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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
WHITE MOUNTAINS INSURANCE GROUP, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/x/ Fee paid previously with preliminary materials.
/x/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $226,132.85
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(2) Form, Schedule or Registration Statement No.: 333-87649
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(3) Filing Party: White Mountains Insurance Group (Arizona), Inc.
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(4) Date Filed: September 23, 1999
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[Logo]
September 27, 1999
Dear Fellow Shareholder:
We are pleased to present a proposal for reorganizing and redomesticating
your company from Delaware, its current place of incorporation, to Bermuda. We
believe the reorganization will add shareholder value over time as it will
enable our company to gain business advantages that are not currently available
under our corporate structure. The redomestication of our company will offer us
greater flexibility in structuring international business activities. We believe
that the opportunities include (1) a more favorable corporate structure for the
formation and growth of non-U.S. based insurance and/or reinsurance operations,
(2) an enhanced ability to compete with non-U.S. insurance/reinsurance entities,
(3) an enhanced ability to pursue business combinations with non-U.S. entities,
including Bermuda companies, (4) an expansion of the investor base as our
company's shares may become more attractive to non-U.S. investors, and
(5) increased visibility among the investment banking community arising from its
perception of the company's enhanced corporate structure. In addition, after the
reorganization, our company will be taxable in the United States only on that
portion of its worldwide income that is attributable to the United States or
United States subsidiaries.
If the reorganization is approved and the company changes domicile, the
number of shares you own and your relative economic ownership in our company
will remain unchanged. However, you will then hold common shares in a Bermuda
company, White Mountains Insurance Group, Ltd., rather than a Delaware
corporation and your shares of common stock will automatically become common
shares of the Bermuda company without any further action by you. In addition, we
plan to increase the number of authorized common shares from 15,000,000 to
50,000,000 and preference shares from 1,000,000 to 20,000,000. The increase in
authorized shares positions us to consider issuing shares in a rights offering,
merger, or other similar transaction, acquisition, or in other corporate
transactions. We will remain a publicly traded company and expect our shares to
continue to be listed on the New York Stock Exchange under the symbol "WTM." Due
to a technical requirement of Delaware law, our company would first
reincorporate into Arizona immediately before becoming a Bermuda company.
This proxy statement (which includes a prospectus covering the issuance to
you in the reorganization of the same number of shares that you previously owned
in the company) provides you with detailed information regarding the
reorganization.
Along with the benefits mentioned above, this transaction contains certain
important changes to your rights as shareholders and is not without some risk.
While we believe the potential benefits outweigh any change in your rights and
any possible risks, we encourage you to read this entire document including the
bye-laws annexed to this proxy statement/prospectus carefully.
Our board of directors believes that this proposal is favorable for our
company and for you and unanimously recommends and approves this proposal for
reorganization. By acting now, the board of directors believes that the proposed
change can be implemented with moderate cost to us, but none to you.
Your support and your vote for the reorganization matter greatly. Whether
or not you plan to attend the special meeting, please complete, date and sign
the enclosed proxy card and mail it promptly in the enclosed return envelope.
Because the proposed change requires the affirmative
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vote of a majority of all outstanding shares of common stock, it is extremely
important that you respond. We urge you to join us in supporting this important
opportunity.
Sincerely,
/s/ K. Thomas Kemp
K. Thomas Kemp
Chief Executive Officer and President
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated September 24, 1999 and is first
being mailed to stockholders on or about September 27, 1999.
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[Logo]
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF WHITE MOUNTAINS INSURANCE GROUP, INC.
TO BE HELD ON OCTOBER 22, 1999
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To the Stockholders of WHITE MOUNTAINS INSURANCE GROUP, INC.:
A special meeting of stockholders of White Mountains Insurance Group, Inc.
will be held at 10:00 a.m., local time, on October 22, 1999 at Hotel Plaza
Athenee, Le Trianon Room, 37 East 64th Street, New York, NY 10021, for the
following purposes:
(1) To approve the proposed corporate reorganization whereby White
Mountains Insurance Group-Delaware will change its domicile from Delaware to
Bermuda pursuant to (1) an agreement and plan of merger, a copy of which is
attached as annex I to the accompanying proxy statement/prospectus, pursuant to
which White Mountains Insurance Group-Delaware will be merged with and into
White Mountains Insurance Group (Arizona), Inc., a newly-formed, wholly-owned
Arizona subsidiary, and (2) a memorandum of continuance, a copy of which is
attached as annex II to the accompanying proxy statement/prospectus, upon the
registration of which White Mountains Insurance Group-Arizona will become a
Bermuda company (with bye-laws in the form of annex III to the accompanying
proxy statement/prospectus) through a continuance under Arizona and Bermuda law
and to authorize the board of directors to exercise the powers of the board of
directors set out in such bye-laws and to take any and all actions deemed
necessary or advisable to give effect to the reorganization; and
(2) To transact such other business as may properly be brought before the
meeting.
The board of directors has fixed the close of business on September 24,
1999 as the record date for determining stockholders entitled to notice of, and
to vote at, the special meeting.
By order of the Board of Directors,
/s/ Dennis Beaulieu
DENNIS P. BEAULIEU
Vice President and Secretary
September 27, 1999
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE FURNISHED FOR THAT PURPOSE.
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TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION............................................................ 1
SUMMARY................................................................................................... 5
RISK FACTORS.............................................................................................. 10
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................................................. 14
THE REORGANIZATION........................................................................................ 21
THE SPECIAL MEETING....................................................................................... 24
THE MERGER AGREEMENT AND THE MEMORANDUM OF CONTINUANCE.................................................... 26
WHITE MOUNTAINS INSURANCE GROUP-DELAWARE AND WHITE MOUNTAINS INSURANCE GROUP-BERMUDA...................... 28
DESCRIPTION OF AUTHORIZED SHARES OF WHITE MOUNTAINS INSURANCE GROUP-BERMUDA............................... 29
COMPARISON OF RIGHTS OF SHAREHOLDERS...................................................................... 31
MATERIAL TAX CONSIDERATIONS............................................................................... 43
MANAGEMENT OF WHITE MOUNTAINS INSURANCE GROUP-BERMUDA..................................................... 47
LEGAL MATTERS............................................................................................. 47
EXPERTS................................................................................................... 47
WHERE YOU CAN FIND MORE INFORMATION....................................................................... 47
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS........................................................... 49
ANNEX I--AGREEMENT AND PLAN OF MERGER..................................................................... I-1
ANNEX II--MEMORANDUM OF CONTINUANCE....................................................................... II-1
ANNEX III--BYE-LAWS....................................................................................... III-1
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FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OF THIS PROSPECTUS.
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QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION
Q: WHAT ARE THE PURPOSES OF THE REORGANIZATION?
A: The reorganization will allow us to avail ourselves of business and
financial advantages that are not available under our current corporate
structure. The redomestication of our company, as the holding company for
all of its operating businesses and investments, would offer our company
greater flexibility in structuring international business activities. We
believe the opportunities include:
o a more favorable corporate structure for the formation and growth of
non-U.S. based insurance and/or reinsurance operations,
o an enhanced ability to compete with non-U.S. insurance/reinsurance
entities,
o an enhanced ability to pursue business combinations with non-U.S.
entities, including Bermuda companies,
o an expansion of the investor base as our company's shares may become more
attractive to non-U.S. investors, and
o increased visibility among the investment banking community arising from
its perception of the company's enhanced corporate structure.
Q: ARE THERE ANY OTHER BENEFITS TO THE REORGANIZATION?
A: At this time, our worldwide income is subject, either immediately or
eventually, to U.S. taxation. After the reorganization, our company will be
taxable in the United States only on that portion of its worldwide income
that is attributable to the United States or United States subsidiaries.
Q: HOW WOULD I BENEFIT FROM THIS CHANGE?
A: Our principal objective in this reorganization is to enhance shareholder
value by increasing the long-term profitability of our company.
Q: WILL I BE TAXED AS A RESULT OF THIS PROPOSAL?
A: The reorganization is structured so that it will be tax-free to you. Your
tax basis and holding period will remain the same.
Q: WILL OUR COMPANY HAVE TO PAY TAXES AS A RESULT OF THE PROPOSAL?
A: At the time of the reorganization, our company will be treated as if it sold
all of its directly owned assets in a fully taxable transaction in which
gains, if any, but not losses will be recognized. Based on our current
estimates of the fair market values of our assets and our tax attributes,
management expects the company will incur a tax liability of between $5.0
million and $20.0 million at the time of the reorganization.
Q: WILL THE IRS ACCEPT OUR DETERMINATION OF OUR TAX LIABILITY?
A: The IRS is not obliged to accept our determination or the methodologies we
used.
Q: HAS THE IRS RENDERED AN OPINION ON THIS TRANSACTION?
A: We are not requesting any ruling or expression of views from the IRS, as the
transaction is fully taxable to our company. With respect to our
shareholders, our counsel has rendered an opinion that the reorganization is
not taxable to you. See "Material Tax Considerations."
Q: WHY WAS BERMUDA SELECTED AS THE NEW DOMICILE FOR OUR COMPANY?
A: We chose Bermuda for its political stability, its long association with
insurance companies and its legal framework. Bermuda is the location of many
holding companies that have worldwide insurance operations.
The first international, not locally owned company was incorporated in
Bermuda in the 1930's. There are currently many companies domiciled there
which are publicly traded on U.S. and European markets. In addition, the
corporate legal system in Bermuda is based on English legal principles.
Under current Bermuda law, a Bermuda company is not required to pay taxes in
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Bermuda on either income or capital gains.
Q: WILL THE PROPOSAL AFFECT OUR COMPANY'S CURRENT OPERATIONS AND JOBS? WHAT
ABOUT THE FUTURE?
A: This reorganization will have limited immediate effect on our U.S.
operations or employees. In the future, we may form a Bermuda domiciled
insurance or reinsurance subsidiary at which point we can expect to have
employees and operations in Bermuda. As we grow, locations of future
operations will be chosen based on the needs of the business, which we
expect to address independently from where we are legally domiciled.
Q: WHY IS OUR COMPANY INCREASING THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE?
A: The increase in authorized shares positions us to consider issuing shares in
a rights offering, merger, amalgamation, acquisition, or other corporate
transaction.
Q: WILL OUR COMPANY REPURCHASE SHARES IN THE FUTURE?
A: While Bermuda law permits Bermuda companies to repurchase their shares, we
have no present intent to repurchase our shares.
