrophes or other adverse events) or
that might reduce or eliminate the availability of external financial
resources. For a discussion of some of the factors that could cause the
Company's actual experience to differ from expectations, investors should
refer to the headings "Risk Factors" and "Note on Forward-Looking Statements."
The Company's capital management strategy is subject to change at the
discretion of the Board, as the Company's ability to implement its capital
management strategy will depend on various factors, some of which are beyond
its control.
OPERATING STRATEGIES
The Company pursues the following operating strategies which, in conjunction
with its capital management strategy, are intended to maximize return on
shareholders' equity:
Focus on Property Catastrophe Reinsurance. The Company concentrates on
writing property catastrophe reinsurance of risks located throughout the
world. For the years ended September 30, 1996 and 1995, the Company derived
86.5% and 88.4%, respectively, of its net premiums written from property
catastrophe reinsurance. The high level of severity and frequency of property
catastrophe losses from 1987 through 1992 precipitated a general increase in
rates and attachment points in this line of reinsurance. Although rates have
declined from their highs in 1993 and 1994, the Company believes that property
catastrophe reinsurance can still be significantly profitable for a reinsurer,
such as the Company, that has the financial strength, flexibility and
responsiveness needed to attract quality business and the high level of
technical underwriting judgment and skill necessary to price risks
appropriately.
Selectively Write Other Lines of Business. While property catastrophe
reinsurance is the Company's primary focus, the Company also seeks to take
advantage of pricing opportunities that may occur in other lines of
30
<PAGE>
reinsurance. These lines generally are characterized by a relatively short
period between the collection of premium and the notification of loss. These
lines currently include property risk excess and pro rata treaty insurance,
which constituted 5.1% and 2.6% of the Company's net premiums written in the
years ended September 30, 1996 and 1995, respectively. The Company also writes
casualty clash, marine, crop hail, aviation and satellite reinsurance. For the
years ended September 30, 1996 and 1995, these coverages represented 6.5% and
6.0%, respectively, of the Company's net premiums written. The Company
believes that writing these types of reinsurance enhances the utilization of
capital because these lines generally do not create additional aggregate
exposure for the Company. In addition, the Company has formed LaSalle Re
Capital to provide capital support to selected Lloyd's syndicates. During the
quarter ended December 31, 1996, LaSalle Re Capital was accepted as a
corporate member of Lloyd's, and since January 1, 1997 LaSalle Re Capital has
participated in three Lloyd's syndicates. One of these syndicates writes
direct and facultative property insurance, one writes marine insurance and
reinsurance, and one writes professional indemnity and directors and officers'
insurance and bankers blanket bond business. LaSalle Re Capital provides
capital support to the syndicates through letters of credit.
Utilize a Disciplined Underwriting Approach. Underwriting decisions are made
following analysis of each reinsurance contract based on the expected
incremental return on equity in relation to the Company's overall portfolio of
reinsurance contracts. To assess its property catastrophe risks, the Company
uses a variety of underwriting techniques, including simulation models,
exposure ratings and experience ratings. The Company has developed its
proprietary L-CAM(TM) catastrophe analysis model to assess its risks in the
U.S. property catastrophe market. The Company controls and monitors its
aggregate exposures on a real-time basis using computer-based rating and
control systems. The Company is highly selective in accepting risks, extending
coverage on approximately 29% and 24% of the contract submissions it received
in the years ended September 30, 1996 and 1995, respectively.
Maintain and Develop Long-Term Relationships with Clients and Brokers. The
Company seeks to maintain and develop long-term relationships with its clients
and brokers by providing a high level of service. The Company promptly
responds to underwriting submissions, designs customized programs, offers lead
terms when circumstances warrant and pays valid claims within an average of
five days. The Company retains a substantial portion of its clients from year
to year. Retention of clients permits the Company to use its experience
regarding a client's underwriting practices and risk management systems to
underwrite its own business with greater precision. In addition, the Company's
relationships with brokers permit it to obtain business and monitor
developments in various lines of reinsurance in order to increase its writings
when market conditions in those lines are favorable.
INDUSTRY TRENDS
The Company believes that an imbalance between the supply of and demand for
property catastrophe reinsurance existed in 1993 and resulted in an increase
in premiums from pre-1993 levels. As a result of the increased property
catastrophe reinsurance capacity since 1993, the Company believes that supply
and demand in the property catastrophe reinsurance market became more stable
in 1994 and have remained relatively stable in succeeding years. The Company
believes that property catastrophe reinsurance capacity has increased further
since 1994. Based on the Company's marketing efforts, reinsurance contract
submissions and publicly available information, the Company believes that
property catastrophe rates generally remained at the substantially increased
1993 levels in 1994 and decreased somewhat in 1995 and further in 1996 from
1994 levels. In particular, rates have declined significantly in areas, such
as Japan and Europe, where there has been favorable loss experience, while in
the U.S. market, where the level of property catastrophe losses has generally
been higher than in international markets in recent years, rates have
decreased to a lesser degree. Notwithstanding these rate decreases, the
Company believes that current rates generally exceed 1992 levels. If and while
favorable loss experience continues and reinsurance capacity does not
diminish, the Company expects further downward pressure on rates during 1997,
which it expects will in turn put downward pressure on its premium levels.
Based on the 1997 contract renewals that have occurred to date, the Company
estimates that it has experienced overall rate decreases of approximately 15%
compared to 1996. See "Risk Factors--Business Considerations."
For a more complete description of the Company's business, reference is made
to the documents of the Company incorporated by reference in this Prospectus.
See "Incorporation of Certain Documents by Reference."
31
<PAGE>
DESCRIPTION OF SERIES A PREFERRED SHARES
The description of the terms and provisions of the Series A Preferred Shares
in this Prospectus does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the terms and provisions of the
Certificate of Designation and the Bye-Laws, which are incorporated by
reference herein. Copies of the Certificate of Designation and the Bye-Laws
are filed as an exhibit to the Registration Statement of which this Prospectus
is a part.
GENERAL
The authorized share capital of Holdings consists of 100,000,000 shares,
including (i) Common Shares, of which 16,517,485 were outstanding as of March
10, 1997, and (ii) preferred shares, par value $1.00 per share. Pursuant to
the Bye-Laws and Bermuda law, the Board by resolution may issue preferred
shares in series without the approval of the shareholders of the Company. In
connection with any such issuance, the Board may establish the number of
preferred shares to be included in each series and may fix the designation,
powers, preferences and rights of the preferred shares of each series,
including but not limited to such matters as dividends, voting rights,
redemption, conversion and liquidation rights. On February 27, 1997, the Board
authorized the issuance of 3,000,000 Series A Preferred Shares in connection
with the Offering.
When issued and paid for pursuant to the Offering, the Series A Preferred
Shares will be duly authorized, validly issued, fully paid and nonassessable.
The holders of the Series A Preferred Shares will have no preemptive rights
with respect to any shares of the capital stock of the Company or any other
securities of the Company convertible into or carrying rights or options to
purchase any such shares. The Series A Preferred Shares will not be subject to
any sinking fund or other obligation of the Company to redeem or retire the
Series A Preferred Shares. Unless redeemed by the Company, the Series A
Preferred Shares will have a perpetual term, with no maturity.
The transfer agent, registrar and dividend disbursing agent for the Series A
Preferred Shares will be First Chicago Trust Company of New York.
DIVIDENDS
Holders of the Series A Preferred Shares shall be entitled to receive, when,
as and if declared by the Board, out of funds legally available for the
payment of dividends, cumulative preferential cash dividends in an amount per
share equal to % of the liquidation preference per annum (equivalent to $
per share). Such dividends shall begin to accrue and shall be cumulative from
the date of original issuance and shall be payable quarterly, when, as and if
declared by the Board, in arrears on the first day of March, June, September
and December of each year or, if such date is not a business day, on the
business day immediately before such date (each, a "Dividend Payment Date").
The first dividend, which will be payable on June 1, 1997, will represent the
period from the original issue date until the Dividend Payment Date of June 1,
1997. The dividend for such partial dividend period and any other dividend
payable on the Series A Preferred Shares for any other partial dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in the
Register of Members of the Company at the close of business on the applicable
record date, which shall be on such date designated by the Board for the
payment of dividends that is not more than 60 nor less than 30 days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
No dividends on Series A Preferred Shares shall be declared by the Board or
paid or set apart for payment by the Company at such time as the terms and
provisions of any agreement of the Company, including any agreement relating
to its indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment shall be restricted or
prohibited by law. Notwithstanding the foregoing, dividends on the Series A
Preferred Shares will accrue whether or not there are funds legally available
for the payment of such dividends and whether or not such dividends are
declared. Holders of the Series A Preferred Shares will not be entitled to any
dividends in excess of full
32
<PAGE>
cumulative dividends as described above. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments
on the Series A Preferred Shares which may be in arrears.
If there shall be any change in the law, regulation or official directive
(whether or not having the force of law) or in the interpretation by any
Bermuda Government authority or court of competent jurisdiction which imposes
on the Company any condition with respect to the Series A Preferred Shares as
a result of which any dividend payment is reduced, the Company shall give
notice to the holders of Series A Preferred Shares of such event and all such
reductions shall be borne in full by the holders of Series A Preferred Shares
(but only to the extent permitted by law).
If any Series A Preferred Shares are outstanding, no dividends or other
distributions shall be declared or paid or set apart for payment on any class
or series of Parity Shares for any period unless either (i) full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payments on the
Series A Preferred Shares for all dividend periods terminating on or prior to
the dividend payment date on such Parity Shares, or (ii) all dividends
declared upon the Series A Preferred Shares and any class or series of Parity
Shares are declared pro rata so that the amount of dividends declared per
share on the Series A Preferred Shares and any class or series of Parity
Shares shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the Series A Preferred Shares and such class or
series of Parity Shares bear to each other.
If any Series A Preferred Shares are outstanding, unless full cumulative
dividends on the Series A Preferred Shares and any Parity Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period, no dividends (other than those paid in
Common Shares or other capital shares ranking junior to the Series A Preferred
Shares as to dividends and as to the distribution of assets upon any
liquidation, dissolution or winding up (together with the Common Shares,
"Fully Junior Shares")) shall be declared or paid or set apart for payment and
no other distribution shall be declared or paid or set apart for payment upon
the Common Shares or any other capital shares ranking junior to the Series A
Preferred Shares as to dividends or as to the distribution of assets upon any
liquidation, dissolution or winding up (together with the Common Shares,
"Junior Shares"), nor shall any Common Shares or any other Junior Shares be
redeemed, purchased or otherwise acquired (other than a redemption, purchase
or other acquisition of Common Shares made for purposes of an employee
incentive or benefit plan of the Company or any subsidiary) for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any Common Shares or any other Junior Shares) by the
Company (except by conversion into or exchange for Fully Junior Shares).
Any dividend payment made on Series A Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
Series A Preferred Shares which remains payable.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any dividend payment or distribution
shall be made or set apart for payment to the holders of any Common Shares or
any other class or series of Junior Shares, the holders of Series A Preferred
Shares shall be entitled to receive out of assets of the Company legally
available for distribution to shareholders, liquidating distributions in the
amount of the liquidation preference ($25.00 per share), plus an amount equal
to all dividends accrued and unpaid thereon. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series A Preferred Shares will have no right or claim to any of the remaining
assets of the Company. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
the Company are insufficient to pay the amount of the liquidating
distributions on all outstanding Series A Preferred Shares and the
corresponding amounts payable on all classes or series of Parity Shares, then
the holders of the Series A Preferred Shares and all such classes or series of
Parity Shares shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
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<PAGE>
If liquidating distributions shall have been made in full to all holders of
Series A Preferred Shares and all classes or series of Parity Shares, the
remaining assets of the Company shall be distributed among the holders of
Common Shares or any other classes or series of Junior Shares, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation,
amalgamation or merger of the Company with or into any other entity, the sale,
lease or conveyance of all or substantially all of the shares of capital stock
or the property or business of the Company or a statutory share exchange shall
not be deemed to constitute a liquidation, dissolution or winding up of the
Company.
REDEMPTION
Except under certain special circumstances as described below, the Series A
Preferred Shares are not redeemable prior to March , 2007. On and after
such date, the Company, at its option upon not less than 30 nor more than 90
days' written notice, may redeem the Series A Preferred Shares, in whole at
any time or from time to time in part, for cash at a redemption price of
$25.00 per share, plus all accrued and unpaid dividends, if any, thereon to
the date fixed for redemption, without interest. Holders of Series A Preferred
Shares to be redeemed shall surrender certificates for such Series A Preferred
Shares at the place designated in such notice and shall be entitled to the
redemption price and any accrued and unpaid dividends payable upon such
redemption following such surrender.
If fewer than all of the outstanding Series A Preferred Shares are to be
redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares), by lot or by any
other method determined by the Company in its sole discretion to be equitable.
Unless full cumulative dividends on all Series A Preferred Shares and all
Parity Shares shall have been declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, no Series A Preferred Shares or
any Parity Shares shall be redeemed, purchased or otherwise acquired by the
Company unless all outstanding Series A Preferred Shares and any Parity Shares
are redeemed; provided, however, that the foregoing shall not prevent the
purchase or acquisition by the Company of fewer than all of the outstanding
Series A Preferred Shares or Parity Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series A Preferred
Shares and Parity Shares or pursuant to a repurchase of Excess Preferred
Shares as described below.
At any time prior to March , 2007, if the Company shall have submitted to
the holders of its Common Shares a proposal for amalgamation, consolidation,
merger or statutory share exchange, or any proposal for any other matter that
requires for its validation or effectuation an affirmative vote of the holders
of the Series A Preferred Shares at the time outstanding, acting as a single
class, the Company, at its option upon not less than 30 nor more than 90 days'
written notice, may redeem all of the outstanding Series A Preferred Shares at
a redemption price of $26.00 per share, plus accrued and unpaid dividends, if
any, to the date of redemption.
Notice of any redemption will be mailed at least 30 days but not more than
90 days before the redemption date to each holder of record of Series A
Preferred Shares to be redeemed at the address shown in the Register of
Members of the Company. Each notice shall state, as appropriate: (i) the
redemption date; (ii) the number of Series A Preferred Shares to be redeemed;
(iii) the redemption price; (iv) the place or places where certificates for
Series A Preferred Shares are to be surrendered for payment of the redemption
price; and (v) that, where applicable, dividends on the Series A Preferred
Shares to be redeemed will cease to accrue on such redemption date. If fewer
than all Series A Preferred Shares are to be redeemed, the notice mailed to
each such holder thereof shall also specify the number of Series A Preferred
Shares to be redeemed from such holder. If notice of redemption of any Series
A Preferred Shares has been given and if the funds necessary for such
redemption have been set apart by the Company in trust for the benefit of the
holders of Series A Preferred Shares so called for redemption, then from and
after the redemption date, dividends will cease to accrue on the Series A
Preferred
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<PAGE>
Shares being redeemed, such Series A Preferred Shares shall no longer be deemed
to be outstanding and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
The holders of Series A Preferred Shares at the close of business on a
Dividend Record Date will be entitled to receive the dividend payable with
respect to such Series A Preferred Shares on the corresponding Dividend Payment
Date notwithstanding the redemption thereof between such Dividend Record Date
and the corresponding Dividend Payment Date or the Company's default in the
payment of the dividend due. Except as provided above, the Company will make no
payment or allowance for unpaid dividends, whether or not in arrears, on Series
A Preferred Shares which have been called for redemption.
SPECIAL REPRESENTATION AND VOTING RIGHTS; RELATIONSHIP TO PREFERRED SHARES OF
LASALLE RE
Except as indicated below, or except as otherwise from time to time required
by applicable law, the holders of Series A Preferred Shares will have no voting
rights.
Whenever dividends payable on Series A Preferred Shares or any class or
series of Parity Shares shall be in arrears (whether or not such dividends have
been earned or declared) in an amount equivalent to dividends for six full
dividend periods (whether or not consecutive), then, immediately upon the
happening of such event, the holders of Series A Preferred Shares, together
with the holders of shares of every other class or series of Parity Shares (all
such other classes or series, the "Voting Preferred Shares"), voting as a
single class regardless of class or series, shall have the right to elect two
Special Representatives to the Board of the Company. The Special
Representatives shall not be directors or officers of the Company but shall be
entitled to receive notice of all Board meetings and to take part in such Board
meetings, with the privilege of voice but not vote. In addition, at all times
when the holders of the Series A Preferred Shares and the Voting Preferred
Shares have the right to be represented by such Special Representatives at the
Company Board level, the Company shall be obligated to cause, to the extent
permitted under Bermuda law, the election of two additional directors to the
LaSalle Re board (which currently includes thirteen members) who shall be
designated by the Special Representatives (the "Subsidiary Voting Right"). The
Subsidiary Voting Right will allow the holders of the Company's Series A
Preferred Shares and the Voting Preferred Shares to have the right to exercise,
in effect, voting rights through board members at the LaSalle Re board level
under such circumstances. Whenever all arrearages in dividends on the Series A
Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of holders
of the Series A Preferred Shares and the Voting Preferred Shares to be
represented by Special Representatives and the Subsidiary Voting Right shall
cease (but subject always to the same provision for the vesting of such rights
in the case of any future arrearages in an amount equivalent to dividends for
six full dividend periods), and the positions of the Special Representatives
and the additional directors elected at the LaSalle Re board level shall
forthwith terminate.
Contemporaneously with the issuance of the 3,000,000 Series A Preferred
Shares by the Company pursuant to the Offering, LaSalle Re will issue an
equivalent number of its own Series A Preferred Shares, par value $1.00 per
share ("the Subsidiary Preferred Shares"). All of the Subsidiary Preferred
Shares will be owned by the Company. The Subsidiary Preferred Shares will have
identical dividend rights and liquidation rights to the Series A Preferred
Shares, but will be redeemable at any time at the option of LaSalle Re,
provided that the Company shall make alternative arrangements to provide a
means for it to continue to have adequate resources to meet its dividend
obligations to the holders of its Series A Preferred Shares.
Whenever dividends payable on Subsidiary Preferred Shares or shares ranking
on a parity with such shares shall be in arrears (whether or not such dividends
have been earned or declared) in an amount equivalent to dividends for six full
dividend periods (whether or not consecutive), then, immediately upon the
happening of such event, the Company as holder of the Subsidiary Preferred
Shares (along with the holders of any parity shares) shall acquire the right
(the "Subsidiary Preferred Voting Right") to elect two additional members of
the board of directors of LaSalle Re. The Subsidiary Preferred Voting Right
shall correlate to the Subsidiary
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Voting Right described above such that there shall be no more than a total of
two additional directors elected to the board of LaSalle Re at any time
pursuant to such rights. The Company shall be obligated under such
circumstances to exercise the Subsidiary Preferred Voting Right for the
election of such additional directors in such manner as the Special
Representatives elected at the Company Board level as described above shall
direct. The Subsidiary Preferred Voting Right will allow the holders of the
Company's Series A Preferred Shares and the Voting Preferred Shares to have
the right to exercise, in effect, voting rights through board members at the
LaSalle Re board level under such circumstances. Whenever all arrearages in
dividends on the Subsidiary Preferred Shares and any parity shares shall have
been paid and dividends thereon for the current quarterly dividend period
shall have been paid or declared and set apart for payment, then the
Subsidiary Preferred Voting Right shall cease (but subject always to the same
provision for the vesting of such rights in the case of any future arrearages
in an amount equivalent to dividends for six full dividend periods), and the
terms of office of all persons elected pursuant to the Subsidiary Preferred
Voting Right as additional members of the board of directors of LaSalle Re
shall forthwith terminate.
As to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, the Subsidiary
Preferred Shares shall rank junior to the preferred stock of LaSalle Re
authorized in connection with the Company's credit facility but currently
unissued.
So long as any Series A Preferred Shares are outstanding, in addition to any
other vote or consent of shareholders required by law or by the Bye-Laws, the
affirmative vote of the holders of at least 75% of the Series A Preferred
Shares at the time outstanding, acting as a single class, given in person or
by proxy, either in writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or validating (i) any
amendment, alteration or repeal of any of the provisions of the Company's
Memorandum of Association, Bye-Laws or the Certificate of Designation that
would vary the rights, preferences or voting powers of the holders of the
Series A Preferred Shares; (ii) any amalgamation, consolidation, merger or
statutory share exchange that affects the Series A Preferred Shares, unless in
each such case each Series A Preferred Share shall remain outstanding with no
variation in its rights, preferences or voting powers or shall be converted
into or exchanged for preferred shares of the surviving entity having rights,
preferences and voting powers identical to that of a Series A Preferred Share;
(iii) the authorization, creation or any increase in the authorized amount of,
any shares of any class or series or any security convertible into shares of
any class or series ranking prior to the Series A Preferred Shares in the
payment of dividends or the distribution of assets on any liquidation,
dissolution or winding up of the Company; or (iv) any other transaction or
action which would amount to a variation of the rights, preferences or voting
powers of the holders of the Series A Preferred Shares. However, no such vote
of the holders of Series A Preferred Shares is required if, prior to the time
when any of the foregoing actions is to take effect, all Series A Preferred
Shares at the time outstanding shall have been redeemed. See "--Redemption."
