<PAGE>
SCHEDULE 13D
Under the Securities Exchange Act of 1934
-----------------------------------------
(Amendment No. 8)
Financial Security Assurance Holdings Ltd.
------------------------------------------
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
--------------------------------------
(Title of Class of Securities)
31769P 10 0
-----------
(CUSIP Number)
Michael S. Paquette
Senior Vice President and Controller
White Mountains Insurance Group, Ltd.
80 South Main Street
Hanover, NH 03755
(603) 640-2205
-------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 1, 1999
------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box __.
Check the following box if a fee is being paid with this statement __.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class. (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
(1) Name of Reporting Person. S.S. or I.R.S. Identification No. of Above Person
White Mountains Insurance Group, Ltd. ("WMIG") 94-2708455
(formerly White Mountains Insurance Group, Inc.)
(formerly Fund American Enterprises Holdings, Inc.)
- ------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) _____________ of a Group (See
Instructions)
___________________________________(b)_______________ / / / /
- ------------------------------------------------------------------------------------------------------------------
(3) (SEC Use Only)
- ------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
WC
- ------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
- ------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization Bermuda
- ------------------------------------------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned 0
by Each Reporting -------------------------------------------------------------
Person With (8) Shared Voting Power
8,943,316*
-------------------------------------------------------------
(9) Sole Dispositive Power
0
-------------------------------------------------------------
(10) Shared Dispositive Power
8,943,316*
-------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
8,943,316 shares*
- -------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
- -------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
Approximately 25.5%
- -------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) HC, CO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* The reporting person owns no shares of record and beneficially owns (through
wholly-owned affiliates) 6,943,316 shares of common stock ("Common Stock") of
Financial Security Assurance Holdings Ltd. ("FSA"). The amounts shown in rows
(8), (10), (11) and (13) also include 2,000,000 shares of Series A Convertible
Redeemable Preferred Stock of FSA ("Preferred Stock"), convertible at the option
of the holder thereof into Common Stock, as further described herein.
2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
(1) Name of Reporting Person. S.S. or I.R.S. Identification No. of Above Person
White Mountains Properties (Barbados) SRL ("WMP") 94-2708455
- -------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) _____________
of a Group (See Instructions)
___________________________________(b)_______________ / / / /
- -------------------------------------------------------------------------------------------------------------------
(3) (SEC Use Only)
- -------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
WC
- -------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e)
- -------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization Barbados
- -------------------------------------------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned 922,509
by Each Reporting --------------------------------------------------------------
Person With (8) Shared Voting Power
0
--------------------------------------------------------------
(9) Sole Dispositive Power
922,509
--------------------------------------------------------------
(10) Shared Dispositive Power
0
- -------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
922,509 shares
- -------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
- -------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
Approximately 2.6%*
- -------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) HC, CO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Based on the number of shares of Common Stock outstanding and also includes
2,000,000 shares of Preferred Stock, convertible at the option of the holder
thereof into Common Stock, as further described herein.
3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
(1) Name of Reporting Person. S.S. or I.R.S. Identification No. of Above Person
White Mountains Holdings, Inc. ("WMH") 51-0328932
- -------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) _____________ of a Group (See
Instructions)
___________________________________(b)_______________ / / / /
- -------------------------------------------------------------------------------------------------------------------
(3) (SEC Use Only)
- -------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
WC
- -------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
- -------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization Delaware
- -------------------------------------------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned 0
by Each Reporting --------------------------------------------------------------
Person With (8) Shared Voting Power
8,020,807*
--------------------------------------------------------------
(9) Sole Dispositive Power
0
--------------------------------------------------------------
(10) Shared Dispositive Power
8,020,807*
--------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
8,020,807 shares*
- -------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
- -------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
Approximately 22.9%
- -------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) HC, CO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* The reporting person owns no shares of record and beneficially owns (through
wholly-owned affiliates) 6,020,807 shares of Common Stock. The amounts shown in
rows (8), (10), (11) and (13) also include 2,000,000 shares of Preferred Stock,
convertible at the option of the holder thereof into Common Stock, in each case
as further described herein.