Q: WILL THE REORGANIZATION AFFECT OUR COMPANY'S DIVIDEND POLICY?
A: We currently intend to reconsider, and possibly reduce, after the
reorganization, quarterly dividends with due consideration given to the
financial characteristics of our remaining invested assets and operations,
the amount and regularity of our cash flow and our business opportunities.
The payment of any future cash dividends on the White Mountains Insurance
Group-Bermuda common shares is necessarily dependent upon the earnings and
financial needs of White Mountains Insurance Group-Bermuda, along with
applicable legal and contractual restrictions.
Q: WHAT EFFECT WILL THE REORGANIZATION HAVE ON MANAGEMENT AND DIRECTOR
COMPENSATION?
A: In connection with the reorganization, some compensation benefits to
management and directors will be accelerated and, in some cases, terminated.
Q: WHAT WILL BE THE SIGNIFICANT CHANGES TO OUR ORGANIZATIONAL DOCUMENTS AS A
RESULT OF THE REORGANIZATION?
A:o The board of directors of White Mountains Insurance Group-Bermuda may
mandatorily redeem shares from a shareholder at fair market value if it
determines that share ownership by that shareholder may result in adverse
tax, regulatory or legal consequences to our company, any of our
subsidiaries or any of our shareholders;
o a provision limiting the voting rights of any person who owns (directly,
indirectly or constructively under the U.S. Internal Revenue Code) 10% or
more of the shares of White Mountains Insurance Group-Bermuda to 9.9%. This
9.9% voting limitation provision will not be applicable to John J. Byrne,
any foundation or trust established by John J. Byrne, Patrick M. Byrne (his
son and one of our directors) and/or any affiliate or associate of any of
them or any group of which any of them is a part (each of them, a "Byrne
Entity") with respect to any matter submitted to shareholders other than
with respect to the election of directors. This provision is intended to
prevent our company from being characterized as a controlled foreign
corporation, which could cause U.S. persons owning 10% or more of our
shares to suffer adverse U.S. tax consequences;
o a provision limiting the voting rights of any group (defined as two or more
persons acting as a partnership, syndicate or other group for the purpose
of acquiring, holding or disposing of the relevant securities) which owns
10% or more of the shares to 9.9%, except that this provision relating to
groups will not
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apply to (a) any Byrne Entity, or (b) any person or group that the board of
directors, by the affirmative vote of at least 75% of the entire board of
directors, may exempt from this provision;
o a provision (similar to that under Delaware corporate law) limiting
business combinations with interested shareholders. However, any Byrne
Entity will be exempt from this provision;
o shareholders will not have the right to remove directors for cause (unless
the Board determines otherwise);
o an increase in the number of authorized common shares from 15,000,000 to
50,000,000 and preference shares from 1,000,000 to 20,000,000;
o our bye-laws can only be amended with both the prior approval of the board
of directors and approval by the holders of a majority of the voting power
of the shareholders present at a meeting of the shareholders (subject to
supermajority provisions in certain circumstances); and
o shareholders' rights to bring derivative suits will be more limited.
Q: WHY IS ARIZONA INVOLVED IN THE PROPOSAL?
A: Delaware law requires approval by 100% of our stockholders to move our
domicile to a non-U.S. jurisdiction in the manner proposed. Because we are a
publicly traded company with a large stockholder base, this requirement
makes reorganization directly from Delaware to Bermuda impossible. Delaware
law permits us to move to another state with majority shareholder approval.
Going through a state such as Arizona, which requires only a majority
approval of stockholders to move to a non-U.S. jurisdiction, is the only
practical way to accomplish this step in the reorganization.
Q: IS A MAJORITY OF ALL SHARES REQUIRED OR ONLY OF THE SHARES THAT ARE ACTUALLY
VOTED?
A: In order for us to change our domicile, we need favorable votes from a
majority of all outstanding shares. Shares for which no votes are cast will
be treated as though they were voted against the reorganization, so it is
very important for all stockholders to vote.
Q: WON'T THIS PROPOSAL ADD ANOTHER LEVEL OF COST AND COMPLEXITY TO OUR COMPANY
THAT WILL BE DISTRACTING TO MANAGEMENT?
A: Short term, there will be some additional financial and legal requirements,
but we don't expect these or the related costs to be material or burdensome.
Longer term, we expect this reorganization should actually simplify our
structure and lower our costs.
Q: IF APPROVED, WHEN DOES ALL THIS BECOME EFFECTIVE?
A: While we currently expect the reorganization to take place soon after the
special meeting, the board of directors of White Mountains Insurance Group-
Delaware may defer for a significant time or abandon the reorganization
after the special meeting. One of the factors the board of directors of
White Mountains Insurance Group-Delaware will consider at the time of the
reorganization is whether there has been an increase in our estimate of the
tax cost of the reorganization, which can rise due to increases in the fair
market values of the assets of White Mountains Insurance Group-Delaware.
The merger of White Mountains Insurance Group-Delaware with and into White
Mountains Insurance Group-Arizona will occur only if the change of domicile
to Bermuda is to occur immediately after the merger.
Q: DO I HAVE TO EXCHANGE MY STOCK CERTIFICATES?
A: No. Holders of White Mountains Insurance Group-Delaware stock will not be
required to exchange their stock certificates after the reorganization. If
you want to sell some or all of your shares, delivery of the original stock
certificates will be sufficient.
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Q: WHAT IF I WANT TO BUY OR SELL SHARES DURING THE TIME IT TAKES OUR COMPANY TO
BECOME DOMICILED IN BERMUDA?
A: The reorganization should have no impact on your ability to trade your
shares.
Q: WILL THE SHARES OF OUR COMPANY REMAIN LISTED ON THE NEW YORK STOCK EXCHANGE
AFTER THE REORGANIZATION?
A: Yes, we expect that your shares will still trade on the New York Stock
Exchange under the symbol "WTM."
Q: WHAT SHOULD I DO NOW TO VOTE?
A: You should indicate on your proxy card how you want to vote and mail your
signed proxy card in the enclosed return envelope as soon as possible so
that your shares can be voted at the special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. You must instruct your broker how to vote your shares or else your
broker will not vote your shares. Follow your broker's directions as to the
procedure for voting your shares.
Q: CAN I CHANGE MY VOTE AFTER I GRANT MY PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in the manner described under "The Special
Meeting--Proxies."
Q: WHOM DO I CONTACT WITH FURTHER QUESTIONS?
A: Please call our proxy solicitor and information agent, Corporate Investor
Communications, Inc., toll free at (877) 460-9330, or our company at
(603) 643-1567.
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger and the other transactions more fully and for a more complete description
of the legal terms of the reorganization, you should read carefully this entire
document and the other documents to which we have referred you. See "Where You
Can Find More Information" on page 47 of this proxy statement/prospectus. The
actual terms of the reorganization are contained in the merger agreement and
memorandum of continuance. The merger agreement is included in this proxy
statement/prospectus as annex I. The memorandum of continuance and bye-laws will
govern our company once we are domiciled in Bermuda and are included in this
document as annex II and annex III.
In this document, "we," "us," "our" and "our company" refer to White
Mountains Insurance Group, Inc. and its subsidiaries or White Mountains
Insurance Group, Ltd. and its subsidiaries, as the context requires, and "you"
refers to the stockholders of White Mountains Insurance Group, Inc. or the
shareholders of White Mountains Insurance Group, Ltd., as the context requires.
The reorganization means both the merger and the change of domicile, taken
together.
PARTIES TO THE REORGANIZATION
(SEE PAGES 28-29)
White Mountains Insurance Group-Delaware
White Mountains Insurance Group, Inc. is a New Hampshire-based financial
services holding company. Our subsidiaries and affiliates provide property and
casualty insurance, reinsurance and financial guaranty insurance. Our company
was incorporated in Delaware in 1980.
In the current fiscal year, we have announced or consummated the following
significant transactions:
o the disposition and discontinuance of our mortgage banking operations;
o the sale of Valley Group, Inc., consisting of Valley Insurance Company,
Charter Indemnity Company, White Mountains Insurance Company and related
insurance affiliates;
o an agreement to purchase the Consolidated International Group, Inc., a
Delaware based insurance holding company;
o the repurchase of 871,845 shares of our common stock; and
o the exercise by John J. Byrne of his warrants to purchase 1,000,000
shares of our common stock, as described under "The Reorganization--
Acceleration of Deductions Related to Compensation Benefits."
We also own a passive investment portfolio. Management's primary strategic
goal is to reinvest our passive investments, together with other resources
available to us, into operating businesses in which management has knowledge and
experience, if appropriate opportunities can be found.
White Mountains Insurance Group-Arizona
White Mountains Insurance Group-Arizona is an Arizona corporation. It has
transacted no business to date except in connection with the reorganization and
related transactions. White Mountains Insurance Group-Delaware currently holds
all shares of White Mountains Insurance Group-Arizona.
White Mountains Insurance Group-Bermuda
In the reorganization, White Mountains Insurance Group-Arizona will be
converted into and continue its existence as White Mountains Insurance
Group-Bermuda. White Mountains Insurance Group-Bermuda will be a Bermuda company
registered and existing under the laws of Bermuda upon registration of the
memorandum of continuance by the Registrar of Companies in Bermuda. After the
reorganization, you will be a shareholder of White Mountains Insurance
Group-Bermuda.
Our headquarters will be located at Clarendon House, 2 Church Street, P.O.
Box HM 666, Hamilton HM CX, Bermuda (telephone 441-295-1422). Our principal
executive offices will remain at 80 South Main Street, Hanover, New Hampshire
03755 (telephone 603-643-1567).
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THE REORGANIZATION (SEE PAGES 21-24)
General
Our board of directors has unanimously approved and recommends that you
approve a proposed corporate reorganization whereby we will change our domicile
from Delaware to Bermuda. A holder of White Mountains Insurance Group-Delaware
common stock will, after the reorganization, continue to own, as a holder of
White Mountains Insurance Group-Bermuda common shares, the same relative
economic interest in White Mountains Insurance Group-Bermuda. However, there
will be significant differences in your rights as a shareholder of White
Mountains Insurance Group-Bermuda which are described in "Risk Factors" and
"Comparison of Rights of Shareholders," including a provision which will limit
the voting rights of any person (other than a Byrne Entity except in the case of
election of directors) to 9.9%.