The Company may also create and issue additional classes or series of Parity
Shares and Fully Junior Shares without the consent of any holder of Series A
Preferred Shares. The holders of Series A Preferred Shares are not entitled to
vote on any sale of all or substantially all of the assets of the Company.
CONVERSION
The Series A Preferred Shares are not convertible into or exchangeable for
any other securities of the Company.
LIMITATIONS ON TRANSFER AND OWNERSHIP
The Certificate of Designation provides that no person may acquire ownership
of more than 9.9% of the outstanding Series A Preferred Shares. Any Series A
Preferred Shares owned by a person in excess of such 9.9% shall be deemed
"Excess Preferred Shares." Within 10 days of becoming aware of the existence
of Excess Preferred Shares (whether by notice on Schedule 13D or otherwise),
the Company shall initiate the repurchase of any and all Excess Preferred
Shares by giving notice of repurchase to the holder or holders thereof. The
repurchase shall be completed on a closing date not more than 10 days after
the date on which the Company
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mails the repurchase notice. The Company will be entitled to assign its
repurchase right to a third party or parties, who may be other shareholders of
the Company, with the consent of any such assignee. The repurchase price of
each Excess Preferred Share called for repurchase shall be the average daily
per share closing price of the Series A Preferred Shares, if the Series A
Preferred Shares are listed on a national securities exchange or are reported
on the Nasdaq National Market System, and if the Series A Preferred Shares are
not so listed or reported, shall be the mean between the average per share
closing bid prices and the average per share closing asked prices of the
Series A Preferred Shares, in each case during the 30-day period ending on the
business day prior to the mailing date of the repurchase notice, or if there
have been no sales on a national securities exchange or the Nasdaq National
Market System and no published bid quotations and no published asked
quotations with respect to Series A Preferred Shares during such 30-day
period, the repurchase price shall be the price determined by the Board in
good faith. The foregoing limitation on ownership shall not apply to the
acquisition of Series A Preferred Shares by an underwriter in a public
offering of Series A Preferred Shares and shall not apply to the ownership of
Series A Preferred Shares by a managing underwriter in the initial public
offering of Series A Preferred Shares. The Board, in its sole and absolute
discretion, may exempt from the 9.9% ownership limitation certain designated
Series A Preferred Shares owned by a person who has provided the Board with
evidence and assurances acceptable to the Board that ownership of such shares
will cause no adverse tax, legal or regulatory consequences to the Company,
any of its subsidiaries or any of its shareholders.
Under the Bye-Laws, any transfer of Series A Preferred Shares that results
in a shareholder (other than an Investment Company) beneficially owning more
than 5.0% of the outstanding capital stock of Holdings or any shareholder
holding Controlled Shares in excess of 9.9% of the outstanding capital stock
of Holdings, in each case without the Board's prior approval, shall not be
registered in the share register of Holdings and shall be void and of no
effect. The Bye-Laws also provide that if the Board in its absolute discretion
determines that share ownership by any shareholder may result in adverse tax,
regulatory or legal consequences to Holdings, any of its subsidiaries or any
other shareholder, then Holdings will have the option, but not the obligation,
to repurchase all or part of the shares held by such shareholder to the extent
the Board determines it is necessary to avoid such adverse or potential
adverse consequences. The price to be paid for such shares will be the fair
market value of such shares.
DIFFERENCES IN CORPORATE LAW
The Companies Act 1981 of Bermuda (the "Act") differs in certain material
respects from laws generally applicable to United States corporations and
their shareholders. Set forth below is a summary of certain significant
provisions of the Act (including modifications adopted pursuant to the Bye-
Laws) applicable to the Company, which differ in certain respects from
provisions of Delaware corporate law. The following statements are summaries,
and do not purport to deal with all aspects of Bermuda law that may be
relevant to the Company and its shareholders.
Interested Directors. The Bye-Laws provide that any transaction entered into
by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed
at the first opportunity at a meeting of directors or in writing to the
directors. Under Delaware law, such transaction would not be voidable if (i)
the material facts as to such interested director's relationship or interests
are disclosed or are known to the board of directors and the board in good
faith authorizes the transaction by the affirmative vote of a majority of the
disinterested directors, (ii) such material facts are disclosed or are known
to the stockholders entitled to vote on such transaction and the transaction
is specifically approved in good faith by vote of the stockholders or (iii)
the transaction is fair as to the corporation as of the time it is authorized,
approved or ratified. Under Delaware law, such interested director could be
held liable for any transaction for which such director derived an improper
personal benefit.
Mergers and Similar Arrangements. The Company may acquire the business of
another Bermuda exempted company or a company incorporated outside Bermuda and
carry on such business when it is within the objects of its Memorandum of
Association. The Company may also amalgamate with another Bermuda company or
with
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a body incorporated outside Bermuda. In the case of an amalgamation, a
shareholder may apply to a Bermuda court for a proper valuation of such
shareholder's shares if such shareholder is not satisfied that fair value has
been paid for such shares. The court ordinarily would not set aside the
transaction on that ground absent evidence of fraud or bad faith. Under
Delaware law, with certain exceptions, any merger, consolidation or sale of
all or substantially all the assets of a corporation must be approved by the
board of directors and a majority of the outstanding shares entitled to vote.
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which such stockholder may receive cash in the
amount of the fair market value of the shares held by such stockholder (as
determined by a court or by agreement of the corporation and the stockholder)
in lieu of the consideration such stockholder would otherwise receive in the
transaction. Delaware law does not provide stockholders of a corporation with
voting or appraisal rights when the corporation acquires another business
through the issuance of its stock or other consideration (i) in exchange for
the assets of the business to be acquired, (ii) in exchange for the
outstanding stock of the corporation to be acquired or (iii) in a merger of
the corporation to be acquired with a subsidiary of the acquiring corporation.
Takeovers. Bermuda law provides that where an offer is made for shares of
another company and, within four months of the offer, the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering shareholders to transfer their shares
on the terms of the offer. Dissenting shareholders may apply to the court
within one month of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise its discretion
to enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any
shareholder vote, may merge with any 90% or more owned subsidiary. Upon any
such merger, dissenting stockholders of the subsidiary would have appraisal
rights.
Shareholder's Suit. The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English
case law precedent, which would permit a shareholder to commence an action in
the name of the Company to remedy a wrong done to the Company where the act
complained of is alleged to be beyond the corporate power of the Company or is
illegal or would result in the violation of its Memorandum of Association or
the Bye-Laws. Furthermore, consideration would be given by the court to acts
that are alleged to constitute a fraud against the minority shareholders or
where an act requires the approval of a greater percentage of the Company's
shareholders than actually approved it. The winning party in such an action
generally would be able to recover a portion of attorneys' fees incurred in
connection with such action. Class actions and derivative actions generally
are available to stockholders under Delaware law for, among other things,
breach of fiduciary duty, corporate waste and actions not taken in accordance
with applicable law. In such actions, the court has discretion to permit the
winning party to recover attorneys' fees incurred in connection with such
action.
Indemnification of Directors. The Company may indemnify its directors or
officers in their capacity as such in respect of any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which a director or officer may
be guilty in relation to the Company other than in respect of his own fraud or
dishonesty. Under Delaware law, a corporation may adopt a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for breaches of the director's duty of loyalty, for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violations of law, for improper payment of dividends or for any
transaction from which the director derived an improper personal benefit.
Delaware law has provisions and limitations similar to Bermuda regarding
indemnification by a corporation of its directors or officers, except that
under Delaware law the statutory rights to indemnification may not be as
limited.
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Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office
of the Registrar of Companies in Bermuda, which will include the Memorandum of
Association (including its objects and powers) and any alteration to the
Memorandum of Association and documents relating to any increase or reduction
of authorized capital. The shareholders have the additional right to inspect
the Bye-Laws, minutes of general meetings and audited financial statements of
the Company, which must be presented to the annual general meeting of
shareholders. The register of shareholders of the Company is also open to
inspection by shareholders without charge, and to members of the public for a
fee. The Company is required to maintain its share register in Bermuda but may
establish a branch register outside Bermuda. The Company is required to keep
at its registered office a register of its directors and officers which is
open for inspection by members of the public without charge. Bermuda law does
not, however, provide a general right for shareholders to inspect or obtain
copies of any other corporate records. Delaware law permits any shareholder to
inspect or obtain copies of a corporation's shareholder list and its other
books and records for any purpose reasonably related to such person's interest
as a shareholder. Delaware law does not permit inspection by the public of the
register of shareholders.
CERTAIN TAX CONSIDERATIONS
The following summary of taxation of Holdings, LaSalle Re, LaSalle Re
Services and LaSalle Re Capital and the taxation of shareholders of the
Company is based upon current law. The following discussion is a summary of
the principal Bermuda, United Kingdom and U.S. federal income tax consequences
of the ownership and disposition of Holdings' Series A Preferred Shares. The
summary does not purport to be a complete analysis of all of the tax
considerations that may be applicable to a decision to acquire Series A
Preferred Shares of Holdings and, unless explicitly noted to the contrary,
deals only with investors who are U.S. Persons (as defined below) who will
hold the Series A Preferred Shares as "capital assets" within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code");
provided, however, that except as explicitly provided below, the summary does
not apply to a U.S. 10% shareholder (as defined below) of Holdings or LaSalle
Re. The tax treatment of any particular shareholder may vary depending on such
shareholder's particular tax situation or status. Consequently, each
prospective shareholder is urged to consult his or its own tax advisors as to
the particular tax consequences of the Offering to such shareholder, including
the effect and applicability of federal, state, local and foreign income and
other tax laws. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary.
As used herein, the term "U.S. Person" means a citizen or resident of the
United States; a corporation, partnership, or other entity created or
organized in the United States or under the laws of the United States or of
any political subdivision thereof; an estate whose income is includible in
gross income for United States Federal income tax purposes regardless of its
source; or a "United States Trust." A United States Trust is (a) for taxable
years beginning after December 31, 1996, or if the trustee of a trust elects
to apply the following definition to an earlier taxable year, any trust if,
and only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more U.S.
trustees have the authority to control all substantial decisions of the trust,
and (b) for all other taxable years, any trust whose income is includible in
gross income for United States Federal income tax purposes regardless of its
source. A U.S. Person who holds Common Shares, Series A Preferred Shares or
shares of LaSalle Re as "capital assets" within the meaning of section 1221 of
the Code will be referred to herein as a "U.S. Holder."
Statements made below as to Bermuda tax law are based on the opinion of
Conyers Dill & Pearman, Bermuda counsel to the Company as to such tax laws
(subject to the qualifications and assumptions set forth in such opinion).
Statements below as to the United Kingdom tax law are based on the opinion of
Clyde & Co., U.K. counsel to the Company as to such tax laws (subject to the
qualifications and assumptions set forth in such opinion). Statements made
below as to United States federal income tax law are based upon the opinion of
Mayer, Brown & Platt, United States counsel to the Company as to such tax laws
(subject to the qualifications and assumptions set forth in such statements).
The statements as to the Company's beliefs and conclusions as to the
application of such tax laws to the Company represent the views of the
Company's management as to the application of such laws and do not represent
legal opinions of the Company or its counsel.
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TAXATION OF THE COMPANY AND ITS SUBSIDIARIES
Bermuda
Under current Bermuda law, there is no income tax or capital gains tax
payable by Holdings, LaSalle Re or LaSalle Re Capital. Holdings, LaSalle Re
and LaSalle Re Capital have received from the Bermuda Minister of Finance an
assurance under The Exempted Undertakings Tax Protection Act, 1966 of Bermuda,
to the effect that in the event of there being enacted in Bermuda any
legislation imposing tax computed on profits or income, or computed on any
capital asset, gain or appreciation, or any tax in the nature of estate duty
or inheritance tax, then the imposition of any such tax shall not be
applicable to Holdings, to LaSalle Re, to LaSalle Re Capital, or to any of
their operations or their shares, debentures or other obligations, until March
28, 2016. This assurance is subject to the proviso that it is not construed so
as to prevent the application of any tax or duty to such persons as are
ordinarily resident in Bermuda (Holdings, LaSalle Re and LaSalle Re Capital
are not so currently affected) or to prevent the application of any tax
payable in accordance with the provisions of The Land Tax Act 1967 of Bermuda
or otherwise payable in relation to any property leased to Holdings, LaSalle
Re and LaSalle Re Capital. Holdings, LaSalle Re and LaSalle Re Capital, under
current rates, each pay annual Bermuda government fees of $15,000, $15,000 and
$1,680, respectively, and each of LaSalle Re and LaSalle Re Capital currently
pays annual insurance fees of $1,155. In addition, all entities employing
individuals in Bermuda are required to pay a payroll tax to the Bermuda
government.
United Kingdom
LaSalle Re Services is subject to tax in the United Kingdom on its income
and is also required to charge and account to the U.K. Inland Revenue for
value added tax on chargeable supplies of services. However, the Company
believes that the taxable income of LaSalle Re Services will be modest, and
that its tax liability is and will continue to be small. LaSalle Re Capital is
a corporate member of Lloyd's and is subject to U.K. corporation tax on any
profits and gains, net of deductible expenditure, deriving from its
participation in any Lloyd's syndicates. The Company believes that the
activities of LaSalle Re Services and LaSalle Re Capital will not cause
LaSalle Re or Holdings to be subject to United Kingdom tax on any portion of
their net income.
United States
In general, under current U.S. tax rules and regulations, a foreign
corporation is subject to U.S. federal income tax on its taxable income that
is treated as effectively connected to its conduct of a trade or business
within the U.S. and to the U.S. branch profits tax on its effectively
connected earnings and profits (with certain adjustments) deemed repatriated
out of the United States. However, pursuant to most U.S. income tax treaties,
a foreign corporation is subject to the U.S. federal income tax on its
business profits only if it is engaged in the conduct of a trade or business
in the U.S. through a permanent establishment located therein. The U.S. has
entered into a treaty with Bermuda relating to the taxation of insurance
enterprises (the "Bermuda Treaty"). Pursuant to the Bermuda Treaty business
profits earned by an insurance company that is a resident of Bermuda may be
taxed in the United States only if such profits are attributable to the
conduct of a trade or business carried on through a permanent establishment in
the United States. However, an insurance enterprise resident in Bermuda will
be entitled to the benefits of the Bermuda Treaty only if (i) 50% or more of
its equity is beneficially owned, directly or indirectly, by Bermuda residents
or U.S. citizens or residents and (ii) its income is not used in substantial
part, directly or indirectly, to make disproportionate distributions to, or to
meet certain liabilities to, persons who are not Bermuda residents or U.S.
citizens or residents (the "Bermuda Treaty Benefits Test"). For purposes of
the Bermuda Treaty, a permanent establishment generally is defined to include
a branch, office or other fixed place of business through which the business
of the enterprise is carried on, or an agent (other than an agent of
independent status acting in the ordinary course of its business) that has,
and habitually exercises in the U.S., authority to conclude contracts in the
name of the corporation.
It is the opinion of the Company's United States counsel that, based on
representations made by Holdings and LaSalle Re regarding their activities
with respect to the United States, Holdings and LaSalle Re should not be
subject to U.S. federal net income tax imposed on their business income. It is
anticipated that Holdings and
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LaSalle Re will operate in the future so as not to be engaged in the conduct
of a trade or business in the U.S. However, as there are no definitive
standards provided by the Code, regulations or court decisions as to those
activities that constitute being engaged in the conduct of a trade or business
within the United States, and as the determination is essentially factual in
nature, there can be no assurance that the IRS will not contend successfully
that Holdings and/or LaSalle Re is engaged in a trade or business in the
United States. If Holdings and/or LaSalle Re were deemed to be so engaged,
that entity would be subject to U.S. income tax, as well as the branch profits
tax, on its income which is treated as effectively connected with the conduct
of that trade or business unless the entity is entitled to relief under the
permanent establishment provision of the Bermuda Treaty, as discussed below.
It is uncertain whether LaSalle Re will be entitled to relief under the
permanent establishment provisions of the Bermuda Treaty upon completion of
the Offering or at any time thereafter as it cannot be predicted whether
LaSalle Re would satisfy the Bermuda Treaty Benefits Test. No regulations
interpreting the Bermuda Treaty have been issued. However, as stated above,
while there can be no assurances, the Company believes that LaSalle Re will
not be engaged in the conduct of a U.S. trade or business and, in any event,
the Company does not believe that LaSalle Re will have a permanent
establishment in the United States.
If Holdings or LaSalle Re is subject to U.S. federal income tax, that entity
would be taxed at regular corporate rates on all of its income that is
effectively connected with the conduct of its U.S. business (or, in the case
of LaSalle Re, all of its income attributable to its U.S. permanent
establishment if LaSalle Re is entitled to the benefits of the Bermuda
Treaty). In addition, the Company or LaSalle Re would be subject to the branch
profits tax. Such income tax, if imposed, would be based on effectively
connected income computed in a manner generally analogous to that applied to
the income of a domestic corporation, except that a foreign corporation can
anticipate an allowance of deductions and credits only if it files a United
States income tax return. Penalties may be assessed for failure to file tax
returns. Holdings and LaSalle Re intend to file protective U.S. income tax
returns on a timely basis in order to preserve their right to claim tax
deductions and credits if either company subsequently is determined to be
subject to U.S. tax on a net basis. The highest marginal federal income tax
rates currently are 35% for a corporation's effectively connected income and
30% for the "branch profits" tax. If LaSalle Re were deemed to be engaged in
business in the United States but did not have a permanent establishment in
the United States within the meaning of the Bermuda Treaty and LaSalle Re
qualified for Bermuda Treaty benefits, there is an argument that premium
income of LaSalle Re would be exempt from U.S. tax but that its investment
income effectively connected with its U.S. business would be subject to U.S.
tax on a net basis, and that the branch profits tax may be applicable to that
investment income.
LaSalle Re Capital is a corporate member of Lloyd's. Pursuant to a Closing
Agreement between Lloyd's and the IRS, LaSalle Re Capital will be treated as
engaged in business in the U.S. and is subject to U.S. corporate income tax on
its net income from U.S. sources.
Foreign corporations not engaged in a trade or business in the United
States, as well as foreign corporations engaged in the conduct of a U.S. trade
or business but only with respect to their income that is not effectively
connected with such trade or business, are nonetheless subject to U.S. income
tax on certain "fixed or determinable annual or periodical gains, profits and
income" (such as dividends and certain interest on investments) derived from
sources within the United States. Such tax generally is imposed at a rate of
30% on the gross income subject to the tax, but the rate may be reduced by
applicable treaties, and the tax is eliminated with respect to certain types
of U.S. source income, such as portfolio interest.
The United States also imposes an excise tax on insurance and reinsurance
premiums paid to foreign insurers or reinsurers with respect to risks located
in the United States. The rates of tax applicable to premiums paid to LaSalle
Re are 4% for casualty insurance premiums and 1% for reinsurance premiums.
The Treasury Department has recently announced proposals that would
significantly affect the taxation of companies that enter into insurance or
reinsurance contracts with certain affiliated companies. These proposals, if
enacted into law, might significantly affect the taxation of the Company.
However, these proposals have not
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been introduced in Congress as legislation and it is impossible to predict
whether, or in what form, such legislation will be enacted and the effect, if
any, of legislation that might be enacted on the taxation of the Company.
TAXATION OF SHAREHOLDERS
Bermuda Taxation
Currently, there is no Bermuda withholding tax on dividends paid by the
Company.
United States Taxation of U.S. and Non-U.S. Shareholders
Taxation of Dividends. Subject to the discussion below relating to the
potential application of the "controlled foreign corporation" and "passive
foreign investment company" rules, cash distributions made with respect to
Series A Preferred Shares will constitute dividends for U.S. federal income
tax purposes to the extent paid out of current or accumulated earnings and
profits of Holdings. U.S. Holders generally will be subject to U.S. federal
income tax on the receipt of such dividends. Generally, such dividends will
not be eligible for the dividends received deduction. To the extent that a
distribution exceeds earnings and profits, it will be treated first as a
return of the U.S. Holder's basis to the extent thereof, and then as gain from
the sale of a capital asset.
Possible Classification of the Company as a Controlled Foreign Corporation.