4
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
(1) Name of Reporting Person. S.S. or I.R.S. Identification No. of Above Person
White Mountains Services Corporation ("WMSC") 38-2011419
(formerly Source One Mortgage Services Corporation)
- -------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member (a) _____________ of a Group (See
Instructions)
___________________________________(b)_______________ / / / /
- -------------------------------------------------------------------------------------------------------------------
(3) (SEC Use Only)
- -------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions)
WC
- -------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
- -------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization Delaware
- -------------------------------------------------------------------------------------------------------------------
Number of Shares (7) Sole Voting Power
Beneficially Owned 8,020,807*
by Each Reporting --------------------------------------------------------------
Person With (8) Shared Voting Power
0
--------------------------------------------------------------
(9) Sole Dispositive Power
8,020,807*
--------------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
8,020,807 shares*
- -------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
- -------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
Approximately 22.9%
- -------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) CO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* The reporting person directly owns 6,020,807 shares of Common Stock of record.
The amounts shown in rows (7), (9), (11) and (13) also include 2,000,000 shares
of Preferred Stock, convertible at the option of the holder thereof into Common
Stock, in each case as further described herein.
5
<PAGE>
ONLY ITEMS REPORTED IN THIS AMENDMENT NO. 8 TO SCHEDULE 13D ARE
AMENDED FROM THE FILING ON SCHEDULE 13D DATED MAY 13, 1994, AS AMENDED BY
AMENDMENT NO. 1 DATED SEPTEMBER 2, 1994, AMENDMENT NO. 2 DATED SEPTEMBER
14, 1994, AMENDMENT NO. 3 DATED JANUARY 17, 1995, AMENDMENT NO. 4 DATED
NOVEMBER 13, 1995, AMENDMENT NO. 5 DATED JUNE 17, 1996, AMENDMENT NO. 6
DATED MAY 12, 1999 AND AMENDMENT NO. 7 DATED SEPTEMBER 2, 1999 (AS SO
AMENDED, THE "SCHEDULE 13D"), FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BY WMIG, WITH RESPECT TO THE COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF FSA, A NEW YORK CORPORATION. ALL OTHER ITEMS REMAIN UNCHANGED.
UNLESS OTHERWISE SPECIFIED, ALL DEFINED TERMS USED HEREIN HAVE THE MEANING
PREVIOUSLY ASCRIBED TO THEM IN THE SCHEDULE 13D.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this Amendment No. 8 are WMIG (a Bermuda corporation),
WMP (a Barbados Corporation), WMH (a Delaware corporation) and WMSC (a Delaware
corporation), collectively referred to herein as the "Reporting Persons". WMP,
WMH and WMSC are each direct or indirect wholly-owned subsidiaries of WMIG.
WMIG, WMP, WMH and WMSC are financial services holding companies. The
principal business and office address of WMIG and WMH is 80 South Main Street,
Hanover, New Hampshire 03755-2053. The principal business and office address of
WMP is The Financial Services Centre, Bishop's Hill Court, St. Michael,
Barbados, West Indies. The principal business and office address of WMSC is P.O.
Box 2005, Farmington Hills, MI 48333-2005.
6
<PAGE>
Information with respect to each executive officer and director of each
of the Reporting Persons, including each such officer's and director's name,
residence or business address, present principal occupation or employment and
the name, principal business and address of any corporation or other
organization in which such employment is conducted, and citizenship, is set
forth in Schedule I attached to this Amendment No. 8, which Schedule I is
incorporated herein by reference.
None of the Reporting Persons nor, to the knowledge of the Reporting
Persons, any executive officer or director of any of the Reporting Persons has,
during the last five years, (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceedings was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On December 1, 1999, WMP purchased 922,509 shares of Common Stock from
FSA at a price of $54.20 per share. The transaction was part of a private
offering by FSA pursuant to which it sold a total of $140.0 million of Common
Stock to WMP, XL Capital Ltd, The Tokio Marine and Fire Insurance Co., Ltd and
an FSA management group.
ITEM 4. PURPOSE OF TRANSACTION.