Reasons for the Reorganization
Our board of directors believes that because the insurance industry is
increasingly global in nature, the reorganization will allow us to avail
ourselves of significant business and financial advantages that are not
available under the current corporate structure. In particular, the board of
directors recommends the reorganization for the following reasons:
o more favorable corporate structure for the formation and growth of
non-U.S. based insurance and/or reinsurance operations;
o an enhanced ability to compete with non-U.S. insurance/reinsurance
entities;
o an enhanced ability to pursue business combinations with non-U.S.
entities, including Bermuda companies;
o an expansion of the investor base as our company's shares may become more
attractive to non-U.S. investors; and
o increased visibility among the investment banking community arising from
its perception of our company's enhanced corporate structure.
Other Benefits
Our current corporate structure is such that worldwide income is subject,
either immediately or eventually, to U.S. taxation. After the reorganization, we
will be taxable in the United States only on that portion of our worldwide
income that is attributable to the United States or our United States
subsidiaries.
We can give no assurances, however, that we will realize any of the
anticipated benefits of the reorganization.
Costs and Risks
The reorganization will impose some moderate costs on our company and will
expose our company and certain of our larger shareholders to some risks. Our
board of directors believes that the potential advantages of the reorganization
substantially outweigh these costs and risks.
At the time of the reorganization, White Mountains Insurance Group-Delaware
will be treated as if it sold all of its directly owned assets in a fully
taxable transaction in which gains, if any, but not losses, will be recognized.
The gains on assets of any subsidiary that redomesticates to a non-U.S.
jurisdiction as part of the reorganization will be taxed similarly. Based on our
current estimates of the fair market values of our assets and our tax
attributes, management expects the company will incur a tax liability of between
$5.0 million and $20.0 million at the time of the reorganization. However, the
IRS may contest our calculation of the gain and the methodologies we used to
calculate it. See "Risk Factors--The Reorganization Could Result in a Larger
Than Expected Taxable Gain to Our Company," "Unaudited Pro Forma Financial
Information" and "Material Tax Considerations."
There are differences between Delaware and Bermuda corporate law. We
discuss the material differences under "Comparison of Rights of Shareholders."
We describe the principal tax and enforcement risks related to the
reorganization under "Risk Factors."
THE MERGER AGREEMENT AND THE MEMORANDUM OF CONTINUANCE
(SEE PAGES 26-28)
The reorganization will be accomplished through the merger of White
Mountains Insurance Group-Delaware with and into White Mountains Insurance
Group-Arizona, which will be the surviving corporation in the merger. At that
time each outstanding share of White Mountains Insurance Group-Delaware common
stock will be automatically converted into one White Mountains Insurance Group-
Arizona common share. Immediately after the
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merger, White Mountains Insurance Group-Arizona will, through a statutory
continuation procedure, become White Mountains Insurance Group-Bermuda. At that
time each outstanding White Mountains Insurance Group-Arizona common share will
be automatically converted into one White Mountains Insurance Group-Bermuda
common share.
AMENDMENT/TERMINATION; EFFECTIVE TIME
(SEE PAGES 27-28)
The merger may be terminated, and the reorganization abandoned, at any
time, by action of the board of directors of White Mountains Insurance
Group-Delaware, whether before or after the special meeting. While we currently
expect the reorganization to take place soon after the special meeting, the
board of directors of White Mountains Insurance Group-Delaware may defer the
reorganization for a significant time or may abandon the reorganization after
the special meeting. Also, the merger of White Mountains Insurance
Group-Delaware with and into White Mountains Insurance Group-Arizona will occur
only if the change of domicile to Bermuda is to occur immediately after the
merger. Our board of directors may exercise this right for a variety of reasons
including if they determined that the reorganization would, in their view, be
too costly, or would have material adverse consequences to our company.
One of the factors the board of directors of White Mountains Insurance
Group-Delaware will consider at the time of the reorganization is whether there
has been an increase in our estimate of the tax cost of the reorganization,
which can rise due to increases in the fair market values of the assets of White
Mountains Insurance Group-Delaware.
Procedurally, the reorganization will become effective on the date that the
memorandum of continuance is registered by the Registrar of Companies of
Bermuda.
ACCELERATION OF SOME MANAGEMENT AND DIRECTOR COMPENSATION BENEFITS
(SEE PAGES 23-24)
In connection with the reorganization, some management and director
benefits are being accelerated and, in some cases, terminated. See "Risk
Factors--Management May Have Conflicts of Interest as a Result of the
Reorganization Principally Because of the Acceleration and, in Some Cases,
Termination of Some Compensation Benefits" and "The Reorganization--Acceleration
of Deductions Related to Compensation Benefits."
RECOMMENDATION OF THE BOARD OF DIRECTORS
(SEE PAGE 22)
THE BOARD OF DIRECTORS OF WHITE MOUNTAINS INSURANCE GROUP-DELAWARE HAS
UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATION AND RECOMMENDS THAT YOU VOTE
FOR THE PROPOSAL TO APPROVE THE REORGANIZATION.
VOTE REQUIRED FOR ADOPTION (SEE PAGES 24-25)
Approval of the reorganization requires the affirmative vote of the holders
of a majority of the outstanding shares of White Mountains Insurance
Group-Delaware common stock voting together as a single class. Abstentions and
broker nonvotes will be treated as votes against the proposal to approve the
reorganization.
As of the record date described below, there were 5,982,291 shares of White
Mountains Insurance Group-Delaware common stock outstanding and entitled to
vote. As of the record date, the directors and executive officers of White
Mountains Insurance Group-Delaware and affiliates of those persons directly
owned, in the aggregate, approximately 1,475,548 shares of White Mountains
Insurance Group-Delaware common stock (approximately 24.7% of the outstanding
White Mountains Insurance Group-Delaware common stock). They (or their proxies)
have indicated their intention to vote these shares in favor of the proposal to
approve the reorganization.
Proxies
If you held White Mountains Insurance Group-Delaware common stock on the
record date, you will receive a proxy card. You may grant a proxy to vote by
marking the proxy card appropriately, executing it in the space provided, and
returning it to White Mountains Insurance Group-Delaware.
If you hold your White Mountains Insurance Group-Delaware common stock in
the name of a bank, broker or other nominee, you should follow the instructions
provided by your bank, broker or nominee on voting your shares. To be effective,
a proxy card must be received at or prior to the special meeting.
7
<PAGE>
Shares of White Mountains Insurance Group-Delaware common stock represented
by a properly executed proxy card will be voted, and where a choice is specified
on the proxy card, these shares will be voted in accordance with the
specification indicated on such proxy card. Shares of White Mountains Insurance
Group-Delaware common stock represented by a properly executed proxy card on
which no specification is made will be voted FOR the proposal to approve the
reorganization.
If any other matters are properly presented at the special meeting for
consideration, including consideration of a motion to adjourn the special
meeting to another time and/or place, including adjournments for the purpose of
soliciting additional proxies, the persons named in the proxy card will have the
discretion to vote on those matters in accordance with their best judgment.
Revocation
You may revoke a proxy card at any time prior to its exercise by:
o giving written notice of the revocation to the Secretary of White
Mountains Insurance Group-Delaware;
o appearing and voting in person at the special meeting; or
o properly completing and executing a later-dated proxy and delivering it
to the Secretary of White Mountains Insurance Group-Delaware at or before
the special meeting.
Presence without voting at the special meeting will not automatically
revoke a proxy, and any revocation during the meeting will not affect votes
previously taken.
QUORUM (SEE PAGE 24)
The presence, in person or by proxy, of stockholders holding a majority of
the outstanding shares of White Mountains Insurance Group-Delaware common stock
entitled to vote at the special meeting will constitute a quorum.
RECORD DATE (SEE PAGE 24)
Only White Mountains Insurance Group-Delaware stockholders of record at the
close of business on September 24, 1999, as shown on White Mountains Insurance
Group-Delaware's records, will be entitled to vote, or to grant proxies to vote,
at the special meeting.
NYSE TRADING (SEE PAGE 22)
White Mountains Insurance Group-Delaware common stock is currently traded
on the NYSE under the symbol "WTM." We expect that White Mountains Insurance
Group-Bermuda common shares will be listed under the same symbol immediately
following the reorganization. As is the case with White Mountains Insurance
Group-Delaware, as a NYSE listed company, White Mountains Insurance
Group-Bermuda will be subject to the informational requirements of the
securities laws of the United States.
MARKET PRICE (SEE PAGE 29)
The closing price per share of White Mountains Insurance Group-Delaware
common stock on the NYSE was $132 on September 22, 1999. The high and low
sales prices of White Mountains Insurance Group-Delaware common stock on the
NYSE were $131.25 and $131.625 on September 22, 1999, the last trading day
before the public announcement of the reorganization.
COMPARISON OF RIGHTS OF SHAREHOLDERS
(SEE PAGES 31-42)
There are differences between the rights of shareholders under Delaware law
and Bermuda law. In addition, there are differences between White Mountains
Insurance Group-Delaware's certificate of incorporation and by-laws and White
Mountains Insurance Group-Bermuda's memorandum of continuance and bye-laws.
The most significant differences are:
o the board of directors of White Mountains Insurance Group-Bermuda may
mandatorily redeem shares from a shareholder at fair market value if it
determines that share ownership by that shareholder may result in adverse
tax, regulatory or legal consequences to our company, any of our
subsidiaries or any of our shareholders;
o a provision limiting the voting rights of any person who owns (directly,
indirectly or constructively under the IRC) 10% or more of the shares of
White Mountains Insurance Group-Bermuda to 9.9%. This 9.9% voting
limitation provision will not be applicable to any Byrne Entity with
respect to any matter submitted to shareholders other than with respect
to
8
<PAGE>
the election of directors. This provision is intended to prevent our
company from being characterized as a controlled foreign corporation,
which could cause U.S. persons owning 10% or more of our shares to suffer
adverse U.S. tax consequences;
o a provision limiting the voting rights of any group (defined as two or
more persons acting as a partnership, syndicate or other group for the
purpose of acquiring, holding or disposing of the relevant securities)
which owns 10% or more of the shares to 9.9%, except that this provision
relating to groups will not apply to (a) any Byrne Entity, or (b) any
person or group that the board of directors, by the affirmative vote of
at least 75% of the entire board of directors, may exempt from this
provision;
o a provision (similar to that under Delaware corporate law) limiting
business combinations with interested shareholders. However, any Byrne
Entity will be exempt from this provision;
o shareholders will not have the right to remove directors for cause
(unless the Board determines otherwise);
o an increase in the number of authorized common shares from 15,000,000 to
50,000,000 and preference shares from 1,000,000 to 20,000,000;
o our bye-laws can only be amended with both prior approval of the board of
directors and approval by the holders of a majority of the voting power
of the shareholders present at a meeting of the shareholders (subject to
super-majority provisions in certain circumstances); and
o shareholders' rights to bring derivative suits will be more limited.