Under section 951(a) of the Code, each "U.S. 10% shareholder" (as defined
below) that, on the last day of the foreign corporation's taxable year, owns,
directly or indirectly through a foreign entity, shares of a foreign
corporation that is a "controlled foreign corporation" ("CFC") for an
uninterrupted period of 30 days or more during any taxable year must include
in its gross income for United States federal income tax purposes its pro rata
share of the CFC's "subpart F income" for such year, even if the subpart F
income is not distributed. In addition, the U.S. 10% shareholders of a CFC may
be deemed to receive taxable distributions to the extent the CFC increases the
amount of its earnings that are invested in certain specified types of U.S.
property. All of Holdings', LaSalle Re's, and LaSalle Re Capital's income is
expected to be subpart F income, except to the extent that LaSalle Re
Capital's income qualifies for an exception from the subpart F rules as
described below. "Subpart F income" includes, inter alia, (i) "foreign
personal holding company income," such as interest, dividends, and other types
of passive investment income and (ii) "insurance income," which is defined to
include any income (including underwriting and investment income) that is
attributable to the issuing (or reinsuring) of any insurance or annuity
contract in connection with property in, liability arising out of activity in,
or in connection with the lives or health of residents of, a country other
than the country under the laws of which the CFC is created or organized, and
which (subject to certain modifications) would be taxed under the insurance
company provisions of the Code if such income were the income of a domestic
insurance company ("Subpart F Insurance Income"). However, Subpart F income
does not include (i) any income from sources within the U.S. which is
effectively connected with the conduct of a trade or business within the U.S.
and not exempted or subject to a reduced rate of tax by applicable treaty and
(ii) certain income subject to high foreign taxes.
Under Code section 951(b), any U.S. Person who owns, directly or indirectly
through foreign entities, or is considered to own (by application of the rules
of constructive ownership set forth in Code section 958(b), generally applying
to family members, partnerships, estates, trusts or 10% controlled
corporations) 10% or more of the total combined voting power of all classes of
stock of a foreign corporation will be considered to be a "U.S. 10%
shareholder." In general, a foreign corporation is treated as a CFC only if
its U.S. 10% shareholders collectively own more than 50% of the total combined
voting power or total value of the corporation's stock on any day (the "50%
Test"). However, for purposes only of taking into account Subpart F Insurance
Income, a foreign corporation will be treated as a CFC if (i) more than 25% of
the total combined voting power or total value of its stock is owned by U.S.
10% shareholders and (ii) the gross amount of premiums or other consideration
in respect of risks outside its country of incorporation exceeds 75% of the
gross amount of all premiums or other consideration in respect of all risks
(the "25% Test"). It is anticipated for both LaSalle Re and LaSalle Re Capital
that the gross premiums of each corporation in respect of Subpart F Insurance
Income
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will exceed 75% of each such corporation's gross premiums in respect of all
risks so that the 25% Test, rather than the 50% Test, will be applicable with
respect to the Subpart F Insurance Income of both LaSalle Re and LaSalle Re
Capital.
In determining the U.S. 10% shareholders of LaSalle Re and LaSalle Re
Capital, capital stock of LaSalle Re and LaSalle Re Capital that is held
indirectly by U.S. persons through Holdings or any other non-U.S. entity is
treated as held by United States persons. A holder of Series A Preferred
Shares will be treated as owning indirectly a proportion of the capital stock
of LaSalle Re and LaSalle Re Capital corresponding to the ratio that the
Series A Preferred Shares owned by such person bears to the value of all the
capital stock of Holdings. The Certificate of Designation provides that no
person may acquire ownership of more than 9.9% of the outstanding Series A
Preferred Shares, and that the Company shall repurchase any shares owned by a
person in excess of such 9.9% within 20 days of becoming aware of such excess
ownership. The Board may exempt from the foregoing requirement any person who
has provided evidence that such ownership will cause no adverse tax, legal or
regulatory consequences to the Company, any of its subsidiaries or any of its
shareholders. In addition, the Bye-Laws require prior Board approval for any
transfer of shares that results in any shareholder (other than an Investment
Company) beneficially owning more than 5.0% of the outstanding capital stock
of Holdings or any shareholder holding actually, indirectly through foreign
entities or constructively more than 9.9% of the outstanding capital stock of
Holdings. The Bye-Laws also provide that if the Board in its absolute
discretion determines that share ownership by any shareholder may result in
adverse tax, regulatory or legal consequences to Holdings, any of its
subsidiaries or any other shareholder, then Holdings will have the option, but
not the obligation, to repurchase all or part of the shares held by such
shareholder to the extent the Board determines it is necessary to avoid such
adverse or potential adverse consequences. The price to be paid for such
shares will be the fair market value of such shares. See "Description of
Series A Preferred Shares--Limitations on Transfer and Ownership." Because of
the foregoing provisions, the Company believes that neither Holdings, LaSalle
Re nor LaSalle Re Capital is a CFC under the general rules described above.
However, there can be no assurance that Holdings, LaSalle Re or LaSalle Re
Capital will not at some time become a CFC. Each prospective investor should
consult its own tax advisor to determine whether its ownership interest in
Holdings would cause it to become a U.S. 10% shareholder of Holdings, LaSalle
Re, LaSalle Re Capital or of any subsidiary which may be created by Holdings
or LaSalle Re and to determine the impact of such a classification of such
investor.
RPII Companies. A different definition of "controlled foreign corporation"
is applicable in the case of a foreign corporation which earns related person
insurance income ("RPII"). RPII is defined in Code section 953(c)(2) as any
"insurance income" (as defined above) attributable to policies of insurance or
reinsurance with respect to which the person (directly or indirectly) insured
is a "RPII shareholder" (as defined below) of the foreign corporation or a
"related person" to such a shareholder. For purposes only of taking into
account RPII, and subject to the exceptions described below, LaSalle Re or
LaSalle Re Capital will be treated as a CFC if its "RPII shareholders"
collectively own, directly, indirectly, or by attribution under Code Section
958(b), 25% or more of the total combined voting power or value of such
corporation's stock on any day during a taxable year. If LaSalle Re or LaSalle
Re Capital is a CFC for an uninterrupted period of at least 30 days during any
taxable year under the special RPII rules, a U.S. Person who owns, directly or
indirectly through foreign entities, shares of LaSalle Re or LaSalle Re
Capital on the last day of any such taxable year must include in its gross
income for United States Federal income tax purposes its allocable share of
RPII income of such corporation for the entire taxable year, subject to
certain modifications. For purposes of inclusion of LaSalle Re's or LaSalle Re
Capital's RPII in the income of U.S. Persons who own Series A Preferred Shares
or shares of LaSalle Re, unless an exception applies, the term "RPII
shareholder" includes all U.S. Persons who own, directly or indirectly through
foreign entities, any amount (rather than 10% or more) of the Series A
Preferred Shares or shares of LaSalle Re or LaSalle Re Capital. Generally, the
term "related person" for purposes of the RPII rules means someone who
controls or is controlled by the RPII shareholder or someone who is controlled
by the same person or persons which control the RPII shareholder. Control is
measured by either more than 50% in value or more than 50% in voting power of
stock applying constructive ownership principles similar to the rules of
section 958 of the Code.
RPII Exceptions. The special RPII rules do not apply if direct and indirect
insureds and persons related to such insureds, whether or not U.S. Persons,
are treated at all times during the taxable year as owning, directly or
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indirectly through foreign entities, less than 20% of the voting power and
less than 20% of the value of the stock of LaSalle Re and LaSalle Re Capital
(the "RPII 20% Ownership Exception"), or the RPII of each of LaSalle Re
Capital, determined on a gross basis, is less than 20% of such corporation's
gross insurance income for such taxable year (the "RPII 20% Gross Income
Exception"), or if certain other exceptions apply. Where no exception applies,
each RPII shareholder of LaSalle Re and LaSalle Re Capital on the last day of
such corporation's taxable year will be required to include in its gross
income for United States federal income tax purposes its share of the RPII for
the entire taxable year, determined as if all such RPII were distributed
proportionately only to such RPII shareholders at that date, but limited by
such corporation's current-year earnings and profits and reduced by the RPII
shareholder's share, if any, of prior-year deficits in earnings and profits.
LaSalle Re reinsures, and expects to continue reinsuring, the risks of an
insurance company that is related to CNA, a RPII shareholder of LaSalle Re,
and thus expects to generate RPII. In addition, LaSalle Re may be considered
to reinsure directly or indirectly the risks of other RPII shareholders of
LaSalle Re or parties related thereto, thus generating RPII. LaSalle Re has in
the past and intends in the future to monitor the reinsurance of related
persons to limit the gross RPII from such reinsurance to less than 20% of
LaSalle Re's gross insurance income. For LaSalle Re's most recent taxable year
ended September 30, 1996, the Company believes gross RPII of LaSalle Re was
less than 20% of LaSalle Re's gross insurance income for the year and,
although no assurances can be given, the Company will endeavor to take such
steps as it determines to be reasonable to cause LaSalle Re's gross RPII to
remain below such level. The Company believes gross RPII of LaSalle Re Capital
will be less than 20% of LaSalle Re Capital's gross insurance income for each
taxable year and will endeavor to take such steps as it determines to be
reasonable to cause LaSalle Re Capital's gross RPII to remain below such
level.
Computation of RPII. In order to determine how much RPII LaSalle Re and
LaSalle Re Capital have earned in each taxable year, the Company intends to
obtain and rely upon information from its insureds to determine whether any of
the insureds or persons related to such insureds own shares of Holdings or
LaSalle Re and are U.S. Persons. The Company may not be able to determine
whether any of the underlying insureds of the insurance companies to which
LaSalle Re and LaSalle Re Capital provide reinsurance are RPII shareholders or
related persons to such shareholders. Consequently, Holdings may not be able
to determine accurately the gross amount of RPII earned by LaSalle Re and
LaSalle Re Capital in a given taxable year. LaSalle Re and LaSalle Re Capital
will take reasonable steps to secure such additional information relevant to
determine the amount of each corporation's insurance income that is RPII as
they believe advisable, but there can be no assurance that such information
will be sufficient to enable LaSalle Re and LaSalle Re Capital to establish
clearly such amount. For any year in which the Company has determined that
gross RPII is 20% or more of LaSalle Re's or LaSalle Re Capital's gross
insurance income, the Company may also seek information from its shareholders
as to whether direct or indirect owners of Series A Preferred Shares or shares
of LaSalle Re at the end of the year are U.S. Persons so that the RPII may be
determined and apportioned among such persons. In any such year, the Company
will inform all shareholders of RPII per share and RPII shareholders are
obligated to file a return reporting such amounts. To the extent the Company
is unable to determine whether a direct or indirect owner of shares is a U.S.
Person the Company may assume that such owner is not a U.S. Person for the
purpose of allocating RPII, thereby increasing the per share RPII amount for
all RPII shareholders.
Apportionment of RPII to RPII Shareholders. The amount of RPII includible in
the income of a RPII shareholder is based upon the net RPII income for the
year after deducting related expenses such as losses, loss reserves and
operating expenses. Every U.S. Person who owns, directly or indirectly through
foreign entities, Series A Preferred Shares, Common Shares or shares of
LaSalle Re on the last day of any taxable year of LaSalle Re or LaSalle Re
Capital in which LaSalle Re or LaSalle Re Capital does not meet either the
RPII 20% Ownership Exception or the RPII 20% Gross Income Exception should
expect that for such year it will be required to include in gross income its
share of such corporation's RPII for the entire year, whether or not
distributed, even though it may not have owned the shares for the entire year.
A U.S. Person who owns Series A Preferred Shares, Common Shares or shares of
LaSalle Re during such taxable year but not on the last day of the taxable
year, which would normally be September 30, is not required to include in
gross income any part of LaSalle Re's or LaSalle Re Capital's RPII. The
aggregate amount of RPII allocable to U.S. Holders of Series A
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Preferred Shares who are required to include RPII of LaSalle Re or LaSalle Re
Capital in income for a given taxable year normally is the amount of RPII
which bears the same ratio to the total RPII of such corporation for that
taxable year as the amount of earnings and profits which would be distributed
indirectly through Holdings with respect to the Series A Preferred Shares if
all earnings and profits of such corporation were distributed on the last day
of that taxable year bears to the total earnings and profits of such
corporation for that taxable year which would be distributed with respect to
all shares of such corporation owned, directly or indirectly through Holdings,
by U.S. Holders. If LaSalle Re or LaSalle Re Capital has RPII and Holdings
makes a distribution of such RPII to a U.S. Holder with respect to the Series
A Preferred Shares, such dividends will not be taxable to the extent of any
RPII that has been included in the gross income of such holders for the
taxable year in which the distribution was paid or for any prior year.
Basis Adjustments. A RPII shareholder's tax basis in its Series A Preferred
Shares, Common Shares or shares of LaSalle Re will be increased by the amount
of any RPII that the shareholder includes in income. The RPII shareholder's
tax basis in its Series A Preferred Shares, Common Shares or shares of LaSalle
Re will be reduced by the amount of such distributions that are excluded from
income. In general, a RPII shareholder will not be able to exclude from income
distributions with respect to RPII that a prior shareholder included in
income.
Information Reporting. Every U.S. Person who "controls" a foreign
corporation by owning directly or by attribution more than 50% of the total
combined voting power of all classes of stock entitled to vote, or more than
50% of the total value of shares of all classes of stock, of such corporation,
for an uninterrupted period of 30 days or more during a taxable year of that
foreign corporation, must file a Form 5471 with its U.S. income tax return.
However, the IRS has the authority to, and does require, any U.S. Person
treated as a U.S. 10% shareholder or RPII shareholder of a CFC that owns
shares directly or indirectly through a foreign entity to file a Form 5471.
Thus, if LaSalle Re's or LaSalle Re Capital's gross RPII for a taxable year
constitutes 20% or more of such corporation's gross insurance income for such
period, any U.S. Person treated as owning shares of LaSalle Re or LaSalle Re
Capital directly or indirectly on the last day of such taxable year is
considered a RPII shareholder for purposes of the RPII rules and will be
required to file a Form 5471. In addition, U.S. Persons who own more than 5%
in value of the outstanding stock of Holdings or LaSalle Re at any time during
a taxable year are required in certain circumstances to file Form 5471 even if
neither corporation is a CFC. For any taxable year in which the Company
determines that LaSalle Re's or LaSalle Re Capital's gross RPII constitutes
20% or more of such corporation's gross insurance income, the Company intends
to mail to all shareholders of record, and will make available at the transfer
agent with respect to the Series A Preferred Shares, Common Shares and shares
of LaSalle Re, Form 5471 (completed with Company information) for attachment
to the returns of shareholders. However, the Company's determination of the
amount of LaSalle Re's or LaSalle Re Capital's gross RPII for a given taxable
year may not be accurate because of the Company's inability to gather the
information necessary to make such determination. See "Certain Tax
Considerations--Taxation of Shareholders--United States Taxation of U.S. and
Non-U.S. Shareholders--Computation of RPII." A tax-exempt organization that is
treated as a U.S. 10% shareholder or a RPII shareholder for any purpose under
subpart F will be required to file a Form 5471 in the circumstances described
above. Failure to file Form 5471 may result in penalties.
Tax-Exempt Shareholders. Code section 512(b)(17), which was added to the
Code on August 20, 1996, by the Small Business Job Protection Act of 1996
(P.L. 104-188), requires a tax-exempt entity owning, directly or indirectly
through a foreign entity or constructively under Code section 958(b) shares of
Holdings, LaSalle Re or LaSalle Re Capital, to treat as unrelated business
taxable income ("UBTI") within the meaning of Code section 512 the portion of
any deemed distribution to such shareholder of Subpart F income under Code
section 951(a) that is attributable to insurance income which, if derived
directly by such shareholder, would be treated as UBTI. Exceptions are
provided for income attributable to a policy of insurance or reinsurance with
respect to which the person (directly or indirectly) insured is--(i) the tax-
exempt shareholder, (ii) an affiliate of the tax-exempt shareholder which
itself is exempt from tax under Code section 501(a), or (iii) a director or
officer of, or an individual who (directly or indirectly) performs services
for, the tax-exempt shareholder or an exempt affiliate but only if the
insurance covers primarily risks associated with the performance of services
in connection with the tax-exempt shareholder or exempt affiliate.
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Code section 512(b)(17) applies to amounts included in gross income in any
taxable year beginning after December 31, 1995. If LaSalle Re's or LaSalle Re
Capital's gross RPII were to equal or exceed 20% of such corporation's gross
insurance income, or Holdings, LaSalle Re or LaSalle Re Capital were otherwise
treated as a CFC, for a taxable year beginning after December 31, 1995, tax-
exempt entities owning stock in the Company might be required to treat a
portion of the Company's Subpart F income as UBTI. Prospective investors that
are tax-exempt entities are urged to consult their tax advisors as to the
potential impact of Code section 512(b)(17) and the UBTI provisions of the
Code.
Dispositions of Series A Preferred Shares. Subject to the discussion
elsewhere relating to the potential application of the "controlled foreign
corporation" and "passive foreign investment company" rules, capital gain or
loss realized by a U.S. Holder on the sale, exchange or other disposition of
Series A Preferred Shares will be includible in gross income as capital gain
or loss in an amount equal to the difference between such holder's basis in
Series A Preferred Shares and the amount realized on the sale, exchange or
other disposition. If a U.S. Holder's holding period for the Series A
Preferred Shares is more than one year, any gain will be subject to the U.S.
federal income tax at a current maximum marginal rate of 28% for individuals
and 35% for corporations.
Code section 1248 provides that if a U.S. Person owns directly, indirectly
through foreign entities or constructively under Code section 958(b), 10% or
more of the voting shares of a corporation that is a CFC, any gain from the
sale or exchange of the shares may be treated as ordinary income to the extent
of the CFC's earnings and profits during the period that the shareholder held
the shares (with certain adjustments). Code section 953(c)(7) generally
provides that section 1248 also will apply to the sale or exchange of shares
by a RPII shareholder in a foreign corporation that earns RPII and is
characterized as a CFC under the RPII rules if the foreign corporation would
be taxed as an insurance company if it were a domestic corporation, regardless
of whether the shareholder is a U.S. 10% shareholder or whether such
corporation meets either the RPII 20% Ownership Exception or the RPII 20%
Gross Income Exception. Existing Treasury Department regulations do not
address whether Code section 1248 would apply when a foreign corporation (such
as Holdings) is not a CFC but the foreign corporation has an insurance company
subsidiary that is a CFC (such as LaSalle Re or LaSalle Re Capital) for
purposes of requiring U.S. shareholders to take into account RPII.
It is the opinion of the Company's United States counsel that Code section
1248 should not apply to dispositions of Series A Preferred Shares because
Holdings will not have any U.S. 10% shareholders and Holdings is not directly
engaged in the insurance business. There can be no assurance, however, that
the IRS will interpret proposed regulations under Code section 953 in this
manner or that the Treasury Department will not amend the proposed regulations
under Code section 953 or other regulations to provide that Code section 1248
will apply to dispositions of shares in a corporation such as Holdings which
is engaged in the insurance business indirectly through its subsidiaries. If
the IRS or Treasury Department were to take such action, the Company would
notify shareholders that Code section 1248 will apply to dispositions of
Series A Preferred Shares.
Uncertainty as to Application of RPII. The RPII provisions of the Code have
never been interpreted by the courts. Regulations interpreting the RPII
provisions of the Code exist only in proposed form, having been proposed on
April 16, 1991. It is not certain whether these regulations will be adopted in
their proposed form or what changes or clarifications might ultimately be made
thereto or whether any such changes, as well as any interpretation or
application of RPII by the IRS, the courts or otherwise, might have
retroactive effect. Accordingly, the meaning of the RPII provisions and the
application thereof to Holdings, LaSalle Re and LaSalle Re Capital is
uncertain. These provisions include the grant of authority to the U.S.
Treasury Department to prescribe "such regulations as may be necessary to
carry out the purpose of this subsection including . . . regulations
preventing the avoidance of this subsection through cross insurance
arrangements or otherwise." In addition, there can be no assurance that any
amounts of RPII inclusions reported by the Company to RPII shareholders will
not be subject to adjustment based upon subsequent IRS examination. Each U.S.
person who is considering an investment in Series A Preferred Shares should
consult his tax advisor as to the effects of these uncertainties.
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Foreign Tax Credit. Because it is anticipated that U.S. Persons will own a
majority of Holdings' shares after the Offering and because a substantial part
of LaSalle Re's business includes the insurance of U.S. risks, only a portion
of the RPII and dividends paid by Holdings (including any gain from the sale
of Series A Preferred Shares that is treated as a dividend under Code section
1248) will be treated as foreign source income for purposes of computing a
shareholder's U.S. foreign tax credit limitation. It is likely that
substantially all of the RPII and dividends that are foreign source income
will constitute either "passive" or "financial services" income for foreign
tax credit limitation purposes. Thus, it may not be possible for certain U.S.
Holders to utilize excess foreign tax credits to reduce U.S. tax on such
income.
