<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LASALLE RE HOLDINGS LIMITED
---------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF ANNUAL GENERAL MEETING
December 30, 1998
Hamilton, Bermuda
TO THE SHAREHOLDERS OF LASALLE RE HOLDINGS LIMITED:
The Annual General Meeting of LaSalle Re Holdings Limited (the "Company")
will be held on Wednesday, February 24, 1999 at 9:00 a.m., local time, at the
Elbow Beach Hotel, Paget, Bermuda, for the following purposes:
(1) To elect three directors to hold office until 2002;
(2) To appoint KPMG Peat Marwick as the Company's independent auditors
for the fiscal year ending September 30, 1999 and authorize the Board of
Directors to set the fees for the independent auditors; and
(3) To transact such other further business, if any, as lawfully may be
brought before the meeting.
The shareholders will also receive at the Annual General Meeting the
Company's financial statements for the fiscal year ended September 30, 1998 as
approved by the Company's Board of Directors.
Only shareholders of record, as shown by the transfer books (Register of
Members) of the Company, at the close of business on December 24, 1998 are
entitled to notice of, and to vote at, the Annual General Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE
USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY
STATEMENT CONTAINED ON THE FOLLOWING PAGES.
By Order of the Board of Directors,
Victor H. Blake, O.B.E.
Chairman, Chief Executive Officer
and President
<PAGE>
LASALLE RE HOLDINGS LIMITED
25 CHURCH STREET
P.O. BOX HM 1502
HAMILTON HM FX BERMUDA
DECEMBER 30, 1998
PROXY STATEMENT
The Board of Directors of LaSalle Re Holdings Limited (the "Company") is
soliciting the accompanying proxy to be voted at the Annual General Meeting of
the Company to be held at 9:00 a.m., local time, on February 24, 1999, at the
Elbow Beach Hotel, Paget, Bermuda, and any adjournments thereof. When the
proxy is properly executed and returned, the common shares of the Company, par
value U.S. $1.00 per share (the "Common Shares"), it represents will, subject
to any direction to the contrary, be voted at the meeting in favor of items
(1) and (2) set forth in the "Notice of Annual General Meeting" attached
hereto.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy. However, such action must be taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.
Shareholders of record as of the close of business on December 24, 1998 will
be entitled to vote at the meeting. As of December 24, 1998, there were
outstanding 15,773,274 Common Shares of the Company entitled to vote at the
meeting, with each Common Share entitling the holder of record on such date to
one vote.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the
affirmative vote of a majority of the votes cast at the Annual General
Meeting, provided there is a quorum (consisting of not less than two persons
present in person or by proxy holding at least 50% of the issued and
outstanding Common Shares entitled to vote at the Annual General Meeting). The
Company will appoint one or more inspectors of election to count votes cast in
person or by proxy. Common Shares owned by shareholders electing to abstain
from voting will be counted towards the presence of a quorum. However, such
Common Shares, and Common Shares owned by shareholders and not voted in person
or by proxy at the Annual General Meeting, will not be counted towards the
majority needed to elect a director or approve any other matter before the
shareholders and thus will have no effect on the outcome of those votes.
"Broker non-votes" will be counted towards the presence of a quorum, but will
not be counted towards the majority needed to elect a director or approve any
other matter before the shareholders and thus will have no effect on the
outcome of those votes.
The Company has enclosed a copy of its 1998 Annual Report to Shareholders
along with this Proxy Statement. This Proxy Statement, the attached Notice of
Annual General Meeting and the accompanying proxy card are first being mailed
to shareholders on or about December 30, 1998.
The Company knows of no specific matter to be brought before the Annual
General Meeting that is not referred to in the attached Notice of Annual
General Meeting and this Proxy Statement. If any such matter comes before the
meeting, including any shareholder proposal properly made, the proxy holders
will vote proxies in accordance with their best judgment with respect to such
matters. To be properly made, a proposal must comply with the Company's Bye-
Laws and must relate to a specific agenda item listed in the attached Notice
of Annual General Meeting.
ELECTION OF DIRECTORS
(PROPOSAL 1 ON PROXY CARD)
The Company's Board of Directors consists of 9 directors and is divided into
three classes with the terms of office of each class ending in successive
years. Each class of directors consists of three directors.
1
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The Board of Directors has nominated William J. Adamson, Ivan P. Berk and
Paul J. Zepf for election as directors of the Company to serve three-year
terms to expire at the Annual General Meeting in 2002 and until their
respective successors shall have been elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
It is the intention of the persons named as proxies, subject to any
direction to the contrary, to vote in favor of the candidates nominated by the
Board of Directors. If any one or more of the nominees is unable or unwilling
to serve, the proxies will, subject to any direction to the contrary, be voted
for such other person or persons as the Board of Directors may recommend, or
the size of the Board of Directors may be reduced. The proxies cannot be voted
for more than three persons for director.
Certain information with respect to nominees for election as directors
proposed by the Board of Directors of the Company and the other directors
whose terms of office as directors will continue after the Annual General
Meeting, including their principal occupation for the past five years, is set
forth below.
NOMINEES FOR ELECTION TO TERM EXPIRING IN 2002
William J. Adamson, age 45, has been Deputy Chairman and a director of the
Company since its organization in October 1995, a director of the Company's
subsidiary, LaSalle Re Limited ("LaSalle Re") since its organization in
October 1993 and Deputy Chairman of LaSalle Re since November 1995. He also
served as Chairman of LaSalle Re from October 1993 to May 1994 and President
of LaSalle Re from October 1993 to November 1995. Mr. Adamson has 23 years of
experience with CNA Financial Corporation (together with its affiliates "CNA")
in the reinsurance industry in Chicago and London. CNA Re includes CNA
International Reinsurance Company Ltd. ("CNA Re London"), a leading property
and casualty insurer operating in the London market, and the U.S. reinsurance
operations of CNA. Mr. Adamson has acted as Chief Executive Officer of CNA Re
and has been Chief Executive Officer of CNA Re London and Senior Vice
President of Continental Casualty Company ("CCC") since November 1995. He
acted as Chief Operating Officer of CNA Re from its formation in April 1994 to
November 1995. Mr. Adamson has been the head of the Chicago-based reinsurance
operations of CNA Re and President of CNA Re London and CNA (Bermuda) Services
Limited ("CNA Bermuda") since 1993. Prior to his appointment as Senior Vice
President of CCC, he was a Group Vice President and a Vice President of CCC
and its principal insurance subsidiaries.
Ivan P. Berk, age 61, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since May 1997.
Previously, he had been an alternate director of LaSalle Re since its
organization in October 1993. He is a Senior Executive Director of Aon
Advisors, Inc., where he has been Manager of Equities since March 1993 and was
Senior Portfolio Manager from December 1990 until March 1993. Mr. Berk has 30
years of investment experience, including the formation of six insurance
related companies in the last five years.