TAX CONSIDERATIONS (SEE PAGES 43-47)
Taxation of White Mountains Insurance Group Stockholders
The reorganization will be characterized for U.S. federal income tax
purposes as a tax-free reorganization in which you will not recognize any gain
or loss and in which your tax basis and holding period with respect to White
Mountains Insurance Group-Bermuda common shares will be the same as your tax
basis and holding period for the White Mountains Insurance Group-Delaware common
stock.
Taxation of White Mountains Insurance Group
At the time of the reorganization, White Mountains Insurance Group-Delaware
will be treated as if it sold all of its directly owned assets in a fully
taxable transaction in which gains, if any, but not losses, will be recognized.
The gain on assets of any subsidiary that redomesticates to a non-U.S.
jurisdiction as part of the reorganization will be taxed similarly. Based on our
current estimates of the fair market values of our assets and our tax
attributes, management expects the company will incur a tax liability of between
$5.0 million and $20.0 million at the time of the reorganization. However, the
IRS may contest our calculation of the gain and the methodology used by our
advisors to calculate it.
After the reorganization, White Mountains Insurance Group-Bermuda will be
subject to U.S. federal income tax only to the extent that it derives U.S.
source income that is subject to U.S. withholding tax or income that is
effectively connected with the conduct of a trade or business within the United
States and is not exempt from U.S. tax under an applicable income tax treaty
with the United States. Our U.S. subsidiaries will continue to be subject to
U.S. tax on their worldwide income.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR TAX
CONSEQUENCES.
RIGHTS OF DISSENTING SHAREHOLDERS
(SEE PAGE 22):
You will not have dissenters' appraisal rights in connection with the
reorganization.
ACCOUNTING TREATMENT (SEE PAGE 23)
The reorganization involves a pooling of interests among companies within
common control and, therefore, there will be no change in accounting as a result
of the reorganization.
9
<PAGE>
RISK FACTORS
You should consider the following risk factors carefully as well as the
other information in this document.
We also caution you that this document contains statements that contain
"forward looking" information that are not related to historical facts, as that
term is defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on our current beliefs as to the outcome and timing of
future events, and actual results may differ materially from those projected or
implied in the forward looking statements. Further, some forward looking
statements are based upon assumptions of future events which may not prove to be
accurate. The forward looking statements involve risks and uncertainties
including, but not limited to, the risks and uncertainties referred to under
"Risk Factors," "Disclosure Regarding Forward Looking Statements" and elsewhere
within the document and in other of our filings with the Securities and Exchange
Commission.
THE REORGANIZATION COULD RESULT IN A LARGER THAN EXPECTED TAXABLE GAIN TO OUR
COMPANY.
At the time of the reorganization, White Mountains Insurance Group-Delaware
will be treated as if it sold all of its directly owned assets in a fully
taxable transaction in which it will recognize gains, if any, but not losses. In
addition, the gains on assets of any of our subsidiaries that changes domicile
to a non-U.S. jurisdiction as part of the reorganization will be taxed
similarly. We believe, based on current estimates of the fair market values of
our assets and our tax attributes, that we will incur a U.S. federal income tax
liability of between $5.0 million and $20.0 million at the time of the
reorganization. However, this federal income tax liability could be increased
materially if the fair market value of White Mountains Insurance
Group-Delaware's assets at the time of the reorganization were determined to be
substantially in excess of current estimates. The IRS is not obliged to accept
our determination or the methodologies we used.
WE MAY CHOOSE TO DEFER OR ABANDON THE REORGANIZATION.
The merger may be terminated, and the reorganization abandoned, at any
time, by action of the board of directors of White Mountains Insurance
Group-Delaware, whether before or after the special meeting. While we currently
expect the reorganization to take place soon after the special meeting, the
board of directors of White Mountains Insurance Group-Delaware may defer the
reorganization for a significant time or may abandon the reorganization after
the special meeting because, among other factors, of an increase in our estimate
of the cost of the reorganization, which can rise due to increases in the fair
market values of the assets of White Mountains Insurance Group-Delaware. The
merger will only occur if the change of domicile to Bermuda will occur
immediately after the merger. Our board of directors may exercise these rights
for a variety of reasons including if they determined that the reorganization
would, in their view, be too costly, or would have material adverse consequences
to our company.
WE WILL BECOME SUBJECT TO CHANGES IN BERMUDA LAW OR POLITICAL CIRCUMSTANCES.
Under current Bermuda law, we will not be subject to tax on income or
capital gains. Furthermore, we expect to obtain from the Minister of Finance of
Bermuda under the Exempted Undertakings Tax Protection Act, 1966, an undertaking
that, in the event that Bermuda enacts legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, or any tax in the
nature of estate duty or inheritance, then the imposition of the tax will not be
applicable to us or our operations, until March 28, 2016. We could be subject to
taxes in Bermuda after that date. This undertaking does not, however, prevent
the imposition of taxes on any person ordinarily resident in Bermuda or any
company in respect of its ownership of real property or leasehold interests in
Bermuda. Also, the Organisation for Economic Co-operation and Development has
issued a report aiming to curb what they consider harmful tax competition and
tax havens. A
10
<PAGE>
branch of the OECD is currently determining which jurisdictions meet the
definition of tax haven and in the future, the OECD could issue directives to
its members to remove benefits to taxpayers who participate in the jurisdictions
that are designated as tax havens.
Bermuda's political structure is based upon a parliamentary system with two
major parties, the United Bermuda Party and the Progressive Labour Party. In the
latest election, the Progressive Labour Party gained control of the legislative
branch for the first time over the incumbent United Bermuda Party. To date, the
government's financial and regulatory policies have not been changed in a way
that we believe would materially affect us.
THE ENFORCEMENT OF CIVIL LIABILITIES AGAINST US MAY BE MORE DIFFICULT.
If the reorganization is consummated, we will be a Bermuda company and in
the future some of our officers and directors may be residents of various
jurisdictions outside the United States. All or a substantial portion of the
assets of White Mountains Insurance Group-Bermuda and of those persons may be
located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon those
persons or to enforce judgments obtained against those persons in United States
courts. White Mountains Insurance Group-Bermuda will irrevocably agree that it
may be served with process with respect to actions based on offers and sales of
securities made in the United States by having CSC United States Corporation
Company, 1013 Centre Road, Wilmington, Delaware 19805, be its United States
agent appointed for that purpose.
Conyers Dill & Pearman, our special Bermuda tax counsel, has advised us
that there is doubt as to whether Bermuda courts would enforce judgments of
United States courts obtained in:
o actions against those persons or White Mountains Insurance Group-Bermuda
that are predicated upon the civil liability provisions of the Securities
Act; or
o original actions brought in Bermuda against White Mountains Insurance
Group-Bermuda or those persons predicated upon the Securities Act.
There is no treaty in effect between the United States and Bermuda
providing for this enforcement. In addition, there are grounds upon which
Bermuda courts may not enforce judgments of United States courts. Some remedies
available under the United States federal securities laws may not be allowed in
Bermuda courts.
SOME OF YOUR RIGHTS AS A SHAREHOLDER WILL CHANGE AS A RESULT OF THE
REORGANIZATION.
Because of differences in Delaware law and Bermuda law and differences in
the governing documents of White Mountains Insurance Group-Delaware and White
Mountains Insurance Group-Bermuda, your rights as a shareholder will change if
we complete the reorganization.
The most significant differences are:
o the board of directors of White Mountains Insurance Group-Bermuda may
mandatorily redeem shares from a shareholder at fair market value if it
determines that share ownership by that shareholder may result in adverse
tax, regulatory or legal consequences to our company, any of our
subsidiaries or any of our shareholders;
o a provision limiting the voting rights of any person who owns (directly,
indirectly or constructively under the IRC) 10% or more of the shares of
White Mountains Insurance Group-Bermuda to 9.9%. This 9.9% voting
limitation provision will not be applicable to any Byrne Entity with
respect to any matter submitted to shareholders other than with respect
to the election of directors. This provision is intended to prevent our
company from being characterized as a controlled foreign corporation,
which could cause U.S. persons owning 10% or more of our shares to suffer
adverse U.S. tax consequences;
11
<PAGE>
o a provision limiting the voting rights of any group (defined as two or
more persons acting as a partnership, syndicate or other group for the
purpose of acquiring, holding or disposing of the relevant securities)
which owns 10% or more of the shares to 9.9%, except that this provision
relating to groups will not apply to (a) any Byrne Entity, or (b) any
person or group that the board of directors, by the affirmative vote of
at least 75% of the entire board of directors, may exempt from this
provision;
o a provision (similar to that under Delaware corporate law) limiting
business combinations with interested shareholders. However, any Byrne
Entity will be exempt from this provision;
o shareholders will not have the right to remove directors for cause
(unless the Board determines otherwise);
o an increase in the number of authorized common shares from 15,000,000 to
50,000,000 and preference shares from 1,000,000 to 20,000,000;
o our bye-laws can only be amended with both the prior approval of the
board of directors and approval by the holders of a majority of the
voting power of the shareholders present at a meeting of the shareholders
(subject to super-majority provisions in certain instances); and
o shareholders' rights to bring derivative suits will be more limited.
ANTI-TAKEOVER PROVISIONS IN OUR BERMUDA BYE-LAWS MAY MAKE IT MORE UNLIKELY THAT
SOMEONE WILL ATTEMPT TO ACQUIRE US AT A PREMIUM IN A HOSTILE OFFER.
Provisions in our bye-laws could have the effect of discouraging
unsolicited takeover bids from third parties or the removal of incumbent
management. As a result, it may be less likely that you will receive premium
prices for your shares in an unsolicited takeover of our company by another
party. These provisions include:
o the voting cut-back and repurchase provisions described above;
o a staggered board of directors;
o an interested shareholder provision which could delay or prevent a third
party or significant shareholder (other than a Byrne Entity) from
acquiring control; and
o a requirement that any anti-takeover provisions may be repealed or
altered only with prior board approval and upon the affirmative vote of
shareholders holding generally a supermajority (ranging from 66 2/3% to
75%) of the voting power of shares entitled to vote.