Passive Foreign Investment Companies. Code sections 1291 through 1297
contain special rules applicable with respect to foreign corporations that are
"passive foreign investment companies" ("PFICs"). In general, a foreign
corporation will be a PFIC if 75% or more of its gross income constitutes
"passive income" (the "75% Income Test") or 50% or more of its assets produce,
or are held for the production of, passive income (the "50% Asset Test"). If
the Company were to be characterized as a PFIC, its United States shareholders
would have to make an election (a "QEF Election") to be currently taxable on
their pro-rata share of earnings of the Company whether or not such earnings
were distributed or they would be subject to a special tax and an interest
charge at the time of the sale of, or receipt of an "excess distribution" with
respect to, their shares, and a portion of any gain may be recharacterized as
ordinary income. In general, a shareholder receives an "excess distribution"
if the amount of the distribution is more than 125% of the average
distribution with respect to the stock during the three preceding taxable
years (or shorter period during which the taxpayer held the stock). In
general, the special tax and interest charges are based on the value of the
tax deferral of the taxes that are deemed due during the period the United
States shareholder owned the shares, computed by assuming that the excess
distribution or gain (in the case of a sale) with respect to the shares was
taxed in equal portions throughout the holder's period of ownership at the
highest marginal tax rate. The interest charge is computed using the
applicable rate imposed on underpayments of U.S. Federal income tax for such
period. In general, if a U.S. Person owns stock in a foreign corporation
during any taxable year in which such corporation is a PFIC and such
shareholder does not make a QEF Election, the stock will be treated as stock
in a PFIC for all subsequent years.
For the above purposes, "passive income" is defined to include income of a
kind that would be characterized as foreign personal holding company income
under Code section 954(c), and generally includes interest, dividends,
annuities and other investment income. The PFIC statutory provisions contain
an express exception for income "derived in the active conduct of an insurance
business by a corporation which is predominantly engaged in an insurance
business . . ." (the "Insurance Company Exception"). This exception is
intended to ensure that income derived by a bona fide insurance company is not
treated as passive income. Thus, to the extent such income is attributable to
financial reserves in excess of the reasonable needs of the insurance
business, it may be treated as passive income for purposes of the PFIC rules.
The PFIC statutory provisions also contain a look-through rule that states
that, for purposes of determining whether a foreign corporation is a PFIC,
such foreign corporation shall be treated as if it "received directly its
proportionate share of the income . . ." and as if it "held its proportionate
share of the assets . . ." of any other corporation in which it owns at least
25% of the value of the stock. It is anticipated that both LaSalle Re and
LaSalle Re Capital should be entitled to the Insurance Company Exception and
that neither corporation will have financial reserves in excess of the
reasonable needs of its insurance business, and therefore that none of LaSalle
Re's or LaSalle Re Capital's income or assets will be considered to be
passive. Under the look-through rule Holdings would be deemed to own its
proportionate share of the assets and to have received its proportionate share
of the income of LaSalle Re and LaSalle Re Capital for purposes of the 75%
Income and 50% Asset Tests, and therefore Holdings should not be considered a
PFIC.
However, no final regulations interpreting the substantive PFIC provisions
have yet been issued. Therefore, substantial uncertainty exists with respect
to their application or their possible retroactivity. Each U.S. person who is
considering an investment in Series A Preferred Shares should consult his tax
advisor as to the effects of these rules.
Other. Dividends paid by Holdings to U.S. corporate shareholders will not be
eligible for the dividends received deduction provided by Code section 243.
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Except as discussed below with respect to backup withholding, dividends paid
by Holdings will not be subject to a U.S. withholding tax.
Information reporting to the IRS by paying agents and custodians located in
the U.S. will be required with respect to payments of dividends (if any) on
the Series A Preferred Shares to holders of Series A Preferred Shares or to
paying agents or custodians located in the United States. In addition, a
holder of Series A Preferred Shares may be subject to backup withholding at
the rate of 31% with respect to dividends paid by such persons, unless such
holder (a) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact; or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. The backup withholding tax is not an additional tax and may
be credited against a holder's regular Federal income tax liability.
Sales of Series A Preferred Shares through brokers by certain U.S. Persons
also may be subject to back-up withholding. Sales by corporations, certain
tax-exempt entities, individual retirement plans, REITs, certain financial
institutions, and other "exempt recipients" as defined in applicable Treasury
regulations currently are not subject to back-up withholding. Holders of
Series A Preferred Shares should consult their own tax advisors regarding the
possible applicability of the back-up withholding provisions to sales of their
Series A Preferred Shares.
If a non-U.S. holder sells Series A Preferred Shares through a U.S. office
of a U.S. or foreign broker, the broker is required to file an information
return and is required to withhold 31% of the sale proceeds unless the non-
U.S. holder is an exempt recipient or has provided the broker with the
information and statements, under penalties of perjury, necessary to establish
an exemption from backup withholding. If payment of the proceeds of the sale
of a share by a non-U.S. holder is made to or through the foreign office of a
broker, that broker will not be required to backup withhold or, except as
provided in the next sentence, to file information returns. In the case of
proceeds from a sale of a share by a non-U.S. holder paid to or through the
foreign office of a U.S. broker or a foreign office of a foreign broker that
is (i) a controlled foreign corporation for U.S. tax purposes or (ii) a person
50% or more of whose gross income for the three-year period ending with the
close of the taxable year preceding the year of payment (or for the part of
that period that the broker has been in existence) is effectively connected
with the conduct of a trade or business within the United States (a "Foreign
U.S. Connected Broker"), information reporting is required unless the broker
has documentary evidence in its files that the payee is not a U.S. person and
certain other conditions are met, or the payee otherwise establishes an
exemption. In addition, the Treasury Department has indicated that it is
studying the possible application of backup withholding in the case of such
foreign offices of U.S. and Foreign U.S. Connected Brokers.
The foregoing discussion (including and subject to the matters and
qualifications set forth in such summary) is based upon current law and is for
general information only. The tax treatment of a holder of Series A Preferred
Shares, or of a person treated as a holder of Series A Preferred Shares for
United States Federal income, state, local or non-U.S. tax purposes, may vary
depending on the holder's particular tax situation. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could be
retroactive and could affect the tax consequences to holders of Series A
Preferred Shares. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO
THEM OF OWNING THE SERIES A PREFERRED SHARES.
48
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, each Underwriter named below, for whom Smith Barney
Inc., Lazard Freres & Co. LLC and Morgan Stanley & Co. Incorporated are acting
as the Representatives (the "Representatives"), has severally agreed to
purchase, and the Company has agreed to sell to such Underwriter, the number
of Series A Preferred Shares set forth opposite the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc................................................
Lazard Freres & Co. LLC.........................................
Morgan Stanley & Co. Incorporated...............................
---------
Total....................................................... 3,000,000
=========
</TABLE>
The Underwriters initially propose to offer part of the Series A Preferred
Shares directly to the public at the public offering price set forth on the
cover page of this Prospectus and part to certain dealers at a price that
represents a concession not in excess of $ per share below the public
offering price. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share to the other Underwriters or to
certain other dealers. After the initial offering of the Series A Preferred
Shares to the public, the public offering price and such concessions may be
changed by the Underwriters.
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series A Preferred Shares
are subject to approval of certain legal matters by counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all
Series A Preferred Shares offered hereby if any such Series A Preferred Shares
are taken.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Series A Preferred Shares are a new issue of securities with no
established trading market. The Company intends to make application to list
the Series A Preferred Shares on the New York Stock Exchange. There can be no
assurance that the Series A Preferred Shares will be so listed or will
continue to be listed; however, it is expected that the Series A Preferred
Shares will commence trading on the New York Stock Exchange within a 30-day
period after the initial delivery of the Series A Preferred Shares. The
Company has been advised by the Representatives that they presently intend to
make a market in the Series A Preferred Shares, although they are under no
obligation to do so and they may discontinue any such market making at any
time in their sole discretion. Accordingly, no assurance can be given as to
the liquidity of, or the trading markets for, the Series A Preferred Shares.
In connection with this Offering and in compliance with applicable law, the
Representatives, on behalf of the Underwriters, may overallot (i.e., sell more
Series A Preferred Shares than the total amount shown on the list of
Underwriters and participations which appears above) and may effect
transactions which stabilize, maintain or otherwise affect the market price of
the Series A Preferred Shares at levels above those which might otherwise
prevail in the open market. Such transactions may include placing bids for the
Series A Preferred Shares or effecting purchases of the Series A Preferred
Shares for the purpose of pegging, fixing or maintaining the price of the
Series A Preferred Shares or for the purpose of reducing a syndicate short
position created in connection with the Offering. In addition, the contractual
arrangements among the Underwriters include a provision for imposing penalty
bids whereby, if, prior to termination of price and trading restrictions, the
Representatives purchase Series A Preferred Shares in the open market for the
account of the underwriting syndicate and the securities purchased can be
traced to a particular Underwriter or member of the selling group, the
underwriting syndicate may require the Underwriter or selling group member in
question to purchase the Series A Preferred Shares in question at the cost
price to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question the selling concession
applicable to the securities in question. The Underwriters are not required to
engage in any of these activities and any such activities, if commenced, may
be discontinued at any time.
Smith Barney Inc., Lazard Freres & Co. LLC and Morgan Stanley & Co.
Incorporated have provided investment banking and financial advisory services
to the Company and certain of the Founding Shareholders.
49
<PAGE>
LEGAL MATTERS
The validity of the Series A Preferred Shares under Bermuda law will be
passed upon for the Company by Conyers Dill & Pearman, Hamilton, Bermuda.
Certain legal matters in connection with the Offering will be passed upon for
the Company by Mayer, Brown & Platt, Chicago, Illinois, and for the
Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York, in each
case in reliance on the opinion of Conyers Dill & Pearman with respect to
Bermuda law.
EXPERTS
The consolidated financial statements and schedules of Holdings as of September
30, 1996 and 1995 and for the years ended September 30, 1996 and 1995 and the
period October 26, 1993 (date of incorporation) to September 30, 1994 have been
incorporated by reference herein and in the Registration Statement in reliance
upon the reports of KPMG Peat Marwick, independent auditors, incorporated by
reference herein and in the Registration Statement of which this Prospectus is
a part, and upon the authority of said firm as experts in accounting and
auditing.
50
<PAGE>
GLOSSARY OF SELECTED INSURANCE AND REINSURANCE TERMS
Acquisition costs. Brokerage, commissions, the portion of administrative,
general and other expenses attributable to underwriting operations and excise
taxes.
Alien reinsurer. A reinsurance company that is organized under the laws of a
non-U.S. jurisdiction.
Attachment point. The amount of losses above which excess of loss
reinsurance becomes operative.
Broker. A person or firm that negotiates contracts of reinsurance between a
ceding company and a reinsurer on behalf of the ceding company and receives a
brokerage commission for placement of the reinsurance contract as well as
other services rendered.
Casualty insurance and/or reinsurance. Insurance and/or reinsurance that is
concerned primarily with the legal liability of the insured for injuries or
damage to the person or property of third persons (persons other than the
policyholder).
Cede; ceding company; cedent; cession. When an insurance or reinsurance
company transfers all or a portion of a risk it has underwritten to a
reinsurance company, it "cedes" such risk and is referred to as the "ceding
company" or the "cedent." Such transfer of risk is referred to as a "cession."
Clash exposure. The exposure of an insurer or reinsurer to losses arising
from a single set of circumstances but covered by more than one insurance or
reinsurance contract underwritten by such insurer or reinsurer.
Combined ratio. The sum of the loss and loss expense ratio and the expense
ratio. A combined ratio below 100% generally indicates profitable underwriting
prior to the consideration of investment income. A combined ratio over 100%
generally indicated unprofitable underwriting prior to the consideration of
investment income.
Excess of loss reinsurance. The generic term describing reinsurance that
indemnifies the ceding company against all or a specified portion, the
"limit," of losses on underlying insurance policies or reinsurance contracts
in excess of a specified dollar amount, called "attachment point" or
"retention." The combination of a limit and an attachment point constitutes a
layer.
Expense ratio. The ratio of (i) acquisition costs and operational expenses
minus net gains on foreign exchange to (ii) earned premiums, determined in
accordance with GAAP.
Facultative Reinsurance. The reinsurance of part or all of (the insurance
provided by) a single policy, with separate negotiation for each cession. The
word "facultative" connotes that both the primary insurer and the reinsurer
have the faculty or option of accepting or rejecting the individual submission
(as distinguished from the obligation to cede and accept, to which the parties
agree in treaty reinsurance).
Generally accepted accounting principles ("GAAP"). Accounting principles as
set forth in opinions of the Accounting Principle Board of the American
Institute of Certified Public Accountants and/or in statements of the
Financial Accounting Standards Board and/or their respective successors and
that are applicable to the circumstances as of the date in question.
Gross premiums written. Total premiums for insurance and reinsurance assumed
during a given period.
Incurred but not reported ("IBNR") loss reserves. Reserves for losses that
have been incurred but not yet reported to the insurer or reinsurer and which
are often estimated using actuarial analysis.
Incurred losses. The total losses sustained by an insurer or reinsurer under
its policies or contracts, whether paid or unpaid. Incurred losses include a
provision for claims that have occurred but have not yet been reported to the
insurer or reinsurer ("IBNR").
51
<PAGE>
Layer. See "Excess of loss reinsurance."
Lloyd's. Lloyd's of London, the formal name of which is "Underwriters at
Lloyd's, London," refers to a marketplace located in London, England at which
collections of individuals (referred to as "Names") and corporate members
supply the capital support to individual syndicates to underwrite risks
through policies of insurance and reinsurance. The policy liabilities are
assumed by the Names and corporate members on a several and not a joint basis.
Loss expenses. The expenses of adjusting, defending and settling claims,
including legal and other fees and the portion of general expenses allocated
to claim settlement costs.
Loss and loss expense ratio. The ratio of (i) incurred losses and loss
expenses to (ii) earned premiums, determined in accordance with GAAP.
Loss reserves. Liabilities established by insurers and reinsurers to reflect
the estimated cost of claims payments that the insurer or reinsurer ultimately
will be required to pay in respect of insurance or reinsurance it has written.
Reserves are established for losses and loss expenses, and consist of case
reserves and IBNR reserves.
Net premiums earned. The portion of net premiums written that is recognized
for accounting purposes as income during a period.
Net premiums written. Gross premiums written for a given period less
premiums ceded to reinsurers during such period.
Program. A treaty or a combination of treaties that provide the cedent with
one or more layers of reinsurance protection.
Property catastrophe reinsurance. A form of excess of loss reinsurance that,
subject to a specified limit, indemnifies the ceding company for the amount of
loss in excess of a specified retention with respect to an accumulation of
losses resulting from a catastrophic event. The reinsurance contract is called
a "catastrophe cover."
Property insurance and/or reinsurance. Insurance and/or reinsurance that
indemnifies a person with an insurable interest in tangible property for its
loss, damage or loss of use.
Pro rata of reinsurance. A generic term describing forms of reinsurance in
which the reinsurer shares a proportional part of the original premiums and
losses of the ceding company. Pro rata reinsurance is also known as
proportional or quota share reinsurance.
Reinstatement. The restoration of the reinsurance limit, under an excess of
loss treaty, for any portion of the original limit depleted by losses incurred
on that treaty by the reinsurer. The reinstatement applies for the remainder
of the duration of the treaty, or until depleted by further losses.
Reinstatement premium. Premium paid by a primary insurer to a reinsurer to
reinstate coverage under an excess of loss treaty.
Reinsurance. The practice whereby one party, called the reinsurer, in
consideration of a premium paid to it, agrees to indemnify another party,
called the reinsured, for part or all of the liability assumed by the
reinsured under a policy or policies of insurance that it has issued or
contract(s) of reinsurance it has written. The reinsured may be referred to as
the ceding company. The purchase of reinsurance does not legally discharge the
ceding company from its liability to its insureds or reinsureds.
Retention; retention layer. The amount or portion of risk that an insurer or
reinsurer retains for its own account. Losses in excess of the retention are
paid by that company's reinsurer or retrocessionaire. The retention can be
expressed as a dollar amount or a percentage of the amount at risk.
52
<PAGE>
Retrocession; retrocessionaire. A transaction whereby a reinsurer cedes to
another reinsurer (the "retrocessionaire") all or part of the reinsurance it
has assumed. Retrocessions (as is the case with any reinsurance) do not
legally discharge the ceding reinsurer from its liability to its reinsured.
Treaty reinsurance; treaty. Reinsurance of a specified type or category of
risk defined in a reinsurance agreement (a "treaty") between a ceding company
and a reinsurer. Typically, in treaty reinsurance the ceding company is
obligated to offer and the reinsurer is obligated to accept a specified
portion of all such type or category of risks originally insured or reinsured
by the ceding company.
Underwriting. The process of reviewing applications submitted for insurance
or reinsurance coverage, deciding whether to accept all or part of the
coverage requested and determining the applicable premiums and coverage
conditions.
Unearned premiums. Premiums written but not yet earned, as they are
attributable to the unexpired portion of the related contract term.
Unearned premium reserve. Liabilities established in respect of unearned
premiums.
Zonal exposure. The calculation of an insurer's or reinsurer's exposure to
insured losses arising from a single event or series of events (i.e., storms,
earthquakes, etc.) occurring within a specified geographic area. The insurer
or reinsurer establishes its own definition of zones and determines the amount
of insured risk it is willing to assume in each such zone and from all such
zones combined.
53
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RE-
LATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH
IT RELATES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enforcement of Civil Liabilities under United States Federal Securities
Laws..................................................................... 3
Available Information..................................................... 3
Incorporation of Certain Documents by
Reference................................................................ 4
Note on Forward-Looking Statements........................................ 5
Prospectus Summary........................................................ 6
Risk Factors.............................................................. 14
Use of Proceeds........................................................... 22
Ratio of Earnings to Combined Fixed
Charges and Preferred Share Dividends.................................... 22
Pro Forma Condensed Consolidated Financial Data........................... 23
Capitalization............................................................ 28
Business.................................................................. 29
Description of Series A Preferred Shares.................................. 32
Certain Tax Considerations................................................ 39
Underwriting.............................................................. 49
Legal Matters............................................................. 50
Experts................................................................... 50
Glossary of Selected Insurance and
Reinsurance Terms........................................................ 51
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,000,000 SHARES
LASALLE RE
HOLDINGS LIMITED
SERIES A PREFERRED SHARES
--------
PROSPECTUS
MARCH , 1997
--------
SMITH BARNEY INC.
LAZARD FRERES & CO. LLC
MORGAN STANLEY & CO.
INCORPORATED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of the expenses payable by the Company in
connection with issuance and distribution of the securities being registered
hereby. All amounts shown are estimates, except the Commission registration
fee and the NYSE listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 22,728
NYSE listing fee ............................................... 100,000
Printing and engraving.......................................... 150,000
Legal fees and expenses......................................... 225,000
Accounting fees and expenses.................................... 65,000
Blue sky fees and expenses...................................... 6,000
Miscellaneous................................................... 6,272
--------
Total....................................................... $575,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of the Act, Holdings has adopted provisions in
its Bye-Laws which require it to indemnify its directors and officers in
certain circumstances and specifically to indemnify its directors and officers
against all amounts actually and reasonably incurred to Holdings or its
shareholders by reason of a breach of duty to the Company, provided that such
director or officer acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action, suit or proceeding, had no reasonable cause to believe
that the conduct was unlawful, and except for any claim, issue or matter as to
which such person shall have been finally adjudged to be liable for wilful
negligence, wilful default, fraud or dishonesty in the performance of the duty
to Holdings.
The Company also maintains insurance on its directors and officers, which
covers liabilities under the federal securities laws.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
The following documents are filed with this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
------- ---
<C> <S> <C>
1.1 Form of Underwriting Agreement.
4.1 Memorandum of Association (Incorporated by reference to
Exhibit 3.1 to Registration Statement on Form S-1 (No. 33-
97304)).
4.2 Bye-Laws (Incorporated by reference to Exhibit 3.1 to Form
10-Q for the quarterly period ended December 31, 1995 (File
No. 0-27216)).
4.3 Form of Certificate of Designation, Preferences and Rights
of Series A Preferred Shares of LaSalle Re Holdings Limited.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
------- ---
<C> <S> <C>
5.1 Opinion of Conyers Dill & Pearman regarding the validity of
the Series A Preferred Shares.
8.1 Opinion of Conyers Dill & Pearman regarding certain Bermuda
tax matters (included in Exhibit 5.1).
8.2 Opinion of Mayer, Brown & Platt regarding certain U.S. tax
matters.
8.3 Opinion of Clyde & Co regarding certain U.K. tax matters.
12.1* Statement Re: Computation of Ratios.
23.1 Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.3 Consent of Clyde & Co (included in Exhibit 8.3).
23.4 Consent of KPMG Peat Marwick.
24.1* Powers of Attorney
</TABLE>
- --------
*Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN HAMILTON, BERMUDA ON THE 18TH DAY OF MARCH,
1997.
LaSalle Re Holdings Limited
/s/ Andrew Cook
By___________________________________
Andrew Cook
Chief Financial Officer and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AND ON THE 18TH DAY OF MARCH, 1997.
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
/s/ Victor H. Blake* Chairman, President and Chief Executive
___________________________________________ Officer (Principal Executive Officer)
Victor H. Blake
/s/ Andrew Cook Chief Financial Officer and Treasurer
___________________________________________ (Principal Financial Officer)
Andrew Cook
/s/ Steven Given* Controller (Principal Accounting Officer)
___________________________________________
Steven Given
/s/ William J. Adamson, Jr.* Director
___________________________________________
William J. Adamson, Jr.