Paul J. Zepf, age 33, has been a director of the Company and LaSalle Re
since May 1996. Previously, he had been an alternate director of LaSalle Re
since its organization in October 1993. He is a Managing Director of Corporate
Advisors, L.P. (an investment advisory services firm) ("Corporate Advisors"),
which he joined in 1989. Mr. Zepf is also a Managing Director of Centre
Partners Management llc, which manages Centre Capital Investors II, L.P. and
related investment funds. Mr. Zepf is a director of Firearms Training Systems,
Inc. and The Learning Company, Inc.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THIS MEETING
Directors Whose Terms Expire in 2000
Victor H. Blake, O.B.E., age 63, has been Chairman, Chief Executive Officer
and President of the Company since its organization in October 1995, Chairman
and Chief Executive Officer of LaSalle Re since May 1994 and President of
LaSalle Re since November 1995. Mr. Blake has 39 years of experience in the
insurance
2
<PAGE>
industry, concentrating primarily in reinsurance. Mr. Blake served as Chairman
and Chief Executive Officer of CNA Re London from its formation in 1976 until
October 1995. In addition, he acted as the Chairman and Chief Executive
Officer of CNA Re from its formation in April 1994 until October 1995 and
continues to act as non-executive Chairman of CNA Re. Mr. Blake is also
founder Chairman of LUC Holdings Ltd, the shareholders of the London
Underwriting Centre, a marketplace housing many of the London market insurers
and reinsurers. He served as a member of the Council of the London Insurance
and Reinsurance Market Association and its predecessor bodies from 1977 to
1996. Mr. Blake was awarded the Order of the British Empire in 1997.
Tim I. Madden, age 42, has been a director of the Company and LaSalle Re
since September 1997, when he was elected by the Board of Directors to fill a
vacancy created by the resignation of Harvey G. Simons. Mr. Madden has 20
years of experience in the insurance industry, concentrating primarily in
reinsurance. Mr. Madden has acted as Executive Vice President and Chief
Underwriting Officer for the U.S. reinsurance operations of CNA Re and has
been Group Vice President of CCC since 1994. Mr. Madden was Vice President of
CCC and head of the CNA Reinsurance Division, Specialty Operations Department,
from 1992 to 1994. Mr. Madden is a member of the board of the Brokers and
Reinsurance Markets Association/Reinsurance Association of America
("BRMA/RAA"). He is also co-chair of the placing committee of the BRMA/RAA
joint venture development of EDI Placing Messages.
Lester Pollack, age 65, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since its
organization in October 1993. Mr. Pollack was a Deputy Chairman of LaSalle Re
from October 1993 to November 1995. Mr. Pollack has been a Managing Director
of Centre Partners Management llc (an investment services firm) since 1995,
Senior Managing Director of Corporate Advisors (an investment advisory
services firm) since 1988, Managing Director of Lazard Freres & Co. LLC (an
investment banking firm) since 1986 and Chief Executive Officer of Centre
Partners, L.P. since 1986. Mr. Pollack is a director of Firearms Training
Systems, Inc., Parlex Corporation, SunAmerica Corporation and Tidewater Inc.
Directors Whose Terms Expire in 2001
Clement S. Dwyer, Jr., age 50, has been a director of the Company and
LaSalle Re since February 1998. He has 28 years of experience in the insurance
industry, concentrating primarily in worldwide property casualty business and
the financing of insurance enterprises. Since 1997, Mr. Dwyer has been
Managing Member of URSA Advisors, L.L.C., which provides advisory and capital-
raising services to insurance and reinsurance companies. From May to December
1996 he was President and Chief Executive Officer of Signet Star Holdings,
Inc., the holding company for the reinsurance subsidiaries of W.R. Berkeley
Corp. From 1992 to 1996, he was Executive Vice President and Director of Guy
Carpenter & Company, Inc. (a reinsurance broker and a subsidiary of Marsh &
McLennan Co. Inc.), by whom he had been employed in various executive
capacities since 1970.
Donald P. Koziol, Jr., age 50, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since November 1995.
Mr. Koziol has been President since February 1997 of Aon Services Group (an
insurance firm formerly known as Aon Specialty Group), of which he was
Executive Vice President from January 1995 to February 1997. Mr. Koziol was
Chairman and Chief Executive Officer of Carvill America, Inc. (a reinsurance
brokerage firm) from 1984 until 1994.
Peter J. Rackley, age 60, has been a director of the Company since its
organization in October 1995 and a director of LaSalle Re since its
organization in October 1993. Mr. Rackley has been Chairman and Group Chief
Executive of Western International Financial Group Ltd. (a Bermuda-based
insurance business) since 1993. Prior to that, Mr. Rackley held senior
management executive positions in General Accident Fire & Life Assurance
Company plc and NZI Insurance Group. Mr. Rackley is also Chairman of Catlin
Westgen Holdings Limited, Westgen High Ridge Holdings Limited and CHA
Insurance Company Limited and Deputy Chairman of Commercial Risk Partners
Limited.
3
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended September 30, 1998, the Board of Directors met six
times, acted by written consent nine times and held seventeen committee
meetings. All directors continuing in office or standing for reelection
attended at least 75% of the aggregate of such meetings of the Board of
Directors and the committees of the Board of Directors of which they were a
member (or of such meetings during such director's tenure on the Board of
Directors), except for Mr. Pollack. Mr. Pollack attended certain meetings of
the Board of Directors and certain committee meetings by proxy, as permitted
under Bermuda law, and on this basis attended in person or by proxy more than
75% of the aggregate number of meetings of the Board of Directors and the
committees of the Board of Directors on which he served. The Board of
Directors has established five standing committees: Audit, Compensation,
Investment/Finance, Nominating and Underwriting/Actuarial.
Audit Committee
The Audit Committee is composed entirely of non-management directors and
reviews the adequacy and effectiveness of the Company's external auditors and
their audit report. The Audit Committee is comprised of Peter J. Rackley
(Chairman), Clement S. Dwyer and Paul J. Zepf. The Audit Committee met three
times in fiscal year 1998.
Compensation Committee
The Compensation Committee is composed entirely of non-management directors
and has responsibility for determining executive compensation. The
Compensation Committee is comprised of Lester Pollack (Chairman), Clement S.
Dwyer and Peter J. Rackley. The Compensation Committee met four times in
fiscal year 1998.
Investment/Finance Committee
The Investment/Finance Committee approves guidelines that provide standards
to ensure portfolio liquidity and safety, approves investment managers and
custodians for portfolio assets and recommends asset allocation to the Board
of Directors. The Investment/Finance Committee is comprised of Ivan P. Berk
(Chairman), William J. Adamson, Victor H. Blake and Paul J. Zepf. The
Investment/Finance Committee met four times in fiscal year 1998.
Nominating Committee
The Nominating Committee reviews candidates for the Board of Directors and
makes recommendations to the Board of Directors. The Nominating Committee will
consider a shareholder's suggestion for candidates if mailed to: LaSalle Re
Holdings Limited, 25 Church Street, P.O. Box HM 1502, Hamilton HM FX Bermuda.
The Nominating Committee is comprised of William J. Adamson, (Chairman), Ivan
P. Berk, Lester Pollack and Peter J. Rackley. The Nominating Committee met one
time in fiscal year 1998.
Underwriting/Actuarial Committee
The Underwriting/Actuarial Committee establishes guidelines for the
Company's underwriters and actuaries and periodically reviews underwriting
decisions. The Underwriting/Actuarial Committee is comprised of William J.
Adamson (Chairman), Donald P. Koziol, Tim I. Madden, Peter J. Rackley and Paul
J. Zepf. The Underwriting/Actuarial Committee met four times in fiscal year
1998.
DIRECTOR COMPENSATION
Non-management directors of the Company are each paid a director's fee of
$20,000 per annum plus $3,000 per annum in respect of each committee
appointment. Non-management directors also receive reimbursement of their
reasonable cost for attendance at each meeting (including committee meetings).
In addition, directors of the Company are eligible to purchase in each
calendar year up to $25,000 in value of the Company's Common Shares at a 15%
discount to fair market value pursuant to the Company's Employee Stock
Purchase Plan.
