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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-12823
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LaSalle Re Holdings Limited
(Exact name of registrant as specified in its charter)
Bermuda Not applicable
- ------------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
Continental Building, 25 Church Street, Hamilton HM12, Bermuda
--------------------------------------------------------------
(Address of principal executive offices)
441-292-3339
------------
(Registrant's Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] Not applicable [_]
The number of the Registrant's Common Shares (par value $1.00 per share)
outstanding as of, May 6, 1998 was 15,165,832.
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LaSalle Re Holdings Limited
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. Unaudited Consolidated Financial Statements.
Consolidated Balance Sheets
March 31, 1998 and September 30, 1997............................ 3
Consolidated Statements of Operations and Comprehensive Income
Three Months and Six Months ended March 31, 1998 and 1997........ 4
Consolidated Statements of Changes in Shareholders' Equity
Three Months and Six Months ended March 31, 1998 and 1997........ 5
Consolidated Statements of Cash Flows
Six Months ended March 31, 1998 and 1997......................... 6
Notes to Unaudited Consolidated Financial Statements............. 7
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................... 10
PART 11 - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................ 20
ITEM 2. Changes in Securities and Use of Proceeds........................ 20
ITEM 3. Defaults upon Senior Securities.................................. 20
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 20
ITEM 5. Other information................................................ 20
ITEM 6. Exhibits and Reports on Form 8-K................................. 21
Signatures................................................................. 22
</TABLE>
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<PAGE>
LaSalle Re Holdings Limited
Consolidated Balance Sheets
(Expressed in thousands of United States Dollars, except share
and per share data)
Unaudited
<TABLE>
<CAPTION>
======================================================================================================
March 31, 1998 September 30, 1997
<S> <C> <C>
Assets
Cash and cash equivalents $ 77,413 $ 54,761
Investments held as available for sale at fair value 508,l38 498,282
(amortized cost $504,925 : $495,7O5)
Accrued investment income 11,516 12,684
Reinsurance balances receivable 102,334 8O,O4l
Deferred acquisition costs 16,458 11,932
Prepaid reinsurance premiums 14,406 5,837
Other assets 28,321 22,551
-------------- ------------------
Total assets $758,586 $686,088
============== ==================
Liabilities
Reserve for losses and loss expenses $ 51,870 $ 45,491
Unearned premium reserve 110,524 88,490
Other liabilities 45,543 22,823
Dividend payable 11,374 10,703
-------------- ------------------
Total liabilities 219,311 167,507
-------------- ------------------
Minority Interest 97,628 93,355
-------------- ------------------
Shareholders' equity
Share capital authorised in the aggregate 100,000,000
shares, par value $1
Preferred shares
(issued & outstanding, 3,000,000 Series A
preferred shares par value $1,
liquidation preference $25 per share) 3,000 3,000
Common shares
(issued & outstanding, 15,165,150 : 15,073,914 par value $1) 15,165 15,074
Additional paid in capital 300,345 299,964
Accumulated other comprehensive income
Unrealized gain on investments 2,536 2,035
Retained earnings 120,601 105,153
-------------- ------------------
Total shareholders' equity 441,647 425,226
-------------- ------------------
Total liabilities, minority interest and
shareholders' equity $758,586 $686,088
============== ==================
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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3
<PAGE>
LaSalle Re Holdings Limited
Consolidated Statements of Operations and Comprehensive Income
(Expressed in thousands of United States Dollars, except share
and per share data)
Unaudited
<TABLE>
<CAPTION>
=================================================================================================================
Three Months Ended Six Months Ended
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
<S> <C> <C> <C> <C>
Revenues
Gross premiums written $ 94,631 $109,396 $104,255 $114,633
Premiums ceded (12,426) (10,151) (10,966) (10,151)
-------------- -------------- -------------- -------------
Net premiums written 82,205 99,245 93,289 104,482
Change in unearned premiums (40,299) (57,845) (13,464) (19,959)
-------------- -------------- -------------- -------------
Net premiums earned 41,906 41,400 79,825 84,523
Net investment income 8,583 8,143 17,035 16,291
Net realized gains on investments 1,613 392 2,017 423
Other income 0 0 63 0
-------------- -------------- -------------- -------------
Total revenues 52,102 49,935 98,940 101,237
-------------- -------------- -------------- -------------
Expenses
Losses and loss expenses incurred 19,938 6,886 28,636 17,723
Underwriting expenses 6,200 5,784 12,374 12,899
Operational expenses 3,514 2,621 5,604 5,925
Corporate expenses 0 529 0 1,368
Interest expense 439 536 1,002 603
Exchange (gain) loss (12) 881 (378) 1,974
-------------- -------------- -------------- -------------
Total expenses 30,079 17,237 47,238 40,492
-------------- -------------- -------------- -------------
Income before minority interest 22,023 32,698 51,702 60,745
Minority interest 4,290 8,933 10,191 15,840
-------------- -------------- -------------- -------------
Net income 17,733 23,765 41,511 44,905
Other comprehensive Income
Unrealized (losses) gains on securities (715) (5,326) 501 (2,530)
Less: reclassification adjustments
for gains (losses) included in net income 763 433 507 (45)
-------------- -------------- -------------- -------------
Total other comprehensive income 48 (4,893) 1,008 (2,575)
-------------- -------------- -------------- -------------
Comprehensive Income $ 17,781 $ 18,872 $ 42,519 $ 42,330
============== ============== ============== =============
Earnings per common share $1.06 $1.44 $2.53 $2.67
============== ============== ============== =============
Earnings per common share - assuming dilution $0.97 $1.34 $2.31 $2.50
============== ============== ============== =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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4
<PAGE>
LaSalle Re Holdings Limited
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in thousands of United States Dollars, except share
and per share data)
Unaudited
<TABLE>
<CAPTION>
=================================================================================================================
Three Months Ended Six Months Ended
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
<S> <C> <C> <C> <C>
Preferred shares par value $1
Balance at beginning of period $ 3,000 $ 0 $ 3,000 $ 0
Issue of shares 0 3,000 0 3,000
-------------- -------------- -------------- -------------
Balance at end of period $ 3,000 $ 3,000 $ 3,000 $ 3,000
============== ============== ============== =============
Common shares par value $1
Balance at beginning of period $ 15,134 $ 16,517 $ 15,074 $ 14,398
Exercise of share options 31 0 81 0
Issue of shares - employee stock purchase plan 0 0 10 0
Conversion of exchangeable non-voting shares 0 0 0 2,119
-------------- -------------- -------------- -------------
Balance at end of period $ 15,165 $ 16,517 $ 15,165 $ 16,517
============== ============== ============== =============
Additional paid in capital
Balance at beginning of period $300,322 $254,645 $299,964 $221,968
Issue of shares - employee stock purchase plan 23 10 381 17
Issue of preferred shares, net of
underwriting discount 0 70,283 0 70,283
Conversion of exchangeable non-voting shares 0 0 0 32,670
-------------- -------------- -------------- -------------
Balance at end of period $300,345 $324,938 $300,345 $324,938
============== ============== ============== =============
Unrealized loss on investments
Balance at beginning of period $ 3,251 $ 935 $ 2,035 $ (1,861)
Unrealized (loss) gain in period (715) (5,325) 501 (2,254)
Conversion of exchangeable non-voting shares 0 0 0 (275)
-------------- -------------- -------------- -------------
Balance at end of period $ 2,536 $ (4,390) $ 2,536 $ (4,390)
============== ============== ============== =============
Retained earnings
Balance at beginning of period $115,899 $ 93,502 $105,153 $ 72,943
Net income 17,733 23,765 41,511 44,905
Common share dividends (11,359) (11,727) (22,700) (23,454)
Preferred share dividends (1,641) 0 (3,282) 0
Exercise of share options (31) 0 (81) 0
Conversion of exchangeable non-voting shares 0 0 0 11,146
-------------- -------------- -------------- -------------
Balance at end of period $120,601 $105,540 $120,601 $105,540
============== ============== ============== =============
Total shareholders' equity $441,647 $445,605 $441,647 $445,605
============== ============== ============== =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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5
<PAGE>
LaSalle Re Holdings Limited
Consolidated Statements of Cash Flows
(Expressed In thousands of United States Dollars)
Unaudited
<TABLE>
<CAPTION>
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Six Months Ended
Cash flows from operating activities March 31, 1998 March 31, 1997
<S> <C> <C>
Net income $ 41,511 $ 44,905
Adjustments to reconcile net income to
cash provided by operating activities:
Minority interest in net income 10,191 15,840
Amortization of investment premium 484 1,241
Net gain on sale of investments (2,017) (423)
Unrealized loss on foreign exchange (521) 862
Changes in:
Reinsurance balances receivable (21,920) (37,992)
Deferred acquisition costs (4,526) (3,007)
Prepaid reinsurance premiums (8,569) (9,797)
Accrued investment income 1,168 937
Other assets (5,770) (18,642)
Reserve for losses and loss expenses 6,528 (6,599)
Unearned premium reserve 22,034 29,756
Other liabilities 22,556 27,458
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Cash provided by operating activities 61,149 44,539
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Cash flows from investing activities
Purchase of investments (234,223) (149,580)
Net purchases of short term investments 0 (1,947)
Proceeds on the sale of marketable securities 206,535 111,538
Proceeds on the maturity of marketable securities 20,000 46,000
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Cash (applied to) provided by investing activities (7,688) 6,011
--------- ---------
Cash flows from financing activities
Issue of shares 392 72,655
Dividends paid (31,201) (21,818)
--------- ---------
Cash (applied to) provided by investing activities (3O,8O9) 50,837
--------- ---------
Net Increase In cash and cash equivalents 22,652 101,387
Cash and cash equivalents at beginning of period 54,761 46,990
--------- ---------
Cash and cash equivalents at end of period $ 77,413 $ 148,377
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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6
<PAGE>
LaSalle Re Holdings Limited
Notes to Unaudited Consolidated Financial Statements
(Expressed in thousands of United States Dollars,
except share and per share data)
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1. General
The accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by generally accepted
accounting principles for complete financial statements are not included herein.
The interim financial statements should be read in conjunction with the LaSalle
Re Holdings Limited Annual Report on Form 10-K for the fiscal year ended
September 30, 1997.
Interim statements are subject to possible adjustments in connection with the
annual audit of the Company's financial statements for the full year; in the
Company's opinion, all adjustments necessary for a fair presentation of these
interim statements have been included and are of a normal and recurring nature.
Unless the context otherwise requires, references herein to the "Company"
include LaSalle Re Holdings Limited and its subsidiary, LaSalle Re Limited
("LaSalle Re") and its subsidiaries LaSalle Re Corporate Capital Ltd. ("LaSalle
Re Capital") and LaSalle Re (Services) Limited. The consolidated financial
statements include the results of the Company and the Company's share of LaSalle
Re and its subsidiaries for all periods presented.
2. Comprehensive Income
During the quarter ended March 31, 1998, the Company adopted the reporting and
disclosure requirements of SFAS No. 130 "Reporting Comprehensive Income".
3. Accounting Policies
Earnings per share have been calculated in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS 128"). Earnings per share are
calculated by dividing net income available to common shareholders by the
weighted average number of common shares outstanding. For the purposes of this
calculation, the exchangeable non-voting shares of LaSalle Re ("Exchangeable
Non-Voting Shares") are considered outstanding common shares of the Company due
to the exchangeable nature of the shares. Earnings per share assuming dilution
are computed by dividing net income available to common shareholders by the sum
of the weighted average number of common shares outstanding and the dilutive
potential common shares outstanding during the period of calculation. Prior
period calculations have been restated to give effect to SFAS 128.
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7
<PAGE>
LaSalle Re Holdings Limited
Notes to Unaudited Consolidated Financial Statements
(Expressed in thousands of United States Dollars,
except share and per share data)
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4. Earnings per Share
Earnings per share have been calculated in accordance with SFAS 128:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $ 17,733 $ 23,765 $ 41,511 $ 44,905
Add back: minority interest 4,290 8,933 10,191 15,840
Less: Series A preferred share
dividends (1,641) (73) (3,281) (73)
----------- ----------- ----------- -----------
Income available to common
shareholders $ 20,382 $ 32,625 $ 48,421 $ 60,672
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding:
Common shares 15,157,646 16,517,462 15,123,573 16,517,280
Exchangeable Non-Voting Shares 4,018,146 6,210,180 4,018,146 6,210,180
----------- ----------- ----------- -----------
Weighted average number of shares
outstanding: 19,175,792 22,727,642 19,141,719 22,727,460
=========== =========== =========== ===========
Earnings per share $ 1.06 $ 1.44 $ 2.53 $ 2.67
=========== =========== =========== ===========
Income available to common
shareholders $ 20,382 $ 32,625 $ 48,421 $ 60,672
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding: 19,175,792 22,727,642 19,141,719 22,727,460
Plus: incremental shares from assumed
exercise of options 1,722,423 1,552,005 1,745,881 1,445,337
exercise of stock appreciation rights 80,973 63,833 83,602 57,313
Plus: contingently issuable shares 4,609 0 2,266 0
----------- ----------- ----------- -----------
Adjusted weighted average number of
common shares outstanding 20,983,797 24,343,480 20,973,468 24,230,110
----------- ----------- ----------- -----------
Earnings per share assuming dilution $ 0.97 $ 1.34 $ 2.31 $ 2.50
=========== =========== =========== ===========
</TABLE>
As of March 31, 1998, the Company had 2,416,457 options outstanding and had
granted 340,872 stock appreciation rights. As of March 31, 1997, the Company had
2,499,348 options outstanding and had granted 340,872 stock appreciation rights.
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8
<PAGE>
LaSalle Re Holdings Limited
Notes to Unaudited Consolidated Financial Statements
(Expressed In thousands of United States Dollars, except share and per share
data)
===============================================================================
5. Reinsurance
The effect of reinsurance on premiums written and earned is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Written Earned Written Earned Written Earned Written Earned
Assumed 94,631 43,059 109,396 41,754 104,255 82,012 114,633 84,877
Ceded (12,426) (1,153) (10,151) (354) (10,966) (2,187) (10,151) (354)
-------- ------ -------- ------- -------- ------- -------- -------
Net Premiums 82,205 41,906 99,245 41,400 93,289 79,825 104,482 84,523
======== ====== ======== ======= ======== ======= ======== =======
===========================================================================================
</TABLE>
9
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
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The following is a discussion and analysis of the Company's results of
operations for the three months and six months ended March 31, 1998 and 1997 and
financial condition as of March 31, 1998. This discussion and analysis should be
read in conjunction with the attached unaudited consolidated financial
statements and notes thereto of the Company and the audited consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1997.
General
The Company primarily writes property catastrophe reinsurance on a worldwide
basis through its subsidiary, LaSalle Re. Property catastrophe reinsurance
contracts cover unpredictable events such as hurricanes, windstorms, hailstorms,
earthquakes, fires, industrial explosions, freezes, riots, floods and other man-
made or natural disasters. Therefore, there can be significant volatility in the
Company's results from fiscal quarter to quarter and fiscal year to year.