/s/ Andrew Africk* Director
___________________________________________
Andrew Africk
/s/ Ivan P. Berk* Director
___________________________________________
Ivan P. Berk
/s/ Joseph Haviv* Director
___________________________________________
Joseph Haviv
/s/ Jonathan H. Kagan* Director
___________________________________________
Jonathan H. Kagan
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE POSITION
--------- --------
<S> <C>
/s/ Donald P. Koziol, Jr.* Director
___________________________________________
Donald P. Koziol, Jr.
/s/ Lester Pollack* Director
___________________________________________
Lester Pollack
/s/ Peter J. Rackley* Director
___________________________________________
Peter J. Rackley
/s/ Scott A. Schoen* Director
___________________________________________
Scott A. Schoen
/s/ Harvey G. Simons* Director
___________________________________________
Harvey G. Simons
/s/ David A. Stockman* Director
___________________________________________
David A. Stockman
/s/ Paul J. Zepf* Director
___________________________________________
Paul J. Zepf
</TABLE>
/s/ Andrew Cook
*By_____________________________
Andrew Cook
Attorney-in-Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
------- --------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
4.1 Memorandum of Association (Incorporated by reference to
Exhibit 3.1 to Registration State-
ment on Form S-1 (No. 33-97304)).
4.2 Bye-Laws (Incorporated by reference to Exhibit 3.1 to Form 10-
Q for the quarterly period
ended December 31, 1995 (File No. 0-27216)).
4.3 Form of Certificate of Designation, Preferences and Rights of
Series A Preferred Shares of LaSalle Re Holdings Limited.
Opinion of Conyers Dill & Pearman regarding the validity of
5.1 the Series A Preferred Shares.
8.1 Opinion of Conyers Dill & Pearman regarding certain Bermuda
tax matters (included in
Exhibit 5.1).
Opinion of Mayer, Brown & Platt regarding certain U.S. tax
8.2 matters.
8.3 Opinion of Clyde & Co regarding certain U.K. tax matters.
12.1* Statement Re: Computation of Ratios.
23.1 Consent of Conyers Dill & Pearman (included in Exhibit 5.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.3 Consent of Clyde & Co (included in Exhibit 8.3).
23.4 Consent of KPMG Peat Marwick.
24.1* Powers of Attorney (included in signature pages).
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 1.1
3,000,000 Shares
LASALLE RE HOLDINGS LIMITED
[____]% Series A Preferred Shares
(Liquidation Preference $[____] Per Share)
UNDERWRITING AGREEMENT
----------------------
March __, 1997
SMITH BARNEY INC.
LAZARD FRERES & CO. LLC
MORGAN STANLEY & CO. INCORPORATED
c/o SMITH BARNEY INC.
333 West 34th Street
New York, New York 10001
Dear Sirs:
LaSalle Re Holdings Limited, a Bermuda corporation (the "Company"),
proposes to issue and sell 3,000,000 of its [____]% Series A Preferred Shares,
par value $1.00 per share, liquidation preference $[____] per share (the
"Shares"), to the several Underwriters named in Schedule I hereto (the
"Underwriters") for whom Smith Barney Inc., Lazard Freres & Co. LLC, and Morgan
Stanley & Co. Incorporated are acting as representatives (the
"Representatives"). References herein to "LaSalle Re" are to LaSalle Re Limited,
a Bermuda corporation and a subsidiary of the Company.
The Company wishes to confirm as follows its agreements with the
several Underwriters in connection with the several purchases of the Shares by
the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations of the Commission thereunder, a
registration statement on Form S-3 under the Act, (the "registration
statement"), including a prospectus subject to completion, relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, and as thereafter amended by post-
effective amendment. The term
<PAGE>
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference in this Agreement to the registration statement,
the Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of the
registration statement, the Registration Statement, such Prepricing Prospectus
or the Prospectus, as the case may be, and any reference to any amendment or
supplement to the registration statement, the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after such date under which, upon filing, are incorporated
by reference therein, as required by paragraph (b) of Item 12 of Form S-3. As
used herein, the term "Incorporated Documents" means the documents which at the
time are incorporated by reference in the registration statement, the
Registration Statement, any Prepricing Prospectus, the Prospectus, or any
amendment or supplement thereto. If the Company has filed an abbreviated
registration statement to register additional Shares pursuant to Rule 462(b)
under the Act (the "Rule 462 Registration Statement"), then any reference herein
to the term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement. For purposes of this Agreement: "Rules and Regulations"
means the rules and regulations adopted by the Commission under either the Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable.
2. AGREEMENTS TO SELL AND PURCHASE. Upon the basis of the
representations, warranties and agreements contained herein and subject to all
the terms and conditions set forth herein, the Company agrees to sell to each
Underwriter and each Underwriter agrees, severally and not jointly, to purchase
from the Company, at a purchase price of $[____] per share (the "purchase price
per share"), the number of Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Shares increased as set
forth in Section 10 hereof).
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as
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in your judgment is advisable and initially to offer the Shares upon the terms
set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Shares shall be made at the office of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, NY
10019, at 10:00 A.M., New York City time, on __________, 1997 (the "Closing
Date"). The place of closing for the Shares and the Closing Date may be varied
by agreement between you and the Company.
Certificates for the Shares to be purchased hereunder shall be
registered in such names and in such denominations as you shall request by
written notice, it being understood that a facsimile transmission shall be
deemed written notice, prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date. Such certificates shall be made
available to you in New York City for inspection and packaging not later than
9:30 A.M., New York City time, on the business day next preceding the Closing
Date. The certificates evidencing the Shares to be purchased hereunder shall be
delivered to you on the Closing Date against payment of the purchase price
therefor in immediately available funds.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, including the filing of any information, documents or reports
pursuant to the Exchange Act, that makes any statement of a material fact made
in the Registration Statement or the Prospectus (as then amended or
supplemented) untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus (as then amended or
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supplemented) in order to state a material fact required by the Act or the Rules
and Regulations to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Company will furnish to you without charge (i) four signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits to
the registration statement, (ii) such number of conformed copies of the
registration statement as originally filed and of each amendment thereto, but
without exhibits, as you may reasonably request, (iii) such number of copies of
the Incorporated Documents, without exhibits, as you may reasonably request, and
(iv) four copies of the exhibits to the Incorporated Documents.
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, of which you
shall not previously have been advised or to which you shall reasonably object
in writing after being so advised or (ii) so long as, in the written opinion of
counsel for the Underwriters (a copy of which shall be delivered to the
Company), a Prospectus is required by the Act or the Rules and Regulations to be
delivered in connection with sales by any Underwriter or dealer, file any
information, document or report pursuant to the Exchange Act that upon filing
becomes an Incorporated Document, without delivering a copy of such information,
document or report to you, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to you, without charge, in such quantities
as you have reasonably requested or may hereafter reasonably request, copies of
each form of the Prepricing Prospectus. The Company consents to the use, in
accordance with the provisions of the Act and the Rules and Regulations and with
the securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a Prospectus is required by the Act or the Rules
and Regulations to be delivered in connection with sales by any Underwriter or
dealer, the Company will expeditiously deliver to each Underwriter and each
dealer, without charge, as many copies of the Prospectus (and of any amendment
or supplement thereto) as you may reasonably request. The Company consents to
the use of the Prospectus (and of any
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amendment or supplement thereto) in accordance with the provisions of the Act
and the Rules and Regulations and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and by
all dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the Act or the Rules and Regulations to be delivered in connection
with sales by any Underwriter or dealer. If during such period of time any event
shall occur that in the judgment of the Company or in the written opinion of
counsel for the Underwriters is required to be set forth in the Prospectus (as
then amended or supplemented) or should be set forth therein in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to supplement or amend the
Prospectus (or to file under the Exchange Act any document which, upon filing,
becomes an Incorporated Document) in order to comply with the Act or any other
law, the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto (or to such document), and will expeditiously furnish to the
Underwriters and dealers a reasonable number of copies thereof. In the event
that the Company and you agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may reasonably
designate, and will maintain such qualifications in effect for as long as may be
required for the distribution of the Shares, and will file such consents to
service of process or other documents necessary or appropriate in order to
effect such registration or qualification; provided that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to service of
process in suits, other than those arising out of the offering or sale of the
Shares, or subject it to general taxation, in any jurisdiction where it is not
now so subject.
(h) The Company will make generally available to its securityholders
a consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as reasonably
practicable after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to shareholders or filed with the Commission or the New York Stock
Exchange ("NYSE") and (ii) from
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time to time such other information concerning the Company as you may reasonably
request; provided that the Company shall not be required to provide to you any
such information that is not available to the public.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 10 hereof or by notice given by you terminating this
Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply, in any material respect, with the terms or
fulfill, in any material respect, any of the conditions of this Agreement, the
Company agrees to reimburse the Underwriters for all reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(l) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, neither the Company nor any of its subsidiaries has
taken or will take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Shares or any other security of the Company to facilitate the
sale or resale of the Shares pursuant to the distribution contemplated by this
Agreement.
(m) The Company will use its best efforts to have the Shares
registered under the Exchange Act and listed on the NYSE concurrently with the
effectiveness of the registration statement and to maintain such listing and the
registration of the Shares under the Exchange Act.
(n) The Company hereby validly and irrevocably submits to the
jurisdiction of any federal or state court sitting in The City of New York and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of venue of any such suit, action or
proceeding brought in any such court based on or arising under this Agreement
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(o) The Company will use all reasonable commercial efforts to satisfy
on or before the Closing Date all conditions contained in Section 8 hereof to
the Underwriters' obligations to purchase the Shares.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
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<PAGE>
(a) Each Prepricing Prospectus included as part of any registration
statement or as part of the Registration Statement or any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act and the Rules
and Regulations, and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; except that this representation and warranty does not
apply to statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
an Underwriter through the Representatives expressly for use therein.
(b) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form S-3 under the Act. The Registration
Statement in the form in which it became or becomes effective and also in such
form as it may be when any post-effective amendment thereto shall become
effective and the Prospectus and any supplement or amendment thereto when filed
with the Commission under Rule 424(b) under the Act, complied or will comply in
all material respects with the provisions of the Act and the Rules and
Regulations and will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through the Representatives expressly for use therein.
(c) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when such
amendment was filed), complied in all material respects with the provisions of
the Exchange Act and the Rules and Regulations and any further Incorporated
Documents so filed will, when they are filed, comply in all material respects
with the provisions of the Exchange Act and the Rules and Regulations; no such
document at any such times contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and no such further document, when
it is filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) No order preventing or suspending the use of any Prepricing
Prospectus has been issued by the Commission and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company, threatened or
contemplated by the Commission.
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<PAGE>
(e) The consolidated financial statements of the Company (together
with related notes) included or incorporated by reference in the Registration
Statement and Prospectus comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations and present fairly the
financial position of the Company as at the dates indicated and the results of
its operations for the periods specified; such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis during the periods involved, except as
disclosed therein; and the supporting schedules included or incorporated by
reference in the Registration Statement present fairly the information required
to be stated therein. The consolidated pro forma financial statements of the
Company (together with related notes) included or incorporated by reference in
the Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the applicable requirements
of the Act and the Rules and Regulations, have been properly compiled on the pro
forma bases described therein and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein; and the
supporting schedules included or incorporated by reference in the Registration
Statement fairly present the information stated therein. All statutory financial
statements of the Company and its subsidiaries where required or permitted to be
prepared in accordance with the insurance laws of each of the jurisdictions in
which it conducts its business and the rules and regulations promulgated
thereunder, from which certain ratios and other statistical data contained or
incorporated by reference in the Registration Statement and the Prospectus have
been derived, and for each relevant period have been prepared in conformity in
all material respects with the requirements of such insurance laws and such
rules and regulations and present fairly the information purported to be shown.
(f) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, earnings, business, prospects, or results of operations
of the Company and its subsidiaries considered as a whole, whether or not
arising in the ordinary course of business, (ii) there have been no material
transactions entered into by the Company or any of its subsidiaries other than
those in the ordinary course of business, (iii) neither the Company nor any of
its subsidiaries has incurred any liability or obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as a whole, and
there has not been any change in the capital stock of the Company or any payment
of or declaration to pay any dividends or any other distributions with respect
to the Company's capital stock, except as set forth in the Prospectus, and (iv)
there has not been any material change in the shareholders' equity, statutory
surplus or reserves (including any such change in the loss and loss expense
reserves) of the Company or any of its subsidiaries.
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<PAGE>
(g) The Company has been duly incorporated and organized and is
validly existing as a corporation and as an exempted company in good standing
under the laws of Bermuda with all requisite power and authority (corporate and
other) to own, lease and operate its properties and conduct its business as
described in the Registration Statement and Prospectus; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which it owns or leases property or in which the conduct
of its business requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition, financial or otherwise, earnings, business,
prospects, or results of operations of the Company and its subsidiaries
considered as a whole.
(h) Each of the subsidiaries of the Company has been duly
incorporated and organized and is validly existing as a corporation and in the
case of LaSalle Re as an exempted company in good standing under the laws of the
jurisdiction of its incorporation, with all requisite power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Registration Statement and Prospectus; and each is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases property or in which
the conduct of its business requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition, financial or otherwise, earnings,
business, prospects, or results of operations of the Company and its
subsidiaries considered as a whole; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and validly
issued and is fully paid and non-assessable, and (except as otherwise described
in the Registration Statement and the Prospectus) as of the Closing Date all
such capital stock will be owned by the Company, directly or through one or more
of its subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance,
security interest adverse claim or equity.
(i) Neither the Company nor any of its subsidiaries is in violation
of its or any of their charters or bye-laws or other organizational documents or
in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any material contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which it or any
of them is a party or by which it or any of them or their properties may be
bound; no consent, approval, authorization, order, registration, filing,
qualification or other action of or with any court, regulatory body, arbitrator,
administrative body or other governmental authority or agency (including,
without limitation, any insurance regulatory agency or body) is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except such as may be required and
have been obtained from the Bermuda Monetary Authority and under the Act, the
Exchange Act, the Rules
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and Regulations or as may be required under state securities or Blue Sky laws
(including state insurance securities laws) in connection with the distribution
of the Shares by the Underwriters; and the issue and sale of the Shares, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will any such action conflict with or result in a breach or
violation of the terms and provisions of or constitute a default under (i) the
memorandum of association or bye-laws or other organizational documents of the
Company or any of its subsidiaries or (ii) any statute, rule, regulation or
administrative or court decree or order of any governmental agency or body
(including, without limitation, any insurance regulatory agency or body) or any
court or arbitrator, which is applicable to the Company or any of its
subsidiaries or any of their respective properties.
(j) The Company and each of its subsidiaries possess all necessary
consents, authorizations, approvals, orders, licenses, certificates, or permits
issued by any regulatory agencies or bodies (collectively, "Permits") which are
necessary to conduct the business now operated by them; each of the Company and
its subsidiaries has fulfilled and performed all obligations necessary to
maintain such Permits; all of such Permits are in full force and effect; there
is no pending, or to the knowledge of the Company or any of its subsidiaries,
contemplated or threatened action, suit, proceeding, investigation or event
against or involving the Company or any of its subsidiaries (and neither the
Company nor any of its subsidiaries know of any reasonable basis for any such
action, suit, proceeding, investigation or event) that could lead to the
revocation, modification, termination, suspension or any other material
impairment of the rights of the holder of any such Permit which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the condition, financial or otherwise,
earnings, business, prospects or results of operations of the Company and its
subsidiaries considered as a whole; neither the Company nor any of its
subsidiaries has received any notification from any insurance authority,
commission or other insurance regulatory body to the effect that any additional
Permit from such authority, commission or body is needed to be obtained by
either the Company or any of its subsidiaries; and no insurance regulatory
agency or body has issued any order or decree impairing, restricting or
prohibiting the payment of any dividends by the Company or any of its
subsidiaries or the continuation of the business of the Company or any
subsidiary of the Company as currently conducted.
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(k) Except as set forth in the Prospectus, as amended or
supplemented, there is no (i) action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company or any of its subsidiaries, contemplated or threatened
against the Company or any of its subsidiaries, (ii) statute, rule, regulation
or order that has been enacted, adopted or issued by any governmental agency or
body, domestic or foreign, or (iii) injunction, restraining order or order of
any nature by a court of competent jurisdiction that has been issued, any of the
foregoing of which (a) might individually or in the aggregate result in any
material adverse change in the condition, financial or otherwise, earnings,
business, prospects or results of operations of the Company and its subsidiaries
considered as a whole, (b) might materially and adversely affect the properties
or assets thereof, (c) might interfere with or adversely affect the offering of
the Shares in the manner contemplated by the Prospectus, (d) is required to be
disclosed in the Registration Statement or the Prospectus and is not disclosed
or (e) in any manner seek to challenge the validity of this Agreement or the
Shares; and there are no material contracts or other documents which are
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations or to any Incorporated
Document which have not been so described or have not been so filed as required.
(l) Each of the Company and its subsidiaries has good and marketable
title to all personal property and assets owned by it, in each case free and
clear of all liens, encumbrances and defects except (i) such as are referred to
in the Prospectus or (ii) such as do not materially and adversely affect the
value of such property to the Company or such subsidiary, and do not materially
interfere with the use made and proposed to be made of such property by the
Company or such subsidiary; neither the Company nor any of its subsidiaries owns
any real property; and any real property and buildings held under lease by the
Company or any of its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made by the Company or any of its
subsidiaries, and no default (other than any default by the lessor) related
thereto has occurred or is continuing.
(m) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
(n) The Company and LaSalle Re have an authorized capitalization as
set forth or incorporated by reference in the Prospectus, and on the Closing
Date, all of the outstanding shares of capital stock of the Company and LaSalle
Re (including the Shares) will have been duly authorized and validly issued and
will be fully paid and non-assessable; such shares conform to the
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description thereof contained or incorporated by reference in the Prospectus;
the Shares are not subject to pre-emptive or other similar rights; the form of
certificates for the Shares conforms to the requirements of the laws of Bermuda
and the NYSE; and the Shares have been approved for quotation on the NYSE.
(o) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or to the
knowledge of the Company or its subsidiaries, contemplated or threatened against
the Company or any of its subsidiaries, or any injunction, restraining order or
order of any nature by a court of competent jurisdiction, arising out of or in
connection with the consummation of the transactions contemplated by this
Agreement.
(p) Consummation of the transactions contemplated by this Agreement,
including but not limited to any actions taken pursuant to the indemnification
and contribution provisions set forth herein, will not constitute unlawful
financial assistance by the Company or LaSalle Re under Bermuda law.
(q) Except as described in the Prospectus, there are no (i)
contracts, agreements or understandings between the Company or any of its
subsidiaries and any person granting such person the right to require the
Company or such subsidiary to file a registration statement under the Act with
respect to any securities of the Company or such subsidiary owned or to be owned
by such person or to require the Company to include such securities under the
Registration Statement or with any securities being registered pursuant to any
other registration statement filed by the Company or such subsidiary under the
Act or (ii) outstanding options, warrants or other rights with respect to the
issuance of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any subsidiary or any security
convertible or exchangeable into or exercisable for such shares.
(r) Each of the Company and its subsidiaries has filed all reports,
information statements and other documents as required to be filed pursuant to
applicable insurance statutes, including the statutes relating to companies
which control insurance companies, and the rules, regulations and
interpretations of the insurance regulatory authorities thereunder (the
"Applicable Insurance Laws"), and has duly paid all taxes (including franchise
taxes and similar fees) it is required to have paid under the Applicable
Insurance Laws, except where the failure to file such statement or reports would
not have a material adverse effect on the condition, financial or otherwise,
earnings, business, prospects or results of operations of the Company and its
subsidiaries considered as a whole; and each of the Company and its subsidiaries
maintains its books and records in accordance with the Applicable Insurance
Laws, except where the failure to so maintain its books and records would not
have a material adverse effect on the condition, financial or otherwise,
earnings, business, prospects, or results of operations of the Company and its
subsidiaries considered as a whole.
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(s) LaSalle Re is duly registered as an insurer and is subject to
regulation and supervision in Bermuda. Each of the Company and its subsidiaries
is duly licensed or admitted as an insurer or an insurance holding company, as
applicable, in each jurisdiction where it is required to be so licensed or
admitted to conduct its business as described in the Prospectus.
(t) The Company and each of its subsidiaries are in compliance with
the applicable requirements of the Bermuda Insurance Act 1978, as amended, and
any applicable rules and regulations thereunder (collectively, the "Bermuda
Insurance Act"); and neither the Company nor any of its subsidiaries is subject
to the insurance laws of any other jurisdiction, provided that LaSalle Re
--------
Corporate Capital Ltd., a Bermuda corporation and a subsidiary of the Company
("LaSalle Re Capital"), has been admitted by Lloyd's of London ("Lloyd's") to
corporate membership and is an underwriting member of Lloyd's.