Our board of directors also has the right to issue preferred shares having
the rights and qualifications that it determines. The issuance of preferred
shares may have the effect of delaying, deferring or preventing a merger,
amalgamation, tender offer or proxy contest involving our company. This may
cause the market price of our shares to fall, and may further dilute the voting
rights of our existing shareholders.
Under Bermuda law and our bye-laws, no bye-law may be amended without prior
approval of the board of directors.
MANAGEMENT MAY HAVE CONFLICTS OF INTEREST AS A RESULT OF THE REORGANIZATION
PRINCIPALLY BECAUSE OF THE ACCELERATION AND, IN SOME CASES, TERMINATION OF SOME
COMPENSATION BENEFITS.
In connection with the reorganization, we will be accelerating and, in some
cases, terminating some compensation benefits, which will benefit directors and
management. These directors and officers may be deemed to have a conflict of
interest in determining whether the reorganization is beneficial to our
shareholders. For a more complete description of the acceleration see
"Reorganization--Acceleration of Deductions Related to Compensation Benefits."
John J. Byrne, the Chairman, and certain related persons will be exempt from
some of the voting cut-back and anti-takeover provisions as described above.
12
<PAGE>
WE MAY SEEK TO RAISE ADDITIONAL CAPITAL BY SELLING OUR SHARES IN THE FUTURE.
After the change in domicile, we intend to examine acquisition
opportunities and/or equity or debt capital raising opportunities, which may
include rights offerings to our shareholders. Any such actions could adversely
affect the market price of our common stock or be dilutive to our shareholders.
WE DO NOT PRESENTLY INTEND TO REPURCHASE SHARES AND AFTER THE REORGANIZATION WE
WILL REVIEW THE PAYMENT OF DIVIDENDS.
While Bermuda law permits Bermuda companies to repurchase their shares, we
have no present intent to repurchase our shares. We currently intend to
reconsider, and possibly reduce, after the reorganization, quarterly dividends
with due consideration given to the financial characteristics of our remaining
invested assets and operations, the amount and regularity of our cash flow and
our business opportunities. The payment of any future cash dividends on the
White Mountains Insurance Group-Bermuda common shares is necessarily dependent
upon the earnings and financial needs of White Mountains Insurance
Group-Bermuda, along with applicable legal and contractual restrictions.
13
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The reorganization involves a pooling of interests among companies within
common control which will require no change in accounting.
As a result of or in preparation for the reorganization, we expect to
undertake various transactions that will have a material impact on our current
financial statements. Those transactions include (1) the payment of taxes as
part of the reorganization to the extent the "fair value" of our directly held
assets exceeds their current tax book value, and (2) the acceleration of the
payment of compensation to some of our current and former employees and
directors.
The accompanying unaudited pro forma condensed consolidated income
statements of White Mountains Insurance Group-Delaware for the periods ended
June 30, 1999 and December 31, 1998 present our results as if these transactions
had occurred as of January 1, 1999 and January 1, 1998, respectively. The
accompanying unaudited pro forma condensed consolidated balance sheet of White
Mountains Insurance Group-Delaware as of June 30, 1999 presents our financial
position as if these transactions had occurred as of June 30, 1999. The
unaudited pro forma financial information does not purport to represent what our
financial position or results of operations actually would have been had these
events occurred as of the dates indicated, or to project our financial position
or results of operations for any future date or period. The pro forma
adjustments are based on available information and certain assumptions that we
currently believe are reasonable under the circumstances. The unaudited pro
forma financial information should be read in conjunction with the financial
information and data and discussions contained in the documents described under
"Where You Can Find More Information" on page 47.
The accompanying pro forma condensed consolidated income statements
contained herein present the financial impact of the pro forma adjustments on
the company's historical net income from continuing operations which does not
include net income from discontinued mortgage banking operations and accumulated
other comprehensive net income items (primarily the after tax change in net
unrealized investments gains arising during the periods).
White Mountains Insurance Group-Delaware notes that the long-term impact of
the transactions described above on its financial statements and book value per
share will likely be less material than indicated herein as a significant
portion of the transactions represent the acceleration of expenses that would
have ordinarily been incurred in future periods.
On September 15, 1999, John J. Byrne exercised all his remaining warrants
and purchased 1,000,000 shares of our common stock at the strike price of $21.66
per share. Due to the significance of the warrant exercise to the company's
statement of financial position, the actual effects of this exercise have been
included in the unaudited pro forma balance sheet at June 30, 1999 contained
herein.
These pro forma adjustments contained herein assume that the United States
federal income tax rate is 35%, the maximum statutory rate for corporations.
14
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(in millions of dollars, except per share data)
<TABLE>
<CAPTION>
WHITE [2] [3]
MOUNTAINS [1] COMPENSATION WARRANT
ASSETS HISTORICAL TAXES ACCELERATION EXERCISE PRO FORMA
---------- ------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Fixed maturities at market.............................. $ 886.0 $ 886.0
Equity securities at market............................. 214.5 214.5
Other investments....................................... 60.4 60.4
Short term investments.................................. 131.0 (93.4) 15.7 53.3
--------- ------ ------ ------ ---------
TOTAL INVESTMENTS................................. 1,291.9 -- (93.4) 15.7 1,214.2
Cash.................................................... 2.4 2.4
Investments in unconsolidated insurance affiliates...... 347.0 347.0
Insurance and reinsurance balances receivable........... 61.7 61.7
Reinsurance recoverable on paid and unpaid losses....... 154.3 154.3
Deferred acquisition costs.............................. 22.3 22.3
Investment income accrued............................... 14.1 14.1
Other assets............................................ 62.5 62.5
Net assets of discontinued mortgage operations.......... 19.4 19.4
--------- ------ ------ ------ ---------
TOTAL ASSETS...................................... $ 1,975.6 $ -- $(93.4) $ 15.7 $ 1,897.9
--------- ------ ------ ------ ---------
--------- ------ ------ ------ ---------
LIABILITIES
Loss and loss adjustment expense reserves............... $ 823.0 $ 823.0
Unearned insurance and reinsurance premiums............. 91.9 91.9
Long term debt.......................................... 136.5 136.5
Deferred credit......................................... 38.4 38.4
Accounts payable and other liabilities.................. 259.7 20.0 (90.8) (19.7) 169.2
--------- ------ ------ ------ ---------
TOTAL LIABILITIES................................. 1,349.5 20.0 (90.8) (19.7) 1,259.0
--------- ------ ------ ------ ---------
SHAREHOLDERS' EQUITY
Common stock and paid in surplus........................ 189.3 189.3
Retained earnings....................................... 790.5 (20.0) (6.7) (77.5) 686.3
Common stock in treasury................................ (434.2) 4.1 112.9 (317.2)
Accumulated other comprehensive income, after tax....... 80.5 80.5
--------- ------ ------ ------ ---------
TOTAL SHAREHOLDERS' EQUITY........................ 626.1 (20.0) (2.6) 35.4 638.9
--------- ------ ------ ------ ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $ 1,975.6 $ -- $(93.4) $ 15.7 $ 1,897.9
--------- ------ ------ ------ ---------
--------- ------ ------ ------ ---------
BOOK VALUE PER COMMON SHARE (FULLY CONVERTED)[4]........ $ 112.36 $(3.34) $(1.90) $(1.94) $ 105.18
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
15
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(in millions of dollars, except fixed charge ratio and per share data)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------
WHITE [2] [3]
MOUNTAINS [1] COMPENSATION WARRANT
REVENUES HISTORICAL TAXES ACCELERATION EXERCISE PRO FORMA
---------- ------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Earned property and casualty insurance
premiums.................................... $ 166.3 $ 166.3
Gain on sale of Valley Group, Inc.............. 88.1 88.1
Net investment income.......................... 29.2 29.2
Net realized investment gains.................. 26.8 26.8
Earnings from unconsolidated insurance
affiliates.................................. 9.0 9.0
Other insurance revenues....................... 7.0 7.0
------- ------ ------ ------ -------
TOTAL REVENUES................................... $ 326.4 $ -- $-- $ -- $ 326.4
------- ------ ------ ------ -------
------- ------ ------ ------ -------
EXPENSES
Insurance losses and loss adjustment
expenses.................................... $ 123.0 $ 123.0
Insurance and reinsurance acquisition
expenses.................................... 39.5 39.5
Compensation and benefits...................... 25.1 19.5 6.0 50.6
Interest expense............................... 8.2 8.2
General expense................................ 9.2 9.2
------- ------ ------ ------ -------
TOTAL EXPENSES................................... 205.0 -- 19.5 6.0 230.5
------- ------ ------ ------ -------
PRETAX EARNINGS.................................. 121.4 -- (19.5) (6.0) 95.9
------- ------ ------ ------ -------
Income tax provision............................. 46.8 20.0 (6.8) (2.1) 57.9
------- ------ ------ ------ -------
NET INCOME FROM CONTINUING OPERATIONS............ $ 74.6 $(20.0) $(12.7) $ (3.9) $ 38.0
------- ------ ------ ------ -------
------- ------ ------ ------ -------
NET INCOME PER SHARE FROM
CONTINUING OPERATIONS: [4]
BASIC.......................................... $ 13.16 $ 5.63
DILUTED........................................ $ 11.74 $ 5.60
RATIO OF EARNINGS TO FIXED CHARGES: [5].......... 8.6 4.4
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENT
16
<PAGE>
WHITE MOUNTAINS INSURANCE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
(in millions of dollars, except fixed charge ratio and per share data)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------------
WHITE [2] [3]
MOUNTAINS [1] COMPENSATION WARRANT
REVENUES HISTORICAL TAXES ACCELERATION EXERCISE PRO FORMA
---------- ------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Earned property and casualty insurance
premiums.................................... $ 246.0 $ 246.0
Net investment income.......................... 36.8 36.8
Net realized investment gains.................. 71.0 71.0
Earnings from unconsolidated insurance
affiliates.................................. 24.3 24.3
Other insurance operations revenues............ 12.2 12.2
------- ------ ------ ------ -------
TOTAL REVENUES................................... $ 390.3 $ -- $-- $ -- $ 390.3
------- ------ ------ ------ -------
------- ------ ------ ------ -------
EXPENSES
Insurance losses and loss adjustment
expenses.................................... $ 174.8 $ 174.8
Insurance and reinsurance acquisition
expenses.................................... 54.8 54.8
Compensation and benefits...................... 51.5 9.1 6.0 66.6
Interest expense............................... 13.7 13.7
General expense................................ 15.9 15.9
------- ------ ------ ------ -------
TOTAL EXPENSES................................... 310.7 -- 9.1 6.0 325.8
------- ------ ------ ------ -------
PRETAX EARNINGS.................................. 79.6 -- (9.1) (6.0) 64.5
------- ------ ------ ------ -------
Income tax provision............................. 28.5 20.0 (3.2) (2.1) 43.2
------- ------ ------ ------ -------
NET INCOME FROM CONTINUING OPERATIONS............ $ 51.1 $(20.0) $ (5.9) $ (3.9) $ 21.3
------- ------ ------ ------ -------
------- ------ ------ ------ -------
NET INCOME PER SHARE FROM
CONTINUING OPERATIONS: [4]
BASIC.......................................... $ 8.71 $ 3.06
DILUTED........................................ $ 7.75 $ 3.00
RATIO OF EARNINGS TO FIXED CHARGES: [5].......... 3.3 1.1
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENT
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
1. Represents the provision of an estimated $20.0 million in taxes as part of
the reorganization. The IRS is not obliged to accept our determination or the
methodologies we are using in making our determination. See "Risk
Factors--The Reorganization Could Result in a Larger Than Expected Taxable
Gain to Our Company."