Through LaSalle Re Capital, the Company also provides capital support to
selected Lloyd's syndicates which individually write the following lines of
business: direct and facultative property insurance; marine reinsurance; and
professional indemnity, directors and officers insurance and bankers blanket
bond business. In addition, as a result of the Company's limited operating and
claims history, the financial data included herein are not necessarily
indicative of the results of operations or financial condition of the Company in
the future.
Results of Operations - for the three months ended March 31, 1998 and 1997
Gross premiums written for the quarter ended March 31, 1998 were $94.6 million
compared to $109.4 million for the quarter ended March 31, 1997, a decrease of
13.5%. The Company's property catastrophe book experienced a reduction in gross
premiums written of $25.9 million for the quarter ended March 31, 1998 compared
to the quarter ended March 31, 1997. Of this reduction, approximately $7.7
million resulted from the Company's reduction of its line sizes on two
international quota share contracts, pursuant to its policy of reducing
aggregate exposures in a declining rate environment. The remaining portion of
the reduction was due to continuing competitive rates, which have led to lower
priced premiums in comparison to those written in the quarter ended March 31,
1997, and the non-renewal of contracts in certain cases where the Company
considered business to be under-priced. The reduction in the property
catastrophe book was primarily related to international property catastrophe
business with only 34.4% of the reduction related to United States property
catastrophe business. Based on the Company's experience, rates for business
written in the quarter ended March 31, 1998 were approximately 18% below rates
written in the quarter ended March 31, 1997 for international business and
approximately 15% below rates written in the quarter ended March 31, 1997 for
United States business.
The decline in the core property catastrophe book during the quarter ended March
31, 1998 was offset by an increase in gross premiums written in other lines of
business. For the quarter ended March 31, 1998 gross premiums written in other
lines of business totaled $22.0 million or 23.3% of gross premiums written
compared to $17.8 million or 16.3% of gross premiums written for the quarter
ended March 31, 1997. This increase was primarily due to increased gross
premiums written by LaSalle Re Capital.
Premiums ceded for the quarter ended March 31, 1998 were $12.4 million compared
to $10.2 million in the quarter ended March 31, 1997. The increase of $2.2
million was principally due to an
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10
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
================================================================================
increase in the premiums associated with the Company's multi-year excess of loss
policy, which was renewed January 1, 1998.
As a result of the above, net premiums written for the quarter ended March 31,
1998 were $82.2 million compared to $99.2 million for the quarter ended March
31, 1997.
Net premiums earned for the quarter ended March 31, 1998 were $41.9 million
compared to $41.4 million for the same quarter in 1997. Positive premium
adjustments for the quarter ended March 31, 1998, compared with significant
negative premium adjustments for the quarter ended March 31, 1997 contributed to
the 1.2% increase in net premiums earned. In addition, the increased premiums
earned on business written by LaSalle Re Capital offset the decline in premiums
earned on the property catastrophe book. Premiums written by LaSalle Re Capital
are earned over a period of 18-24 months from the inception date of the
contracts. As LaSalle Re Capital began writing premiums with effect from January
1, 1997, there were limited earnings in the quarter ended March 31, 1997.
Premiums on property catastrophe excess of loss contracts are earned over the
period coverage is provided, which is generally 12 months and under proportional
property catastrophe contracts, with the risks underlying the contracts
incepting throughout the contract period, premiums are generally earned over 18
months. Premiums on other lines of business are earned over the period for which
coverage is provided, which can be anywhere from 12 months to 60 months.
Ceded premiums amortized were $1.2 million for the quarter ended March 31, 1998
compared to $0.4 million and related to protection purchased by both LaSalle Re
and LaSalle Re Capital.
Net investment income increased 6.2% to $8.6 million for the quarter ended
March 31, 1998 from $8.1 million for the quarter ended March 31, 1997.
Annualized investment income as a percentage of the average market value of
invested assets was 6.2% for the quarter ended March 31, 1998 compared to 6.0%
for the quarter ended March 31, 1997. The increase in net investment income was
primarily attributable to a larger average investment base.
Net realized gains on investments were $1.6 million during the quarter ended
March 31, 1998 compared to $0.4 million during the quarter ended March 31, 1997.
The gains in the quarter ended March 31, 1998 resulted primarily from a credit
spread enhancement exercise undertaken during the period. In addition, the
Company realized small gains on the sale of bonds with Far East and Asian
exposure. In accordance with generally accepted accounting principles,
unrealized gains and losses on the Company's investment portfolio are not
recognized in the Company's consolidated results of operations but are reflected
as part of comprehensive income and shown as a separate component of
shareholders' equity.
The following table sets forth the Company's combined ratios for the quarters
March 31, 1998 and 1997:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Loss and loss expense ratio 47.6% 16.6%
Expense ratio 23.2% 20.3%
Combined ratio 70.8% 36.9%
</TABLE>
Losses and loss expenses incurred represents losses paid and reserves
established in respect of specific losses and loss expenses reported by cedents
and expected loss development and additions to incurred-but-not-reported loss
reserves.
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11
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
================================================================================
The Company incurred losses and loss expenses of $19.9 million during the
quarter ended March 31, 1998 compared with $6.9 million during the quarter ended
March 31, 1997. Of the losses incurred for the quarter ended March 31, 1998,
$7.0 million related to a claim on an aggregate stop loss protection of which
the Company was notified during the quarter. In addition, the Company incurred
losses in respect of: satellite failures; various risk and aggregate stop loss
protection losses; losses relating to the Company's participation in Lloyd's;
the Canadian winter freeze which occurred in January 1998 and Typhoon Paka which
hit Guam. The main components of losses and loss expenses incurred during the
quarter ended March 31, 1997 related to tornado damage in the southern United
States and the triggering of aggregate loss covers.
The expense ratio includes underwriting expenses and operational expenses.
Underwriting expenses include brokerage, commissions, excise taxes and other
costs related to underwriting reinsurance contracts. Underwriting expenses as a
percentage of net earned premiums were 14.8% for the quarter ended March 31,
1998 compared to 14.0% for the quarter ended March 31, 1997. Due to lower
underwriting profits, fees accrued pursuant to the Underwriting Services
Agreement decreased in the quarter ended March 31, 1998 to 2.0% as a percentage
of net earned premiums from 3.4% for the quarter ended March 31, 1997. The
Company's brokerage, ceding and profit commissions increased from 10.6% for the
quarter ended March 31, 1997 to 12.8% for the quarter ended March 31, 1998. The
increase was partly due to an increase in earned premiums written by LaSalle Re
Capital, whose expense ratio is approximately 20%, and partly due to an increase
in the average cost of property catastrophe proportional business.
Operational expenses were $3.5 million for the quarter ended March 31, 1998
compared to $2.6 million for the quarter ended March 31, 1997. As a percentage
of net premiums earned operational expenses were 8.4% during the quarter ended
March 31, 1998 compared to 6.3% for the quarter ended March 31, 1997. The
increase in operational expenses of $0.9 million was primarily due to an
increase in the level of executive compensation booked in respect of stock
appreciation rights. During the quarter ended March 31, 1998, the Company
expensed $0.8 million in respect of stock appreciation rights compared to $0.1
million during the quarter ended March 31, 1997. Effective October 1, 1997, the
Administrative Services Agreement with Aon Risk Consultants (Bermuda) Ltd.
("ARC"), was terminated and all of the personnel assigned to the Company by ARC
became employees of the Company with the Company assuming the functions
previously performed by ARC. The Company incurred $1.4 million in respect of
this agreement during the quarter ended March 31, 1997. For the quarter ended
March 31, 1998 the Company incurred compensation and other costs, previously
paid by ARC of approximately $1.5 million.
The Company did not incur any corporate expenses during the quarter ended March
31, 1998. Corporate expenses for the quarter ended March 31, 1997 were $0.5
million, which included costs associated with the offering of preferred shares,
except the underwriting discount, which was charged to additional paid in
capital, and the initial costs associated with the tender offer. All corporate
expenses are charged to income in the period they are incurred.
Interest expense was $0.4 million during the quarter ended March 31, 1998
compared with $0.5 million in the quarter ended March 31, 1997. Interest expense
includes financing charges associated with the deposit portion of LaSalle Re's
ceded reinsurance contract and other interest expenses related to the ongoing
commitment fees payable on the Company's credit facility. As at March 31, 1998,
there were no borrowings under this facility.
Foreign exchange gains in the quarter ended March 31, 1998 were $0.01 million
compared to losses of $0.9 million in the quarter ended March 31, 1997. The
negligible gains in the quarter
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12
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
================================================================================
ended March 31, 1998 were principally due to gains on the Company's sterling and
the Australian dollar positions, which were offset by losses on the Deutsche
Mark and New Zealand dollar positions. In 1997, the losses were due to a
decrease in the value of the US dollar against sterling, which created
unrealized losses on the Company's sterling receivable balances.
The Company's earnings per share were $1.06 for the quarter ended March 31, 1998
compared to $1.44 for the quarter ended March 31, 1997. Earnings per share
assuming dilution were $0.97 for the quarter ended March 31, 1998 compared to
$1.34 for the quarter ended March 31, 1997.
Results of Operations - for the six months ended March 31, 1998 and 1997
Gross premiums written for the six months ended March 31, 1998 were $104.3
million compared to $114.6 million for the six months ended March 31, 1997, a
decrease of 9.0%. The Company's property catastrophe book experienced a
reduction in gross premiums written of $26.1 million for the six months ended
March 31, 1998 compared to the six months ended March 31, 1997. Of this
reduction, approximately $7.7 million resulted from the Company's reduction of
its line sizes on two international quota share contracts, pursuant to its
policy of reducing aggregate exposures in a declining rate environment. The
remaining portion of the reduction is due to continuing competitive rates, which
have led to lower priced premiums in comparison to those written in the six
months ended March 31, 1997, and the non-renewal of contracts in certain cases
where the Company considered business to be under-priced. The reduction in the
property catastrophe book was primarily related to international property
catastrophe business with only 33.5% of the reduction related to United States
property catastrophe business.
The decline in the core property catastrophe book during the six months ended
March 31, 1998 was offset by an increase in gross premiums written in other
lines of business. For the six months ended March 31, 1998, gross premiums
written in other lines of business totaled $30.7 million or 29.4% of gross
premiums written compared to $20.2 million or 17.6% of gross premiums written
for the six months ended March 31, 1997. The increase was primarily due to
increased gross premiums of $9.0 million written by LaSalle Re Capital.
Premiums ceded for the six months ended March 31, 1998 were $11.0 million
compared to $10.2 million in the six months ended March 31, 1997. This increase
related to the reinsurance protections purchased by LaSalle Re and LaSalle Re
Capital.
As a result of the above, net premiums written for the six months ended March
31, 1998 were $93.3 million compared to $104.5 million for the six months ended
March 31, 1997.
Net premiums earned for the six months ended March 31, 1998 were $79.8 million
compared to $84.5 million for the same period in 1997. The 5.6% decrease was the
result of reduced premiums earned on the Company's core property catastrophe
business, which was been partially offset by increased earned premiums on those
premiums written by LaSalle Re Capital and positive premium adjustments.
Premiums written by LaSalle Re Capital are earned over a period of 18-24 months
from the inception date of the contracts. Premiums on property catastrophe
excess of loss contracts are earned over the period coverage is provided, which
is generally 12 months and under proportional property catastrophe contracts,
with the risks underlying the contracts incepting throughout the contract period
premiums are generally earned over 18 months. Premiums on other lines of
business are earned over the period for which coverage is provided, which can be
anywhere from 12 months to 60 months.
================================================================================
13
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
================================================================================
Ceded premiums amortized were $2.2 million for the six months ended March 31,
1998 compared to $0.4 million for the six months ended March 31, 1997. The
charge for the six months ended March 31, 1997 effectively included only one
quarter's charge as the reinsurance protections were not in place until
January 1, 1997.
Net investment income increased 4.3% to $17.0 million for the six months ended
March 31, 1998 from $16.3 million for the six months ended March 31, 1997.
Annualized investment income as a percentage of the average market value of
invested assets was 6.1% for the six months ended March 31, 1998 compared to
6.0% for the six months ended March 31, 1997. The increase in net investment
income was primarily attributable to a larger average investment base.
Net realized gains on investments were $2.0 million for the six months ended
March 31, 1998 compared to $0.4 million for the six months ended March 31, 1997.
The gains in the six months ended March 31, 1998 resulted primarily from a
credit spread enhancement exercise undertaken during the quarter ended March 31,
1998. In accordance with generally accepted accounting principles, unrealized
gains and losses on the Company's investment portfolio are not recognized in the
Company's consolidated results of operations but are reflected as part of
comprehensive income and shown as a separate component of shareholders' equity.
The following table sets forth the Company's combined ratios for the six months
ended March 31, 1998 and 1997:
March 31, 1998 March 31, 1997
-------------- --------------
Loss and loss expense ratio 35.9% 21.0%
Expense ratio 22.5% 22.3%
Combined ratio 58.4% 43.3%
Losses and loss expenses incurred represents losses paid and reserves
established in respect of specific losses and loss expenses reported by cedents
and expected loss development and additions to incurred-but-not-reported loss
reserves.
The Company incurred losses and loss expenses of $28.6 million during the six
months ended March 31, 1998 compared with $17.7 million during the six months
ended March 31, 1997. Of the losses incurred for the six months ended March 31,
1998, $7.0 million related to a claim on an aggregate stop loss protection
contract. In addition, the Company incurred losses in respect of: satellite
failures; various risk and aggregate stop loss protection losses; the Canadian
winter freeze which occurred in January 1998 and Typhoon Paka which hit Guam.
The main components of losses and loss expenses incurred during the six months
ended March 31, 1997 related to: development on Hurricane Fran; winter storm
activity in the United States, United Kingdom and Europe and the triggering of
aggregate loss covers.
The expense ratio includes underwriting expenses and operational expenses.
Underwriting expenses include brokerage, commissions, excise taxes and other
costs related to underwriting reinsurance contracts. Underwriting expenses as a
percentage of net earned premiums were 15.5% for the six months ended March 31,
1998 compared to 15.3% for the six months ended March 31, 1997. Due to lower
underwriting profits in the six months ended March 31, 1998 fees accrued
pursuant to the Underwriting Services Agreement as a percentage of net premiums
earned, decreased to 3.1% from 4.0% for the six months ended March 31, 1997. The
Company's brokerage, ceding and profit commissions increased from 11.3% for the
six months ended March 31, 1997 to 12.4% for the six months ended March 31,
1998. The increase was partly due to an increase in earned premiums written by
LaSalle Re Capital, whose expense ratio is approximately
================================================================================
14
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
- --------------------------------------------------------------------------------
20%. In addition, the Company experienced an increase in the average cost of
property catastrophe proportional business.
Operational expenses were $5.6 million for the six months ended March 31, 1998,
compared to $5.9 million for the six months ended March 31, 1997. As a
percentage of net premiums earned, operational expenses were 7.0% during both
the six months ended March 31, 1998 and the six months ended March 31, 1997.