4
<PAGE>
CERTAIN TRANSACTIONS
Underwriting Services Agreement
Pursuant to an underwriting services agreement (the "Underwriting Services
Agreement") with CNA Bermuda, CNA Bermuda provided underwriting services and
underwrote all classes of insurance and reinsurance as agent for LaSalle Re
through September 30, 1998. Pursuant to the Underwriting Services Agreement,
LaSalle Re accrued underwriting service fees to CNA Bermuda of $2,535,523 for
the year ended September 30, 1998. Pursuant to the Underwriting Services
Agreement these fees represented (i) 1.5% of gross written and collected
premiums per fiscal year and (ii) for periods during which the Company's loss
ratio since inception of LaSalle Re was 57% or less, subject to certain
conditions, an underwriting profit commission of 4.0% of the aggregate net
underwriting profits of LaSalle Re. The fees for underwriting services were
negotiated and approved by a vote of directors of LaSalle Re who were not
affiliated with either CNA or Aon Corporation (together with its affiliates,
"Aon"). In addition, the Company incurred profit commissions to CNA Bermuda of
$1,058,985 for the year ended September 30, 1998.
Effective on October 1, 1998, the Company assumed direct responsibility for
its underwriting and all of the personnel formerly assigned by CNA Bermuda to
provide contract underwriting services to the Company became employees of the
Company. In connection with these changes, the Company entered into an
underwriting support services agreement (the "Underwriting Support Services
Agreement") with CNA Re Services Company ("CRSC") and CNA Bermuda. Under the
Underwriting Support Services Agreement, which expires on September 30, 2001,
CRSC provides underwriting support services to the Company on a daily or
hourly fee basis when and as requested by the Company. The Company pays CNA
Bermuda a $333,333 annual retainer, which is credited against CRSC's daily or
hourly fees and associated travel expenses. In recognition of the contribution
made by CNA Bermuda to the development of the Company's business, the Company
has agreed, subject to certain conditions, to pay CNA Bermuda an underwriting
profit commission of 1.67% of the aggregate net underwriting profits of
LaSalle Re for each fiscal year during the term of the Underwriting Support
Services Agreement for which the Company's loss ratio was 70% or less. With
respect to business written prior to October 1, 1998, the Underwriting Support
Services Agreement provides for the Company to pay CNA Bermuda the service fee
and underwriting profit commission, subject to certain modifications, that
would have been due under the former underwriting services agreement, which
was terminated effective on October 1, 1998.
Investment Management Agreement
Pursuant to an investment management agreement (the "Investment Management
Agreement") with Aon Advisors (UK) Limited ("Aon Advisors"), Aon Advisors
provides LaSalle Re with investment management services in accordance with the
investment guidelines set by the Board of Directors. The Investment Management
Agreement expires on September 30, 2000. Pursuant to the terms of the
Investment Management Agreement, the Company pays Aon Advisors a fee equal to
0.16375% per annum of the assets under management. The fees for investment
management services were determined in arm's length commercial negotiations.
The performance of Aon Advisors and the fees paid are periodically reviewed by
the Investment Committee of the Board of Directors. LaSalle Re paid Aon
Advisors investment management fees of $850,247 for the year ended September
30, 1998.
Shareholders Agreement
Pursuant to the Amended and Restated Shareholders Agreement dated November
27, 1995 among the Company, LaSalle Re, each of the founding shareholders of
LaSalle Re (the "Founding Shareholders") and Mr. Blake (the "Shareholders
Agreement"), certain holders of Common Shares have the right to demand that
the Company register such shares with the Securities and Exchange Commission
in an underwritten or at the market public offering. Such shareholders also
have the right to have their Common Shares registered in connection with any
registration of securities by the Company. The demand right may be exercised
at any time, subject to limitations. In connection with the first four such
registrations, the Company is required to bear all registration
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<PAGE>
and selling expenses, other than underwriting fees and commissions. Pursuant
to the Shareholders Agreement, the Company also is (i) prevented from engaging
in certain activities without the consent of a majority of the holders of
exchangeable non-voting shares of LaSalle Re (the "Exchangeable Non-Voting
Shares"), (ii) prevented from incurring certain indebtedness without the
consent of a majority of the holders of Common Shares who are parties to the
Shareholders Agreement and (iii) prevented from changing the terms of the
Exchangeable Non-Voting Shares (other than as contemplated by a conversion
agreement among the Company, LaSalle Re and certain of the Founding
Shareholders) without the consent of a majority of both of (A) the outstanding
Exchangeable Non-Voting Shares and (B) the Common Shares held by certain
Founding Shareholders. In addition, upon a liquidation of LaSalle Re, holders
of Exchangeable Non-Voting Shares will be contractually obligated to the
parties to the Shareholders Agreement to transfer to holders of Common Shares
such amount so as to ensure that the proceeds of the liquidation will be
shared on a pro rata basis among the holders of Common Shares and the
Exchangeable Non-Voting Shares. Additionally, LaSalle Re may not knowingly
sell reinsurance so as to generate "related person insurance income" of 20% or
more of its gross insurance income without approval of 85% of the Board of
Directors of LaSalle Re. If LaSalle Re knowingly sells reinsurance so as to
generate "related person insurance income" of 20% or more of its gross
insurance income, then any such shareholder may exercise its registration
rights regardless of the number of Common Shares it holds or, at the option of
the Company, the Company may repurchase such shareholder's shares for their
fair market value.
Excess Ownership Agreement
Pursuant to an excess ownership agreement dated November 27, 1995 among
LaSalle Re, the Company and certain Founding Shareholders, each such
shareholder will at the request of the Company (i) provide certain information
on its ownership to the Company, (ii) notify the Company of any change in its
ownership and (iii) inquire of each new partner or new 10% owner of the
shareholder if such party owns shares in the Company or any ownership interest
in any shareholder of the Company. Additionally, under certain circumstances
such Founding Shareholders will agree to dispose of all or part of their
respective shares of the Company or to exchange them for Exchangeable Non-
Voting Shares.
Reinsurance Transactions with Aon and CNA
In the year ended September 30, 1998, the Company assumed premiums totaling
approximately $16,917,135 from a ceding company related to CNA. Absent CNA's
relationship with the Company, such premiums may not have been written by the
Company. In addition, during the same period the Company wrote premiums
totaling approximately $27,190,283 through brokers related to Aon; brokerage
fees incurred in respect of this business were approximately $2,719,028 during
the same period. The terms of these reinsurance transactions were negotiated
between the parties and the Company believes that such terms were at market
rates. The Company anticipates similarly assuming premiums from a CNA related
ceding company and writing premiums through Aon related brokers during the
year ending September 30, 1999. However, the quantity of such business for the
1999 fiscal year cannot yet be determined.
Loan to Executive Officer
In accordance with Mr. Blake's employment agreement, the Company loaned Mr.
Blake $695,000 to purchase a condominium in Bermuda. The loan is evidenced by
a promissory note. The Company has agreed to reimburse Mr. Blake for interest
paid on the loan. The loan is due at the time the condominium is sold or
otherwise transferred by Mr. Blake. Subject to Mr. Blake's right to repay the
loan upon termination of his employment, the sale of the condominium is
required within a reasonable time following termination of his employment. If
Mr. Blake elects to repay the loan upon termination of his employment, the
principal of, and any unpaid interest on, the loan will be due on the 50th day
after the termination date. If, as of the termination date, the fair market
value of the condominium has increased over the amount of the loan, Mr. Blake
shall also be required to pay the amount of the increase to the Company. If
the fair market value of the condominium has
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<PAGE>
decreased to below the purchase price, the amount due from Mr. Blake shall be
reduced by the amount of the decrease.