The Common Stock was purchased by WMP for investment purposes at a cash
purchase price of $54.20 per share. The cash purchase price per share was
determined as 97.5% of the average of the high sale price and the low sale price
of Common Stock on the New York Stock Exchange on October 29, 1999, the day WMP
agreed to purchase the Common Stock from FSA.
7
<PAGE>
Except as set forth above, neither WMIG, WMP, WMH nor WMSC has any
current plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Issuer, or the
disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (d) any change in the
present board or directors or management of the Issuer, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Issuer; (f) any other material change in the Issuer's
business or corporate structure; (g) changes in the Issuer's charter, by-laws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to
any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Issuer has informed the Reporting Persons that 33,017,995 shares of
Common Stock were outstanding on December 1, 1999. After giving effect to
the conversion in full of the Preferred Stock, 35,017,995 shares of
Common Stock would have been outstanding on such date. As of the date of
this Amendment No. 8, WMIG and WMH owned no Common Stock of record and
beneficially owned, through WMSC, 6,020,807 shares of Common Stock and
has the right to acquire beneficial ownership 2,000,000 Common Stock upon
conversion of the Preferred Stock. Additionally, WMIG owned, through WMP,
922,059 shares of Common Stock. Accordingly, as of the date hereof, WMIG
beneficially owned an aggregate of 8,943,316 shares of Common Stock.
8
<PAGE>
As of the date of this Amendment No. 8, WMSC has the right to acquire
2,000,000 shares of Common Stock pursuant to the conversion of the
Preferred Stock. Assuming that the Preferred Stock is converted in full,
(i) such 8,943,316 shares beneficially owned by the Reporting Persons
represent approximately 25.5% of the Issuer's Common Stock which would
then be outstanding. As of the date of this Amendment, the following
persons listed on Schedule I to the Schedule 13D beneficially own the
following number of shares of Common Stock: K. Thomas Kemp - 1,600 shares
and Terry L. Baxter - 1,000 shares. Such numbers of shares each represent
less than 1% of the outstanding shares of Common Stock. Except as set
forth above, neither WMIG nor, to its knowledge, any person listed on
Schedule I to the Schedule 13D beneficially owns any shares of Common
Stock.
(b) WMIG shares the power to vote or to direct the vote of, and shares the
power to dispose or to direct the disposition of the 8,943,316 shares of
Common Stock specified in paragraph (a) immediately above with the other
Reporting Persons, in each case to the extent that any such other
Reporting Person also has beneficial ownership of any such shares of
Common Stock as described in paragraph (a) immediately above. WMH shares
the power to vote or to direct the vote of, and shares the power to
dispose or to direct the disposition of the 8,020,807 shares of Common
Stock specified in paragraph (a).
(c) On December 1, 1999, WMP purchased 922,509 shares of Common Stock from
FSA at a price of $54.20 per share. There have been no other transactions
by WMIG, WMP, WMH or WMSC, or to the knowledge of WMIG, WMP, WMH or WMSC,
any of the persons listed on Schedule I attached hereto, in Common Stock
effected during the past 60 days.
(d) None
(e) Not Applicable
9
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Pursuant to a Purchase Agreement dated October 29, 1999 (enclosed
herein), all Common Stock acquired by WMP on December 2, 1999 will be
subject to demand registration rights under same terms and conditions
(on an aggregate basis) as the shares of Common Stock currently owned
by WMIG and its affiliates.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 99.L - Purchase Agreement dated October 29, 1999 among FSA
and WMIG.
10
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of the knowledge and belief
of the undersigned, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: December 9, 1999
WHITE MOUNTAINS INSURANCE GROUP, LTD.
BY: /s/
----------------------------------------
Name: Michael S. Paquette
Title: Senior Vice President and Controller
WHITE MOUNTAINS PROPERTIES (BARBADOS) SRL
BY: /s/
----------------------------------------
Name: Dennis P. Beaulieu
Title: Secretary
WHITE MOUNTAINS HOLDINGS, INC.