Effective October 1, 1997, the Administrative Services Agreement with ARC was
terminated and all of the personnel assigned to the Company by ARC became
employees of the Company with the Company assuming the functions previously
performed by ARC. In respect of this agreement, the Company incurred $3.1
million during the six months ended March 31, 1997, whereas, for the six months
ended March 31, 1998, the Company incurred compensation and other costs,
previously paid by ARC of approximately $2.3 million. Offsetting this decrease
in operational expenses of approximately $0.8 million was an increase in costs
relating to LaSalle Re Capital of $0.4 million.
The Company did not incur any corporate expenses during the six months ended
March 31, 1998. Corporate expenses of $1.4 million for the six months ended
March 31, 1997 included costs associated with the secondary public offering, the
formation costs of LaSalle Re Capital, the offering of preferred shares and
initial costs associated with the tender offer. Corporate expenses do not
include the underwriting discounts associated with these offerings. In respect
of the secondary public offering, this cost was borne by the selling
shareholders. In respect of the offering of preferred shares, the underwriting
discount was charged to additional paid in capital.
Interest expense was $1.0 million during the six months ended March 31, 1998
compared with $0.6 million in the six months ended March 31, 1997. The increase
in interest expense was due to financing charges associated with the deposit
portion of LaSalle Re's ceded reinsurance contract, which incepted January 1,
1997. Other interest expenses related to the ongoing commitment fees payable on
the Company's credit facility. As at March 31, 1998, there were no borrowings
under this facility.
Foreign exchange gains in the six months ended March 31, 1998 were $0.4 million
compared to losses of $2.0 million in the six months ended March 31, 1997. The
gains in the six months ended March 31, 1998 were principally due to an increase
in the value of the United States dollar against sterling. In 1997, the losses
resulted from an unfavorable closing of a Sterling forward contract, and a
strengthening of the United States Dollar since January 1, 1997 against the
major foreign currencies in which the Company wrote premiums.
The Company's earnings per share were $2.53 for the six months ended March 31,
1998 compared to $2.67 for the six months ended March 31, 1997. Earnings per
share assuming dilution were $2.31 for the six months ended March 31, 1998
compared to $2.50 for the six months ended March 31, 1997.
Liquidity and Capital Resources
As a holding company, the Company's assets consist primarily of all of the
outstanding voting stock of LaSalle Re. The Company's cash flows depend
primarily on dividends and other permitted payments from LaSalle Re and its
subsidiaries.
LaSalle Re's sources of funds consist of net premiums written, investment income
and proceeds from sales and redemptions of investments. Cash is used primarily
to pay losses and loss expenses, brokerage, commissions, excise taxes,
administrative expenses and dividends. Under
- --------------------------------------------------------------------------------
15
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
- --------------------------------------------------------------------------------
the Insurance Act, 1978, amendments thereto and related regulations of Bermuda
(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 Bermuda Minister of Finance if it failed to meet its
required margins in the previous 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
total opening statutory capital by more than 15% without the approval of the
Minister of Finance. LaSalle Re currently meets these requirements. In addition,
the payment of dividends by LaSalle Re is subject to the rights of holders of
the Exchangeable Non-Voting Shares to receive a pro rata share of any dividend
and to its need to maintain shareholders' equity adequate to support the level
of LaSalle Re's reinsurance operations.
Operating activities provided net cash of $61.1 million for the six months ended
March 31, 1998 and $44.5 million for the six months ended March 31, 1997. Cash
flows from operations in future years may differ substantially from net income.
Cash flows are affected by loss payments, which, due to the nature of the
reinsurance coverage provided by LaSalle Re, are generally expected to comprise
large loss payments on a limited number of claims and can therefore fluctuate
significantly from year to year. The irregular timing of these large loss
payments can create significant variations in operating cash flows between
periods. LaSalle Re funds such payments from cash flows from operations and
sales of investments.
As a result of the potential for large loss payments, LaSalle Re maintains a
substantial portion of its assets in cash and investments. As of March 31, 1998,
77% of its total assets were held in cash and investments. To further mitigate
the uncertainty surrounding the amount and timing of potential liabilities and
to minimize interest rate risk, LaSalle Re maintains a short average duration
for its investment portfolio. The modified average duration of the portfolio was
3.03 years at March 31, 1998. At March 31, 1998, the fair value of the Company's
total investment portfolio, including cash, was $585.6 million.
The Company has adopted the Statement of Financial Accounting Standard No. 115
("SFAS 115") to account for its marketable securities with all of the Company's
investments classified as "available for sale". Under this classification,
investments are recorded at fair market value and any unrealized gains or losses
are reported as a separate component of shareholders' equity. In accordance with
SFAS No. 130 "Reporting of Comprehensive Income", the unrealized gains or losses
on these investments are disclosed as part of other comprehensive income in the
income statement. The unrealized gain on the investment portfolio net of amounts
attributable to minority interest was $2.5 million at March 31, 1998 compared to
a gain of $2.0 million at September 30, 1997.
As of March 31, 1998, 85.1% of the securities held in the Company's investment
portfolio were fixed-income securities rated "AA" or better and 99.8% were
fixed-income securities rated "A" or better by Standard & Poor's Rating Service
or Moody's Investors Service, Inc. No single investment comprised more than 5%
of the overall portfolio. As at March 31, 1998, issuers from the Far East and
Asia represented 6.6% of the investment portfolio. These bonds had an aggregate
unrealized loss of $0.1 million. Of these bonds, all except one were rated AAA,
with the other bond rated AA and maturing in July 1998.
Reinsurance balances receivable were $102.3 million at March 31, 1998 compared
to $80.0 million at September 30, 1997. This increase was reflective of the
seasonality of premiums
- --------------------------------------------------------------------------------
16
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
- --------------------------------------------------------------------------------
written, with the Company traditionally writing its highest level of premiums in
the quarter ended March 31 compared to other calendar quarters. In addition,
included within reinsurance balances receivable at March 31, 1998 was $23.2
million which related to the business written by LaSalle Re Capital, compared to
$11.3 million as at September 30, 1997. Given the three year accounting
methodology utilized by Lloyd's, the majority of these balances will not be
received until the year 2000. The seasonality of premiums written also explains
the increases in unearned premiums and deferred acquisition costs from $88.5
million and $11.9 million, respectively, as September 30, 1997 to $110.5 million
and $16.5 million, respectively, at March 31, 1998.
Prepaid reinsurance premiums increased from $5.8 million as at September 30,
1997 to $14.4 million as at March 31, 1998. The increase was due to the
reinsurance coverage placed by the Company at January 1, 1998.
Other assets increased from $22.6 million as at September 30, 1997 to $28.3
million as at March 31, 1998. This was primarily due to the purchase of fixed
assets in connection with the termination of the Administrative Services
Agreement and the deposit portion of the ceded reinsurance contract, which is
accounted for in accordance with SFAS No 113, together with the associated
profit commission.
Other liabilities increased from $22.8 million as at September 30, 1997 to $45.5
million as at March 31, 1998. The increase of $22.7 million was primarily due to
liabilities established for the multi-year excess of loss reinsurance program
and the reinsurance protections purchased by LaSalle Re Capital.
On February 27, 1998, the Company paid a dividend of $0.5469 per share to
holders of record of Series A preferred shares on January 28, 1998. As of March
31, 1998, dividends due but not yet declared on the Series A preferred shares
amounted to $0.5 million. On March 20, 1998, the Company declared a common share
dividend of $0.75 per share to shareholders of record on April 3, 1998, payable
on April 17, 1998. The actual amount and timing of any future common share
dividends is at the discretion of the Board. The declaration and payment of any
dividends is dependent upon the profits and financial requirements of the
Company and other factors, including certain legal, regulatory and other
restrictions. There can be no assurance that the Company's dividend policy will
not change or that the Company will declare or pay any dividends in future
periods.
In accordance with the terms of certain reinsurance contracts, the Company has
posted letters of credit in the amount of $8.9 million as of March 31, 1998 as
compared to $8.7 million as of September 30, 1997 to support outstanding loss
reserves. In connection with LaSalle Re Capital's support of three Lloyd's
syndicates, with effect from January 1, 1997 the Company posted letters of
credit in the amount of $16.4 million (equivalent to (Pounds)9.8 million). All
letters of credit are secured by a lien on the Company's investment portfolio
equal to 115% of the amount of the outstanding letters of credit.
At March 31, 1998, reserves for unpaid losses and loss expenses were $51.9
million. The Company has no material commitments for capital expenditures.
The Company has in place a $100 million committed line of credit from a
syndicate of banks. The proceeds from the credit facility may only be used to
buy preferred shares of LaSalle Re which, in turn, may use the proceeds of such
purchase to meet current cash requirements. The facility matures December 1,
2000, and is secured by a pledge ("legal mortgage") of all the capital stock of
LaSalle Re held by the Company, including any preferred shares that may be
issued by
- --------------------------------------------------------------------------------
17
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
- --------------------------------------------------------------------------------
LaSalle Re to the Company. The line of credit contains various covenants,
including limitations on incurring additional indebtedness; restrictions on the
sale or lease of assets not in the ordinary course of business; maintenance of a
ratio of consolidated total debt to consolidated tangible net worth of no more
than 0.40 to 1.00; maintenance of tangible net worth at the end of each fiscal
year of the greater of $300 million or 70% of net premiums written; maintenance
of statutory capital of LaSalle Re of at least $300 million, increasing to $350
million at the end of calendar year 1998 and $400 million at the end of calendar
year 1999 and thereafter; and maintenance of a ratio of net premiums written to
statutory capital at the end of any fiscal quarter for the four fiscal quarters
then ended of no more than 1.00 to 1.00 in each case. The Company may pay
dividends and make other restricted payments so long as, after giving effect to
such restricted payments, no event of default has occurred. Dividends and
restricted payments are limited to 50% of consolidated net income for its
immediately preceding fiscal year less amounts paid on the Series A preferred
shares. In order for the Company to pay dividends in excess of 50% of
consolidated net income, the Company would have to renegotiate certain terms of
its credit facility. As of March 31, 1998, the credit facility had not been
utilized.
Management has formed a year 2000 task force to assess the extent to which the
Company's computer systems (and third parties' computer systems that are
material to the Company's operations such as the computer systems of brokers and
service providers) are capable of correctly processing information relating to
dates in and after the year 2000. Until the task force completes its assessment,
the Company cannot estimate the costs of making any modifications to the
Company's computer systems that may be needed or the extent to which any failure
to process data information correctly could have a material adverse effect on
the Company's business, operations or financial condition.
The Company's financial condition and results of operations are influenced by
both internal and external forces. Loss payments, investment returns and
premiums may be impacted by changing rates of inflation and other economic
conditions. Cash flows from operations and the liquidity of its investment
portfolio are, in the opinion of the Company, adequate to meet the expected cash
requirements of the Company over the next 12 months.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information." The
statement is effective for fiscal year financial statements issued for periods
ending after December 15, 1997. SFAS 131 requires the Company to report
financial and descriptive information about its reportable operating segments.
The Company is currently reviewing the impact of this standard on its financial
reporting.
In February 1998, the Financial Standards Board issued SFAS No. 132 "Employers
Disclosures about Pensions and Other Post Retirement Benefits". This statement
is effective for fiscal years beginning after December 15, 1997. As the
provisions of the statement need not be applied to immaterial items, the Company
considers it unlikely that as a result of the statement disclosures will change
significantly.
Cautionary Statement Regarding Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of
Section 27A of the United States Securities Act of 1933, as amended, and Section
21E of the United States Securities Exchange Act of 1934, as amended. 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". These
- --------------------------------------------------------------------------------
18
<PAGE>
LaSalle Re Holdings Limited
Management's Discussion and Analysis of Operations
and Financial Condition
- --------------------------------------------------------------------------------
statements relate to the plans of the Company for future operations, including
the Company's dividend policy. In light of the risks and uncertainties inherent
in all future projections, these statements should not be regarded as a
representation that the objectives will be achieved. Many factors could cause
actual results to differ materially from those in the forward-looking
statements, including, but not limited, to the following: catastrophic events of
unanticipated frequency or severity; changes in the demand for or supply of
property catastrophe reinsurance; actions of competitors; changes in the
Company's financial ratings; changes in insurance or tax laws or regulations or
governmental interpretations thereof; changes in foreign economic conditions
including currency rate fluctuations; a major decrease in the cession of
business from CNA Financial Corporation ("CNA"); or the termination of the
Underwriting Services Agreement with an affiliate of CNA. 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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
LaSalle Re Holdings Limited
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual General Meeting of Shareholders was held on February 26,
1998.
The following directors were elected:
Term Expiring Votes in favor Votes Withheld
Tim I. Madden 2000 13,146,025 23,228
Clement S. Dwyer 2001 13,145,025 24,228
Donald P. Koziol 2001 13,146,575 22,678
Peter J. Rackley 2000 13,146,775 22,478
The terms of office of the following directors continued after the
date of the Annual General Meeting: Until 1999 - William J. Adamson,
Ivan P. Berk, and Paul J. Zepf. Until 2000 - Victor H. Blake and
Lester Pollack.
The appointment of KPMG Peat Marwick as independent public
accountants for the Company for the fiscal year ending September 30,
1998 was approved. The holders of 13,158,202 voted in favor, 5,835
shares voted against and 5,216 shares abstained.
Various bye-law amendments recommended by the Board of Directors were
approved. The holders of 10,665,196 shares voted in favor. 696,894
shares voted against and 32,486 shares abstained.
ITEM 5. OTHER INFORMATION.
None.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - The following exhibits are filed as part of this report on
Form 10-Q:
3.1 Memorandum of Association (Incorporated by reference to Exhibit
3.1 to Registration Statement on Form S-1 (File No. 33-97304)).
3.2 Bye-Laws (as amended February 26, 1998).
10.1 Third Amendment, dated March 16, 1998, among the Company,
several banks and Chase Manhattan Bank as administrative agent,
to the Credit Agreement dated as of December 1, 1995 among the
Company, several banks and Chemical Bank, as administrative
agent.
27 Financial Data Schedule
(b) Reports on Form 8-K - No reports were filed during the quarter.