Other Transactions
In 1997, the Company entered into a $100 million multi-year Catastrophe
Equity Put ("CatEPut") option program for which the Company pays an annual
option premium of $2.35 million. The option was partly written by affiliates
of Aon and CNA. The transaction was negotiated at arm's length and approved by
the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, officers and beneficial owners of more than 10 percent of any
class of equity securities of the Company are subject to the reporting
requirements of Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). During the year ended September 30, 1998, Tim I. Madden,
a director elected to fill an interim vacancy on the Board of Directors, was
late in filing a Form 3 following his election, but such form has now been
filed.
7
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BENEFICIAL OWNERSHIP OF COMMON SHARES
DIRECTORS, OFFICERS AND OTHER BENEFICIAL OWNERS
The following table sets forth information, as of December 24, 1998, with
respect to the beneficial ownership of Common Shares and Exchangeable Non-
Voting Shares by (i) Victor H. Blake, the Company's Chairman, Chief Executive
Officer and President (the "CEO"), (ii) each of the Company's other executive
officers whose salary and bonus for the 1998 fiscal year exceeded $100,000
(the "Named Executive Officers"), (iii) each of the Company's directors and
nominees for the position of director, (iv) all directors, nominees for
director and executive officers of the Company as a group and (v) each
shareholder who is known by the Company to beneficially own more than five
percent of the outstanding Common Shares or Exchangeable Non-Voting Shares.
Unless otherwise indicated, the named individual or entity has sole voting and
investment power over the Common Shares set forth below.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL COMMON
PERCENT NUMBER OF PERCENT OF SHARES AND
NUMBER OF OF EXCHANGEABLE EXCHANGEABLE EXCHANGEABLE
COMMON COMMON NON-VOTING NON-VOTING NON-VOTING RESTRICTED
NAME OF BENEFICIAL OWNER SHARES SHARES SHARES SHARES SHARES STOCK(1)
- - ------------------------ --------- ------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Victor H. Blake(2)...... 146,228 * -- -- * 10,376
William J. Adamson...... 2,104 * -- -- * --
Ivan P. Berk............ 300 * -- -- * --
Andrew Cook(3).......... 36,463 * -- -- * 3,607
Clement S. Dwyer, Jr.... 10,000 * -- -- * --
Guy Hengesbaugh(4)...... 49,947 * -- -- * 4,919
Donald P. Koziol, Jr.... -- -- -- -- -- --
Tim I. Madden........... 883 * -- -- * --
Lester Pollack(5)....... 911,917 5.78 -- -- 2.53 --
Peter J. Rackley........ 1,104 * -- -- * --
Paul J. Zepf(6)......... 913,521 5.79 -- -- 2.54 --
All directors and
executive officers as a
group (11 persons)(7).. 1,160,550 7.29 -- -- 5.69 --
Aon Corporation(8)...... 1,205,274 7.64 2,443,500 54.63% 10.13 --
123 North Wacker Drive
Chicago, IL 60606
CNA Financial
Corporation(9)......... 1,425,354 9.04 2,029,146 45.37 9.59 --
CNA Plaza
Chicago, IL 60685
Corporate Partners(5)... 911,917 5.78 -- -- 2.53 --
30 Rockefeller Plaza
Suite 5050
New York, NY 10020
FMR Corp.(10)........... 1,489,400 9.44 -- -- 7.36 --
82 Devonshire Street
Boston, MA 02109
SDI, Inc(11)............ 974,710 6.18 -- -- 2.71 --
232 Court Street
Reno, NV 89501
Schafer Capital
Management(12)......... 808,780 5.13 -- -- 3.99 --
101 Carnegie Center
Princeton, NJ 08540
</TABLE>
8
<PAGE>
- - --------
*Less than 1%
(1) Includes shares of restricted stock that would vest if the holder were to
exercise certain options pursuant to which such restricted shares were
granted as anti-dilution adjustments (see Note (5) to Summary Compensation
Table and "Amendment of Certain Options" below), which options are
exercisable within 60 days of December 24, 1998. Excludes 10,447, 11,076
and 4,456 shares of restricted stock awarded to Messrs. Blake, Hengesbaugh
and Cook, respectively, which cannot vest within 60 days of December 24,
1998 because the options pursuant to which such restricted shares were
granted as anti-dilution adjustments will not vest within such 60-day
period. Also excludes 30,000, 20,000 and 10,000 shares of restricted stock
that were awarded to Messrs. Blake, Hengesbaugh and Cook, respectively, on
October 1, 1998, all of which will vest more than 60 days after December
24, 1998.
(2) Includes options to purchase 79,536 Common Shares which are exercisable
within 60 days of December 24, 1998.
(3) Includes options to purchase 26,400 Common Shares which are exercisable
within 60 days of December 24, 1998.
(4) Includes options to purchase 36,000 Common Shares which are exercisable
within 60 days of December 24, 1998.
(5) Of these 911,917 shares, approximately 85%, 6% and 9% are owned by
Corporate Partners, L.P., Corporate Offshore Partners, L.P. and the State
Board Administration of Florida ("SBA"), respectively, which are the
registered shareholders of the Common Shares. Corporate Advisors, as the
general partner of Corporate Partners, L.P. and Corporate Offshore
Partners, L.P., has sole voting and investment power as to the shares held
by them. Corporate Advisors serves as investment manager over a certain
investment management account for SBA and has sole voting and dispositive
power with respect to the Common Shares held by SBA. All shares listed in
the table as being beneficially owned by Mr. Pollack are beneficially
owned by Corporate Advisors. Mr. Pollack may be deemed to share voting and
investment power over such shares as the Chairman and Treasurer and as a
Director of LFCP Corp. and Senior Managing Director of Corporate Advisors.
LFCP Corp. is the sole general partner of Corporate Advisors and a wholly
owned subsidiary of Lazard Freres & Co. LLC. Mr. Pollack is a Managing
Director of Lazard Freres & Co. LLC. Mr. Pollack disclaims beneficial
ownership of such shares. Excludes options to purchase 454,500
Exchangeable Non-Voting Shares.
(6) Of these 913,521 shares, 911,917 are owned by Corporate Partners, L.P.,
Corporate Offshore Partners, L.P. and SBA. Corporate Advisors, as the
general partner of Corporate Partners, L.P. and Corporate Offshore
Partners, L.P., has sole voting and investment power as to the shares held
by them. Corporate Advisors serves as investment manager over a certain
investment management account for SBA and has sole voting and dispositive
power with respect to the Common Shares held by SBA. Mr. Zepf may be
deemed to share voting and investment power over such shares as a Managing
Director of Corporate Advisors. Mr. Zepf disclaims beneficial ownership of
such shares. Excludes options to purchase 454,500 Exchangeable Non-Voting
Shares.
(7) Includes options to purchase 141,936 Common Shares which are exercisable
within 60 days of December 24, 1998.
(8) Of these 1,205,274 shares, approximately 46%, 27% and 27% are owned by Aon
Risk Consultants (Bermuda) Ltd. ("Aon Bermuda"), Combined Insurance
Company of America ("CICA") and Virginia Surety Company, Inc. ("VSC"),
respectively, which are the registered shareholders of the Common Shares
and wholly-owned subsidiaries Aon. Of the 2,443,500 Exchangeable Non-
Voting Shares, approximately 50% are owned by each of CICA and VSC.