(u) All liability, property and casualty, workers compensation,
directors and officers liability, surety bonds and other similar insurance
contracts that insure the business, properties, operations or affairs of the
Company and each of its subsidiaries or affect or relate to the ownership, use
or operations of the Company's or any of its subsidiaries' assets or properties
are in full force and effect and, to the knowledge of the Company and each of
its subsidiaries, are with financially sound and reputable insurers and in
accordance with normal industry practice and, to the knowledge of the Company
and each of its subsidiaries, in light of the respective businesses, properties,
operations and affairs of the Company and each of its subsidiaries, are in
amounts and provide coverage that is reasonable and customary for persons in
similar businesses or for similar property.
(v) All reinsurance treaties, retrocessional agreements, contracts
and agreements to which the Company or any of its subsidiaries is a party are in
full force and effect and neither the Company nor any of its subsidiaries is in
violation of, or in default in the performance, observance or fulfillment of,
any obligation, agreement, covenant or condition contained therein, except where
any such violation or default would not have a material adverse effect on the
condition, financial or otherwise, earnings, business, prospects, or results of
operations of the Company and its subsidiaries taken as a whole; neither the
Company nor any of its subsidiaries has received any notice from any of the
other parties to such treaties, contract or agreements that such other party
intends not to perform in any material respect such treaty, contract or
agreement, and the Company and its subsidiaries have no reason to believe that
any of the other parties to such treaties, contracts or agreements will be
unable to perform such treaty, contract, agreement or arrangement.
(w) To the knowledge of the Company and each of its subsidiaries, no
change in any insurance law or regulation is pending which could have,
individually or in the aggregate, a
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material adverse effect on the condition, financial or otherwise, earnings,
business, prospects or results of operations of the Company or any of its
subsidiaries.
(x) The Company, LaSalle Re and LaSalle Re Capital have received from
the Bermuda Minister of Finance an assurance under The Exempted Undertakings Tax
Protection Act, 1966 of Bermuda to the effect set forth in the Prospectus under
the caption "Certain Tax Considerations-Taxation of the Company and its
Subsidiaries--Bermuda.
(y) Other than as permitted by the Act or the Rules and Regulations,
the Company and its subsidiaries have not distributed and will not distribute,
prior to the later to occur of (i) the Closing Date and (ii) completion of the
distribution of the Shares, any prospectus or other offering material in
connection with the offering and sale of the Shares.
(z) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, or to the knowledge of the Company and each of
its subsidiaries, is threatened.
(aa) Neither the Company nor any of its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(bb) Other than as set forth in this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company or any of its
subsidiaries any brokerage commission, finder's fee or other like payment as a
result of any of the transactions contemplated by this Agreement.
(cc) Any certificate signed by an officer of the Company or any of its
subsidiaries in their capacities as such and delivered, pursuant to this
Agreement or in connection with the payment of the purchase price and delivery
of the certificates for the Shares, to the Underwriters or counsel for the
Underwriters shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(dd) To the knowledge of the Company and each of its subsidiaries,
neither the Company nor any of its subsidiaries has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, or any law relating to discrimination in the hiring,
promotion or pay of employees or any applicable wages and hours laws.
(ee) KPMG Peat Marwick, who certified the financial statements and
supporting schedules included or incorporated by reference in the Registration
Statement, is the independent public accountant with respect to the Company as
required by the Act and the Rules and Regulations.
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(ff) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in all material respects in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
United States generally accepted accounting principles and with statutory
accounting principles, as the case may be, and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(gg) Any tax returns required to be filed by the Company or any of its
subsidiaries in any jurisdiction have been filed, and any material taxes,
including any withholding taxes, penalties and interest, assessments and fees
and other charges due or claimed to be due from such entities have been paid,
other than any of those being contested in good faith and for which adequate
reserves have been provided or any of those currently payable without penalty or
interest.
(hh) The Company and each of its subsidiaries owns or has valid and
adequate rights to use all patents, trademarks, trademark registration, service
marks, service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights owned by it or necessary for the conduct of
its respective business, free and clear of all liens, claims, security
interests, encumbrances and restrictions that may materially interfere with the
conduct of its business, and neither the Company nor any of its subsidiaries is
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company or any of its subsidiaries with respect to the foregoing.
(ii) As of the Closing Date, LaSalle Re, LaSalle Re (Services) Limited
("LaSalle Services") and LaSalle Re Capital will be the only "subsidiaries" of
the Company within the meaning of Rule 405 under the Act, and each of them is
listed in an exhibit to the Company's Annual Report on Form 10-K which is
incorporated by reference into the Registration Statement.
(jj) There are no currency exchange control laws or withholding taxes
imposed in Bermuda or the United Kingdom that are applicable to the payment of
dividends (i) on the Shares by the Company or (ii) by any subsidiary of the
Company, except in the United Kingdom to the extent that dividends payable are
subject to the payment at the same time of Advance Corporation Tax under the
laws of the United Kingdom.
(kk) Neither the Underwriters nor any subsequent purchasers of the
Shares is subject to any stamp duty, excise or similar tax imposed in Bermuda in
connection with the offering, sale or purchase of the Shares.
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(ll) The Company and each of its subsidiaries have validly appointed
CT Corporation Systems as its authorized agent to receive service of process in
any suit, action or proceeding as contemplated in Section 5(n) above.
(mm) Each of the Company and LaSalle Re now has, and on the Closing
Date will have, the legal right and power, and all necessary consents, approvals
and authorizations, to effectuate its dividend policy as described in the
Prospectus, and no such action will conflict with or result in a breach or
violation of the terms and provisions of or constitute a default under any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
or agreement to which either of them is a party or by which it may be bound, nor
will any such action conflict with or result in a breach or violation of the
terms and provisions of or constitute a default under (i) the charter or bye-
laws or other organizational documents of either of them or (ii) any statute,
rule, regulation or administrative or court decree or order of any governmental
agency or body or any court or arbitrator, which is applicable to either of
them; provided, however, that the payment of dividends by LaSalle Re to the
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Company is limited under Bermuda law and regulations, including Bermuda
insurance law, and that dividends are payable when, as and if declared by the
board of directors of the Company and LaSalle Re, as the case may be.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable legal fees and expenses and reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through a Representative expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing Prospectus or the Prospectus shall
not inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Shares by such Underwriter to
any person if a copy of the Prepricing Prospectus or the Prospectus (as then
amended or supplemented) shall not have been delivered or sent to such person
within the
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time required by the Act and the Rules and Regulations, and the untrue statement
or alleged untrue statement or omission or alleged omission of a material fact
contained in such Prepricing Prospectus or the Prospectus was corrected in the
Prepricing Prospectus or the Prospectus (as then amended or supplemented),
provided that the Company has delivered the Prepricing Prospectus or the
Prospectus (as then amended or supplemented) to the several Underwriters in
requisite quantity on a timely basis to permit such delivery or sending.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses; however, the omission to notify
the indemnifying party shall relieve the indemnifying party from liability only
to the extent prejudiced thereby. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the indemnifying parties have agreed in writing to
pay such fees and expenses, (ii) the indemnifying parties have failed to assume
the defense and employ counsel within a reasonable period of time after being
notified of such action, suit or proceeding, or (iii) the named parties to any
such action, suit or proceeding (including any impleaded parties) include both
such Underwriter or such controlling person and the indemnifying parties and
such Underwriter or such controlling person shall have been advised by its
counsel in writing that representation of such indemnified party and any
indemnifying party by the same counsel would be inappropriate under applicable
standards of professional conduct (whether or not such representation by the
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
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the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the directors and officers of the Company who
sign the Registration Statement and any person who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of the Company's directors, any such officer or
any such controlling person based on the Registration Statement, the Prospectus
or any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (c), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Underwriter's expense),
and the Company, the Company's directors, any such officer and any such
controlling person shall have the rights and duties given to the Underwriters by
paragraph (b) above.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus computed on the basis of the respective
amounts set forth in the notes to the table on the cover page of
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the Prospectus. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the Underwriters on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by a
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective numbers of Shares set forth opposite their names in Schedule I
hereto (or such numbers of Shares increased as set forth in Section 10 hereof)
and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any
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Underwriter or any person controlling any Underwriter, the Company or the
Company's directors or officers or any person controlling the Company, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, the Company's directors or
officers or any person controlling the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M. New York City time, on the date hereof, or at
such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your reasonable satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, that would have a material adverse effect on the condition, financial or
otherwise, earnings, business, prospects, or results of operations of the
Company and its subsidiaries taken as a whole, not contemplated by the
Prospectus, which in your opinion would materially adversely affect the market
for the Shares, or (ii) any event or development relating to or involving the
Company or any officer or director of the Company which makes any statement made
in the Prospectus untrue or which, in the opinion of the Company and its counsel
or the Underwriters and their counsel, requires the making of any addition to or
change in the Prospectus in order to state a material fact required by the Act
or any other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Prospectus
to reflect such event or development would, in your opinion, materially
adversely affect the market for the Shares.
(c) You shall have received on the Closing Date an opinion of Mayer,
Brown & Platt, counsel for the Company and LaSalle Re, dated the Closing Date
and addressed to you to the effect that:
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(i) This Agreement is a valid and binding agreement of the Company.
(ii) On the Closing Date, all of the outstanding shares of capital
stock of the Company and LaSalle Re (including the Shares) conformed in all
material respects to the description thereof contained or incorporated by
reference in the Prospectus; to the knowledge of such counsel, the Shares are
not subject to any contractual pre-emptive or other similar rights; the form of
certificates for the Shares conforms to the requirements of the NYSE; and the
Shares have been registered under the Exchange Act and approved for quotation on
the NYSE.
(iii) To the knowledge of such counsel there is no legal or
governmental action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, contemplated or threatened
against the Company or any of its subsidiaries or any injunction, restraining
order or order of any nature by a court of competent jurisdiction, arising out
of or in connection with the consummation of the transactions contemplated by
this Agreement.
(iv) The Registration Statement and each post-effective amendment, if
any, is effective under the Act and the Rules and Regulations and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement or any part thereof or preventing or suspending the use
of any Prepricing Prospectus has been issued under the Act or the Rules and
Regulations or proceedings therefor initiated or threatened or are pending or
contemplated by the Commission, and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in accordance with such rule.
(v) Statements set forth in the Prospectus under the headings "Risk
Factors", "Business", "Description of Series A Preferred Shares" and in the
Registration Statement under Item 15 of Part II of the Registration Statement,
insofar as such statements constitute a summary of the legal matters, documents
or proceedings or refer to statements of regulation, law or legal conclusions
referred to therein fairly present the information called for with respect to
such legal matters, documents or proceedings and statements, and are accurate in
all material respects.
(vi) No consent, approval, authorization, order, filing, registration,
qualification or other action of or with any court, regulatory body, arbitrator,
administrative body or other governmental authority or agency is required for
the issue and sale of the Shares or the consummation of the transactions
contemplated by this Agreement, except such as may be required and have been
obtained under the Act, the Exchange Act and the Rules and Regulations, or as
may be required under state securities or Blue Sky laws (including state
insurance securities laws) in connection with the distribution of the Shares by
the Underwriters; and the issue and sale of the Shares, the execution, delivery
and
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performance of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument or agreement to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject and which is listed on Exhibit A to such opinion, nor will any such
action conflict with or result in a breach or violation of the terms and
provisions of or constitute a default under any material statute, rule,
regulation or administrative or court decree or order of any governmental agency
or body or any court or arbitrator, which is applicable to the Company or any of
its subsidiaries or any of their respective properties.
(vii) The Company and each of its subsidiaries have validly appointed
CT Corporation Systems as its authorized agent to receive service of process in
any suit, action or proceeding as contemplated in Section 5(n) above.
(viii) To the knowledge of such counsel no (i) legal or governmental
action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending, contemplated or threatened against the
Company or any of its subsidiaries; (ii) statute, rule, regulation or order that
has been enacted, adopted or issued by any governmental agency or body, domestic
or foreign, or (iii) injunction, restraining order or order of any nature by a
court of competent jurisdiction that has been issued, any of the foregoing of
which (a) is required to be disclosed in the Registration Statement or the
Prospectus and is not so disclosed; or (b) in any manner seek to challenge the
validity of this Agreement or the Shares; and, after due inquiry, such counsel
is not aware of any material contract or other document that is required to be
described in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) or to be filed as an exhibit to the Registration Statement
or to any Incorporated Document that is not so described or filed as required.
(ix) Neither the Company nor any of its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
(x) Such counsel (1) is of the opinion that the Registration Statement
(including the Incorporated Documents), as of the date it became effective, any
amendment to the Registration Statement (including the Incorporated Documents),
as of its effective date, and the Prospectus, as of its date (other than the
financial statements and schedules included therein, as to which no opinion need
be expressed) complies as to form in all material respects with the requirements
of the Act and the Rules and
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Regulations, (2) is of the opinion that each of the Incorporated Documents
(other than the financial statements and schedules included therein, as to which
no opinion need be expressed) complies as to form in all material respects with
the Exchange Act and the Rules and Regulations, and (3) shall also state that
nothing has come to their attention that leads them to believe that (other than
the financial statements and schedules included therein, as to which no belief
need be expressed) the Registration Statement (including the Incorporated
Documents), as of the date it became effective, or any amendment to the
Registration Statement (including the Incorporated Documents), as of its
effective date, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and that the Prospectus, as of its date, as of
the date of any amendments or supplements thereto, and as amended or
supplemented at the Closing Date, contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(xi) The discussion of tax matters set forth under the heading
"Certain Tax Considerations" in the Prospectus accurately reflects such
counsel's opinion as to such tax laws (subject to the qualifications and
assumptions set forth in such discussion).
Such opinion shall also state that such counsel has participated in the
preparation of the Registration Statement and the Prospectus and has
participated in conferences with officers and other representatives of the
Company and its subsidiaries, at which the contents of the Registration
Statement and Prospectus (including the contents of all Incorporated Documents)
were discussed. With respect to subparagraph (x) of paragraph (c) above, such
counsel may state they are not passing upon the adequacy or accuracy of the
financial or statistical data contained in the Registration Statement or
Prospectus or any Incorporated Document. Regarding matters relating to Bermuda
law, such counsel shall be entitled to rely on the opinion of Conyers, Dill &
Pearman, Bermuda counsel to the Company.
(d) You shall have received a favorable opinion of Conyers, Dill &
Pearman, Bermuda counsel for the Company, LaSalle Re and LaSalle Re Capital,
dated the Closing Date, to the effect that:
(i) Each of the Company, LaSalle Re and LaSalle Re Capital is
incorporated and validly existing as an exempted company, and has been duly
organized (meaning that the provisional directors meeting and the statutory
members meeting required by the Companies Act 1981 have been held), under the
laws of Bermuda and is in good standing under the laws of Bermuda (meaning that
it has not failed to make any required filing with any Bermuda government
authority or to pay any Bermuda government fee or tax, the failure of which
would make such company liable to be struck off the
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register of companies and thereby cease to exist under the laws of Bermuda) with
all requisite corporate power and authority and has all necessary permits of
Bermuda government authorities (including regulatory authorities) which remain
in full force and effect, to carry on its business and to own, lease and operate
its properties as both are described in the Registration Statement and the
Prospectus.
(ii) Based solely upon certified copies of the respective members
registers, the minutes, resolutions, memoranda of association and Bye-laws of
the Companies, LaSalle Re and LaSalle Re Capital which we have examined and
searches of the register of charges maintained by the Bermuda Registrar of
Companies: (a) all of the issued shares in the capital of the Company, including
the Shares to be sold by the Company, have been duly and validly authorized and
issued and are fully paid and non-assessable (which term when used in such
opinion shall mean that no further sums are required to be paid by the holders
thereof in connection with the issue of such shares); and (b) each of LaSalle Re
and LaSalle Re Capital is a subsidiary of the Company. The Shares are not
subject to any statutory pre-emptive rights (or similar statutory rights), and
the form of share certificates relating thereto conforms with the requirements
of Bermuda law.
(iii) LaSalle Re is duly registered as an insurer under The
Insurance Act 1978 and the regulations promulgated thereunder (together, the
"Insurance Act") and as so registered, LaSalle Re may conduct the insurance
business as described in the Prospectus; and, based solely on Certificates of
Compliance issued by the Bermuda Registrar of Companies and without independent
enquiry, LaSalle Re has filed with the appropriate Bermuda governmental
authority (including regulatory authority) all reports, documents or other
information required to be filed under the Insurance Act.
(iv) The Company has taken all corporate action required to authorize
its due execution, delivery and performance of this Agreement. This Agreement
has been duly authorized and executed by the Company and when delivered will
constitute the valid and binding obligations thereof enforceable in accordance
with its terms.
(v) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement and the
consummation by the Company of the transactions contemplated by this Agreement
do not and will not:
(a) violate any provision of the Memorandum of Association or Bye-
laws of the Company or LaSalle Re;
(b) contravene any provision of any of the laws, rules and
regulations of Bermuda;
(c) based solely upon a search of the Cause Book maintained in the
registry of the Bermuda Supreme Court, and without further
enquiry,
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contravene any judgment, order or decree by the Bermuda Supreme
Court against the Company or LaSalle Re; or
(d) require any consent, approval, authorization, qualification or
order of, or filing or registration with, any Bermuda Court or
Bermuda governmental agency (including regulatory and
administrative), except such as have been obtained.
(vi) Based solely upon our search of the Cause Book maintained in the
registry of the Bermuda Supreme Court and without further enquiry, there is no
action, suit, proceeding, injunction, restraining order or other order now
pending before any Bermuda Court against the Company, LaSalle Re or LaSalle Re
Capital or any of their respective properties.
(vii) Based solely upon a search of the register of charges maintained
by the Bermuda Registrar of Companies, and without further enquiry, there are no
registered liens, encumbrances, equities or claims in such register of charges
in respect of those shares issued in the Company, LaSalle Re and LaSalle Re
Capital other than: (a) a Mortgage of Shares dated as of 1 December 1995 between
the Company and Chemical Bank; and (b) a Deed dated as of 1 December 1995
between the Company and Chemical Bank.
(viii) All statements made in the Registration Statement and
Prospectus with respect to statutes, regulations, rules, treaties and other laws
of Bermuda fairly and accurately present the information set forth therein and
such counsel's opinion as to such matters.
(ix) Based upon an assumption that there are reasonable grounds for
believing that immediately before and after entering this Agreement the Company
(a) is able to pay its liabilities as they fall due and (b) has assets with a
realizable value equal to or greater than the sum of its respective liabilities,
issued share capital and share premium account, the consummation of the
transactions contemplated by this Agreement (including but not limited to any
actions taken pursuant to the indemnification and contribution provisions
contained herein) will not constitute unlawful financial assistance by the
Company under Bermuda law.
(x) Each of the Company, LaSalle Re and LaSalle Re Capital has
received from the Bermuda Minister of Finance an assurance pursuant to the
Exempted Undertakings Tax Protection Act 1966 to the effect set forth in the
Prospectus under the heading "Certain Tax Considerations-Taxation of the Company
and its Subsidiaries-Bermuda."
(xi) The Underwriters and subsequent purchasers of the Shares
purchased pursuant to this Agreement are not subject to any stamp duty, excise
or similar tax imposed in Bermuda in
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<PAGE>
connection with the offering, sale or purchase of such Shares, and there are no
currency exchange control laws or withholding taxes that are applicable to the
payment of dividends by the Company, LaSalle Re or LaSalle Re Capital.
(xii) There are no statutes or Bermuda government rules, regulations
or orders which seek to challenge the validity of this Agreement or the Shares.
(xiii) The issue and sale of the Shares, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property of the Company, LaSalle Re or LaSalle Re Capital
pursuant to this Agreement or the Prospectus.
(xiv) The discussion of tax matters relating to Bermuda set forth
under the heading "Certain Tax Considerations" in the Prospectus accurately
reflects the opinion of such counsel as to such matters (subject to the
qualifications and assumptions set forth in such discussion).
(xv) Upon delivery of the share certificates duly executed in favour
of the Underwriters' designees in respect of the Shares, and the entry in the
Company's register of members of such designees, such designees will be the
registered owners of legal title to such Shares.
(e) You shall have received a favorable opinion of Clyde & Co.,
United Kingdom counsel for the Company and LaSalle Services, dated the Closing
Date, to the effect that:
(i) LaSalle Services has been duly incorporated and organized and is
validly existing as a corporation under the laws of the United Kingdom, with all
requisite power and authority (corporate and otherwise) to own, lease and
operate its properties and conduct its business as described in the Registration
Statement and the Prospectus; all of the issued and outstanding capital stock of
LaSalle Services has been duly authorized and validly issued and is fully paid
and non-assessable and, all of such capital stock (except as otherwise described
in the Registration Statement or the Prospectus) will be owned by the Company,
directly or through one or more of its subsidiaries and, to the knowledge of
such counsel, free and clear of any mortgage, pledge, lien, encumbrance,
security interest, adverse claim or equity.
(ii) There are no currency exchange control laws or withholding taxes
that are applicable to the payment of dividends by LaSalle Services, except to
the extent that dividends payable are subject to the payment at the same time of
Advance Corporation Tax under the tax laws of the United Kingdom.