2. Represents accelerated compensation payments made pursuant to (1) the
termination of the company's director retirement plan, resulting in an
estimated cash payment of $1.5 million to current and former directors,
(2) the termination of the company's deferred compensation plans, resulting
in an estimated cash payment of $86.3 million to current and former officers
and directors, (3) the cash payment of $5.6 million in annual and special
bonuses to current officers, and (4) the payment of performance shares of
$11.8 million to participants, by the issuance of the company's common stock.
At June 30, 1999, approximately $90.8 million had been accrued for these
obligations.
The company expects to offer its current employees, directors and advisors to
the board of directors the option of receiving cash, shares of the company's
common stock or a combination thereof in satisfaction of compensation payable
in connection with the reorganization. The pro forma balance sheet assumes
that only performance share liabilities are paid in the company's common
stock.
For purposes of the presentation of the June 30, 1999 pro forma balance sheet,
the payment of deferred compensation and performance shares were valued at the
June 30, 1999 closing price of the company's common stock of $141.00 per
share. The actual financial statement effects of these transactions will be
affected by the market value of the company's common stock on the date these
items are actually paid.
3. Represents (1) the September 15, 1999 exercise of 1,000,000 outstanding
warrants by the Chairman to acquire an equal number of shares of the
company's common stock at a per share exercise price of $21.66 and (2) a
one-time cash payment of $6.0 million to the Chairman to compensate him for
the estimated interest cost of borrowing the strike price and the amounts
required to pay his income taxes on the exercise due to his exercising early
at our request.
4. Historical book value per common share calculation is based on 5,990,723
shares outstanding, fully converted. Pro forma book value per common share
calculation is based on 6,074,273 shares outstanding, fully converted, which
assumes the issuance of 83,550 shares in satisfaction of performance share
liabilities as described in Note 2 above.
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENTS
Income statement for the six months ended June 30, 1999
1. Represents the provision of an estimated $20.0 million in taxes as part of
the reorganization. The IRS is not obliged to accept our determination or
the methodologies we are using in making our determination. See "Risk
Factors--The Reorganization Could Result in a Larger Than Expected Taxable
Gain to Our Company."
2. Represents the recognition of incremental expenses associated with the
acceleration of compensation payments made pursuant to (1) the termination
of the company's director retirement plan ($.4 million pretax), (2) the
termination of the company's deferred compensation plans ($10.1 million
pretax), (3) annual and special bonuses to current officers ($5.1 million
pretax), and (4) the payment of performance shares ($3.9 million pretax).
For purposes of the presentation of the June 30, 1999 pro forma income
statement, the recognition of incremental expenses associated with deferred
compensation and performance shares were valued at the December 31, 1998
closing price of the company's common stock of $140.06 per share. The actual
financial statement effects of these transactions will be affected by the
market value of the company's common stock on the date these items are
actually paid.
3. Represents the expense associated with a one-time payment of $6.0 million
pretax to the Chairman to compensate him for the estimated interest cost of
borrowing the strike price and the amounts required to pay his income taxes
on the exercise due to his exercising early at our request.
4. Actual basic and diluted earnings per share amounts for the period are based
on the weighted average number of shares of the company's common stock
outstanding of 5,669,050 shares and 6,337,977 shares, respectively. Pro
forma basic and diluted earnings per share amounts are based on the weighted
average number of shares of the company's common stock outstanding of
6,754,600 shares.
5. The ratio of earnings to fixed charges calculation was derived using pretax
earnings from continuing operations as adjusted for undistributed earnings
from unconsolidated insurance affiliates.
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENTS (CONTINUED)
Income statement for the twelve months ended December 31, 1998
1. Represents the provision of an estimated $20.0 million in taxes as part of
the reorganization. The IRS is not obliged to accept our determination or
the methodologies we are using in making our determination. See "Risk
Factors--The Reorganization Could Result in a Larger Than Expected Taxable
Gain to Our Company."
2. Represents the recognition of incremental expenses associated with the
acceleration of compensation payments made pursuant to (1) the termination
of the company's director retirement plan ($.4 million pretax), (2) the
termination of the company's deferred compensation plans ($1.4 million
pretax), (3) annual and special bonuses to current officers ($3.6 million
pretax), and (4) the payment of performance shares ($3.7 million pretax).
For purposes of the presentation of the December 31, 1998 pro forma income
statement, the recognition of incremental expenses associated with deferred
compensation and performance shares were valued at the December 31, 1997
closing price of the company's common stock of $121.00 per share. The actual
financial statement effects of these transactions will be affected by the
market value of the company's common stock on the date these items are
actually paid.
3. Represents the expense associated with a one-time payment of $6.0 million
pretax to the Chairman to compensate him for the estimated interest cost of
borrowing the strike price and the amounts required to pay his income taxes
on the exercise due to his exercising early at our request.
4. Actual basic and diluted earnings per share amounts for the period are based
on the weighted average number of shares of the company's common stock
outstanding of 5,865,902 shares and 6,535,181 shares, respectively. Pro
forma basic and diluted earnings per share amounts are based on the weighted
average number of shares of the company's common stock outstanding of
6,951,452 shares.
5. The ratio of earnings to fixed charges calculation was derived using pretax
earnings from continuing operations as adjusted for undistributed earnings
from unconsolidated insurance affiliates.
20
<PAGE>
THE REORGANIZATION
GENERAL
The board of directors has unanimously approved and recommends that you
approve the proposed reorganization. White Mountains Insurance Group-Delaware
will merge into White Mountains Insurance Group-Arizona, with White Mountains
Insurance Group-Arizona surviving. Immediately after the merger White Mountains
Insurance Group-Arizona will become a Bermuda company pursuant to a conversion
and continuation procedure. The merger will occur only if the change in domicile
to Bermuda is to occur immediately thereafter.
After the reorganization, White Mountains Insurance Group-Bermuda will own
the same assets that White Mountains Insurance Group-Delaware owned before the
reorganization. Your proportionate economic ownership will not change as a
result of the reorganization. The material differences in your rights as a
shareholder of White Mountains Insurance Group-Bermuda are described under "Risk
Factors--Some of Your Rights as a Shareholder Will Change as a Result of the
Reorganization," "Description of Authorized Shares of White Mountains Insurance
Group-Bermuda" and "Comparison of Rights of Shareholders." The actual terms of
the reorganization are contained in the merger agreement and memorandum of
continuance. The merger agreement is included in this proxy statement/prospectus
as annex I. The memorandum of continuance and bye-laws that will govern our
company once we are domiciled in Bermuda are included in this document as annex
II and annex III. We encourage you to read these documents carefully.
BACKGROUND AND REASONS FOR THE REORGANIZATION
The board of directors believes that the reorganization will allow our
company to avail itself of significant business and financial advantages that
are not available under the current corporate structure. Accordingly, the board
of directors believes the reorganization should have a favorable impact on the
conduct of our future business operations. In particular, the board of directors
believes that you should approve the reorganization for the following reasons:
o a more favorable corporate structure for the formation and growth of
non-U.S. based insurance and/or reinsurance operations;
o an enhanced ability to compete with non-U.S. insurance/reinsurance
entities;
o an enhanced ability to pursue business combinations with non-U.S.
entities, including Bermuda companies;
o an expansion of the investor base as our shares may become more
attractive to non-U.S. investors; and
o an increased visibility among the investment banking community
arising from its perception of our company's enhanced corporate
structure.
Other benefits of the reorganization include the following:
o Over the long term, some tax savings and benefits will become
available.
o Our worldwide corporate income taxes should be reduced as a result
of the reorganization, including subjecting our income to an
effective overall tax rate lower than that imposed by the United
States. Thus, the reorganization should permit us to conduct our
business in a manner that will reduce our exposure to U.S. federal
income taxes on the portion of our operations conducted outside the
United States and on the portion of our income from United States
sources which is not subject to withholding taxes, although it may
be subject to income taxes in other jurisdictions.
21
<PAGE>
In addition to the potential benefits described above, the reorganization
will impose some moderate costs on us and will expose us and you to some risks.
See "Risk Factors."
There are also differences between Delaware and Bermuda corporate law, and
our Delaware and Bermuda organizational documents. See "Comparison of Rights of
Shareholders." There are also selected tax and enforcement risks related to the
reorganization. See "Risk Factors." The board of directors determined that the
potential advantages of the reorganization substantially outweigh these risks
and differences.
Although the board of directors evaluated variations in the basic structure
of the reorganization, the board of directors believes, based on advice from
management and its outside advisors, that the proposed structure of the
reorganization is the best structure to provide the advantages we are seeking,
without substantial operational or financial risks. Consequently the board of
directors did not consider any alternatives to the reorganization. No assurances
can be given, however, that the anticipated benefits of the reorganization will
be realized.