(9) All of the 1,425,354 Common Shares are owned by CCC, the registered
shareholder of the Common Shares and a wholly-owned subsidiary of CNA. Of
the 2,029,146 Exchangeable Non-Voting Shares, approximately 84% and 16%
are owned by CCC and CNA Bermuda, respectively. According to information
provided by CNA, at November 30, 1998, approximately 85% of the
outstanding voting securities of CNA were owned by Loews Corporation.
9
<PAGE>
(10) FMR Corp. is the parent holding company of Fidelity Management & Research
Company, which serves as investment adviser to FID Low Priced Stock Fund.
Each of FMR Corp. and Fidelity Management & Research Company has sole
investment power with respect to the 1,489,400 Common Shares owned by FID
Low Priced Stock Fund. The Board of Trustees of FID Low Priced Stock Fund
holds sole voting power with respect to these shares.
(11) Excludes options to purchase 68,175 Exchangeable Non-Voting Shares.
(12) Of these 808,780 shares, approximately 80% are owned by Schafer Capital
Management, Inc. (a registered investment adviser) and approximately 20%
are owned by Schafer Cullen Capital Management, Inc. (a registered
investment adviser and an "affiliate," as defined by the Investment
Advisers Act of 1940, as amended, of Schafer Capital Management, Inc.).
Each of Schafer Capital Management, Inc. and Schafer Cullen Capital
Management, Inc. has sole voting and investment power as to the shares
held by it.
MANAGEMENT
COMPENSATION
The following table sets forth, in summary form, the compensation earned by
the CEO and the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ --------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS $(2) OPTIONS #(3) COMPENSATION
- - ------------------ ------ -------- -------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Victor H. Blake......... 1998 $575,000 $225,000 $137,393(4) $796,601(5) -- $188,114(6)
Chief Executive Officer 1997 575,000 581,877 209,124(4) -- 85,218 308,644(7)
and President 1996 592,038 525,500 136,590(4) -- 85,218 822,308(8)
Guy D. Hengesbaugh(9)... 1998 300,000 150,000 291,634(10) $420,626(5) 28,000 612,600(11)
Executive Vice
President and 1997 230,000 115,000 241,419(10) -- 45,000 9,660(11)
and Chief Operating
Officer 1996 200,000 100,000 104,756(10) -- 45,000 7,788(11)
Andrew Cook............. 1998 225,000 100,000 91,369(12) $308,454(5) 22,000 22,500(13)
Senior Vice President
and 1997 185,000 125,000 90,322(12) -- 33,000 18,500(13)
Chief Financial Officer 1996 161,231 75,000 76,077(12) -- 33,000 13,701(13)
</TABLE>
- - --------
(1) In fiscal 1997, Messrs. Blake, Hengesbaugh and Cook elected to use
$143,757, $28,746 and $24,760, respectively, of the bonus shown in this
column to purchase Common Shares at a discount pursuant to the Company's
Employee Stock Purchase Plan.
(2) As of September 30, 1998, the number and value of the restricted Common
Shares held by each of the above-named executive officers was: Mr. Blake
20,823 shares ($554,412), Mr. Hengesbaugh 10,995 shares ($292,742), and
Mr. Cook 8,063 shares ($214,677). Such values were determined by
multiplying the number of shares by $26.625 (the closing price of a Common
Share on the New York Stock Exchange ("NYSE") on September 30, 1998 ).
(3) In addition to the new options listed in the table, the Company amended
the terms of outstanding options in March 1998, restoring the original
exercise prices which had previously been reduced pursuant to anti-
dilution adjustments. See "Amendment of Certain Options" below.
(4) Includes housing expenses of $113,949 for fiscal 1998, $108,269 for fiscal
1997 and $116,346 for fiscal 1996. For fiscal 1997 also includes a $60,179
discount on 5,806 Common Shares that Mr. Blake elected to purchase using a
portion of his annual bonus pursuant to the Company's Employee Stock
Purchase Plan. See Note (1).
10
<PAGE>
(5) Pursuant to the amended anti-dilution provisions of the 1995 Options and
the 1997 Options (see "Amendment of Certain Options" below), the CEO and
the Named Executive Officers received the following awards of restricted
stock during the fiscal year ended September 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
AWARDED WITH RESPECT AWARDED WITH RESPECT
NAME DATE OF AWARD TO THE 1995 OPTIONS TO THE 1997 OPTIONS
- - ---- ------------------ -------------------- --------------------
<S> <C> <C> <C>
Victor H. Blake......... March 20, 1998 10,524 5,816
June 19, 1998 2,008 1,910
September 18, 1998 350 215
Guy D. Hengesbaugh...... March 20, 1998 5,557 3,071
June 19, 1998 1,061 1,008
September 18, 1998 184 114
Andrew Cook............. March 20, 1998 4,075 2,252
June 19, 1998 778 739
September 18, 1998 135 84
</TABLE>
The value of the restricted stock awarded to the above-named individuals
in respect of the year ended September 30, 1998 was determined by
multiplying the numbers of shares awarded by the closing price of a Common
Share on the NYSE on the respective grant dates described below. The
closing price of a Common Share on the NYSE on March 20, 1998 was $39.25;
the closing price on June 19, 1998 was $35.75 and the closing price on
September 18, 1998 was $26.88. The restricted shares vest only upon the
exercise of the options pursuant to which such restricted shares were
granted as anti-dilution adjustments (see "Amendment of Certain Options"
below). The restricted shares awarded to Messrs. Blake, Hengesbaugh and
Cook with respect to the 1995 Options are associated with options 60% of
which had vested by November 27, 1998, with an additional 20% to vest on
each of November 27, 1999 and November 27, 2000. The restricted shares
awarded to Mr. Blake with respect to the 1997 Options are associated with
options 33 1/3% of which had vested on May 19, 1998, with an additional 33
1/3% to vest on each of May 19, 1999 and May 19, 2000. The restricted
shares awarded to Mr. Hengesbaugh and Mr. Cook with respect to the 1997
Options are associated with options 20% of which had vested on May 19,
1998, with an additional 20% to vest on each of May 19, 1999, May 19,
2000, May 19, 2001 and May 19, 2002.
(6) Consists of $100,000 paid in connection with certain pension benefits for
services rendered in fiscal 1998, $33,320 paid in respect of pension and
compensation consulting services, $23,202 paid for life insurance covering
Mr. Blake and $31,592 paid for permanent health insurance covering Mr.
Blake.
(7) Consists of $126,085 paid for monthly pension contributions, $99,999 paid
in connection with certain pension benefits for services rendered in
fiscal 1997, $48,285 paid in respect of pension and compensation
consulting services, $23,705 paid for life insurance covering Mr. Blake
and $10,570 paid for permanent health insurance covering Mr. Blake.
(8) Consists of $489,061 paid in connection with certain pension benefits for
services rendered in fiscal 1996 and prior periods, $249,863 paid in
connection with certain pension benefits for future services, $88,096 paid
for monthly pension contributions, $22,032 paid for life insurance
covering Mr. Blake and $3,256 paid for permanent health insurance covering
Mr. Blake.
(9) The compensation indicated was paid by CNA Bermuda pursuant to the
Underwriting Services Agreement. See "Election of Directors--Certain
Transactions--Underwriting Services Agreement."