- --------------------------------------------------------------------------------
21
<PAGE>
================================================================================
LaSalle Re Holdings Limited
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: LASALLE RE HOLDINGS LIMITED
--------------- /s/ Andrew Cook
---------------------------
Name: Andrew Cook
Title: Senior Vice President & Chief Financial Officer
Date: /s/ Victor H. Blake
--------------- ---------------------------
Name: Victor H. Blake
Title: Chairman, President & Chief Executive Officer
Date: /s/ Andrew Cook
--------------- ---------------------------
Name: Andrew Cook
Title: Senior Vice President & Chief Financial Officer
================================================================================
22
<PAGE>
B Y E - L A W S
OF
LASALLE RE HOLDINGS LIMITED
(as amended February 26, 1998)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Interpretation.......................................................... 1
BOARD OF DIRECTORS...................................................... 4
2. Board of Directors...................................................... 4
3. Management of the Company............................................... 4
4. Power to appoint managing director or chief executive officer........... 5
5. Power to appoint manager................................................ 5
6. Power to authorize specific actions..................................... 5
7. Power to appoint attorney............................................... 5
8. Power to appoint and dismiss employees.................................. 5
9. Power to delegate to a committee........................................ 6
10. Power to borrow and charge property..................................... 7
11. Election of Directors................................................... 7
11A. Nominations proposed by Members......................................... 8
12. Defects in appointment of Directors..................................... 8
13. Removal of Directors.................................................... 8
14. Vacancies on the Board.................................................. 9
15. Notice of meetings of the Board......................................... 9
16. Meetings of the Board................................................... 10
17. Unanimous written resolutions........................................... 11
18. Contracts and disclosure of Directors' interests........................ 11
19. Remuneration of Directors............................................... 11
20. Other interests of Directors............................................ 11
OFFICERS................................................................ 12
21. Officers of the Company................................................. 12
22. Remuneration of Officers................................................ 12
23. Duties of Officers...................................................... 12
24. Chairman of meetings.................................................... 12
25. Register of Directors and Officers...................................... 13
MINUTES................................................................. 13
26. Obligations of Board to keep minutes.................................... 13
INDEMNITY............................................................... 13
27. Indemnification and exculpation of Directors and Officers of the Company 13
</TABLE>
-i-
<PAGE>
B Y E - L A W S
OF
LASALLE RE HOLDINGS LIMITED
(as amended February 26, 1998)
. . . . . . . . . . . . . . . . . . . .
1. Interpretation
--------------
(1) In these Bye-laws the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:
(a) "Act" means the Companies Act 1981 of Bermuda as amended from
time to time;
(b) "Auditor" includes any individual or partnership;
(c) "Board" means the Board of Directors appointed or elected
pursuant to these Bye-laws and acting by resolution in accordance
with the Act and these Bye-laws or the Directors present at a
meeting of Directors at which there is a quorum;
(d) "Code" means the United States Internal Revenue Code of 1986, as
amended, or any United States federal statute then in effect that
has replaced such statute, and a reference to a particular
section thereof shall be deemed to include a reference to the
comparable section, if any, of any such replacement United States
federal statute;
(e) "Company" means the company for which these Bye-laws are
approved and confirmed;
(f) "Controlled Shares" in reference to any person means all shares
of the Company that such person is deemed to own directly,
indirectly or by attribution (within the meaning of Section 958
of the Code);
(g) "Director" means a director of the Company;
<PAGE>
(h) "Exchange Act" means the United States Securities Exchange Act of
1934, as amended, or any United States federal statute then in
effect that has replaced such statute, and a reference to a
particular section thereof shall be deemed to include a reference
to the comparable section, if any, of any such replacement United
States federal statute;
(i) "Fair Market Value" means, with respect to a repurchase of any
shares of the Company in accordance with these Bye-laws, (i) if
such shares are listed on a securities exchange, the average
closing sale price of such shares on such exchange, or, if such
shares are listed on more than one exchange, the average closing
sale price of the shares on the principal securities exchange on
which such shares are then traded, or, if such shares are not
then listed on a securities exchange but are traded in the over-
the-counter market, the average of the latest bid and asked
quotations for such shares in such market, in each case for the
last five trading days immediately preceding the day on which
notice of the repurchase of such shares is sent pursuant to these
Bye-laws or (ii) if no such closing sales prices or quotations
are available because such shares are not publicly traded or
otherwise, the fair value of such shares as determined by one
independent nationally recognized investment banking firm chosen
by the Company and reasonably satisfactory to the Member whose
shares are to be so repurchased by the Company. The calculation
of the Fair Market Value of the shares made by such appointed
investment banking firm (i) shall not include any discount
relating to the absence of a public trading market for, or any
transfer restrictions on, such shares, and (ii) such calculation
shall be final and the fees and expenses stemming from such
calculation shall be borne by the Company or its assignee, as the
case may be;
(j) "Maximum Percentage" means, with respect to any person, 9.9% or,
if applicable, such other percentage as the Board shall have
previously approved for such person in accordance with these
Bye-laws;
(k) "Member" means the person registered in the Register of Members
as the holder of shares and, when two or more persons are so
registered as joint holders of shares, means the person whose
name stands first in the Register of Members as
-2-
<PAGE>
one of such joint holders or all of such persons as the context
so requires;
(l) "notice" means written notice as further defined in these
Bye-laws unless otherwise specifically stated;
(m) "Officer" means any person appointed by the Board to hold an
office in the Company;
(n) "person" means an individual, a trust, estate, partnership,
association, company, corporation or other legal entity;
(o) "Register of Directors and Officers" means the Register of
Directors and Officers referred to in Bye-law 25;
(p) "Register of Members" means the Register of Members referred
to in Bye-law 52;
(q) "Secretary" means the person appointed to perform any or all the
duties of secretary of the Company and includes any deputy or
assistant secretary;
(r) "Securities Act" means the United States Securities Act of 1933,
as amended, or any United States federal statute then in effect
that has replaced such statute, and a reference to a particular
section thereof shall be deemed to include a reference to the
comparable section, if any, of any such replacement United States
federal statute;
(s) "United States" shall the United States of America and dependent
territories or any part thereof;
(t) "U.S. Person", except as otherwise indicated, means an individual
who is a citizen or resident of the United States, a corporation
or partnership created or organized under the laws of the United
States or any state thereof, or an estate or trust, all of the
income of which is includable in gross income for United States
federal income tax purposes, regardless of its source.
(2) In these Bye-laws, where not inconsistent with the context:
(a) words denoting the plural number include the singular number
and vice versa;
-3-
<PAGE>
(b) words denoting the masculine gender include the feminine
gender;
(c) the word:
(i) "may" shall be construed as permissive;
(ii) "shall" shall be construed as imperative; and
(d) unless otherwise provided herein words or expressions defined in
the Act shall bear the same meaning in these Bye-laws.
(3) Expressions referring to writing or written shall, unless the contrary
intention appears, include facsimile, printing, lithography, photography,
electronic mail and other modes of representing words in a visible form.
(4) Headings used in these Bye-laws are for convenience only and are not
to be used or relied upon in the construction hereof.
BOARD OF DIRECTORS
------------------
2. Board of Directors
------------------
The business of the Company shall be managed and conducted by the Board.
3. Management of the Company
-------------------------
(a) In managing the business of the Company, the Board may exercise all
such powers of the Company as are not, by statute or by these Bye-laws, required
to be exercised by the Company in general meeting subject, nevertheless, to
these Bye-laws, the provisions of any statute and to such regulations as may be
prescribed by the Company in general meeting.
(b) No regulation or alteration to these Bye-laws made by the Company in
general meeting shall invalidate any prior act of the Board which would have
been valid if that regulation or alteration had not been made.
(c) The Board may procure that the Company pays all expenses incurred
in promoting and incorporating the Company.
(d) The Board may exercise all the powers of the Company to discontinue
the Company to a named country or jurisdiction outside Bermuda pursuant to
Section 132G of the Act.
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4. Power to appoint managing director or chief executive officer
-------------------------------------------------------------
The Board may from time to time appoint one or more Directors to the office
of managing director or chief executive officer of the Company who shall,
subject to the control of the Board, supervise and administer all of the general
business and affairs of the Company.
5. Power to appoint manager
------------------------
The Board may appoint a person to act as manager of the Company's day to
day business and may entrust to and confer upon such manager such powers and
duties as it deems appropriate for the transaction or conduct of such business.
6. Power to authorize specific actions
-----------------------------------
The Board may from time to time and at any time authorize any Director,
Officer or other person to act on behalf of the Company for any specific purpose
and in connection therewith to execute any agreement, document or instrument on
behalf of the Company.
7. Power to appoint attorney
-------------------------
The Board may from time to time and at any time by power of attorney
appoint any company, firm, person or body of persons, whether nominated directly
or indirectly by the Board, to be an attorney of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those vested in
or exercisable by the Board) and for such period and subject to such conditions
as it may think fit and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as
the Board may think fit and may also authorize any such attorney to sub-delegate
all or any of the powers, authorities and discretions so vested in the attorney.
Such attorney may, if so authorized under the seal of the Company, execute any
deed or instrument under such attorney's personal seal with the same effect as
the affixation of the seal of the Company.
8. Power to appoint and dismiss employees
--------------------------------------
The Board may appoint, suspend or remove any manager, secretary, clerk,
agent or employee of the Company and may fix their remuneration and determine
their duties.
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<PAGE>
9. Power to delegate to a committee
--------------------------------
The Board may appoint one or more Board committees and may delegate any of
its powers to any such committee. Without limiting the foregoing, such
committees may include:
(a) an Executive Committee which shall have the power of the Board
between meetings of the Board;
(b) an Underwriting and Actuarial Committee, which shall, among other
things, advise the Board with respect to underwriting policies
for the Company, review underwriting decisions made by the
Company, monitor any appointed underwriting services provider,
advise the Board with respect to actuarial and pricing services,
review actuarial decisions and monitor any provider of actuarial
services;
(c) an Investment Committee, which shall, among other things, review
and monitor the Company's financial affairs and the conformity of
the Company's financial and investment activities with the
business strategy for the Company established by the Board;
(d) an Audit Committee, which shall, among other things, advise the
Board with respect to the Company's financial reporting
responsibilities and related matters;
(e) a Nominating Committee, which shall, among other things, propose
to the Members or to continuing Directors, before any election of
Directors by Members or the filling of any vacancy by the Board,
a slate of director candidates equal in number to the vacancies
to be filled. The Nominating Committee shall have neither more
nor less than three members; and
(f) a Compensation Committee, which shall, among other things,
advise the Board with respect to compensation of Officers.
All Board committees shall conform to such directions as the Board shall
impose on them, provided that each member shall have one (1) vote, and each
committee shall have the right as it deems appropriate to retain outside
experts. Each committee may adopt rules for the conduct of its affairs,
including rules governing the adoption of resolutions by unanimous written
consent, and the place, time, and notice of meetings, as shall be advisable and
as shall not be inconsistent with these Bye-laws or with any applicable
resolution adopted by the Board. Each committee shall cause
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minutes to be made of all meetings of such committee and of the attendance
thereat and shall cause such minutes and copies of resolutions adopted by
unanimous consent to be promptly inscribed or incorporated by the Secretary in
the minute book.
10. Power to borrow and charge property
-----------------------------------
The Board may exercise all the powers of the Company to borrow money, to
assume, guarantee or otherwise become directly or indirectly liable for
indebtedness for borrowed money, and to mortgage or charge its undertaking,
property and uncalled capital, or any part thereof, and may issue debentures,
debenture stock and other securities whether outright or as security for any
debt, liability or obligation of the Company or any third party.
11. Election of Directors
---------------------
The number of Directors constituting the Board shall be not less than two
(2) nor more than thirteen (13), the exact number to be determined from time to
time by resolution adopted by the affirmative vote of more than fifty percent
(50%) of the Directors then in office; provided, however, that if no such
resolution shall be in effect the number of Directors shall be thirteen (13).
The Board shall be divided into three classes, with the term of the office of
one class expiring each year. Each class shall consist, as nearly as possible,
of one-third of the total number of Directors constituting the entire Board.
Upon the adoption of this Bye-law, Class I Directors shall be those Directors
elected to hold office for a term expiring at the annual general meeting in the
year 1998; Class II Directors shall be those Directors elected to hold office
for a term expiring at the annual general meeting in the year 1999; and Class
III Directors shall be those Directors elected to hold office for a term
expiring at the annual general meeting in the year 2000. At each annual general
meeting of Members, successors to Directors whose terms expire at that annual
general meeting shall be of the same class as the Directors they succeed and
shall be elected to hold office for a full three (3) year term. If the number of
Directors is altered by resolution of the Board pursuant to this Bye-law, such
resolution shall apportion any increase or decrease among the classes so as to
maintain the number of Directors in each class as equal as possible, but in no
case shall a decrease in the number of Directors shorten the term of any
incumbent Director.
Notwithstanding any other provision of this Bye-law 11, no person shall be
elected as a Director, other than persons nominated by the Board or a committee
thereof, unless advance notice of the nomination of such person shall have been
given to the Company in the manner provided in Bye-law 11A.
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<PAGE>
11A. Nominations proposed by Members
-------------------------------
(a) If a Member desires to nominate one or more persons for election as
Directors at any general meeting duly called for the election of Directors,
written notice of such Member's intent to make such a nomination must be
received by the Secretary at the registered office of the Company not less than
60 days nor more than 120 days before such general meeting. Such notice shall
set forth (i) the name and address, as it appears in the Register of Members, of
the Member who intends to make such nomination; (ii) a representation that the
Member is a holder of record of shares of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to make such
nomination; (iii) the class and number of shares of the Company which are held
by the Member; (iv) the name and address of each person to be nominated; (v) a
description of all arrangements or understandings between the Member and any
such nominee and any other person or persons (naming such person or persons)
pursuant to which such nomination is to be made by the Member; (vi) such other
information regarding any such nominee proposed by such Member as would be
required to be included in a proxy statement filed pursuant to Regulation 14A
under the Exchange Act, whether or not the Company is then subject to such
Regulation; and (vii) the consent of any such nominee to serve as a Director, if
so elected. The Chairman of such general meeting shall, if the facts warrant,
refuse to acknowledge a nomination that is not made in compliance with the
procedure specified in this Bye-law 11A, and any such nomination not properly
brought before the meeting shall not be considered.
(b) Notwithstanding anything contained in these Bye-laws to the contrary,
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding shares entitled to vote, voting together as a
single class, shall be required to amend or repeal, or adopt any provision
inconsistent with, the last sentence of Bye-law 11 or any provision of this
Bye-law 11A.
12. Defects in appointment of Directors
-----------------------------------
All acts done bona fide by any meeting of the Board or by a committee of
the Board or by any person acting as a Director shall, notwithstanding that it
be afterwards discovered that there was some defect in the appointment of any
Director or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every such person had been duly appointed and
was qualified to be a Director.
13. Removal of Directors
--------------------
Subject to any provisions to the contrary in these Bye-laws, the Members,
at an annual general meeting or a special general meeting called for that
purpose, may remove any Director or the entire Board, provided that (i) the
notice of any such
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<PAGE>
meeting shall contain a statement of the intention so to do and be served on
such Director not less than fourteen (14) days before the meeting and (ii) at
such meeting such Director shall be entitled to be heard on the motion for such
Director's removal.
14. Vacancies on the Board
----------------------
(a) The Board shall have the power from time to time and at any time, by
the affirmative vote of more than fifty percent (50%) of the Directors then in
office, to appoint any person as a Director to fill a vacancy on the Board
occurring as the result of the death, disability, disqualification or
resignation of any Director or, to the extent authorized by these Bye-laws, to
fill a vacancy on the Board occurring as a result of the removal of a Director
by the Members pursuant to these Bye-laws. A Director so appointed shall hold
office until the next annual general meeting or until such Director's successor
is elected or appointed or such Director's office is otherwise vacated.