BY: /s/
----------------------------------------
Name: David G. Staples
Title: President
WHITE MOUNTAINS SERVICES CORPORATION
BY: /s/
----------------------------------------
Name: Michael S. Paquette
Title: President
11
<PAGE>
SCHEDULE I TO SCHEDULE 13D
Following is a list of the directors and executive officers of White
Mountains Insurance Group, Ltd. ("WMIG"), White Mountains Properties (Barbados)
SRL ("WMP"), ("WMH") White Mountains Holdings, Inc. ("WMH"), and White Mountains
Services Corporation ("WMSC") setting forth the business address and present
principal occupation or employment (and the name, principal business and address
of any corporation or organization in which such employment is conducted) of
each such person. Each such person is a citizen of the USA except for Messrs.
Douglas and Thomson who are citizens of Barbados, West Indies.
<TABLE>
<CAPTION>
Name and Present Principal
Business Address Office Occupation or Employment
- ---------------- ------ ------------------------
<S> <C> <C>
WMIG
Raymond Barrette Executive Vice President and Executive Vice President and
White Mountains Insurance Chief Financial Officer Chief Financial Officer
Group, Ltd.
80 South Main Street
Hanover, NH 03755
Terry L. Baxter Executive Vice President Executive Vice President
White Mountains Insurance and Director and Director
Group, Ltd.
80 South Main Street
Hanover, NH 03755
John J. Byrne Chairman of the Board Chairman of the Board
White Mountains Insurance
Group, Ltd.
80 South Main Street
Hanover, NH 03755
Patrick M. Byrne Director self employed
35 Rope Ferry Road
Hanover NH, 03755
Reid T. Campbell Vice President - Finance Vice President - Finance
White Mountains Insurance
Group, Ltd.
80 South Main Street
Hanover, NH 03755
Howard L. Clark, Jr. Director Vice Chairman of Lehman
Lehman Brothers Inc. Brothers Inc.
American Express Tower
New York, NY 10128
Robert P. Cochran Director Chairman, President & Chief
Financial Security Assurance Executive Officer of
Holdings Ltd. Financial Security Assurance
350 Park Avenue Holdings Ltd.
New York, NY 10022
</TABLE>
12
<PAGE>
SCHEDULE I TO SCHEDULE 13D (CONT.)
<TABLE>
<CAPTION>
Name and Present Principal
Business Address Office Occupation or Employment
- ---------------- ------ ------------------------
<S> <C>
George J. Gillespie, III Director Partner in Cravath,
Cravath, Swaine & Moore Swaine & Moore
825 Eighth Avenue
New York, NY 10019
John D. Gillespie Director Self Employed
White Mountains Holdings, Inc.
80 South Main Street
Hanover, NH 03755
K. Thomas Kemp President, Chief Executive President and Chief Executive
White Mountains Insurance Officer & Director Officer
Group, Ltd.
80 South Main Street
Hanover, NH 03755
Gordon S. Macklin Director Retired
8212 Burning Tree Road
Bethesda, MD 20817
Kernan V. Oberting Vice President Vice President
White Mountains Insurance
Group, Ltd.
80 South Main Street
Hanover, NH 03755
Frank A. Olson Director Chairman of the Board
The Hertz Corporation of The Hertz Corporation
225 Brae Boulevard
Park Ridge, NJ 07656
Michael S. Paquette Sr. Vice President & Controller Sr. Vice President & Controller
White Mountains Insurance
Group, Ltd.
80 South Main Street
Hanover, NH 03755
David G. Staples Vice President-Taxation Vice President-Taxation
White Mountains Insurance
Group, Ltd.
80 South Main Street
Hanover, NH 03755
WMP
K. Thomas Kemp Director (see above)
(see above)
William P. A. Douglas Director Director
The Financial Services Centre
Bishop's Court Hill
St. Michael, Barbados, West Indies
</TABLE>
13
<PAGE>
SCHEDULE I TO SCHEDULE 13D (CONT.)
<TABLE>
<CAPTION>
Name and Present Principal
Business Address Office Occupation or Employment
- ---------------- ------ ------------------------
<S> <C> <C>
Kenneth F. G. Thomson Director Director
The Financial Services Centre
Bishop's Court Hill
St. Michael, Barbados, West Indies
WMH
Terry L. Baxter Director (see above)
(see above)
Dennis P. Beaulieu Secretary (see above)
(see above)
K. Thomas Kemp Director (see above)
(see above)
Kernan V. Oberting Vice President (see above)
(see above)
J. Brian Palmer Controller Controller
White Mountains Holdings, Inc.