(10) Includes housing expenses and overseas allowances of $264,000 for fiscal
1998, $218,840 for fiscal 1997 and $97,607 for fiscal 1996. For fiscal
1997 also includes a $12,034 discount on 1,161 Common Shares that Mr.
Hengesbaugh elected to purchase using a portion of his annual bonus
pursuant to the Company's Employee Stock Purchase Plan. See Note (1).
(11) For fiscal 1998, includes deferred compensation of $600,000 paid by CNA
Bermuda in recognition of the contribution Mr. Hengesbaugh made to
LaSalle Re's business in the first five years of its existence. Also
includes contributions to a 401(k) plan of $12,600, $9,660 and $7,788 for
fiscal 1998, 1997 and 1996, respectively.
11
<PAGE>
(12) Includes housing expenses of $78,000 for fiscal 1998, $60,000 for fiscal
1997 and $60,462 for fiscal 1996. For fiscal 1997 also includes a $10,365
discount on 1,000 Common Shares that Mr. Cook elected to purchase using a
portion of his annual bonus pursuant to the Company's Employee Stock
Purchase Plan. See Note (1).
(13) Consists of $22,500, $18,500 and $13,701 paid in connection with a
noncontributory pension plan for fiscal 1998, 1997 and 1996,
respectively.
The following table sets forth information concerning stock options that
were awarded on October 1, 1998 under the LaSalle Re Holdings Limited 1996
Long-Term Incentive Plan (the "Incentive Plan") to the Company's CEO and Named
Executive Officers with respect to the year ended September 30, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------- ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE
NAME GRANTED FISCAL YEAR PRICE EXPIRATION DATE 5% 10%
- - ---- ---------- ------------ -------- --------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Victor H. Blake......... -- -- -- -- -- --
Guy D. Hengesbaugh...... 28,000 18% $25.875 October 1, 2008 $ 455,634 $ 1,154,667
Andrew Cook............. 22,000 14% $25.875 October 1, 2008 $ 357,998 $ 907,238
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- - --------
(1) The options vest ratably with 33 1/3% vesting on each of October 1, 1999,
October 1, 2000 and October 1, 2001.
The following table sets forth information for the CEO and the Named
Executive Officers with regard to the number of Common Shares underlying
unexercised stock options and SARs, and the value of such stock options and
SARs, in each case at September 30, 1998. No stock options or SARs have been
exercised by any of the executive officers.
1998 FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SEPTEMBER 30, 1998 AT SEPTEMBER 30, 1998
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- ------------------------- -------------------------
<S> <C> <C>
Victor H. Blake(1).......... 126,122/385,186 $2,077,828/$5,315,260
Guy D. Hengesbaugh.......... 18,000/ 72,000 $ 132,750/$ 199,125
Andrew Cook................. 13,200/ 52,800 $ 97,350/$ 146,025
</TABLE>
- - --------
(1) Of the exercisable securities underlying Mr. Blake's options/SARs, 92,035
pertain to SARs and 34,087 to stock options. These are valued at
$1,826,435 and $251,393, respectively. Of the unexercisable securities
underlying Mr. Blake's options/SARs, 248,837 pertain to SARs and 136,349
to stock options. These are valued at $4,938,170 and $377,090,
respectively. The future exercisability of Mr. Blake's SARs will depend on
the Company's financial performance. Assuming that the Company's financial
performance continues at historical levels through December 31, 1998, only
20,453 of Mr. Blake's 248,837 currently unexercisable SARs will ever
become exercisable. If the remaining 228,384 of Mr. Blake's unexercisable
SARs are excluded from the calculations in the table, he has 156,802
unexercisable options/SARs, which are valued at $782,979.
AMENDMENT OF CERTAIN OPTIONS
Effective on March 20, 1998, holders of options granted under the Incentive
Plan in 1995 (the "1995 Options") and in 1997 (the "1997 Options") receive
awards of restricted stock under the Incentive Plan to
12
<PAGE>
compensate for the dilutive effect of certain dividends paid by the Company.
The awards of restricted stock vest only when the underlying options are
exercised. This anti-dilution provision superseded a prior provision which
compensated for the dilutive effect of certain dividends paid by the Company
by reducing the exercise price of the options. The new anti-dilution provision
was designed to provide the same economic benefit to holders of options as the
prior provision. However, in accordance with published views of the Securities
and Exchange Commission staff, the implementation of the new provision is
reported, solely for purposes of required disclosure under the securities
laws, as the surrender of an existing option followed by the grant of a new
option. The following table sets forth information concerning the amended
options and related repricing.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF EXERCISE ORIGINAL
SECURITIES MARKET PRICE PRICE AT OPTION TERM
UNDERLYING OF STOCK AT TIME OF REMAINING AT DATE
OPTIONS TIME OF REPRICING NEW OF
REPRICED REPRICING OR OR EXERCISE REPRICING OR
NAME DATE OR AMENDED AMENDMENT(S) AMENDMENT PRICE AMENDMENT
- - ---- ---- ---------- ------------ --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Victor H. Blake......... March 20, 1998 85,218 $39.25 $16.58 $19.25 November 27, 2005
85,218 $39.25 $26.58 $28.75 May 19, 2007
Guy D. Hengesbaugh...... March 20, 1998 45,000 $39.25 $16.58 $19.25 November 27, 2005
45,000 $39.25 $26.58 $28.75 May 19, 2007
Andrew Cook............. March 20, 1998 33,000 $39.25 $16.58 $19.25 November 27, 2005
33,000 $39.25 $26.58 $28.75 May 19, 2007
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, as amended, with
Victor H. Blake, pursuant to which he serves as Chairman of the Board of
Directors, Chief Executive Officer and President of the Company. The agreement
provides for an annual base salary of $575,000, effective October 1, 1996. In
addition, Mr. Blake is entitled to an annual non-discretionary bonus based on
the amount, if any, by which LaSalle Re's return on equity for that year
exceeds 15% per annum; effective October 1, 1998, Mr. Blake is entitled to an
annual partially discretionary bonus based in part on the amount, if any, by
which LaSalle Re's return on equity for that year exceeds 15% per annum. In
addition, Mr. Blake has been awarded 340,872 stock appreciation rights
("SARs") with respect to Common Shares. Of these SARs, 68,174 became
exercisable on January 1, 1997 and 23,861 became exercisable on January 1,
1998. Additional portions of these SARs may become exercisable on January 1,
1999 based upon the amount, if any, by which the Company's compound annual
rate of return exceeds 18% per annum for the entire measurement period. Once
exercisable, each SAR may be exercised on or before March 30, 2004 or, if
earlier, two years after Mr. Blake's termination of employment, for an amount
equal to the fair market value of a Common Share, minus an amount equal to
$16.67 minus dividend adjustments. The current exercise price is $6.78. The
Company's dividend policy will likely result in downward adjustments to this
exercise price. Alternatively, at the Company's sole discretion, the SARs will
entitle Mr. Blake to either (i) the number of special non-voting shares, par
value U.S. $1.00 per share, which were issued by LaSalle Re in connection with
the formation and capitalization of LaSalle Re (the "Special Non-Voting
Shares") equal to the aggregate value of the SARs divided by the fair market
value of a Common Share at the exercise date or (ii) upon payment of the base
value for each SAR, the number of Special Non-Voting Shares equal to the
number of SARs exercised. The SARs may also become exercisable upon the
occurrence of an "extraordinary transaction" involving a change in control of
the Company. The agreement also provides Mr. Blake with certain benefits,
including certain disability, pension and life insurance benefits, use of an
automobile, certain club memberships and reimbursement of expenses incurred on
a basis appropriate to an individual holding the position of chairman of a
company such as the Company. In addition, the Company has loaned $695,000 to
Mr. Blake in order to finance the purchase of a condominium in Bermuda. The
agreement expires on October 31, 2000; provided, however, that no bonus shall
be payable to Mr. Blake for the period from October 1, 2000 through October
31, 2000.