(b) The Board may act notwithstanding any vacancy in its number but, if
and for so long as its number is reduced below the number fixed by these
Bye-laws as the quorum necessary for the transaction of business at meetings of
the Board, the continuing Directors or Director may act only for the purpose of
(i) summoning a general meeting of the Company or (ii) preserving the assets of
the Company.
(c) The office of Director shall be vacated if the Director:
(i) is removed from office pursuant to these Bye-laws or is
prohibited from being a Director by law;
(ii) is or becomes bankrupt or makes any arrangement or composition
with his creditors generally;
(iii) is or becomes of unsound mind or dies; or
(iv) resigns his or her office by notice in writing to the Company.
15. Notice of meetings of the Board
-------------------------------
(a) The Chairman or Deputy Chairman, or any two (2) Directors may, and the
Secretary on the requisition of the Chairman, Deputy Chairman, or any two (2)
Directors shall, at any time summon a meeting of the Board by not less than five
(5) days' notice in writing to each Director.
(b) Notice of a meeting of the Board shall specify the general nature of
the business to be considered at such meeting and shall be deemed to be duly
given to a Director if it is given to such Director in person or otherwise
communicated or sent
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<PAGE>
to such Director by mail, courier service, cable, telex, telecopier, facsimile
or other mode of representing words in a legible and non-transitory form at such
Director's address in the Register of Directors and Officers or to such other
address given by such Director to the Company for this purpose, in each case,
not less than five (5) days' prior to the meeting to which such notice relates.
If such notice is sent by next-day courier, cable, telex, telecopier or
facsimile it shall be deemed to have been given the day following sending and,
if by registered mail, five days following the sending.
(c) A Board meeting shall, notwithstanding that it is called by shorter
notice than that specified in this Bye-law, be deemed to have been properly
called if it is so agreed in writing by all the Directors, whether present or
not at the meeting.
(d) Meetings of the Directors may be held within or outside of Bermuda.
16. Meetings of the Board
---------------------
(a) The Board shall hold regular quarterly meetings although it may
specially meet for the transaction of business, adjourn and otherwise regulate
its meetings as it sees fit. The quorum necessary for the transaction of
business may be fixed by the affirmative vote of more than fifty percent (50%)
of the Directors then in office and unless so fixed shall be the lesser of six
(6) or fifty percent (50%) of the Directors then in office.
(b) Directors may participate in any meeting of the Board by means of such
telephone, electronic or other communication facilities as permit all persons
participating in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.
(c) The Directors shall elect one of their number to be Chairman of the
Board and another to be Deputy Chairman of the Board.
(d) A resolution put to the vote at a meeting of the Board shall be
carried by the affirmative vote of more than fifty percent (50%) of the votes of
the Directors present at a duly constituted meeting at which a quorum is present
and acting throughout unless otherwise provided by these Bye-laws or by Bermuda
law; provided, however, that not less than 75% of the votes of the Directors
then in office shall be required to cause more than 20% of LaSalle Re Limited's
written premiums received in any fiscal year (calculated on a consolidated
basis) to be other than from property catastrophe reinsurance.
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<PAGE>
17. Unanimous written resolutions
-----------------------------
A resolution in writing signed by all the Directors, which may be in
counterparts, shall be as valid as if it had been passed at a meeting of the
Board duly called and constituted. Such resolution shall be deemed to be adopted
at the place where, and at the time when, the last signature of a Director is
affixed thereto.
18. Contracts and disclosure of Directors' interests
------------------------------------------------
(a) Any Director, or any Director's firm, partner or any company with whom
any Director is associated, may act in a professional capacity for the Company
and such Director or such Director's firm, partner or such company shall be
entitled to remuneration for professional services as if such Director were not
a Director, provided that nothing herein contained shall authorize a Director or
Director's firm, partner or such company to act as Auditor of the Company.
(b) A Director who is directly or indirectly interested in a contract or
proposed contract or arrangement with the Company shall declare the nature of
such interest as required by the Act.
(c) Following a declaration being made pursuant to this Bye-law, and
unless disqualified by the chairman of the relevant Board meeting, a Director
may vote in respect of any contract or arrangement or proposed contract or
arrangement in which such Director is interested and may be counted in the
quorum at such meeting.
19. Remuneration of Directors
-------------------------
(a) The remuneration (if any) of the Directors shall be determined by the
Board and shall be deemed to accrue from day to day. The Directors shall be
reimbursed for all travel, hotel and other expenses which are reasonable and
properly incurred by them in attending and returning from meetings of the Board,
any committee appointed by the Board, general meetings of the Company, or in
connection with the business of the Company or their duties as Directors
generally.
(b) A Director may hold any other office or place of profit under the
Company (other than the office of Auditor) in conjunction with his office of
Director for such period on such terms as to remuneration and otherwise as the
Directors may determine.
20. Other interests of Directors
----------------------------
A Director of the Company may be or become a director or other officer of
or otherwise interested in any company promoted by the Company or in which the
Company may be interested as member or otherwise, and no such Director shall be
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<PAGE>
accountable to the Company for any remuneration or other benefits received by
him as a director or officer of, or from his interest in, such other company.
The Directors may also cause the voting power conferred by the shares in any
other company held or owned by the Company to be exercised in such manner in all
respects as the Board thinks fit, including the exercise thereof in favour of
any resolution appointing the Directors or any of them to be directors or
officers of such other company, or voting or providing for the payment of
remuneration to the directors or officers of such other company.
OFFICERS
--------
21. Officers of the Company
-----------------------
The Officers, who shall be appointed by the Board, shall consist of a
Chairman, President, one or more Deputy Chairmen, one or more Vice Presidents, a
Treasurer, a Secretary and such other Officers as the Board may from time to
time determine to be necessary or advisable in the conduct of the affairs of the
Company. The same person may hold two (2) or more offices in the Company, except
no person may hold the offices of President and Secretary, Chairman and Deputy
Chairman or President and Vice-President at the same time. The Deputy Chairman
shall not by virtue of such office have any executive authority on behalf of the
Company.
22. Remuneration of Officers
------------------------
The Officers shall receive such remuneration as the Board may from time to
time determine.
23. Duties of Officers
------------------
The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them by
the Board from time to time.
24. Chairman of meetings
--------------------
Unless otherwise agreed by a majority of those attending and entitled to
attend and vote thereat, the Chairman shall act as chairman at all meetings of
the Members and of the Board at which such person is present. In his absence a
Deputy Chairman, if present, shall act as chairman and in the absence of all of
them a chairman shall be appointed or elected by those present at the meeting
and entitled to vote.
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<PAGE>
25. Register of Directors and Officers
----------------------------------
(a) The Board shall cause to be kept in one or more books at the
registered office of the Company a Register of Directors and Officers and shall
enter therein the particulars required by the Act.
(b) The Register of Directors and Officers shall be open to inspection by
Members and other entitled persons at the office of the Company on every
business day, subject to such reasonable restrictions as the Board may impose,
so that not less than two (2) hours in each business day is allowed for
inspection.
MINUTES
-------
26. Obligations of Board to keep minutes
------------------------------------
The Board shall cause minutes to be duly entered in books provided for the
purpose:
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting of the
Board and of any committee appointed by the Board; and
(c) of all resolutions and proceedings of general meetings of the
Members, meetings of the Board, meetings of managers and meetings
of committees appointed by the Board.
INDEMNITY
---------
27. Indemnification and exculpation of Directors and Officers of the Company
------------------------------------------------------------------------
(a) (i) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
including all appeals (other than an action, suit or proceeding by or in the
right of the Company) by reason of the fact that he is or was a Director,
Officer or advisory committee member, or is or was serving at the request of the
Company as a director or officer of another company, corporation, partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, reasonable professional fees, expert witness fees and attorneys'
fees), judgments, decrees, fines, penalties and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
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<PAGE>
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 his conduct was unlawful except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
finally adjudged to be liable for fraud or dishonesty in the performance of his
duty to the Company. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he 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 reasonable cause to believe that his
conduct was unlawful.
(ii) The Company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, including all appeals, by or in the right of the Company to
procure a judgment in its favour by reason of the fact that he is or was a
Director, Officer or advisory committee member, or is or was serving at the
request of the Company as a director or officer of another company, corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including, without limitation, reasonable professional fees, expert witness
fees and attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged to be liable for fraud or dishonesty in the performance of his
duty to the Company unless and only to the extent that the court in which such
action, suit or proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
(iii) The Company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, including all appeals, by or in the right of the Company to
procure a judgment in its favour by reason of the fact that he is or was a
Director, Officer or advisory committee member, or is or was serving at the
request of the Company as a director or officer of another company, corporation,
partnership, joint venture, trust or other enterprise, against judgments,
decrees, fines, penalties and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, but only to the extent that a court
determines upon application that, in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity.
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<PAGE>
(iv) The purpose of this Bye-law as a whole is to provide the
broadest indemnity allowable at law, and to the extent any indemnification
hereunder is prohibited, unenforceable or not authorized under applicable law,
it is the intent of this Bye-law that such indemnification be interpreted as
broadly as possible without invalidating the remaining provisions hereof.
Specifically, to the extent prohibited by Bermuda law, these Bye-laws shall not
result in indemnification of any person to the extent he engaged in fraud or
dishonesty.
(b) If any person has been successful on the merits or otherwise in
defense of any action, suit or proceeding for which he is entitled to
indemnification pursuant to Bye-law 27(a), or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(c) Any indemnification under Bye-law 27(a), unless ordered by a court,
shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of such person is proper in the circumstances
because he has met the applicable standard of conduct set forth in Bye-law
27(a). Such determination shall be made (1) by the Board by a majority vote of
Directors who were not parties to such action, suit or proceeding, or (2) if a
majority of the disinterested Directors so directs, by independent legal counsel
in a written opinion, or (3) by the Members. If any person is entitled to
indemnification under Bye-law 27(a) for a portion of the expenses (including
attorneys' fees), judgments, decrees, fines, penalties and amounts paid in
settlement actually and reasonably incurred by him in connection with an action,
suit or proceeding, the Company shall indemnify such person only as to the
portion to which he is entitled.
(d) Expenses (including attorneys' fees) actually and reasonably incurred
by any person in defending any civil, criminal, administrative or investigative
action, suit or proceeding or threat thereof referred to in Bye-law 27(a) shall
be paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall be ultimately determined that he is not entitled
to be indemnified by the Company as authorized in these Bye-Laws or otherwise
pursuant to applicable law; provided, however, that if it is determined by
either (1) a majority vote of Directors who were not parties to such action,
suit or proceeding, or (2) if a majority of the disinterested directors so
directs, by independent legal counsel in a written opinion, that there is no
reasonable basis to believe that such person is entitled to be indemnified by
the Company as authorized in these Bye-Laws or otherwise pursuant to applicable
law, then no expense shall be advanced in accordance with this Bye-law 27(d).
(e) The indemnification and advancement of expenses provided in these
Bye-Laws shall not be deemed exclusive of any other rights to which those
seeking
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<PAGE>
indemnification and advancement of expenses may now or hereafter be entitled
under any statute, agreement, vote of Members or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office.
(f) The Company shall have power to purchase and maintain insurance on
behalf of any person who is or was a Director, Officer or advisory committee
member, employee or agent of the Company, or is or was serving at the request of
the Company as a director, officer, employee or agent of another company,
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any capacity, or arising
out of his status as such, whether or not the Company would have the power to
indemnify him against such liability under the provisions of these Bye-Laws or
under law.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Bye-law shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to hold the
position for which he is entitled to be indemnified or advanced expenses and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(h) In order to induce persons to serve as Directors, Officers or advisory
committee members, or at the request of the Company as directors or officers of
another company, corporation, partnership, joint venture, trust or other
enterprise, each Member waives any claim or right of action it might have,
whether individually or by or in the right of the Company, against any such
person on account of any action taken by such person, or the failure of such
person to take any action, in the performance of his duties with or for the
Company or such other company, corporation, partnership, joint venture, trust or
other enterprise; provided, however, that such waiver shall not apply to any
claims or rights of action arising out of the fraud or dishonesty of such person
or to recover any gain, personal profit or advantage to which such person is not
legally entitled.
MEETINGS
--------
28. Notice of annual general meeting
--------------------------------
The annual general meeting of the Company shall be held at such time and
place as the Chairman or any two (2) Directors or any Director and the Secretary
or the Board shall appoint. No annual general meeting shall take place in the
United States. Written notice of such meeting stating the date, place and time
at which the meeting is to be held, that the election of Directors will take
place thereat, and as far as practicable, the other business to be conducted at
the meeting shall be given to each Member not less than five (5) days before the
date of such meeting.
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29. Notice of special general meeting
---------------------------------
The Chairman or any two (2) Directors or any Director and the Secretary or
the Board may convene a special general meeting of the Company whenever in their
judgment such a meeting is necessary. No special general meeting shall take
place in the United States. Written notice of such meeting stating the date,
place and the time at which the meeting is to be held and the general nature of
the business to be considered at the meeting shall be given to each Member not
less than five (5) days before the date of such meeting.
30. Accidental omission of notice of general meeting
------------------------------------------------
The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a general meeting by, any person entitled to receive
notice shall not invalidate the proceedings at that meeting.
31. Meeting called on requisition of Members
----------------------------------------
Notwithstanding anything herein, the Board shall, on the requisition of
Members holding at the date of the deposit of the requisition not less than
one-tenth of such of the paid-up share capital of the Company as at the date of
the deposit carries the right to vote at general meetings of the Company,
forthwith proceed to convene a special general meeting of the Company and the
provisions of section 74 of the Act shall apply.
32. Short notice
------------
A general meeting of the Company shall, notwithstanding that it is called
by shorter notice than that specified in these Bye-laws, be deemed to have been
properly called if it is so agreed by (i) all the Members entitled to attend and
vote thereat in the case of an annual general meeting; and (ii) a majority in
number of the Members having the right to attend and vote at the meeting, being
a majority together holding not less than ninety-five percent (95%) of the total
issued and outstanding Common Shares.
33. Postponement of meetings
------------------------
The Board may postpone any general meeting called in accordance with the
provisions of these Bye-laws (other than a meeting requisitioned under these
Bye-laws) provided that notice of postponement is given to each Member before
the time for such meeting. Fresh notice of the date, time and place for the
postponed meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.
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<PAGE>
34. Quorum for general meeting
--------------------------
At any general meeting of the Company, two (2) or more persons present in
person and representing in person or by proxy in excess of fifty percent (50%)
of the total issued and outstanding Common Shares throughout the meeting shall
form a quorum for the transaction of business, provided that if the Company
shall at any time have only one (1) Member, one Member present in person or by
proxy shall form a quorum for the transaction of business at any general meeting
of the Company held during such time. If within half an hour from the time
appointed for the meeting a quorum is not present, the meeting shall stand
adjourned to the same day one (1) week later, at the same time and place or to
such other day, time or place as the Board may determine.