80 South Main Street
Hanover, NH 03755
David G. Staples President (see above)
(see above)
WMSC
Michael C. Allemang Executive Vice President, Executive Vice President,
Source One Mortgage Chief Financial Officer, Chief Financial Officer,
Services Corporation Secretary and Director Secretary and Director
PO Box 2005
Farmington Hills, MI 48333-2005
Raymond Barrette Director (see above)
(see above)
Terry L. Baxter Chairman (see above)
(see above)
Michael S. Paquette President and Director (see above)
(see above)
David G. Staples Vice President (see above)
</TABLE>
14
<PAGE>
Exhibit 99.L
October 29, 1999
White Mountains Insurance Group Ltd.
Clarendon House
2 Church Street
Hamilton, Bermuda
Attn: Mr. K. Thomas Kemp
President and Chief Executive Officer
Re: Sale of U.S. $50,000,000 of Common Stock of Financial Security Assurance
Holdings Ltd.
Financial Security Assurance Holdings Ltd., a New York corporation ("FSA"), and
White Mountains Insurance Group Ltd, a Bermuda corporation ("WMIG"), hereby
agree that, upon the terms and subject to the conditions set forth below, FSA
shall sell to WMIG and WMIG shall purchase from FSA, shares of FSA Common Stock,
par value $.01 per share ("FSA Common Stock"), for U.S.$50,000,000 (the
"Aggregate Purchase Price").
1. NUMBER OF SHARES.
The purchase price per share (the "Per Share Price") shall equal 97.5% of the
average of the high sale price and the low sale price of FSA common stock on the
New York Stock Exchange on the date hereof, resulting in a Per Share Price of
$54.20. Accordingly, the number of shares of FSA Common Stock to be sold by FSA
to WMIG hereunder (the "Shares") shall equal the quotient of the Aggregate
Purchase Price divided by the Per Share Price, being 922,509 shares. At least
750,000 of the Shares will be registered under FSA's current shelf registration
statement and will not bear restricted legends. All the Shares acquired by WMIG
will be subject to demand registration rights under same terms and conditions
(on an aggregate basis) as the shares of FSA common stock currently owned by
WMIG and its affiliates.
2. CONDITIONS TO PARTIES OBLIGATIONS HEREUNDER.
The sole conditions (the "Closing Conditions") to the performance by FSA and
WMIG of their obligations hereunder are (a) approval by the Board of Directors
of WMIG of this Agreement and the transaction contemplated hereby at its meeting
to be held on November 1, 1999 or as promptly thereafter as practicable (the
"WMIG Board Approval Condition"); and (b) if applicable, (i) expiration or
earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), and (ii) confirmation that the requirements of the New York
Stock Exchange applicable to the sale of Shares contemplated hereby will not
require FSA shareholder approval (the "NYSE Condition"). FSA and WMIG shall
endeavor to (i) promptly make any filing required under the HSR Act and use
commercially reasonable efforts to obtain expiration or earlier termination of
the waiting period under the HSR Act (the "HSR Condition") and satisfaction of
the NYSE Condition, and (ii) consummate, and shall use their best efforts to
consummate, the closing hereunder. In furtherance of the foregoing, WMIG agrees
to schedule a Board meeting on November 1, 1999 or as promptly thereafter as
practicable at which the Board of WMIG shall consider this Agreement and the
transaction contemplated hereby. If the WMIG Board shall not approve this
Agreement and the transaction contemplated hereby at such meeting, then this
Agreement shall terminate.
15
<PAGE>
3. CLOSING DATE.
The closing hereunder shall occur on a date (the "Closing Date") determined by
FSA on which commercial banks are open for business in New York following the
date on which the Closing Conditions shall have been satisfied. FSA shall
provide WMIG at least 5 business days' notice of the Closing Date.