13
<PAGE>
Mr. Blake has agreed that, during the Non-Competition Period (as defined
below), he will not directly or indirectly (i) provide goods or perform
services for the benefit of any client, except with respect to goods provided
or services performed for the benefit of the Company or CNA by the Company
during the period in which Mr. Blake is employed by the Company or (ii)
solicit, attempt to solicit, or endeavor to procure engagement, for himself or
for any business, the opportunity to provide such goods or perform services
for any person (a) to whom the Company has provided such goods or performed
such services for the benefit of the Company or CNA in the 12-month period
prior to Mr. Blake's termination date or (b) to whom, during the six-month
period prior to Mr. Blake's termination date, the Company has devoted material
efforts to obtaining as a purchase of its goods or services. Mr. Blake has
also agreed that, during the Non-Competition Period, he will not directly or
indirectly, divert or attempt to divert any business from the Company. For
purposes of the agreement, the "Non-Competition Period" means (i) if Mr.
Blake's employment is terminated because of his permanent disability, for
cause or if Mr. Blake resigns, the period commencing on the date Mr. Blake's
employment is terminated and continuing for 24 months following such
termination date and (ii) if Mr. Blake terminates his employment following a
breach of the agreement by the Company or if Mr. Blake's employment is
otherwise terminated by the Company, the period commencing on the date Mr.
Blake's employment is terminated and continuing until the earlier to occur of
the last day of the agreement term or 24 months following the termination
date; provided that, for purposes of clause (ii), the Company may extend the
Non-Competition Period beyond the end of the agreement term to a specified
date not later than 24 months following the termination date upon continuation
of Mr. Blake's then applicable base salary.
The Company has entered into an employment agreement with Andrew Cook
pursuant to which he continues to serve as Senior Vice President, Chief
Financial Officer and Treasurer of both the Company and LaSalle Re. The
agreement is initially for a two-year term, effective October 1, 1998. The
agreement provides for automatic renewal on a daily basis beginning on October
1, 1999, such that at any time after October 1, 1999, the remaining term of
the agreement shall equal one year. However, the additional day-to-day
renewals may be terminated by notice from either party, so that the agreement
will expire on the one-year anniversary of the date such notice is given. The
agreement provides for an annual base salary of $275,000. In addition, Mr.
Cook is entitled to an annual partially discretionary bonus based in part on
LaSalle Re's return on equity. The agreement provides Mr. Cook with certain
benefits, including disability and pension benefits, automobile allowance,
club membership, housing and living allowance and reimbursement of reasonable
business expenses. The agreement also includes a non-competition clause that
is similar to the non-competition clause contained in Mr. Blake's employment
agreement and described above.
The Company has entered into an employment agreement with Guy Hengesbaugh
pursuant to which he serves as Executive Vice President and Chief Operating
Officer of the Company and the President and Chief Operating Officer of
LaSalle Re. The agreement is initially for a two-year term, effective October
1, 1998. The agreement provides for automatic renewal on a daily basis
beginning on October 1, 1999, such that at any time after October 1, 1999, the
remaining term of the agreement shall equal one year. However, the additional
day-to-day renewals may be terminated by notice from either party, so that the
agreement will expire on the one-year anniversary of the date such notice is
given. The agreement provides for an annual base salary of $400,000. In
addition, Mr. Hengesbaugh is entitled to an annual partially discretionary
bonus based in part on LaSalle Re's return on equity. The agreement provides
Mr. Hengesbaugh with certain benefits, including disability and pension
benefits, automobile allowance, club membership, housing and living allowance
and reimbursement of reasonable business expenses. The agreement also includes
a non-competition clause that is similar to the non-competition clause
contained in Mr. Blake's employment agreement and described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Pollack, Dwyer and Rackley. No member of the Compensation Committee is or was
an officer or employee of the Company or served as a director or a member of
the compensation committee of any other company, one of whose executive
officers served as a member of the Board of Directors or a member of the
Compensation Committee of the Board of Directors.
14
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is composed solely of
independent outside directors. Where appropriate, the Committee reviews and
considers the recommendations of management before determining compensation
policy. In addition, the Committee has employed outside consultants with
respect to certain compensation-related issues. The Company's compensation
programs are designed to be tied closely to Company performance and
shareholder value, and to enable the Company to attract and retain the best
possible executive talent.
In general, the compensation of the Company's executive officers is paid
pursuant to employment and service contracts previously approved by the
Compensation Committee or the Board of Directors. The relation between Company
performance and compensation is embodied in part in the bonus provisions
contained in those contracts. Messrs. Blake and Cook have been employees of
the Company since October 1, 1995. Prior to 1995, Messrs. Blake, Hengesbaugh
and Cook were officers of LaSalle Re and the compensation of Mr. Cook was paid
by Aon Bermuda pursuant to the Administrative Services Agreement. Until
October 1, 1998, Mr. Hengesbaugh was employed by CNA Bermuda and his
compensation was paid by CNA Bermuda pursuant to the Underwriting Services
Agreement. See "Election of Directors--Certain Transactions."
With respect to chief executive compensation, Mr. Blake's compensation
during the year was based on an amended and restated employment agreement
effective October 1, 1995. For the 1998 fiscal year, the contract provided for
a fixed annual salary and an annual non-discretionary performance-based bonus.
The measure of performance for purposes of the annual non-discretionary bonus
is LaSalle Re's return on equity for the year in question. Based on LaSalle
Re's return on equity for the 1998 fiscal year, this bonus amounted to $2,895.
A one-time award of SARs was previously granted under the contract, a portion
of which becomes exercisable based on the Company's compound annual rate of
return since the inception of the Company. See "Management--Employment
Agreements." Upon re-negotiation of the agreement in 1995, the Compensation
Committee and the Board of Directors took into account, among other things,
(1) their desire to compensate officers competitively with other companies in
the property catastrophe business, (2) Mr. Blake's past compensation and (3)
their view that, for purposes of determining compensation, the portion of
compensation tied to performance should be measured both on an annual basis,
as is done with the non-discretionary performance-based bonus, and on a long-
term basis in the form of equity or equity equivalents, as is done with the
SARs and stock options. Mr. Blake was also awarded a discretionary
performance-based bonus of $222,105 for the 1998 fiscal year. This bonus
recognized his extensive work on potential financial transactions during the
year. In addition the Committee recognized Mr. Blake's substantial efforts in
the renegotiation of the Support Services Agreement with an affiliate of CNA
Bermuda, which replaced the previous Underwriting Services Agreement as of
October 1, 1998. As a result of this project the Company now performs its own
underwriting services and has all work on its premises done by its own
employees.
Mr. Cook's compensation during the 1998 fiscal year was based on an
employment agreement. Based solely on LaSalle Re's return on equity for the
year, Mr. Cook qualified for a non-discretionary bonus of $566 provided under
the contract. On the recommendation of the Chief Executive Officer, based on
the achievement of financial and personal performance objectives and the
complexity of the financial transactions and planning matters undertaken by
the Company during the year, the Committee approved awarding him a
discretionary bonus of $99,434, resulting in a total bonus for the fiscal year
of $100,000.