(iii) The discussion set forth under the heading "Certain Tax
Considerations--Taxation of the Company and its
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<PAGE>
Subsidiaries--United Kingdom" in the Prospectus is accurate (subject to the
qualifications, limitations and assumptions set forth in such discussion).
(iv) Neither the Company nor any of its subsidiaries is required
to be licensed or admitted as an insurer or an insurance holding company, as
applicable, under, or to otherwise comply with, the insurance laws or
regulations of any jurisdiction within the United Kingdom in order to conduct
their respective businesses as described in the Prospectus, provided that
--------
LaSalle Re Capital is admitted by Lloyd's to corporate membership and is an
underwriting member of Lloyd's.
(f) You shall have received on the Closing Date an opinion of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters, dated the
Closing Date, with respect to such matters as you may reasonably request.
Regarding matters relating to Bermuda law, such counsel shall be entitled to
rely on the opinion of Conyers Dill & Pearman, Bermuda counsel to the Company.
(g) You shall have received from the Chief Executive Officer and the
Chief Financial Officer of the Company a certificate, dated the Closing Date, in
which such officers, to the best of their knowledge and after reasonable
investigation, shall state that there has not been, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, (i) any material adverse change in the condition, financial or
otherwise, earnings, business, prospects, or results of operations of the
Company and its subsidiaries considered as a whole, whether or not arising in
the ordinary course of business, (ii) any material transaction entered into by
the Company or any of its subsidiaries other than those in the ordinary course
of business, or (iii) any material change in the capital stock of the Company
nor any material increase in the short-term or long-term debt of the Company
(other than in the ordinary course of business), except in the case of clauses
(i), (ii) and (iii) as set forth in the Prospectus; the representations and
warranties of the Company contained in Section 6 are true and correct with the
same force and effect as though made on and as of the Closing Date and the
Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing Date; and
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been initiated or
threatened or are contemplated by the Commission.
(h) You shall have received from KPMG Peat Marwick, independent
public accountants, two letters, the first dated the date of this Agreement and
the other dated such Closing Date, addressed to the Underwriters (with conformed
copies for each of the Underwriters), substantially in the forms heretofore
approved by you.
(i) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its
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<PAGE>
agreements herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(j) Prior to the Closing Date the Shares shall have been listed,
subject to notice of issuance, on the NYSE.
(k) The Shares shall have a rating of at least (i) ["_____"] from
Standard & Poor's Rating Services and (ii) ["_____"] from Moody's Investors
Service, Inc. and the Company shall have delivered to the Representatives a
letter from each such rating agency (or other evidence satisfactory to the
Representatives), confirming that the Shares have such rating.
(l) On and after the date hereof, except as disclosed in the
Prospectus, (i) no downgrading shall have occurred in any rating (or preliminary
rating) of any active insurance subsidiary of the Company by A.M. Best Company,
Inc. ("A.M. Best"), (ii) A.M. Best shall not have publicly announced that it has
under surveillance or review, with possible negative implications, any such
rating, and (iii) neither the Company nor Smith Barney Inc. shall have received
any indication of any such downgrading.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company and
delivered to the Underwriters, or to counsel for the Underwriters, shall be
deemed a representation and warranty by the Company to each Underwriter as to
the statements made therein.
9. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance of the Company's
respective obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of each registration statement and
the Registration Statement (including financial statements and exhibits
thereto), each Prepricing Prospectus, the Prospectus, and each amendment or
supplement to any of them; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of each registration statement, the Registration Statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes in connection with the original issuance and sale of
the Shares; (iv) the printing (or reproduction) and delivery of this Agreement,
the preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the original
issuance and sale of the Shares; (v) the registration of the Shares under the
Exchange Act and the listing of the Shares on the NYSE; (vi) the registration
or
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<PAGE>
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the fees and expenses of the Registrar and Transfer Agent
for the Shares and its counsel; (viii) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (ix) the fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company; and
(x) any fees and expenses payable in connection with the rating of the Shares.
10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Company, by notifying you, or
by you, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than one-
tenth of the aggregate number of Shares which the Underwriters are obligated to
purchase on the Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Shares set forth
opposite its name in Schedule I hereto bears to the aggregate number of Shares
set forth opposite the names of all non-defaulting Underwriters or in such other
proportion as you may specify in accordance with Section 20 of the Master
Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares which
such defaulting Underwriter or Underwriters are obligated, but fail or refuse,
to purchase. If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase on the Closing Date
and the aggregate number of Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date and arrangements satisfactory to you
and the Company for the purchase of such Shares by one or more non-defaulting
Underwriters or other party or parties approved by you and the Company are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case which does not result in termination of this Agreement, either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
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<PAGE>
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date, as the case may be, (i) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall
have been suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York or Bermuda shall have been declared by
either federal or state (or comparable) authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters.
Notice of such termination may be given by telegram, telecopy or telephone
and shall be subsequently confirmed by letter.
12. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
front cover page, and the sentences of the first paragraph of text under the
caption "Underwriting" concerning the terms of the offering by the Underwriters
and the table thereunder and the second and sixth paragraphs in such
Underwriting section in any Prepricing Prospectus and in the Prospectus
constitute the only information furnished by or on behalf of the Underwriters as
such information is referred to in Sections 6 and 7 hereof.
13. MISCELLANEOUS. Except as otherwise provided in Sections 5, 10 and 11
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company at the office of the
Company at, 25 Church Street, P.O. Box HM 1502, Hamilton HM FX Bermuda,
Attention: Victor H. Blake, Chairman; or (ii) if to the Underwriters, care of
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention:
Manager, Investment Banking Division.
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<PAGE>
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, the Company's directors and officers, the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
LASALLE RE HOLDINGS LIMITED
By______________________________
President and Chief
Executive Officer
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
LAZARD FRERES & CO. LLC
MORGAN STANLEY & CO. INCORPORATED
By SMITH BARNEY INC.
By_____________________________
Managing Director
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<PAGE>
SCHEDULE I
LASALLE RE HOLDINGS LIMITED
Number of
Underwriter Shares
----------- ---------
Smith Barney Inc.............................. [ ]
Lazard Freres & Co. LLC....................... [ ]
Morgan Stanley & Co. Incorporated............. [ ]
-------
Total.................................
=======
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<PAGE>
Exhibit 4.3
FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED SHARES
OF
LASALLE RE HOLDINGS LIMITED
The Series A Preferred Shares shall have the designation, preferences and
rights, and shall be subject to the restrictions, as hereinafter appearing:
Section 1. Designation and Amount. There shall be a series of Preferred
----------------------
Shares of the Company which shall be designated as "Series A Preferred Shares,"
par value $1.00 per share (hereinafter called "Series A Preferred Shares"), and
the number of shares constituting such series shall be 3,000,000. Such number
of shares may be increased or decreased at any time and from time to time by
resolution of the Company's Board of Directors; provided, however, that no
-------- -------
decrease shall reduce the number of shares of Series A Preferred Shares to a
number less than that of the shares then outstanding plus the number of shares
of Series A Preferred Shares issuable upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by the
Company.
Section 2. Definitions. For purposes of the Series A Preferred Shares,
-----------
the following terms shall have the meanings indicated:
"Board" shall mean the Board of Directors of the Company or any
-----
committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Series A Preferred Shares.
"Business Day" shall mean any day other than a Saturday, Sunday or a
------------
day on which banking institutions in Hamilton, Bermuda, or New York, New
York are not required to be open.
"Call Date" shall mean any date which the Company establishes for the
---------
redemption of Series A Preferred Shares, which date must be specified in
the notice mailed to holders of the Series A Preferred Shares pursuant to
Section 5(d) hereof.
"Common Shares" shall mean the common shares of the Company, par value
-------------
$1.00 per share.
"Company" shall mean LaSalle Re Holdings Limited.
-------
"Dividend Payment Date" shall mean the first day of March, June,
---------------------
September and December in each year, commencing on June 1, 1997; provided,
--------
however, that if any Dividend Payment Date falls on any day other than a
-------
Business Day, the dividend
<PAGE>
payment due on such Dividend Payment Date shall be paid on the Business Day
immediately before such Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
----------------
March 1, June 1, September 1 and December 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period (other than the initial Dividend Period, which shall commence on the
Issue Date and end on and include May 31, 1997, and other than the Dividend
Period during which any Series A Preferred Shares shall be redeemed
pursuant to Section 5 hereof, which shall end on and include the Call Date
with respect to the Series A Preferred Shares being redeemed).
"Dollars" or "$" shall mean U.S. Dollars.
------- -
"Excess Preferred Shares" shall have the meaning set forth in Section
-----------------------
9(a) hereof.
"Fully Junior Shares" shall mean the Common Shares and any other class
-------------------
or series of shares of the Company's stock now or hereafter issued and
outstanding over which the Series A Preferred Shares have preference or
priority in both (i) the payment of dividends and (ii) the distribution of
assets on any liquidation, dissolution or winding up of the Company.
"Issue Date" shall mean the first date on which the Series A Preferred
----------
Shares are issued and sold.
"Junior Shares" shall mean the Common Shares and any other class or
-------------
series of shares of the Company's stock now or hereafter issued and
outstanding over which the Series A Preferred Shares have preference or
priority in either (i) the payment of dividends or (ii) the distribution of
assets on any liquidation, dissolution or winding up of the Company.
"LaSalle Re" shall mean LaSalle Re Limited, a subsidiary of the
----------
Company.
"Parity Shares" shall have the meaning set forth in Section 7(b)
-------------
hereof.
"Person" shall mean any individual, firm, partnership, corporation,
------
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Register of Members" shall mean the Register of Members of the
-------------------
Company.
"Repurchase Date" shall have the meaning set forth in Section 9(a)
---------------
hereof.
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<PAGE>
"Repurchase Notice" shall have the meaning set forth in Section
-----------------
9(a) hereof.
"Series A Preferred Shares" shall have the meaning set forth in
-------------------------
Section 1 hereof.
"Set apart for payment" shall be deemed to include, without any action
---------------------
other than the following, the recording by the Company in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to
a declaration of dividends or other distribution by the Board, the
allocation of funds to be so paid on any class or series of shares of the
Company's stock; provided, however, that if any funds for any class or
-------- -------
series of Junior Shares or any class or series of shares of the Company's
stock ranking on a parity with the Series A Preferred Shares as to the
payment of dividends or other distributions are placed in a separate
account of the Company or delivered to a disbursing, paying or other
similar agent, then "set apart for payment" with respect to the Series A
Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Special Representation Right" shall have the meaning set forth in
----------------------------
Section 8(b) hereof.
"Special Representatives" shall have the meaning set forth in Section
-----------------------
8(b) hereof.
"Subsidiary Voting Right" shall have the meaning set forth in Section
-----------------------
8(b) hereof.
"Transfer Agent" shall mean First Chicago Trust Company of New York,
--------------
or such other agent or agents of the Company as may be designated by the
Board or its designee as the transfer agent, registrar and dividend
disbursing agent for the Series A Preferred Shares.
"Voting Preferred Shares" shall have the meaning set forth in Section
-----------------------
8(b) hereof.
Section 3. Dividends.
---------
(a) The holders of Series A Preferred Shares shall be entitled to
receive, when, as and if declared by the Board out of funds legally
available for the payment of dividends, cumulative preferential dividends
payable in cash in an amount per share equal to ___% of the liquidation
preference per annum (equivalent to $_____ per share), except as provided
in Section 3(b) hereof. Such dividends shall begin to accrue and shall be
fully cumulative from the Issue Date, whether or not in any Dividend Period
or Periods there shall be funds of the Company legally available for
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<PAGE>
the payment of such dividends and whether or not such dividends shall be
declared. Such dividends shall be payable quarterly, when, as and if
declared by the Board, in arrears on Dividend Payment Dates, commencing on
the first Dividend Payment Date after the Issue Date. Each such dividend
shall be payable in arrears to the holders of record of Series A Preferred
Shares, as they appear in the Register of Members at the close of business
on such record dates, not less than 30 nor more than 60 days preceding such
Dividend Payment Dates thereof, as shall be fixed by the Board. Accrued
and unpaid dividends for any past Dividend Periods may be declared and paid
at any time and for such interim periods, without reference to any regular
Dividend Payment Date, to holders of record on such date, not less than 30
nor more than 60 days preceding the payment date thereof, as may be fixed
by the Board. Any dividend payment made on Series A Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to Series A Preferred Shares which remains payable.
(b) The holders of Series A Preferred Shares shall be entitled to
receive, when, as and if declared by the Board, a partial dividend for the
initial Dividend Period from the Issue Date until May 31, 1997. The amount
of dividends payable for such period, or any other period shorter than a
full Dividend Period, on the Series A Preferred Shares shall be computed on
the basis of a 360-day year of twelve 30-day months. Holders of Series A
Preferred Shares shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of cumulative dividends, as herein
provided, on the Series A Preferred Shares. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Shares that may be in arrears.
(c) So long as any Series A Preferred Shares are outstanding, no
dividends or other distributions, except as described in the immediately
following sentence, shall be declared or paid or set apart for payment on
any class or series of Parity Shares for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on
the Series A Preferred Shares for all Dividend Periods terminating on or
prior to the dividend payment date in respect of the dividend or other
distribution on such class or series of Parity Shares. When dividends on
the Series A Preferred Shares are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon
Series A Preferred Shares and all dividends declared upon any class or
series of Parity Shares shall be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the Series A
Preferred Shares and accumulated and unpaid on such Parity Shares.
(d) So long as any Series A Preferred Shares are outstanding, no
dividends or other distributions (other than dividends or distributions
paid solely in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Fully Junior Shares) shall be declared or paid or
set apart for payment and no other distribution shall be declared or paid
or set apart for payment upon Junior Shares, nor shall any
-4-
<PAGE>
Junior Shares be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Shares made for
purposes of an employee incentive or benefit plan of the Company or any
subsidiary of the Company) for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any Junior
Shares) by the Company, directly or indirectly (except by conversion into
or exchange for Fully Junior Shares), unless in each case (i) the full
cumulative dividends on all outstanding Series A Preferred Shares and any
Parity Shares shall have been or contemporaneously are declared and paid or
declared and set apart for payment for all past Dividend Periods with
respect to the Series A Preferred Shares and all past dividend periods with
respect to such Parity Shares and (ii) sufficient funds shall have been or
contemporaneously are declared and set apart for the payment of the
dividend for the current Dividend Period with respect to the Series A
Preferred Shares and the current dividend period with respect to such
Parity Shares.
(e) No dividends on Series A Preferred Shares shall be declared by
the Board or paid or set apart for payment by the Company at such time as
the terms and provisions of any agreement of the Company, including any
agreement relating to its indebtedness, prohibit such declaration, payment
or setting apart for payment or provide that such declaration, payment or
setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration, payment or setting apart shall be
restricted or prohibited by law.
(f) If there shall be any change in the law, regulation or official
directive (whether or not having the force of law) or in the interpretation
by any Bermuda Government authority or court of competent jurisdiction
which imposes on the Company any condition with respect to the Series A
Preferred Shares as a result of which any dividend payment is reduced, the
Company shall give notice to the holders of Series A Preferred Shares of
such event and all such reductions shall be borne in full by the holders of
Series A Preferred Shares (but only to the extent permitted by law).
Section 4. Liquidation Rights.
------------------
(a) In the event of any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, before any dividend payment
or distribution of the assets of the Company (whether capital or surplus)
shall be made or set apart for payment to the holders of Junior Shares, the
holders of the Series A Preferred Shares shall be entitled to receive
$25.00 per Series A Preferred Share plus an amount equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the date
of final distribution to such holders; but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of the Series A Preferred Shares shall be
insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any shares of any class or series of Parity
-5-
<PAGE>
Shares, then such assets, or the proceeds thereof, shall be distributed
among the holders of Series A Preferred Shares and any such Parity Shares
ratably in accordance with the respective amounts that would be payable on
such Series A Preferred Shares and any such Parity Shares if all amounts
payable thereon were paid in full. For the purposes of this Section 4, (i)
a consolidation, amalgamation or merger of the Company with one or more
corporations or other entities, (ii) a sale, lease or conveyance of all or
substantially all of the shares of capital stock or the property or
business of the Company or (iii) a statutory share exchange shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(b) Subject to the rights of the holders of shares of any series or
class or classes of shares of the Company's stock ranking on a parity with
or prior to the Series A Preferred Shares upon liquidation, dissolution or
winding up, upon any liquidation, dissolution or winding up of the Company,
after payment shall have been made in full to the holders of the Series A
Preferred Shares, as provided in this Section 4, any other series or class
or classes of Junior Shares shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, according to their respective
numbers of shares, and the holders of the Series A Preferred Shares shall
not be entitled to share therein.
Section 5. Redemption at the Option of the Company.
---------------------------------------
(a) Subject to Section 5(d) and Section 9 hereof, the Series A
Preferred Shares shall not be redeemable by the Company prior to the tenth
anniversary of the Issue Date. On and after the tenth anniversary of the
Issue Date, the Company, at its option, may redeem the Series A Preferred
Shares, in whole at any time or from time to time in part at the option of
the Company, for cash at a redemption price of $25.00 per Series A
Preferred Share, plus any amounts payable pursuant to Section 5(b) hereof.
(b) Upon any redemption of Series A Preferred Shares pursuant to
this Section 5, the Company shall pay all accrued and unpaid dividends, if
any, thereon to the Call Date, without interest. If the Call Date falls
after a dividend payment record date and prior to the corresponding
Dividend Payment Date, then each holder of Series A Preferred Shares at the
close of business on such dividend payment record date shall be entitled to
the dividend payable on such shares on the corresponding Dividend Payment
Date notwithstanding the redemption of such shares before such Dividend
Payment Date or the Company's default in the payment of the dividend due.
Except as provided above, the Company shall make no payment or allowance
for unpaid dividends, whether or not in arrears, on Series A Preferred
Shares called for redemption.
(c) Unless full cumulative dividends on the Series A Preferred
Shares and any class or series of Parity Shares shall have been declared
and paid or declared and
-6-
<PAGE>
set apart for payment for all past Dividend Periods and the then current
Dividend Period (including such dividend periods on any Parity Shares), the
Series A Preferred Shares and any Parity Shares may not be redeemed under
this Section 5 in part and the Company may not otherwise purchase or
acquire Series A Preferred Shares or any Parity Shares, otherwise than
pursuant to a purchase or exchange offer made on the same terms to all
holders of Series A Preferred Shares and Parity Shares or pursuant to
Section 9 hereof.
(d) At any time prior to the tenth anniversary of the Issue Date,
if the Company shall have submitted to the holders of its Common Shares a
proposal for amalgamation, consolidation, merger, statutory share exchange
or any proposal for any other matter that requires for its validation or
effectuation an affirmative vote of the holders of the Series A Preferred
Shares at the time outstanding, acting as a single class, the Company, at
its option, may redeem all of the outstanding Series A Preferred Shares for
cash at a redemption price of $26.00 per Series A Preferred Share, plus any
amounts payable pursuant to Section 5(b) hereof.
(e) Notice of the redemption of any Series A Preferred Shares under
this Section 5 shall be mailed by first-class mail to each holder of record
of Series A Preferred Shares to be redeemed at the address of each such
holder as shown in the Register of Members, not less than 30 nor more than
90 days prior to the Call Date. Neither the failure to mail any notice
required by this paragraph (e), nor any defect therein or in the mailing
thereof, to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to
the other holders. Any notice which was mailed in the manner herein
provided shall be conclusively presumed to have been duly given on the date
when the same would be delivered in the ordinary course of transmission,
whether or not the holder receives the notice. Each such mailed notice
shall state, as appropriate: (1) the Call Date; (2) the number of Series A
Preferred Shares to be redeemed and, if fewer than all the Series A
Preferred Shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (3) the redemption price; (4) the
place or places at which certificates for such shares are to be
surrendered; and (5) that dividends on the Series A Preferred Shares to be
redeemed shall cease to accrue on such Call Date except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after the
Call Date (unless the Company shall fail to make available, as hereinafter
provided, an amount of cash necessary to effect such redemption), (i)
except as otherwise provided herein, dividends on the Series A Preferred
Shares so called for redemption shall cease to accrue; (ii) such shares
shall no longer be deemed to be outstanding; (iii) all rights of the
holders thereof as holders of Series A Preferred Shares of the Company
shall cease (except the right to receive cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their
certificates if so required and to receive any dividends payable thereon);
and (iv) any officer of the Company shall be entitled, on behalf of such
holder and as its attorney-in-fact, to execute and deliver any and all
documents as may be necessary to effect such redemption. The Company's
obligation to provide
-7-
<PAGE>
cash in accordance with the preceding sentence shall be deemed fulfilled
if, on or before the Call Date, the Company shall deposit with a bank or
trust company (which may be an affiliate of the Company) that has an office
in the Borough of Manhattan, City of New York, and that has, or is an
affiliate of a bank or trust company that has, capital and surplus of at
least $50,000,000, funds necessary for such redemption, in trust, with
irrevocable instructions that such cash be applied to the redemption of the
Series A Preferred Shares so called for redemption. No interest shall
accrue for the benefit of the holders of Series A Preferred Shares to be
redeemed on any cash so set aside by the Company. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years from the Call
Date shall revert to the general funds of the Company, after which
reversion the holders of such shares so called for redemption shall look
only to the general funds of the Company for the payment of such cash.