35. Adjournment of meetings
-----------------------
The chairman of a general meeting may, with the consent of the Members at
any general meeting at which a quorum is present (and shall if so directed),
adjourn the meeting. Unless the meeting is adjourned to a specific date and
time, fresh notice of the date, time and place for the resumption of the
adjourned meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.
36. Attendance at meetings
----------------------
Members may participate in any general meeting by means of such telephone,
electronic or other communication facilities as permit all persons participating
in the meeting to communicate with each other simultaneously and
instantaneously, and participation in such a meeting shall constitute presence
in person at such meeting.
37. Written resolutions
-------------------
(a) A resolution in writing signed by all Members, which may be in
counterparts, shall be as valid as if it had been passed by a General Meeting
duly called and constituted, such resolution to be effective on the date on
which the last Member signs the resolution.
(b) A resolution in writing made in accordance with this Bye-law shall
constitute minutes for the purposes of sections 81 and 82 of the Act.
(c) This Bye-law shall not apply to (i) a resolution passed pursuant to
section 89(5) of the Act or (ii) a resolution passed for the purpose of removing
a Director before the expiration of his term of office under these Bye-laws or
Section 93 of the Act.
-18-
<PAGE>
38. Attendance of Directors
-----------------------
The Directors of the Company shall be entitled to receive notice of and to
attend and be heard at any general meeting.
39. Voting at meetings
------------------
Subject to the provisions of the Act and these Bye-laws, any question
proposed for the consideration of the Members at any general meeting shall be
decided by the affirmative vote of more than fifty percent (50%) of the votes
cast in accordance with the provisions of these Bye-laws.
40. Decision of chairman
--------------------
At any general meeting a declaration by the chairman of the meeting that a
question proposed for consideration has been carried, or carried unanimously, or
by a particular majority, or lost, and an entry to that effect in a book
containing the minutes of the proceedings of the Company shall, subject to the
provisions of these Bye-laws, be conclusive evidence of that fact.
41. Demand for a poll
-----------------
(a) Notwithstanding the provisions of the immediately preceding Bye- law,
at any general meeting of the Company, in respect of any question proposed for
the consideration of the Members, a poll may be demanded by any of the following
persons:
(i) the chairman of such meeting;
(ii) at least three (3) Members present in person or represented by
proxy;
(iii) any Member or Members present in person or represented by proxy
and holding between them not less than one-tenth of the total
voting power of all the Members having the right to vote at
such meeting; or
(iv) any Member or Members present in person or represented by proxy
holding Common Shares for which an aggregate sum has been paid
up equal to not less than one-tenth of the total sum paid up on
all Common Shares.
(b) Where, in accordance with the provisions of subparagraph (a) of this
Bye-law, a poll is demanded, subject to any rights or restrictions for the time
being
-19-
<PAGE>
lawfully attached to any class of shares and subject to the provisions of these
Bye-laws, every Member present in person or by proxy at such meeting shall have
one (1) vote for each Common Share of which such person is the holder or for
which such person holds a proxy and such votes shall be counted in the manner
set out in subparagraph (d) of this Bye-law or in the case of a general meeting
at which one (1) or more Members are present by telephone in such manner as the
chairman of the meeting may direct and the result of such poll shall be deemed
to be the resolution of the meeting at which the poll was demanded and shall
replace any previous resolution upon the same matter.
(c) A poll demanded in accordance with the provisions of subparagraph (a)
of this Bye-law, for the purpose of electing a chairman or on a question of
adjournment, shall be taken forthwith, and a poll demanded on any other question
shall be taken in such manner and at such time at such meeting as the chairman
may direct, and any business other than that upon which a poll has been demanded
may be proceeded with pending the taking of the poll.
(d) Where a vote is taken by poll, each Member present in person or by
proxy and entitled to vote shall be furnished with a ballot on which such person
shall record his or her vote in such manner as shall be determined at the
meeting having regard to the nature of the question on which the vote is taken,
and each ballot paper shall be signed or initialled or otherwise marked so as to
identify the voter and the registered holder in the case of a proxy. At the
conclusion of the poll, the ballot papers shall be examined and counted by a
committee of not less than two (2) Members or proxy holders appointed by the
chairman for the purpose and the result of the poll shall be declared by the
chairman.
42. Seniority of joint holders voting
---------------------------------
In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders, and for this purpose seniority shall be determined
by the order in which the names stand in the Register of Members.
43. Instrument of proxy
-------------------
The instrument appointing a proxy shall be in writing in the form, or as
near thereto as circumstances admit, of Form "A" in the Schedule hereto, under
the hand of the appointor or of the appointor's attorney duly authorized in
writing, or if the appointor is a corporation, either under its seal or under
the hand of a duly authorized officer or attorney. The decision of the chairman
of any general meeting as to the validity of any instrument of proxy shall be
final.
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<PAGE>
44. Representation of corporations at meetings
------------------------------------------
A corporation which is a Member may, by written instrument, authorize such
person as it thinks fit to act as its representative at any meeting of the
Members and the person so authorized shall be entitled to exercise the same
powers on behalf of the corporation which such person represents as that
corporation could exercise if it were an individual Member. Notwithstanding the
foregoing, the chairman of the meeting may accept such assurances as he or she
thinks fit as to the right of any person to attend and vote at general meetings
on behalf of a corporation which is a Member.
SHARE CAPITAL AND SHARES
------------------------
45. Rights of shares
----------------
(a) The share capital of the Company shall be divided into two (2) classes
of shares consisting of one hundred million (i) common shares of par value U.S.
$ 1 (the "Common Shares") and (ii) preferred shares of par value U.S. $ 1 (the
"Preferred Shares").
(b) Subject to the provisions of these Bye-laws, the holders of Common
Shares shall:
(1) be entitled to one (1) vote per Common Share;
(2) be entitled to such dividends as the Board may from time to time
declare;
(3) in the event of a winding-up or dissolution of the Company,
whether voluntary or involuntary or for the purpose of a
reorganisation or otherwise or upon any distribution of capital,
be entitled to the surplus assets of the Company; and
(4) generally be entitled to enjoy all of the rights attaching to
shares.
(c) The Board is authorized, subject to limitations prescribed by law, to
issue the Preferred Shares in series, to establish from time to time the number
of Preferred Shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the Preferred Shares of each such
series and the qualifications, limitations or restrictions thereof. The terms
of any series of Preferred Shares shall be set forth in a Certificate of
Designation in the minutes of the Company.
-21-
<PAGE>
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(1) The number of Preferred Shares constituting that series and the
distinctive designation of that series;
(2) The rate of dividend, and whether (and if so, on what terms and
conditions) dividends shall be cumulative (and if so, whether
unpaid dividends shall compound or accrue interest) or shall be
payable in preference or in any other relation to the dividends
payable on any other class or classes of shares or any other
series of the Preferred Shares;
(3) Whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms and extent of
such voting rights;
(4) Whether the Preferred Shares may be redeemed and, if so, the
terms and conditions on which they may be redeemed (including,
without limitation, the dates upon or after which they may be
redeemed and the price or prices at which they may be redeemed,
which price or prices may be different in different circumstances
or at different redemption dates);
(5) Whether the Preferred Shares shall be issued with the privilege
of conversion or exchange and, if so, the terms and conditions of
such conversion or exchange (including without limitation the
price or prices or the rate or rates of conversion or exchange or
any terms for adjustment thereof);
(6) The amounts, if any, payable upon the Preferred Shares in the
event of voluntary liquidation, dissolution or winding up of the
Company in preference of shares of any other class or series and
whether the Preferred Shares shall be entitled to participate
generally in distributions on the Common Shares under such
circumstances;
(7) The amounts, if any, payable upon the Preferred Shares in the
event of involuntary liquidation, dissolution or winding up of
the Company in preference of shares of any other class or series
and whether the Preferred Shares shall be entitled to participate
generally in distributions on the Common Shares under such
circumstances;
-22-
<PAGE>
(8) Sinking fund provisions, if any, for the redemption or purchase
of the Preferred Shares (the term "sinking fund" being understood
to include any similar fund, however designated); and
(9) Any other relative rights, preferences, limitations and powers of
that series.
46. Power to issue shares
---------------------
(a) Subject to the provisions of these Bye-laws, the unissued shares of
the Company (whether forming part of the original share capital or any increased
share capital) shall be at the disposal of the Board, which may issue, offer,
allot, exchange or otherwise dispose of shares, or options, warrants or other
rights to purchase shares or securities convertible into or exchangeable for
shares (including any employee benefit plan providing for the issuance of shares
or options or rights in respect thereof), at such times, for such consideration
and on such terms and conditions as it may determine (including, without
limitation, such preferred or other special rights or restrictions with respect
to dividend, voting, liquidation or other rights of the shares as may be
determined by the Board).
(b) The Board shall, in connection with the issue of any share, have the
power to pay such commissions and brokerage fees and charges as may be permitted
by law.
(c) The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any financial
assistance for the purpose of a purchase or subscription made or to be made by
any person of or for any shares, but nothing in this Bye- law shall prohibit
transactions mentioned in Sections 39A, 39B and 39C of the Act.
47. Repurchase of shares by Company or its assignee(s)
--------------------------------------------------
(a) Exercise of power to repurchase shares of the Company
-----------------------------------------------------
The Board may exercise all the powers of the Company to purchase all or any
part of its own shares pursuant to Sections 42 and 42A of the Act.
(b) Unilateral repurchase right
---------------------------
Subject to Section 42A of the Act, if the Board in its absolute and
unfettered discretion, on behalf of the Company, determines that share ownership
by any Member may result in adverse tax, regulatory or legal consequences to the
Company, any of its subsidiaries or any of the Members, the Company will have
the
-23-
<PAGE>
option, but not the obligation, to repurchase all or part of the shares held by
such Member to the extent the Board, in the reasonable exercise of its
discretion, determines it is necessary to avoid or cure such adverse
consequences for immediately available funds in an amount equal to the Fair
Market Value of such shares on the date the Company sends the Repurchase Notice
(the "Repurchase Price"); provided that the Board will use its best efforts to
exercise this option equally among similarly situated Members (to the extent
possible under the circumstances). In that event, the Company will also be
entitled to assign its repurchase right to a third party or parties including
the other Members, with the consent of such assignee. Each Member shall be bound
by the determination by the Company to repurchase or assign its right to
repurchase such Member's shares and, if so required by the Company, shall sell
the number of shares that the Company requires it to sell.
In the event that the Company or its assignee(s) determines to repurchase
any such shares, the Company shall provide each Member concerned with written
notice of such determination ("Repurchase Notice") at least seven (7) calendar
days prior to such repurchase or such shorter period as each such Member may
authorize, specifying the date on which any such shares are to be repurchased
and the Repurchase Price. The Company may revoke the Repurchase Notice at any
time before it (or its assignee) pays for the shares. Neither the Company nor
its assignee(s) shall be obliged to give general notice to the Members of any
intention to purchase or the conclusion of any purchase of shares. Payment of
the Repurchase Price by the Company or its assignee(s) shall be by wire transfer
and made at a closing to be held no less than seven (7) calendar days after
receipt of the Repurchase Notice by the Member.
(c) Unilateral repurchase right in the event of involuntary transfer
----------------------------------------------------------------
If a Member shall be involuntarily dissolved or liquidated or shall have
entered in respect of it an order for relief under the United States Bankruptcy
Code (or any similar law of any applicable jurisdiction) or shall otherwise be
required to transfer involuntarily any or all of its shares pursuant to a court
order, foreclosure, tax lien, government seizure, death or otherwise, and, in
any such case as a result thereof, any or all of such Member's shares (the
"Involuntary Transfer Shares") shall be actually or purportedly transferred or
otherwise disposed of (the "Involuntary Transfer"), such Member, or its legal
representative or successor, shall promptly give notice to the Company of such
transfer and the Company will have the option, but not the obligation, to
repurchase all or part of the Involuntary Transfer Shares held by such Member
for immediately available funds in an amount equal to the Fair Market Value of
such shares. In that event, the Company will also be entitled to assign its
repurchase right to a third party or parties including the other Members, with
the consent of such assignee. Each Member shall be bound by the determination
by the Company to repurchase or assign its right to repurchase the Involuntary
Transfer
-24-
<PAGE>
Shares and, if so required by the Company, shall sell the number of Involuntary
Transfer Shares that the Board requires it to sell.
In the event that the Company or its assignee(s) determines to repurchase
any Involuntary Transfer Shares, the Company or its assignee(s) shall provide
each Member concerned with written notice at least thirty (30) calendar days
prior to such repurchase or such shorter period as each such Member may
authorize, specifying the date on which any such Involuntary Transfer Shares is
to be repurchased and the Repurchase Price. Neither the Company nor its
assignee(s) shall be obliged to give general notice to the Members of any
intention to purchase or the conclusion of any purchase of the Involuntary
Transfer Shares. Payment of the Fair Market Value of the Involuntary Transfer
Shares by the Company or its assignee(s) shall be by wire transfer and made at a
closing to be held no later than the later to occur of (i) thirty (30) calendar
days after the date the Repurchase Notice is sent to the Member or (ii) fifteen
(15) calendar days after the date that the final governmental approval or
consent to the consummation of the purchase, if required, is obtained.
48. Variation of rights and alteration of share capital
---------------------------------------------------
(a) While the share capital is divided into different classes of shares,
the rights attached to any class (unless otherwise provided by the terms of
issue of the shares of that class) may, whether or not the Company is being
wound-up, be varied with the consent in writing of the holders of not less than
seventy-five percent (75%) of the issued and outstanding shares of that class,
or with the sanction of a resolution passed by the holders of not less than
seventy-five percent (75%) of the issued and outstanding shares of that class at
a separate general meeting of the holders of the shares of the class held in
accordance with Section 47(7) of the Act. The rights conferred upon the holders
of the shares of any class issued with preferred or other rights shall not,
unless otherwise expressly provided by the terms of issue of the shares of that
class, be deemed to be varied by the creation or issue of further shares ranking
pari passu therewith.
(b) The Company may from time to time by resolution of the Members change
the currency denomination of, increase, alter or reduce its share capital in
accordance with the provisions of Sections 45 and 46 of the Act, provided,
however, that any resolution of the Members to alter or reduce its share capital
be by the affirmative vote of Members representing not less than seventy five
percent (75%) of the votes conferred by the issued and outstanding Common Shares
entitled to vote. Where, on any alteration of share capital, fractions of shares
or some other difficulty would arise, the Board may deal with or resolve the
same in such manner as it thinks fit including, without limitation, the issue to
Members, as appropriate, of fractions of shares and/or arranging for the sale or
transfer of the fractions of shares of Members.
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<PAGE>
49. Registered holder of shares
---------------------------
(1) Except as ordered by a court of competent jurisdiction or as required
by law, no person shall be recognized by the Company as holding any share unless
such person is the registered holder, and the Company shall not be bound by or
required in any way to recognize (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or any interest
in any fractional part of a share or any other right in respect of any share
except an absolute right to the entirety thereof in the registered holder.