In line with the Company's general compensation policies and the goal of
encouraging alignment of management and shareholder interests through equity
participation, on October 1, 1998 the Company granted awards of restricted
stock under the Incentive Plan to Messrs. Blake, Hengesbaugh and Cook and
granted awards of options under the Incentive Plan to Messrs. Hengesbaugh and
Cook. These awards were based on an analysis of the compensation offered by
publicly traded Bermuda-based property catastrophe companies. The option
awards were intended to reward performance during the 1998 fiscal year and the
restricted stock awards were intended as an incentive for future performance.
15
<PAGE>
Prior to March 20, 1998, options granted under the Company's Long-Term
Incentive Plan had an anti-dilution mechanism which adjusted the option
exercise price to compensate for the dilutive effect of certain dividends paid
by the Company. This anti-dilution mechanism could have resulted in variable
accounting treatment with recurring charges to earnings as the Company's stock
price fluctuated, which was not the original intent of the Board of Directors.
Accordingly, on March 20, 1998, the Board of Directors amended the outstanding
options, restoring the exercise price of the outstanding options to the
exercise price in effect on the date the options were originally granted (i.e.
$19.25 with respect to the options originally granted on November 27, 1995 and
$28.75 with respect to the options originally granted on May 19, 1997). In
lieu of the adjustment to the exercise price which had previously applied to
the options, the Company granted awards of restricted stock to the option
holders at the time of the amendment and subsequently when certain dividends
were paid by the Company. These grants of restricted stock to the option
holders will continue to be made when certain dividends are paid by the
Company. The restricted stock so granted vests only when the options
associated with such grant are exercised. The amendment to the options was
adopted because establishing a fixed exercise price largely eliminated the
variable accounting treatment associated with the options.
The Company is not a U.S. taxpayer, and therefore Section 162(m) of the U.S.
Internal Revenue Code (which restricts the deductibility of certain
compensation under U.S. tax rules) is inapplicable to the Company's
compensation payments.
COMPENSATION COMMITTEE
Lester Pollack, Chairman
Clement S. Dwyer, Jr.
Peter J. Rackley
16
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns, including reinvestment of dividends, on the Company's Common Shares
to such return for the NYSE composite index and the NYSE financials index for
the period beginning on November 21, 1995, the date of the Company's initial
public offering, and ending on September 30, 1998, assuming $100 was invested
on November 21, 1995. Each measurement point on the graph represents the
cumulative shareholder return as measured by the last reported sale price at
the end of the relevant period.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
AMONG LASALLE RE HOLDINGS (LSH), NYSE COMPOSITE INDEX AND NYSE FINANCIALS INDEX
<TABLE>
<CAPTION>
Measurement Period NYSE NYSE
(Fiscal Year Covered) LSH COMPOSITE INDEX FINANCIALS INDEX
--------------------- ------- --------------- ----------------
<S> <C> <C> <C>
Measurement Pt-
11/21/95 $100.00 $100.00 $100.00
FYE 9/30/96 $116.23 $115.75 $118.86
FYE 9/30/97 $189.52 $160.37 $182.73
FYE 9/30/98 $159.92 $165.62 $177.91
</TABLE>
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2 ON PROXY CARD)
The Company's independent auditors are appointed each year at the Annual
General Meeting of shareholders pursuant to the Board of Directors'
recommendation, which in turn is based on the recommendation of the Audit
Committee. In making its recommendation, the Audit Committee reviews both the
audit scope and estimate fees for professional services for the coming year.
The Board of Directors has recommended the engagement of KPMG Peat Marwick as
the Company's independent auditors for the year ending September 30, 1999.
KPMG Peat Marwick has had responsibility for examining the consolidated
financial statements of the Company and its subsidiaries since 1993.
Representatives of KPMG Peat Marwick will attend the Annual General Meeting
and will have an opportunity to make a statement if they wish. They will also
be available to answer questions at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF AND
AUTHORIZATION OF FEES FOR KPMG PEAT MARWICK AS THE COMPANY'S INDEPENDENT
AUDITORS.
17
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals must be received in writing by the Secretary of the
Company no later than September 8, 1999 and must comply with the requirements
of the Securities and Exchange Commission in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
Annual General Meeting to be held in 2000. Under the circumstances described
in, and upon compliance with, Rule 14a-4(c) under the Exchange Act, the
Company may solicit proxies in connection with such Annual General Meeting
which confer discretionary authority to vote on any shareholder proposals of
which the Secretary of the Company does not receive notice by November 22,
1999. Shareholders who intend to nominate persons for election as directors at
general meetings must comply with the advance notice procedures set forth in
the Bye-Laws of the Company in order for such nominations to be properly
brought before that general meeting. These advance notice procedures require
that written notice of such shareholder's intent to make such a nomination be
received by the Secretary of the Company not less than 60 days nor more than
120 days prior to the general meeting.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by the Company by mail, and may be made by
directors, officers and employees personally or by telephone or telegram.
Proxy cards and materials also will be distributed to beneficial owners of
Common Shares through brokers, custodians, nominees and other like parties,
and the Company expects to reimburse such parties for their charges and
expenses. Corporate Investor Communications, Inc., of Carlstadt, New Jersey,
has been retained to assist the Company in the solicitation of proxies at a
fee estimated not to exceed $5,000.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters that may
be presented at the Annual General Meeting other than those specifically set
forth in the attached Notice of Annual General Meeting. If any other matters
come before the meeting or any adjournment thereof, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their best judgment with respect to such matters.
By Order of the Board of Directors,
Victor H. Blake, O.B.E.
Chairman, Chief Executive Officer
and President
18
<PAGE>
PROXY
LASALLE RE HOLDINGS LIMITED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Andrew Cook, Michael B.
Ashford and Lisa J. Marshall, or any of them, proxies with full power of
substitution and each of them is hereby authorized to represent the undersigned
and to vote all shares of the Company held by the undersigned at the Annual
General Meeting of shareholders to be held at the Elbow Beach Hotel, Paget,
Bermuda on February 24, 1998 at 9:00 a.m. local time, or at any adjournment or
postponement thereof, on the matters set forth below in accordance with any
directions given by the undersigned and, in their discretion, on all other
matters that may properly come before the Annual General Meeting.
(1) TO ELECT DIRECTORS:
W.J. Adamson (to hold office until 2002)
Ivan P. Berk (to hold office until 2002)
Paul J. Zepf (to hold office until 2002)
(2) TO APPOINT KPMG Peat Marwick as the Company's independent auditors for
1999, and authorize the Board of Directors to set the fees for the
independent auditors.
You are encouraged to specify your choices by marking the appropriate boxes (SEE
REVERSE SIDE), but you need not mark any box if you wish to vote in accordance
with the Board of Directors' recommendations. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE>
[X] Please mark your votes as in this example. 6820
----
This proxy, when properly executed, will be voted in the manner directed
herein by the shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 and 2.
- - --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1 and 2.
- - --------------------------------------------------------------------------------
1. Election of Directors. (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
- - --------------------------------------------------
2. TO APPOINT KPMG as the Company's independent auditors for 1999, and authorize
the Board of Directors to set the fees for the independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
- - --------------------------------------------------------------------------------
Please sign below exactly as name(s) appears
hereon. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such.
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SIGNATURE(S) DATE
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SIGNATURE(S) DATE
- - ----------------------------------------------------------------------------