As promptly as practicable after the surrender, in accordance with the
notice given as aforesaid, of the certificates for any Series A Preferred
Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and if the notice shall so state), such shares
shall be exchanged for any cash (without interest thereon) for which such
shares have been redeemed. If fewer than all the outstanding Series A
Preferred Shares are to be redeemed, shares to be redeemed shall be
selected by the Company from outstanding Series A Preferred Shares not
previously called for redemption pro rata (as nearly as may be
practicable), by lot or by any other method determined by the Company in
its sole discretion to be equitable. If fewer than all the Series A
Preferred Shares represented by any certificate are redeemed, then new
certificates representing the unredeemed shares shall be issued without
cost to the holder thereof.
Section 6. Shares To Be Retired. All Series A Preferred Shares which
--------------------
shall have been issued and reacquired in any manner by the Company shall be
restored to the status of authorized but unissued shares of the Company's stock,
without designation as to class or series.
Section 7. Ranking. Any class or series of shares of the Company's stock
-------
shall be deemed to rank:
(a) prior to the Series A Preferred Shares, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series A Preferred Shares;
(b) on a parity with the Series A Preferred Shares, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof shall
be different from those of the Series A Preferred Shares, if the holders of
such class or series and the Series A Preferred
-8-
<PAGE>
Shares shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other
("Parity Shares");
-------------
(c) junior to the Series A Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such class or series shall be Junior Shares; and
(d) junior to the Series A Preferred Shares, as to the payment of
dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Fully Junior
Shares.
Section 8. Special Representation and Voting Rights.
----------------------------------------
(a) Except as otherwise provided in this Section 8 and as otherwise
required by law, holders of the Series A Preferred Shares shall have no
voting rights; provided, however, that each holder of Series A Preferred
-------- -------
Shares shall be entitled to notice of all shareholders' meetings at the
same time and in the same manner as notice is given to the shareholders
entitled to vote at such meetings and shall have the right to attend such
meetings.
(b) Whenever, at any time or times, dividends payable on Series A
Preferred Shares or any class or series of Parity Shares shall be in
arrears (whether or not such dividends have been earned or declared) in an
amount equivalent to dividends for six full Dividend Periods (whether or
not consecutive), then, immediately upon the happening of such event, the
holders of Series A Preferred Shares, together with the holders of shares
of every other class or series of Parity Shares (all such other classes or
series, the "Voting Preferred Shares"), voting as a single class regardless
-----------------------
of class or series, shall have the right (the "Special Representation
----------------------
Right") to elect two special representatives (the "Special
-------
Representatives"). The Special Representatives shall not be directors or
---------------
officers of the Company but shall be entitled to receive notice of all
Board meetings and to take part in such Board meetings, with the privilege
of voice but not vote. At any time after the Special Representation Right
shall have been vested, the Secretary of the Company may, and upon the
written request of any holder of Series A Preferred Shares (addressed to
the Secretary at the principal office of the Company) shall, call a special
meeting of the holders of the Series A Preferred Shares and of the Voting
Preferred Shares for the election of the two Special Representatives, such
call to be made by notice similar to that provided in the Bye-Laws of the
Company for a special general meeting of the shareholders or as required by
law. If any such special meeting required to be called as above provided
shall not be called by the Secretary within 20 days after receipt of any
such request, then any holder of Series A Preferred Shares may call such
meeting, upon the notice above provided, and for that purpose shall have
access to the Register of Members. Alternatively, the two Special
-9-
<PAGE>
Representatives may be elected by a resolution in writing, which may be in
counterparts, signed by all of the holders of the Series A Preferred Shares
and of the Voting Preferred Shares. Any Special Representative elected by
the holders of the Series A Preferred Shares and the Voting Preferred
Shares may be removed, with or without cause, and any vacancy that may
occur in the position of Special Representative may be filled (i) by a
majority vote at any special meeting of the holders of the Series A
Preferred Shares and the Voting Preferred Shares, voting as a single class,
or (ii) by a resolution in writing, which may be in counterparts, signed by
all of the holders of the Series A Preferred Shares and the Voting
Preferred Shares. If any interim vacancy shall occur in the position of
Special Representative prior to a special meeting or written resolution of
the holders of the Series A Preferred Shares and the Voting Preferred
Shares, a successor shall be chosen by the then remaining Special
Representative or the successor of such remaining Special Representative,
to serve until a successor is elected at a special meeting or by written
resolution, or until the position of Special Representative terminates as
hereinafter provided. At any time or times when the Special Representation
Right shall have been vested and shall not have ceased pursuant to this
paragraph, the Company shall cause, to the extent permitted under Bermuda
law, the election of two additional directors of LaSalle Re who shall be
designated by the Special Representatives (the "Subsidiary Voting Right").
In the event that the Special Representatives do not agree with respect to
the designation of the aforesaid two directors, each Special Representative
shall be entitled to designate one of such directors. Whenever all
arrearages in dividends on the Series A Preferred Shares and the Voting
Preferred Shares then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been declared
and paid or declared and set apart for payment, then the Special
Representation Right and the Subsidiary Voting Right shall cease (but
subject always to the same provision for the vesting of such rights in the
case of any future arrearages in an amount equivalent to dividends for six
full Dividend Periods), and the positions of all persons elected as Special
Representatives shall forthwith terminate.
(c) So long as any Series A Preferred Shares are outstanding, in
addition to any other vote or consent of shareholders required by law or by
the Company's Bye-Laws, as amended, the affirmative vote of the holders of
at least 75% of the Series A Preferred Shares at the time outstanding,
acting as a single class, given either in writing without a meeting or by
vote in person or by proxy at any meeting called for the purpose, shall be
necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the Company's Memorandum of Association, Bye-Laws or
this Certificate of Designation that would vary the rights,
preferences or voting powers of the holders of the Series A Preferred
Shares;
(ii) An amalgamation, consolidation, merger or statutory share
exchange that affects the Series A Preferred Shares, unless in each
such case
-10-
<PAGE>
each Series A Preferred Share (i) shall remain outstanding with no
variation in its rights, preferences or voting powers or (ii) shall be
converted into or exchanged for preferred shares of the surviving
entity having rights, preferences and voting powers identical to that
of a Series A Preferred Share;
(iii) The authorization, creation or any increase in the
authorized amount of, any shares of any class or series or any
security convertible into shares of any class or series ranking prior
to the Series A Preferred Shares in the payment of dividends or the
distribution of assets on any liquidation, dissolution or winding up
of the Company; or
(iv) Any other transaction or action which would amount to a
variation of the rights, preferences or voting powers of the holders
of the Series A Preferred Shares;
provided, however, that any action to authorize or create or to increase
-------- -------
the authorized amount of, any Fully Junior Shares or Parity Shares shall
not be deemed to vary the rights, preferences or voting powers of the
holders of Series A Preferred Shares; and provided, further, that no such
-------- -------
vote of the holders of Series A Preferred Shares shall be required if,
prior to the time when any of the foregoing actions is to take effect, all
outstanding Series A Preferred Shares shall have been redeemed.
(d) The holders of the Series A Preferred Shares shall not be
entitled to vote on any sale of all or substantially all of the assets of
the Company.
(e) For purposes of any vote by the holders of the Series A
Preferred Shares pursuant to the foregoing provisions of this Section 8,
each Series A Preferred Share shall have one (1) vote per share, except
that when any class or series of Voting Preferred Shares shall have the
right to vote with the Series A Preferred Shares as a single class on any
matter, then the Series A Preferred Shares and such class or series of
Voting Preferred Shares shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise
required by applicable law or as set forth herein, the Series A Preferred
Shares shall not have any other voting rights or powers, and the consent of
the holders thereof shall not be required for the taking of any action by
the Company.
Section 9. Limitation on Ownership.
-----------------------
(a) Limitation. Notwithstanding any other provision of the terms
----------
of the Series A Preferred Shares, except as provided in the next sentence
and in Section 9(b), no Person shall at any time directly or indirectly
acquire ownership of more than 9.9% of the outstanding Series A Preferred
Shares. Any Series A Preferred Shares owned by a Person in excess of such
9.9% shall be deemed "Excess Preferred Shares." Within 10 days of becoming
-----------------------
aware of the existence of Excess Preferred Shares (whether by notice on
Schedule 13D or otherwise), the Company shall initiate
-11-
<PAGE>
the repurchase of any and all Excess Preferred Shares by giving notice of
repurchase (the "Repurchase Notice") to the holder or holders thereof,
-----------------
unless, prior to the giving of such Repurchase Notice the holder shall have
disposed of its ownership in the Excess Preferred Shares. The Repurchase
Notice shall set forth the number of Series A Preferred Shares constituting
Excess Preferred Shares, the repurchase price and the place and date of the
closing at which the certificates representing such Excess Preferred Shares
are to be surrendered and the repurchase price paid. The closing date shall
be no more than 10 days after the date on which the Company mails the
Repurchase Notice by first-class mail (such date of mailing hereinafter
referred to as the "Repurchase Date"). The Company will be entitled to
---------------
assign its repurchase right to a third party or parties, who may be other
shareholders of the Company, with the consent of any such assignee(s). The
Company may revoke the Repurchase Notice at any time before it (or its
assignee) pays for the Series A Preferred Shares. Neither the Company nor
its assignee(s) shall be obliged to give general notice to the Company's
shareholders of any intention to repurchase or the conclusion of any
repurchase of Series A Preferred Shares. The repurchase price of each
Excess Preferred Share called for such repurchase shall be the average
daily per Series A Preferred Share closing sales price, if the Series A
Preferred Shares are listed on a national securities exchange or are
reported on the Nasdaq National Market System, and if the Series A
Preferred Shares are not so listed or reported, shall be the mean between
the average per Series A Preferred Share closing bid prices and the average
per Series A Preferred Share closing asked prices, in each case during the
30-day period ending on the Business Day prior to the Repurchase Date, or
if there have been no sales on a national securities exchange or the Nasdaq
National Market System and no published bid quotations and no published
asked quotations with respect to Series A Preferred Shares during such 30-
day period, the repurchase price shall be the price determined by the Board
in good faith. From and after the Repurchase Date (i) except as otherwise
provided herein, dividends on the Series A Preferred Shares so called for
repurchase shall cease to accrue; (ii) such shares shall no longer be
deemed to be outstanding; (iii) all rights of the holders thereof as
holders of Series A Preferred Shares of the Company shall cease (except the
right to receive cash payable upon such repurchase, without interest
thereon, upon surrender and endorsement of their certificates if so
required and to receive any dividends payable thereon); and (iv) any
officer of the Company shall be entitled, on behalf of such holder and as
its attorney-in-fact, to execute and deliver any and all documents as may
be necessary to effect such repurchase. Nothing in this Section 9(a) shall
preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
(b) Exemptions. The limitation on ownership set forth in
----------
Section 9(a) shall not apply to the acquisition of Series A Preferred
Shares by an underwriter in a public offering of Series A Preferred Shares
and shall not apply to the ownership of Series A Preferred Shares by a
managing underwriter in the initial public offering of Series A Preferred
Shares. The Board, in its sole and absolute discretion, may exempt from the
ownership limitation set forth in Section 9(a) certain designated Series A
Preferred Shares owned by a Person who has provided the Board with evidence
and assurances
-12-
<PAGE>
acceptable to the Board that ownership of such shares will cause no adverse
tax, legal or regulatory consequences to the Company, any of the Company's
subsidiaries or any of the Company's shareholders.
Section 10. Record Holders. The Company and the Transfer Agent may deem
--------------
and treat the record holder of any Series A Preferred Shares, as the same
appears in the Register of Members, as the true and lawful owner thereof for all
purposes, and neither the Company nor the Transfer Agent shall be affected by
any notice to the contrary. Payments in respect of Series A Preferred Shares
shall be sent to the holders thereof at their address most recently noted on the
Register of Members and, in the case of joint holders of Series A Preferred
Shares, may be made to all such joint holders but sent to that one of the joint
holders of Series A Preferred Shares who is first named in the Register of
Members at his address most recently noted in the Register of Members or shall
be made payable to such person or persons and sent to such address as all the
joint holders of such Series A Preferred Shares may in writing direct. Cheques
in payment of any obligation of the Company to holders of Series A Preferred
Shares shall be sent by first-class mail at the risk of the holder of the Series
A Preferred Shares, and due payment of a cheque shall be full satisfaction of
the obligation represented thereby notwithstanding any notice which the Company
may have whether express or otherwise of any right, title or interest or claim
of any other person to or in such Series A Preferred Shares.
Section 11. Sinking Fund. The Series A Preferred Shares shall not be
------------
entitled to the benefits of any retirement or sinking fund.
Section 12. Conversion. The Series A Preferred Shares shall not be
----------
convertible into or exchangeable for any other securities of the Company.
-13-
<PAGE>
Exhibit 5.1
[Letterhead of Conyers Dill & Pearman]
DWPC/siw/309064/d.331411
14 March 1997
LaSalle Re Holdings Limited
25 Church Street
Hamilton, Bermuda
Dear Sirs:
RE: LASALLE RE HOLDINGS LIMITED (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection
with the preparation of a registration statement on Form S-3 Registration No.
333-23273 (the "Registration Statement") relating to the registration of an
offering (the "Offering") of up to 3,000,000 Series A Preferred Shares of the
Company (the "Series A Preferred Shares").
For the purposes of giving this opinion, we have examined the Registration
Statement, copies of minutes of the Company's board of directors and of its
shareholders, and such other documents and made such enquiries as to questions
of law as we have deemed necessary in order to render the opinions set forth
below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies of documents (whether or not
certified), (b) the accuracy and completeness of all factual representations
made in the Registration Statement and other documents reviewed by us, (c) the
authority of all persons signing any documents reviewed by us, (d) that there is
no provision of the law of any jurisdiction, other than Bermuda, which would
have any implication in relation to the opinions expressed herein.
<PAGE>
-2-
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda.
On the basis of, and subject to, the foregoing, we are of the opinion that:
1. the Series A Preferred Shares to be offered pursuant to the Offering, when
issued by the Company and paid for in accordance with the terms of the
Offering, will be legally issued, fully paid and non-assessable;
2. the discussions set forth under the headings "Certain Tax Considerations -
Taxation of the Company and its Subsidiaries - Bermuda" and "Certain Tax
Considerations - Taxation of Shareholders - Bermuda Taxation" accurately
reflect our opinion with respect to the matters set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the sections entitled
"Certain Tax Considerations" and "Legal Matters" in the Registration Statement.
Yours faithfully,
CONYERS DILL & PEARMAN
/s/Conyers Dill & Pearman
<PAGE>
Exhibit 8.2
[LETTERHEAD OF MAYER, BROWN & PLATT]
March 18, 1997
LaSalle Re Limited
25 Church Street
P.O. Box HM 1502
Hamilton HM FX, Bermuda
Re: LaSalle Re Holdings Limited
---------------------------
Gentlemen:
We have acted as counsel to LaSalle Re Limited, a Bermuda corporation (the
"Company"), and to LaSalle Re Holdings Limited, a Bermuda corporation
("Holdings"), in connection with the corporate proceedings (the "Corporate
Proceedings") taken and to be taken relating to the public offerings of the
Series A Preferred Shares (the "Series A Preferred Shares") of Holdings. We
have also participated in the preparation and filing with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, of a
registration statement on Form S-3 (the "Registration Statement") relating to
the Common Shares. In this connection, we have examined such corporate and
other records, instruments, certificates and documents as we considered
necessary to enable us to express this opinion.
In rendering the opinion set forth in the paragraph below, we have relied
upon the Internal Revenue Code of 1986, as amended (the "Code"), legislative
history, Treasury regulations, judicial authorities, published positions of the
Internal Revenue Service (the "IRS") and such other authorities as we have
considered to be relevant. No tax rulings will be sought from the IRS with
respect to any of the matters discussed herein.
Based on the foregoing, we hereby confirm that, subject to the limitations
set forth therein, the discussion set forth under
<PAGE>
March 18, 1997
Page 2
the captions "Risk Factors -- Tax Matters" and "Certain Tax Considerations"
accurately summarizes our opinion of the material U.S. federal income tax
consequences that could result from the purchase, ownership and disposition of
the Series A Preferred Shares by entities or individuals who hold the Series A
Preferred Shares as "capital assets" within the meaning of section 1221 of the
Code and are subject to U.S. federal income taxation without regard to the
source of their income, and the material federal income tax consequences
applicable to the operations of Holdings and its subsidiaries, including the
Company.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the captions "Certain Tax
Considerations" and "Legal Matters."
We are admitted to practice law in the State of Illinois and we express no
opinions as to matters under or involving any laws other than the laws of the
State of Illinois and the federal law of the United States of America.
Very truly yours,
MAYER, BROWN & PLATT
By /s/ George W. Craven
---------------------------------
George W. Craven
<PAGE>
Exhibit 8.3
[LETTERHEAD OF CLYDE & CO]
18 March 1997
VGS/97-00895
Dear Sirs
Opinion
We have acted as legal advisers in England and Wales to LaSalle Re Limited, a
Bermudian corporation, ("LaSalle Re") and its subsidiaries, LaSalle Re
(Services) Limited, a United Kingdom company, ("Services") and LaSalle Re
Corporate Capital Ltd., a Bermudian corporation, ("LaSalle Re Capital"), in
connection with, inter alia:
(i) a Contact Services Agreement between LaSalle Re and Services; and
(ii) an application by LaSalle Re Capital, for corporate membership of Lloyd's.
We have also commented at your request, made on behalf of LaSalle Re Holdings
Limited ("the Company"), on the Registration Statement described below.
This Option is furnished to you solely for your benefit and is not to be relied
upon by any other person without our written consent.
1. In rendering this opinion we have considered the following documents:
(a) the Company's Registration Statement on Form S-3 (No 333-23273) dated
13 March 1997 and any amendments thereto (the "Registration
Statement");
[LETTERHEAD OF CLYDE & CO]
<PAGE>
-2-
(b) a Contact Office Services Agreement dated 1 September 1994;
(c) a letter dated 23 August 1994 from Verner Southey of Clyde & Co to
Alan Williams of the UK Department of Trade and Industry (Insurance
Division) (the "DTI Letter");
(d) a draft memorandum dated 4 May 1994 from Clyde & Co to CNA
International, London, agents for LaSalle Re, headed "LaSalle Re:
Proposed Contact Office in the UK" (the "First Memorandum");
(e) a memorandum dated 6 June 1994 from Clyde & Co to CNA International,
London headed "LaSalle Re: Management and Control Issues" (the "Second
Memorandum"); and
(f) the document filed by Clyde & Co with Lloyd's in relation to the
application by LaSalle Re Capital for corporate membership of Lloyd's.
2. In connection with this Opinion we have assumed:
(a) that the Company, LaSalle Re and Services carry on business in
conformity with the description in the Registration Statement;
(b) that Services carries on business in conformity with the description
in the DTI Letter and the recommendations made by Clyde & Co in the
First Memorandum;
(c) that LaSalle Re Capital will not carry on any business other than that
of an insurer accepting and reinsuring risks as a corporate member of
Lloyd's acting through managing agents at Lloyd's;
(d) that neither the Company nor LaSalle Re has any place of business or
carry on any business in the United Kingdom other than through
Services or LaSalle Re Capital;
(e) that Services does not have any place of business or carry out any
business function or activity in the United Kingdom save for those
governed by the Contact Office Services Agreement; and
(f) that the management and control of the Company and LaSalle Re are
exercised wholly outside the United Kingdom and in accordance with the
Second Memorandum.
<PAGE>
-3-
We do not in our capacity as legal advisors to the Company in England and
Wales have any personal knowledge of any matter which is inconsistent
with the facts assumed above but we have not carried on any investigation
or verification of those facts.
Based upon and subject to the foregoing, we are of the opinion that:
(i) Services is subject to tax in the United Kingdom in respect of its own
income;
(ii) LaSalle Re Capital is subject to tax in the United Kingdom in respect of
its profits and gains as an underwriting member of Lloyd's but that;
(iii) the activities of Services and LaSalle Re Capital will not cause the
Company or LaSalle Re to be subject to United Kingdom tax on any portion
of their net income.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the section entitled
"Certain Tax Considerations" in the Registration Statement.
Yours faithfully
/s/ Clyde & Co
Clyde & Co
303147
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Consent of Independent Chartered Accountants Exhibit 23.4
The Board of Directors
LaSalle Re Holdings Limited
The audits referred to in our report dated October 19, 1996 included the related
consolidated financial statement schedules of LaSalle Re Holdings Limited as at
September 30, 1996 and 1995 and for the years ended September 30, 1996 and 1995
and for the period from October 26, 1993 (the date of incorporation) to
September 30, 1994 incorporated by reference in the registration statement.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick
Chartered Accountants
Hamilton, Bermuda
March 18, 1997