(2) Any dividend, interest or other monies payable in cash in respect of
shares may be paid by cheque or draft sent through the post directed to the
Member at such Member's address in the Register of Members or, in the case of
joint holders, to such address of the holder first named in the Register of
Members, or to such person and to such address as the holder or joint holders
may in writing direct. If two (2) or more persons are registered as joint
holders of any shares, any one (1) can give an effectual receipt for any
dividend paid in respect of such shares.
50. Death of a joint holder
-----------------------
Where two (2) or more persons are registered as joint holders of a share or
shares, then in the event of the death of any joint holder or holders, the
remaining joint holder or holders shall be absolutely entitled to the said share
or shares and the Company shall recognize no claim in respect of the estate of
any joint holder except in the case of the last survivor of such joint holders.
51. Share certificates
------------------
(a) Every Member shall be entitled to a certificate under the seal of the
Company (or a facsimile thereof) specifying the number and, where appropriate,
the class of shares held by such Member and whether the same are fully paid up
and, if not, how much has been paid thereon. The Board may by resolution
determine, either generally or in a particular case, that any or all signatures
on certificates may be printed thereon or affixed by mechanical means.
(b) The Company shall be under no obligation to complete and deliver a
share certificate unless specifically called upon to do so by the person to whom
such shares have been allotted.
(c) If any such certificate shall be proved to the satisfaction of the
Board to have been worn out, lost, mislaid or destroyed the Board may cause a
new certificate to be issued and request an indemnity for the lost certificate
if it sees fit.
-26-
<PAGE>
REGISTER OF MEMBERS
-------------------
52. Contents of Register of Members
-------------------------------
The Board shall cause to be kept in one (1) or more books a Register of
Members and shall enter therein the following particulars:
(a) the name and address of each Member, the number and the class of
shares held by such Member and the amount paid or agreed to be
considered as paid on such shares;
(b) the date on which each person was entered in the Register of
Members;
(c) the date on which any person ceased to be a Member for one (1)
year after such person so ceased; and
(d) the country where such Member is resident.
53. Inspection of Register of Members
---------------------------------
The Register of Members shall be open to inspection by Members or other
entitled persons at the registered office of the Company on every business day,
subject to such reasonable restrictions as the Board may impose, so that not
less than two (2) hours in each business day is allowed for inspection. The
Register of Members may, after notice has been given by advertisement in an
appointed newspaper to that effect, be closed for any time or times not
exceeding in the whole thirty (30) days in each year.
CLOSING REGISTER OF MEMBERS OR SETTING RECORD DATE
--------------------------------------------------
54. Closing Register of Members
---------------------------
For the purpose of determining Members who are holders of shares entitled
to notice of or to vote at any general meeting of Members or any adjournment
thereof, or entitled to receive payment of any dividend, or in order to make a
determination of Members for any other proper purpose, the Directors may provide
that the Register of Members shall be closed for transfers for a stated period
but not to exceed in any case thirty (30) days. If the Register of Members
shall be so closed for the purpose of determining Members entitled to notice of
or to vote at a general meeting of Members, such Register shall be so closed for
at least ten (10) days immediately preceding such meeting and the record date
for such determination shall be the date of the closure of the Register of
Members.
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<PAGE>
55. Setting of record date
----------------------
In lieu of or apart from closing the Register of Members, the Directors may
fix any date as the record date for:
(a) determining the Members entitled to receive any dividend; and
(b) determining the Members entitled to receive notice of and to vote
at any general meeting of the Company.
TRANSFER OF SHARES
------------------
56. Instrument of transfer
----------------------
(1) Subject to the Act and to such of the restrictions contained in these
Bye-laws or elsewhere as may be applicable, any Member may transfer all or any
of his shares by an instrument of transfer as specified herein.
(2) An instrument of transfer shall be in the form or as near thereto as
circumstances admit of Form "B" in the Schedule hereto or in such other common
form as the Board may accept. Such instrument of transfer shall be signed by or
on behalf of the transferor and transferee provided that, in the case of a fully
paid share, the Board may accept the instrument signed by or on behalf of the
transferor alone. The transferor shall be deemed to remain the holder of such
share until the same has been transferred to the transferee in the Register of
Members.
(3) The Board may refuse to recognize any instrument of transfer unless it
is accompanied by the certificate in respect to the shares to which it relates
and by such other evidence as the Board may reasonably require to show the right
of the transferor to make the transfer.
57. Restrictions on transfer
------------------------
(a) Any transfer of shares (or any interest therein) that results in a
Member holding Controlled Shares in excess of the Maximum Percentage of the
outstanding capital stock of the Company without the approval of more than 50%
of the Directors then in office shall not be registered in the share register of
the Company and shall be void and of no effect.
(b) Any transfer of shares (or any interest therein) that results in a
Member (other than a Member which is a registered "Investment Company" under the
United States Investment Company Act of 1940, as amended) directly, indirectly
or beneficially owning (within the meaning of Section 13(d) of the Exchange Act)
more than 5% of the outstanding capital stock of the Company without the
approval of
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<PAGE>
more than 50% of the Directors then in office shall not be registered in the
share register of the Company and shall be void and of no effect.
(c) Without limiting the foregoing, the Board shall decline to approve or
register a transfer of shares unless all applicable consents, authorisations,
permissions or approvals of any governmental body or agency in Bermuda, the
United States or any other applicable jurisdiction required to be obtained prior
to such transfer shall have been obtained.
(d) If the Board declines to approve or register a transfer, it shall,
within ten (10) days after the date on which the Company received notice of the
transfer, send to the transferor and transferee notice of such refusal.
(e) The restrictions on transfer authorized by this Bye-law shall not be
imposed in any circumstances in a way that would interfere with the settlement
of trades or transactions entered into through the facilities of the New York
Stock Exchange, Inc.; provided, however, that the Company may decline to
register transfers in accordance with these Bye-laws and resolutions of the
Board after a settlement has taken place.
TRANSMISSION OF SHARES
----------------------
58. Representative of deceased Member
---------------------------------
In the case of the death of a Member, the survivor or survivors where the
deceased Member was a joint holder, and the legal personal representatives of
the deceased Member where the deceased Member was a sole holder, shall be the
only persons recognised by the Company as having any title to the deceased
Member's interest in the shares. Subject to the provisions of Section 52 of the
Act, for the purpose of this Bye-law, "legal personal representative" means the
executor or administrator of a deceased Member or such other person as the Board
may in its absolute discretion decide as being properly authorised to deal with
the shares of a deceased Member.
59. Registration on death or bankruptcy
-----------------------------------
(a) Any person becoming entitled to a share in consequence of the death or
bankruptcy of any Member may be registered as a Member upon such evidence as the
Board may deem sufficient or may elect to nominate some person to be registered
as a transferee of such share, and in such case the person becoming entitled
shall execute in favour of such nominee an instrument of transfer in the form,
or as near thereto as circumstances admit, of Form "C" in the Schedule hereto.
On the presentation thereof to the Board, accompanied by such evidence as the
Board may require to
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<PAGE>
prove the title of the transferor and such other information as the Board shall
deem necessary or appropriate, and the transferee shall be registered as a
Member but the Board shall, in either case, have the same right to decline or
suspend registration as it would have had in the case of a transfer of the share
by that Member before such Member's death or bankruptcy, as the case may be.
(b) If the person so becoming entitled shall elect to be registered as a
holder, such person shall deliver or send to the Company a notice in writing
signed by such person stating that it so elects.
60. Successors of Members
---------------------
A person becoming entitled to a share by reason of the death or bankruptcy
of the holder (or in any other case than by transfer) shall be entitled to the
same dividends and other advantages to which he would be entitled if he were the
registered holder of the share, except that he shall not, before being
registered as a holder in respect of the share, be entitled in respect of it to
exercise any right conferred by virtue of being a holder in relation to meetings
of the Company, provided, however, that the Directors may at any time give
notice requiring any such person to elect either to be registered himself or to
transfer the share and if the notice is not complied with within ninety (90)
days the Directors may thereafter withhold payment of all dividends, bonuses or
other monies payable in respect of the share until the requirements of the
notice have been complied with.
DIVIDENDS AND OTHER DISTRIBUTIONS
---------------------------------
61. Declaration of dividends by the Board
-------------------------------------
Subject to any rights or restrictions at the time lawfully attached to any
class of shares and subject to the provisions of these Bye-laws, the Board may,
in accordance with Section 54 of the Act, by the affirmative vote of more than
fifty percent (50%) of the votes of the Directors then in office, declare a
dividend to be paid to the Members, in proportion to the number of shares held
by them, and such dividend may be paid in cash or wholly or partly in specie in
which case the Board may fix the value for distribution in specie of any assets.
62. Other distributions
-------------------
The Board may, by the affirmative vote of more than fifty percent (50%) of
the votes of the Directors then in office, declare and make such other
distributions (in cash or in specie) to the Members as may be lawfully made out
of the assets of the Company.
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<PAGE>
63. Reserve fund
------------
The Board may from time to time before declaring a dividend set aside, out
of the surplus or profits of the Company, such sum as it thinks proper as a
reserve fund to be used to meet contingencies or for equalising dividends or for
any other special purpose.
64. Deduction of amounts due to the Company
---------------------------------------
The Board may deduct from the dividends or distributions payable to any
Member all monies due from such Member to the Company.
65. Unclaimed dividends
-------------------
Any dividend unclaimed for a period of six (6) years from the date of
declaration of such dividend shall be forfeited and shall revert to the Company
and the payment by the Board of any unclaimed dividend, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.
66. Interest on dividend
--------------------
No dividend or distribution shall bear interest against the Company.
CAPITALIZATION
--------------
67. Capitalization
--------------
(a) The Board may resolve to capitalise any part of the amount for the
time being standing to the credit of any of the Company's share premium or other
reserve accounts or to the credit of the profit and loss account or otherwise
available for distribution by applying such sum in paying up unissued shares to
be allotted as fully paid shares pro rata to the Members.
(b) The Company may capitalise any sum standing to the credit of a reserve
account or sums otherwise available for dividend or distribution by applying
such amounts in paying up in full partly paid shares of those Members who would
have been entitled to such sums if they were distributed by way of dividend or
distribution.
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<PAGE>
ACCOUNTS AND FINANCIAL STATEMENTS
---------------------------------
68. Record of account
-----------------
The Board shall cause to be kept proper records of account with respect to
all transactions of the Company and in particular with respect to:
(a) all sums of money received and expended by the Company and the
matters in respect of which the receipt and expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) the assets and liabilities of the Company.
Such records of account shall be kept at the registered office of the Company
or, subject to Section 83(2) of the Act, at such other place as the Board thinks
fit and shall be available for inspection by the Directors during normal
business hours.
69. Financial year end
------------------
The financial year end of the Company may be determined by resolution of
the Board and failing such resolution shall be December 31 in each year.
70. Financial statements
--------------------
Subject to any rights to waive laying of accounts pursuant to Section 88 of
the Act, financial statements as required by the Act shall be laid before the
Members in general meeting.
AUDIT
-----
71. Appointment of Auditor
----------------------
Subject to Section 88 of the Act, at the annual general meeting or at a
subsequent special general meeting in each year, an independent representative
of the Members shall be appointed by them as Auditor of the accounts of the
Company. Such Auditor may be a Member but no Director, Officer or employee of
the Company shall, during his or her continuance in office, be eligible to act
as an Auditor of the Company.
-32-
<PAGE>
72. Remuneration of Auditor
-----------------------
The remuneration of the Auditor shall be fixed by the Company in general
meeting or in such manner as the Members may determine.
73. Vacation of office of Auditor
-----------------------------
If the office of Auditor becomes vacant by the resignation or death of the
Auditor, or by the Auditor becoming incapable of acting by reason of illness or
other disability at a time when the Auditor's services are required, the Board
shall, as soon as practicable, convene a special general meeting to fill the
vacancy thereby created.
74. Access to books of the Company
------------------------------
The Auditor shall at all reasonable times have access to all books kept by
the Company and to all accounts and vouchers relating thereto, and the Auditor
may call on the Directors or Officers of the Company for any information in
their possession relating to the books or affairs of the Company.
75. Report of the Auditor
---------------------
(a) Subject to any rights to waive laying of accounts or appointment of an
Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be
audited at least once in every year.
(b) The financial statements provided for by these Bye-laws shall be
audited by the Auditor in accordance with generally accepted auditing standards.
The Auditor shall make a written report thereon in accordance with generally
accepted auditing standards and the report of the Auditor shall be submitted to
the Members in general meeting.
(c) The generally accepted auditing standards referred to in subparagraph
(b) of this Bye-law may be those of a country or jurisdiction other than Bermuda
or which have been appointed pursuant to section 90 of the Act. If so, the
financial statements and the report of the Auditor must disclose this fact and
identify the generally accepted auditing standards used.
NOTICES
-------
76. Notices to Members of the Company
---------------------------------
A notice may be given by the Company to any Member either by delivering it
to such Member in person or by sending it to such Member's address in the
Register
-33-
<PAGE>
of Members or to such other address given for the purpose. For the purposes of
this Bye-law, a notice may be sent by mail, courier service, cable, telex,
telecopier, facsimile or other mode of representing words in a legible and non-
transitory form. If such notice is sent by next-day courier it shall be deemed
to have been given the day following sending and, if by registered mail, five
days following the sending.
77. Notices to joint Members
------------------------
Any notice required to be given to a Member shall, with respect to any
shares held jointly by two (2) or more persons, be given to whichever of such
persons is named first in the Register of Members and notice so given shall be
sufficient notice to all the holders of such shares.
78. Service and delivery of notice
------------------------------
Any notice shall be deemed to have been served at the time when the same
would be delivered in the ordinary course of transmission and, in proving such
service, it shall be sufficient to prove that the notice was properly addressed
and prepaid, if posted, and the time when it was posted, delivered to the
courier or to the cable company or transmitted by telex, facsimile or other
method as the case may be.
REGISTERED OFFICE
-----------------
79. The registered office of the Company shall be at such address as the Board
may fix from time to time by resolution.
SEAL OF THE COMPANY
-------------------
80. The seal
--------
The seal of the Company shall be in such form as the Board may from time to
time determine. The Board may adopt one or more duplicate seals for use outside
Bermuda.
81. Manner in which seal is to be affixed
-------------------------------------
The seal of the Company shall not be affixed to any instrument except
attested by the signature of a Director and the Secretary or any two Directors,
or any person appointed by the Board for the purpose, provided that any
Director, or Officer, may affix the seal of the Company attested by such
Director or Officer's signature only to any authenticated copies of these
Bye-laws, the incorporating documents of the Company, the minutes of any
meetings or any other documents required to be
-34-
<PAGE>
authenticated by such Director or Officer. Any such signature may be printed or
affixed by mechanical means on any share certificate, debenture stock
certificate or other security certificate.
WINDING-UP
----------
82. Determination to liquidate
--------------------------
The Company shall be wound up voluntarily by resolution of the Members.