For a discussion of some other costs, comprised principally of the
acceleration of some management and director compensation benefits, see
"--Acceleration of Deductions Related to Compensation Benefits."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of White Mountains Insurance Group-Delaware has
unanimously approved the proposed reorganization and recommends that you vote
for the proposal to approve the reorganization.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Section 262 of the Delaware General Corporation Law and
Section 10-1302 of the Arizona Corporations and Associations Law, the holders of
White Mountains Insurance Group-Delaware common stock and the White Mountains
Insurance Group-Arizona common shares will not have dissenters' appraisal rights
under Delaware or Arizona law in connection with the reorganization because,
among other reasons, our shares are traded on the NYSE.
AMENDMENTS TO STOCK BASED PLANS
After the reorganization we will amend our stock based compensation plans
and stock purchase plans to provide that White Mountains Insurance Group-Bermuda
common shares will be issued by White Mountains Insurance Group-Bermuda. We will
revise or amend our other employee benefit plans, as necessary.
Your approval of the reorganization will also constitute approval of
amendments to our stock based compensation plans and stock purchase plans and
other employee benefit plans providing for future use of White Mountains
Insurance Group-Bermuda common shares in lieu of White Mountains Insurance
Group-Delaware common stock after the reorganization.
NYSE TRADING
Our common stock is currently listed on the NYSE under the symbol "WTM." We
expect that immediately following the reorganization, the common shares of White
Mountains Insurance Group-Bermuda will be listed on the NYSE under the same
symbol.
22
<PAGE>
ACCOUNTING TREATMENT
The reorganization involves a pooling of interests among companies with
common control and, therefore, there will be no change in accounting as a result
of the reorganization.
ACCELERATION OF DEDUCTIONS RELATED TO COMPENSATION BENEFITS
At our request, on September 15, 1999, John J. Byrne exercised all of his
remaining warrants and purchased 1,000,000 shares of common stock from us at the
strike price of $21.66 per share (the 1985 Fireman's Fund Corporation initial
public offering price of $25.75 per share adjusted for the 1993 White River
Corporation dividend). The warrants were exercisable until January 2, 2002. In
addition, we paid $6.0 million to Mr. Byrne to compensate him for the estimated
interest cost of borrowing the strike price and the amounts required to pay his
income taxes on the exercise during the period from the date of his exercise at
our request to January 2, 2002, when he otherwise would have had to exercise his
warrants. The amount of taxable income realized by Mr. Byrne in exercising the
warrants, including the $6.0 million payment, was $102.5 million. This amount is
taxable income to him and is tax deductible to us in 1999. In connection with
such exercise, Mr. Byrne granted the Board of Directors of White Mountains
Insurance Group-Delaware an irrevocable proxy to vote all shares of common stock
of such company held by him in excess of 19.9% of the total voting power of such
company, currently expected to be 175,000 shares. Such shares will be voted in
favor of the reorganization.
In connection with the reorganization, the compensation committee of the
board of directors has recommended the acceleration or termination of certain
compensation benefits. This would result in increased tax deductible expenses in
1999 and reduced future expenses. Contingent on consummation of the
reorganization, the board of directors has approved the following compensation
actions:
o Termination of the Director's Retirement Benefit Plan and payout of
the current aggregate benefit to directors not currently retired, at
an after tax cost of approximately $.3 million over the normal cost
for 1999. We will have eliminated the future expense of this plan.
o Termination of the Voluntary Deferred Compensation and Deferred
Benefit Plans. Active employees of White Mountains Insurance
Group-Delaware will be paid lump sum amounts equal to their
accumulated balances or $10.5 million in aggregate. The incremental
after tax cost of the termination for active employees will be
$0.3 million resulting from lost deductions on some payments
exceeding IRS limitations on deductible annual executive
compensation. Participants who are no longer active employees of
White Mountains Insurance Group-Delaware will receive lump sum
payments totalling $75.5 million, which will result in an
incremental after tax cost of $8.1 million. We expect that we will
adopt replacement plans for active employees.
o Payment of 1999 Executive Bonus Pool. The board approved an
"on-target" bonus pool (approximately $.9 million) plus
approximately $4.6 million in one-time special bonuses, but the
board of directors will make a final determination immediately prior
to the reorganization on the pool and special bonus amounts. If the
special bonus and "on-target" bonus amounts are paid, the
incremental after tax cost will be $4.4 million over the normal
"on-target" pool cost for 1999 due to the special bonus amounts and
limitations on the deductibility of executive compensation.
o Payment of the 1999 and 2000 Performance Shares. After a review of
performance against targets, the board approved payout of the
1997-1999 and 1998-2000 performance share cycles, which it
determined were "on-Plan" resulting in 100% payout. The two cycles
contained aggregate grants of 83,550 shares, resulting in an
incremental after tax cost of $2.6 million over the normal cost for
1999 assuming "on-
23
<PAGE>
Plan" performance and a stock price of $130.25 per share (the
closing price on August 31, 1999) including the cost of lost
deductions due to limitations on annual executive compensation. The
1999-2001 cycle will remain in effect.
The company expects to offer its current employees, directors and advisors
to the board of directors the option of receiving cash, shares of the company's
common stock or a combination thereof in satisfaction of compensation payable in
connection with the reorganization. In this regard, the company is considering
filing a registration statement on Form S-8 during 1999 pursuant to which it
could issue up to 200,000 shares of the company's common stock to qualifying
recipients in satisfaction of all or a portion of their compensation payable
pursuant to the director's retirement plan, the voluntary deferred compensation
plan, the deferred benefit plan and the 1999 executive bonus pool. Currently,
the company's performance share plan provides for the issuance of the company's
common stock to participants in satisfaction of performance share liabilities.
THE SPECIAL MEETING
GENERAL
White Mountains Insurance Group-Delaware will hold a special meeting for
its stockholders at 10:00 a.m., local time, on October 22, 1999, at Hotel Plaza
Athenee, Le Trianon Room, 37 East 64th Street, New York, NY 10021, to consider
and vote on:
o approval of the reorganization, including the merger agreement, the
memorandum of continuance and the bye-laws, and authorization for
the board of directors to exercise its powers set out in the
bye-laws and to take all actions deemed necessary or advisable to
give effect to the reorganization, and
o any other matters that may properly come before such meeting.
QUORUM
The presence, in person or by proxy, of stockholders holding a majority of
the outstanding shares of White Mountains Insurance Group-Delaware common stock
entitled to vote at the special meeting will constitute a quorum.
RECORD DATE
Only White Mountains Insurance Group-Delaware stockholders of record at the
close of business on September 24, 1999, as shown on White Mountains Insurance
Group-Delaware's records, will be entitled to vote, or to grant proxies to vote
at the special meeting.
VOTE REQUIRED FOR ADOPTION
Approval of the reorganization requires the affirmative vote of the holders
of a majority of the outstanding shares of White Mountains Insurance
Group-Delaware common stock voting together as a single class.
Because of this vote requirement, abstentions will have the same effect as
votes against the proposal to approve the reorganization. Under the rules of the
NYSE, brokers who hold shares in "street name" for customers have the authority
to vote on many routine proposals when they have not received instructions from
beneficial owners. However, brokers are precluded from exercising their voting
discretion with respect to non-routine matters such as the reorganization. Thus,
absent specific instructions from you, your broker is not empowered to vote your
shares with respect to the approval and adoption of the reorganization. Since an
affirmative vote of a majority of the outstanding White Mountains Insurance
Group-Delaware common shares is required for approval of
24
<PAGE>
the reorganization, a non vote will have the same effect as a vote against the
reorganization. White Mountains Insurance Group-Delaware, as the sole
shareholder of White Mountains Insurance Group-Arizona will approve the
reorganization.
As of the record date described above, there were 5,982,291 shares of White
Mountains Insurance Group-Delaware common stock outstanding and entitled to
vote. As of the record date, the directors and executive officers of White
Mountains Insurance Group-Delaware and affiliates of these persons directly
owned, in the aggregate, approximately 1,475,548 shares of White Mountains
Insurance Group-Delaware common stock (approximately 24.7% of the outstanding
White Mountains Insurance Group-Delaware common stock). They (or their proxies)
have indicated their intention to vote these shares in favor of the proposal to
approve the reorganization.
PROXIES
General
You will receive a proxy card if you were a stockholder of our company as
of the record date. If you properly received a proxy card, you may grant a proxy
to vote for or against, or to abstain from voting, on the proposal to approve
the reorganization by marking your proxy card appropriately, executing it in the
space provided and returning it to the Secretary of White Mountains Insurance
Group-Delaware.
If you hold your White Mountains Insurance Group-Delaware common stock in
the name of a bank, broker or other nominee, you should follow the instructions
provided by your bank, broker or nominee on voting your shares.
If you have timely submitted a properly executed proxy card and clearly
indicate your votes, your shares will be voted as indicated. If you have timely
submitted a properly executed proxy card and have not clearly indicated your
votes, your shares will be voted FOR the proposal to approve the reorganization.
Any White Mountains Insurance Group-Delaware stockholder of record who is
present at the special meeting in person will be entitled to vote at the meeting
regardless of whether that stockholder has previously granted a proxy with
respect to the reorganization.
Management of White Mountains Insurance Group-Delaware knows of no matters
other than as described in the accompanying notice of special meeting which are
likely to be brought before the special meeting. However, if any other matters
are properly presented at the special meeting for consideration, including
consideration of a motion to adjourn the meeting to another time and/or place,
including adjournments for the purpose of soliciting additional proxies, the
persons named in the proxy card will have the discretion to vote on such matters
in accordance with their best judgment.
Revocation
You may revoke your proxy card at any time prior to its exercise by:
o giving written notice of the revocation to the Secretary of White
Mountains Insurance Group-Delaware;
o appearing and voting in person at the special meeting; or
o properly completing and executing a later-dated proxy and delivering
it to the Secretary of White Mountains Insurance Group-Delaware.
Your presence without voting at the special meeting will not automatically
revoke your proxy and any revocation during the meeting will not affect votes
previously taken. If you hold your White Mountains Insurance Group-Delaware
common stock in the name of a bank, broker or other
25
<PAGE>
nominee, you should follow the instructions provided by your bank, broker or
nominee in revoking your previously granted proxy.
Validity
The inspectors of election will determine all questions as to the validity,
form, eligibility, including time of receipt, and acceptance of proxy cards.
Their determination will be final and binding. The board of directors of White
Mountains Insurance Group-Delaware will have the right to waive any
irregularities or conditions as to the manner of voting. White Mountains
Insurance Group-Delaware may accept proxies by any reasonable form of
communication so long as White Mountains Insurance Group-Delaware is reasonably
assured that the communication is authorized by you.