4. ANTI-DILUTION PROTECTION.
Until the earlier of May 13, 2004 and the date at which WMIG shall cease to own
all the outstanding shares of White Mountain Services Corporation, FSA agrees
that, immediately prior to any issuance of shares by FSA that would otherwise
dilute WMIG's ownership from more than 25% to less than 25% of the outstanding
common stock of FSA, FSA will offer WMIG the ability (on at least 5 business
days notice) to retain WMIG's fully diluted ownership in the common stock of FSA
at a level equal to or greater than 25% by selling FSA common stock to WMIG for
a purchase price per share equal to the price per share of the diluting event as
determined in good faith by FSA (e.g. the price to public in the case of a
public offering and the closing price per share on the NYSE in the case of any
shares issued in connection with any FSA benefit plan); provided, however, that
(a) any such purchase by WMIG shall comply with law and any requirements or
constraints applicable to FSA, including the requirements of (i) any securities
rating agency rating FSA or any FSA subsidiary and (ii) any securities exchange
on which shares of FSA are listed and (b) FSA shall not be required to delay
consummation of the diluting event in order to close the purchase by WMIG if
such delay would be adverse to the interests of FSA as determined in good faith
by FSA.
5. DELIVERY OF AND PAYMENT FOR SHARES.
At the closing hereunder, FSA will deliver, or cause to be delivered to WMIG,
the Shares, registered in the name of WMIG or its nominee, and WMIG shall
simultaneously deliver to FSA immediately available funds in an amount equal to
the Aggregate Purchase Price.
6. REPRESENTATIONS AND WARRANTIES OF FSA.
FSA hereby represents and warrants that (a) FSA is a corporation duly organized
and validly existing under the laws of the State of New York, (b) FSA has the
full corporate power and authority to execute, deliver and perform its
obligations hereunder, and (c) on the date of consummation of the transaction
contemplated hereby, FSA shall transfer the Shares to WMIG, free and clear of
any lien, charge, encumbrance or restriction on transfer.
7. REPRESENTATIONS AND WARRANTIES OF WMIG.
WMIG hereby represents and warrants that it is acquiring the Shares hereunder
for investment only and not with a view toward distribution.
8. FEES AND EXPENSES.
Each of FSA and WMIG shall pay its own respective fees and expenses (including,
without limitation, the fees of any attorneys, accountants, or other
representatives) incurred in connection with this letter agreement and the
transactions contemplated hereby, whether or not such transactions are
consummated, it being agreed that fees of Cravath, Swaine & Moore incurred to
date in connection with a possible sale of White Mountains Services Corporation
shall be for the account of WMIG. Each of FSA and WMIG represents that no
broker, finder or investment banker has been retained or engaged on its behalf
or is entitled to any brokerage, finder's or other fee, commission or
compensation in connection with the transactions contemplated hereby.
16
<PAGE>
9. COMMUNICATIONS.
All notices and other communications provided for in this letter agreement shall
be in writing and shall be deemed effective upon receipt at the party's address
and facsimile number (a), in the case of WMIG, by telephonic communication with
Raymond Barrette at 603-640-2211, with a facsimile to his attention at telecopy
number 603-643-4562, and (b) in the case of FSA, by telephonic communication
with Bruce Stern at (212) 339-3482, with a facsimile to his attention at
telecopy number (212) 339-0849.
10. ASSIGNMENT.
The rights and obligations of FSA and WMIG hereunder may not be assigned without
the prior written consent of the other party.
11. AMENDMENT.
The terms and provisions of this letter agreement may not be amended, modified
or waived except by written instrument signed by both FSA and WMIG.
12. COUNTERPARTS.
This letter agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but such counterparts together
shall constitute but one instrument. 13. Governing Law. This letter agreement
shall be governed by and construed in accordance with the laws of the State of
New York. If the foregoing is in accordance with WMIG understanding of our
agreement, please sign and return to us the enclosed copy of this Agreement,
whereupon it shall become a binding agreement between us.
Very truly yours,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.,
By: /s/ Bruce Stern
Title: Managing Director and General Counsel
Agreed and Accepted by:
WHITE MOUNTAINS INSURANCE GROUP, LTD.,
By: /s/ K. Thomas Kemp
Title: President and Chief Executive Officer
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