83. Winding-up/distribution by liquidator
-------------------------------------
If the Company shall be wound up the liquidator may, with the sanction of a
resolution of the Members, divide among the Members in specie or in kind the
whole or any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may, for such purpose, set such value as
he or she deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the Members or
different classes of Members. The liquidator may, with the like sanction, vest
the whole or any part of such assets in trustees upon such trusts for the
benefit of the Members as the liquidator shall think fit, but so that no Member
shall be compelled to accept any shares or other securities or assets whereon
there is any liability.
ALTERATION OF MEMORANDUM OF ASSOCIATION
---------------------------------------
AND BYE-LAWS
------------
84. Except as required by the Act, neither the Memorandum of Association of the
Company nor any Bye-law shall be rescinded, altered or amended and no new
Bye-law shall be made until the same has been approved by a resolution of the
Directors and confirmed by a resolution of the Members.
-35-
<PAGE>
SCHEDULE - FORM A
-----------------
LASALLE RE HOLDINGS LIMITED
---------------------------
P R O X Y
---------
of the holder of share(s) in the
above-named Company hereby appoint .................................. or failing
him/her .......................................... or failing him/her
....................................... as my proxy to vote on my behalf at the
General Meeting of the Company to be held on the day of , 19 ,
and at any adjournment thereof.
Dated this day of , 19
Signed by the above-named
.....................................
.....................................
Witness
-36-
<PAGE>
SCHEDULE - FORM B
-----------------
TRANSFER OF A SHARE OR SHARES
-----------------------------
FOR VALUE RECEIVED .................................... [amount]
........................................ [transferor] hereby sell(s), assign(s)
and transfer(s) unto ...........................................................
[transferee] of ...................................... [address] with residence
in [country], [number of shares] shares of LASALLE RE HOLDINGS LIMITED
Dated ...........................
........................................
(Transferor)
In the presence of:
...................................
(Witness)
...............................................
(Transferee)
In the presence of:
...................................
(Witness)
-37-
<PAGE>
SCHEDULE - FORM C
-----------------
TRANSFER BY A PERSON
BECOMING ENTITLED ON DEATH OF A MEMBER
--------------------------------------
I/We having become entitled in consequence of the death of [name of the deceased
Member] to [number] share(s) numbered [number in figures] standing in the
register of members of LASALLE RE HOLDINGS LIMITED in the name of the said [name
of deceased Member] instead of being registered myself/ourselves request to have
[name of transferee] (the "Transferee") registered as a transferee of such
share(s), and I/we do hereby accordingly transfer the said share(s), to the
Transferee to hold the same unto the Transferee, his or her executors,
administrators and assigns, subject to the conditions on which the same were
held at the time of the execution thereof; and the Transferee does hereby agree
to take the said share(s) subject to the same conditions.
WITNESS our hands this ...... day of ................., 19...
Signed by the above-named )
[person or persons entitled] )
in the presence of: )
Signed by the above-named )
[transferee] )
in the presence of: )
-38-
<PAGE>
Exhibit 10.1
CONFORMED COPY
--------------
THIRD AMENDMENT AND WAIVER
--------------------------
THIRD AMENDMENT AND WAIVER, dated as of March 16, 1998 (this "Amendment"),
to the Credit Agreement, dated as of December 1, 1995, as amended, among LASALLE
RE HOLDINGS LIMITED, a Bermuda company (the "Borrower"), the several banks and
other financial institutions from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender") and THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative agent for the Lenders
hereunder (the "Credit Agreement").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make,
and have made, certain loans and other extensions of credit to the Borrower; and
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Required Lenders have agreed, that certain provisions of the
Credit Agreement be amended in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Defined Terms. Terms defined in the Credit Agreement and used herein
-------------
shall have the meanings given to them in the Credit Agreement.
II. Amendments to Credit Agreement.
------------------------------
1. Amendment to Subsection 1.1 (a) The definition of "Statutory Capital"
---------------------------
set forth in subsection 1.1 of the Credit Agreement is hereby amended by
deleting that definition in its entirety and substituting therefor the
following:
"Statutory Capital": at any date of determination, (i) the amount set
forth on line 3 of the Statutory Statement of Capital and Surplus in the
Annual Return of LaSalle Re (or, if such statement shall be modified, the
equivalent item on any applicable successor form) or (ii) the amount
identified as "Statutory Capital" on the Quarterly Certificate of LaSalle
Re, whichever was most recently delivered to the Administrative Agent and
the Lenders pursuant to subsection 5.1, plus, to the extent it is excluded
or deducted in the determination of the amount in clause (i) of this
definition, the amount of any preferred stock of LaSalle Re (including the
Preferred Stock, the LaSalle Re Series A Preferred Shares and the LaSalle
Re Series B Preferred Shares) and (iii) less, an amount equal to the
outstanding Loans.
(b) Subsection 1.1 of the Credit Agreement is hereby further amended by
inserting the following new definitions in their appropriate alphabetical order:
<PAGE>
"Holdings Series B Preferred Shares": the perpetual preferred shares
issued pursuant to the Option Agreement, dated July 1, 1997 by the Borrower
in an aggregate amount not exceeding $100,000,000 on substantially the
terms and conditions set forth in Annex I-E hereto.
"LaSalle Re Series B Preferred Shares": the perpetual preferred shares
that may be issued by LaSalle Re in connection with an investment by the
Borrower in LaSalle Re of the proceeds of the Holdings Series B Preferred
Shares in an aggregate amount not exceeding $100,000,000 on substantially
the terms and conditions set forth in Annex 1-F hereto.
"Loss Event": any event, development or circumstance that has resulted
in, or could reasonably be expected to result in, losses to the insurance
industry in excess of $10 billion, as determined by the Property Claims
Service Division of the American Insurance Services Group, Inc.
"Option Agreement": the Catastrophe Equity Securities Issuance Option
Agreement and any amendments thereto, entered into by the Borrower and the
Option Writers as of July 1, 1997, under which the Borrower shall have the
option to require Option Writers to purchase up to 4,000,000 of the
Holdings Series B Preferred Shares on substantially the terms and
conditions set forth in Annex I-E hereto.
2. Amendment to Subsection 6.1. Subsection 6.1 of the Credit Agreement is
---------------------------
hereby amended by deleting in its entirety clause (c) of said subsection and
substituting therefor the following:
(c) Maintenance of Statutory Capital. Permit Statutory Capital at the
end of (1) the 1998 calendar year to be less than $350,000,000 and (2) the
1999 calendar year to be less than $400,000,000.
3. Amendment to Subsection 6.2. Subsection 6.2 of the Credit Agreement is
---------------------------
hereby amended by (a) deleting the "and" at the end of clause (v) of said
subsection and substituting a semi-colon therefor and (b) inserting immediately
before the period at the end of such subsection the following:
(vii) the issue of the Holdings Series B Preferred Shares in an
aggregate amount not exceeding $100,000,000; and
(viii) the issue of the LaSalle Re Series B Preferred Shares in an
aggregate amount not exceeding $100,000,000.
4. Amendment to Subsection 6.7. Subsection 6.7 of the Credit Agreement is
---------------------------
hereby amended by (a) deleting in its entirety clause (iii) thereof and
substituting therefor the following:
<PAGE>
(iii) the Borrower may make Restricted Payments on the Holdings
Series A Preferred Shares in amounts sufficient to make scheduled dividend
payments due thereon, so long as, after giving effect to each such
Restricted Payment, no Default or Event of Default shall have occurred and
be continuing; (iv) the Borrower may make Restricted Payments on the
Holdings Series B Preferred Shares in amounts sufficient to make scheduled
dividend payments due thereon; (v) the Borrower may make Restricted
Payments on its common shares so long as, after giving effect to each such
Restricted Payment, no Default or Event of Default shall have occurred and
be continuing and such Restricted Payment (together with all other
Restricted Payments under this clause (v) during any fiscal year of the
Borrower) shall not exceed 50% of the Consolidated Net Income of the
Borrower for its immediately preceding fiscal year (such Consolidated Net
Income being calculated after subtracting (A) any Restricted Payments
declared and paid by the Borrower pursuant to clause (iii) above in the
immediately preceding fiscal year, and (B) the greater of any Restricted
Payments paid pursuant to clause (iv) above in the immediately preceding
fiscal year and any Restricted Payments paid pursuant to clause (iv) above
in the current fiscal year); and (v) LaSalle Re may make Restricted
Payments on the LaSalle Re Series A Preferred Shares, the LaSalle Re Series
B Preferred Shares and its common shares in amounts sufficient to enable
the Borrower to make payments pursuant to clauses (iii), (iv) and (v)
above.
5. Amendment to Subsection 6.8. Subsection 6.8 of the Credit Agreement is
---------------------------
hereby amended by deleting the amount "$1,000,000" and substituting therefor the
amount "$5,000,000".
6. Amendment to Subsection 6.9. Subsection 6.9 of the Credit Agreement is
---------------------------
hereby amended by (a) deleting the "and" at the end of clause (vi) thereof and
(b) inserting the following new clause immediately preceding the period at the
end of such subsection:
and (viii) Investments by the Borrower in the LaSalle Re Series B Preferred
Shares made prior to June 1, 2000.
7. Amendment to Subsection 6.13. Subsection 6.13 of the Credit Agreement
----------------------------
is hereby amended by inserting immediately prior to the period at the end of
such subsection the following:
and LaSalle Re may issue and sell to the Borrower the LaSalle Re Series B
Preferred Shares.
8. Amendment of Subsection 6.14. Subsection 6.14 of the Credit Agreement
----------------------------
is hereby amended by adding to clause (iii) of said subsection immediately prior
to the comma at the end thereof the following:
and the Option Agreement
<PAGE>
4
9. Amendment of Annexes. Annexes I-E and I-F are hereby added to the
--------------------
Credit Agreement in the respective forms thereof set forth on Exhibit A and B
hereto.
III. Conditions to Effectiveness. This Amendment shall become effective on
---------------------------
the date (the "Amendment Effective Date") on which the Borrower, the Agent and
the Required Lenders shall have executed and delivered this Amendment to the
Agent.
General
-------
1. Representation and Warranties. To induce the Agent and the Lenders
-----------------------------
parties hereto to enter into this Amendment, the Borrower hereby represents and
warrants to the Agent and all of the Lenders as of the Amendment Effective Date
that:
(a) Financial Condition. (1) The audited consolidated balance sheet of
-------------------
the Borrower and its consolidated Subsidiaries as of September 30, 1997 and the
related audited consolidated statements of income and of cash flows for the
fiscal year ended on such date, copies of which have heretofore been furnished
to each Lender, are complete and correct and present fairly the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended.
(2) The unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at December 31, 1997, and the related unaudited
consolidated statements of income and of cash flows for the three-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments).
(3) All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein).
(b) Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
(1) The Borrower has the corporate power and authority, and the legal
right, to make, deliver this Amendment and to perform the Loan Documents to
which it is a party, as amended by this Amendment, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Amendment and the performance of such Loan Documents, as so amended.
(2) No consent or authorization of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person is
required in connection
<PAGE>
5
with the execution and delivery of this Amendment or with the performance,
validity or enforceability of the Loan Documents to which it is a party, as
amended by this Amendment.
(3) This Amendment has been duly executed and delivered on behalf of the
Borrower.
(4) This Amendment and each Loan Document to which it is a party, as
amended by this Amendment, constitutes a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting the
enforcement of creditors rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(c) No Legal Bar. The execution, delivery and performance of this
------------
Amendment and the performance of the Loan Documents, as amended by this
Amendment, will not violate any Requirement of Law or Contractual Obligation of
the Borrower or of any of its Subsidiaries and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation.
(d) Representations and Warranties. The representations and warranties
------------------------------
made by the Borrower in the Loan Documents are true and correct in all material
respects on and as of the Amendment Effective Date, before and after giving
effect to the effectiveness of this Amendment, as if made on and as of the
Amendment Effective Date, except to the extent such representations and
warranties expressly relate to an earlier date in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.
2. Payment of Expenses. The Borrower agrees to pay or reimburse the Agent
-------------------
for all of its out-of-pocket costs and reasonable expenses incurred in
connection with this Amendment, any other documents prepared in connection
herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent.
3. No Other Amendments; Confirmation. Except as expressly amended,
---------------------------------
modified and supplemented hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.
4. Governing Law; Counterparts. (a) This Amendment and the rights and
---------------------------
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
(b) This Amendment may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this
<PAGE>
6
Amendment signed by all the parties shall be lodged with the Borrower and the
Agent. This Amendment may be delivered by facsimile transmission of the relevant
signature pages hereof.
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
LASALLE RE HOLDINGS LIMITED
By: /s/ Andrew Cook
--------------------------------
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By: /s/ Heather Lindstrom
--------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Samuel W. Bridges
--------------------------------
Title: First Vice President
MELLON BANK, N.A.
By: /s/ Karen E. McConomy
--------------------------------
Title: Assistant Vice President
FLEET NATIONAL BANK
By: /s/ Thomas McKinlay
--------------------------------
Title: Senior Vice President
CITIBANK, N.A.
By: /s/ Andrew C. Fowler
--------------------------------
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-START> JAN-01-1998 OCT-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1998
<DEBT-HELD-FOR-SALE> 0 0
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 508,138 508,138
<CASH> 77,413 77,413
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 16,458 16,458
<TOTAL-ASSETS> 758,586 758,586
<POLICY-LOSSES> 51,870 51,870
<UNEARNED-PREMIUMS> 110,524 110,524
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 0 0
<COMMON> 15,165 15,165
0 0
3,000 3,000
<OTHER-SE> 423,482 423,482
<TOTAL-LIABILITY-AND-EQUITY> 758,586<F1> 758,586<F1>
41,906 79,825
<INVESTMENT-INCOME> 8,583 17,035
<INVESTMENT-GAINS> 1,613 2,017
<OTHER-INCOME> 0 63
<BENEFITS> 19,938 28,636
<UNDERWRITING-AMORTIZATION> 6,200 12,374
<UNDERWRITING-OTHER> 3,941 6,228
<INCOME-PRETAX> 22,023 51,702
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 22,023 51,702
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,023 51,702
<EPS-PRIMARY> 1.06<F2> 2.53<F2>
<EPS-DILUTED> 0.97<F3> 2.31<F3>
<RESERVE-OPEN> 0<F4> 0<F4>
<PROVISION-CURRENT> 0<F4> 0<F4>
<PROVISION-PRIOR> 0<F4> 0<F4>
<PAYMENTS-CURRENT> 0<F4> 0<F4>
<PAYMENTS-PRIOR> 0<F4> 0<F4>
<RESERVE-CLOSE> 0<F4> 0<F4>
<CUMULATIVE-DEFICIENCY> 0<F4> 0<F4>
<FN>
<F1> Includes minority interest.
<F2> Basic EPS, following adoption of SFAS 128
<F3> Diluted EPS, following adoption of SFAS 128
<F4> Amounts for Securities Act Industry Guide 6 and Exchange Act Industry Guide
4 disclosures are not provided because the Company's loss reserves do not
exceed one-half of the consolidated common shareholders' equity.
</FN>
</TABLE>