SOLICITATION OF PROXIES
The board of directors of White Mountains Insurance Group-Delaware is
soliciting the accompanying proxy. The expenses of preparing, printing and
mailing the proxy and the materials used in the solicitation will be borne by
White Mountains Insurance Group-Delaware.
White Mountains Insurance Group-Delaware has retained Corporate Investor
Communications, Inc. to aid in the solicitation of proxies, for a fee of
approximately $5,000 and the reimbursement of expenses. Proxies may also be
solicited by personal interview, telephone and telegram by directors, officers
and employees of White Mountains Insurance Group-Delaware who will not receive
additional compensation for their services. Arrangements also may be made with
brokerage houses and other custodians, nominees and fiduciaries to the
beneficial owners of White Mountains Insurance Group-Delaware common stock held
by those persons, and White Mountains Insurance Group-Delaware will reimburse
them for reasonable expenses in connection with the forwarding of the
solicitation materials.
THE MERGER AGREEMENT AND THE
MEMORANDUM OF CONTINUANCE
GENERAL
We propose that the reorganization be effected pursuant to the merger
agreement and the memorandum of continuance. The steps to the reorganization
are:
o merging White Mountains Insurance Group-Delaware with and into White
Mountains Insurance Group-Arizona, with White Mountains Insurance
Group-Arizona surviving;
o automatically converting the shares of White Mountains Insurance
Group-Delaware outstanding immediately prior to the effective time
of the merger into an equal number of White Mountains Insurance
Group-Arizona shares;
o filing the memorandum of continuance with the Registrar of Companies
of Bermuda for registration immediately after the merger, which will
result in White Mountains Insurance Group-Arizona becoming a Bermuda
company pursuant to a continuation procedure under Bermuda and
Arizona law; and
o automatically converting each outstanding White Mountains Insurance
Group-Arizona common share into one White Mountains Insurance
Group-Bermuda common share.
The certificate of incorporation of White Mountains Insurance Group-Arizona
shall be the certificate of incorporation of the surviving corporation of the
merger and is set forth in exhibit A to the merger agreement, attached as
annex I to this proxy statement/prospectus. The memorandum of continuance and
the bye-laws of White Mountains Insurance Group-Bermuda will be the governing
organizational documents and are set forth as annexes II and III to this proxy
statement/prospectus.
26
<PAGE>
NO REQUIREMENT TO EXCHANGE SHARE CERTIFICATES
Stock certificates representing White Mountains Insurance Group-Delaware
common stock will, at the effective time, automatically represent the same
number of White Mountains Insurance Group-Bermuda common shares. You will not be
required to exchange your stock certificates as a result of the reorganization.
Should you desire to sell some or all of your White Mountains Insurance
Group-Bermuda common shares after the effective time, delivery of the stock
certificate or certificates which previously represented White Mountains
Insurance Group-Delaware common stock will be sufficient.
Following the reorganization, certificates bearing the name of White
Mountains Insurance Group-Bermuda will be issued in the normal course upon
surrender for transfer or exchange of outstanding certificates representing
White Mountains Insurance Group-Delaware common stock. If you surrender a
certificate representing shares of White Mountains Insurance Group-Delaware
common stock for exchange or transfer and new certificates are to be issued in a
name other than that appearing on the surrendered certificate, it will be a
condition to the exchange or transfer that the surrendered certificate (1) be
properly endorsed and (2) otherwise be in proper form for transfer.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
The reorganization will not be completed unless, among other requirements,
the following conditions are satisfied or, if allowed by law, waived:
o The stockholders of White Mountains Insurance Group-Delaware approve
the reorganization by the requisite vote.
o We receive all necessary third-party consents to the reorganization,
if any.
EFFECTIVE TIME
We anticipate that the reorganization will become effective soon after the
special meeting. The merger of White Mountains Insurance Group-Delaware into
White Mountains Insurance Group-Arizona, if approved by our shareholders and not
terminated by the board of directors, will become effective upon the later of:
(1) the time of filing a certificate of merger with the Delaware Secretary of
State; (2) the issuance of a certificate of merger by the Arizona Secretary of
State; or (3) a later effective time specified in the filings with those states.
The conversion of White Mountains Insurance Group-Arizona and its continuance as
a Bermuda company, if not terminated by our board of directors, will become
effective when the memorandum of continuance is registered by the Registrar of
Companies of Bermuda.
Immediately following the effective time of the reorganization, White
Mountains Insurance Group-Bermuda will have the same directors and executive
officers as White Mountains Insurance Group-Delaware had immediately prior to
that date.
AMENDMENT/TERMINATION
White Mountains Insurance Group-Delaware and White Mountains Insurance
Group-Arizona, by action of their respective boards of directors, may amend,
modify or supplement the merger agreement or the memorandum of continuance at
any time, except no amendment, modification or supplement may be made or
effected that by law requires further approval by stockholders without the
further approval of those stockholders.
The board of directors of White Mountains Insurance Group-Delaware or White
Mountains Insurance Group-Arizona may terminate the merger agreement and abandon
the reorganization, at any time, whether before or after the special meeting.
The merger of White Mountains Insurance
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<PAGE>
Group-Delaware with and into White Mountains Insurance Group-Arizona will occur
only if the change in domicile to Bermuda is to occur immediately after the
merger. In addition, while we currently expect the reorganization to take place
soon after the special meeting, the board of directors of White Mountains
Insurance Group-Delaware may defer the reorganization for a significant time or
abandon the reorganization after the special meeting because, among other
factors, of increases in our estimate of the cost of the reorganization, which
can rise due to increases in the fair market values of the assets of White
Mountains Insurance Group-Delaware. Our board of directors may exercise these
rights for a variety of reasons including if it determined that the
reorganization would be, in its view, too costly, or would have material adverse
consequences to our company.
WHITE MOUNTAINS INSURANCE GROUP-DELAWARE
AND WHITE MOUNTAINS INSURANCE GROUP-BERMUDA
WHITE MOUNTAINS INSURANCE GROUP-DELAWARE
White Mountains Insurance Group, Inc. is a New Hampshire-based financial
services holding company. Our subsidiaries and affiliates provide property and
casualty insurance, reinsurance and financial guaranty insurance.
White Mountains Insurance Group-Delaware's consolidated and unconsolidated
insurance operations principally include: (a) Folksamerica Holding Company,
Inc., a New York-based broker-market reinsurer; (b) a 25% economic interest in
Financial Security Assurance Holdings Ltd., a New York-based Aaa/AAA writer of
financial guaranty insurance; and (c) a 50% stake in Main Street America
Holdings, Inc., a unit of National Grange Mutual Insurance Company, a New
Hampshire-based property and casualty insurer.
We also own a passive investment portfolio. Management's primary strategic
goal is to reinvest our passive investments, together with other resources
available to us, into operating businesses in which management has knowledge and
experience, if appropriate opportunities can be found.
In the current fiscal year, we have announced or consummated the following
significant transactions:
o the disposition and discontinuance of our mortgage banking
operations;
o the sale of Valley Group, Inc., consisting of Valley Insurance
Company, Charter Indemnity Company and White Mountains Insurance
Company and related insurance affiliates;
o an agreement to purchase the Consolidated International Group, Inc.,
a Delaware based insurance holding company;
o the repurchase of 871,845 shares of our common stock; and
o the exercise by John J. Byrne of his warrants to purchase 1,000,000
shares of our common stock, as described under "The
Reorganization--Acceleration of Deductions Related to Compensation
Benefits."
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PRICE RANGE OF WHITE MOUNTAINS INSURANCE GROUP-DELAWARE COMMON STOCK
As of June 1, 1999 White Mountains Insurance Group-Delaware common stock
traded on the NYSE under the symbol "WTM." Prior to that date our company's
ticker symbol was "FFC." The following table sets forth the quarterly range of
high and low reported sale prices of the White Mountains Insurance
Group-Delaware common stock on the NYSE for the periods indicated.
[CAPTION]
<TABLE>
High Low
---- ----
<S> <C> <C>
1997:
First Quarter............................................................................... $109 3/4 $ 94
Second Quarter.............................................................................. 110 1/2 98
Third Quarter............................................................................... 108 99 1/2
Fourth Quarter.............................................................................. 124 105 1/4
1998:
First Quarter............................................................................... $137 5/16 $120 1/8
Second Quarter.............................................................................. 150 1/4 135 9/16
Third Quarter............................................................................... 153 1/4 119
Fourth Quarter.............................................................................. 144 3/8 117
1999:
First Quarter............................................................................... $150 $118 1/2
Second Quarter.............................................................................. 150 129 9/32
Third Quarter (through September 22, 1999).................................................. 143 129 1/8
</TABLE>
On September 22, 1999 the last reported sale price of the White Mountains
Insurance Group-Delaware common stock as reported on the NYSE was $131.75 per
share. As of September 24, 1999, there were approximately 455 record holders of
White Mountains Insurance Group-Delaware common stock.
WHITE MOUNTAINS INSURANCE GROUP-BERMUDA
White Mountains Insurance Group-Bermuda will be a Bermuda company
registered and existing under the laws of Bermuda upon registration of the
memorandum of continuance by the Registrar of Companies in Bermuda. White
Mountains Insurance Group-Bermuda's registered office will be located at
Bermuda.
DESCRIPTION OF AUTHORIZED SHARES OF
WHITE MOUNTAINS INSURANCE GROUP-BERMUDA
The following discussion is a summary of White Mountains Insurance
Group-Bermuda's share capital. This summary is subject to the complete text of
White Mountains Insurance Group-Bermuda's memorandum of continuance and bye-laws
as they will be in effect on the effective date. Annexes II and III to the proxy
statement/prospectus set forth the memorandum of continuance and the bye-laws.
AUTHORIZED SHARE CAPITAL
The memorandum of continuance and the bye-laws of White Mountains Insurance
Group-Bermuda will provide that the authorized share capital is limited to
50,000,000 common shares having a par value of US$1.00 per share and 20,000,000
preference shares having a par value of US$1.00 per share.
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VOTING
The holders of White Mountains Insurance Group-Bermuda common shares will
be entitled to one vote per share except as restricted by the voting limitation
described below (subject to the rights of the holders of any other class of
shares that may be issued). All actions submitted to a vote of shareholders
shall be voted on by the holders of White Mountains Insurance Group-Bermuda
common shares, voting together as a single class, except as provided by law.
With respect to the election of directors, each holder of White Mountains
Insurance Group-Bermuda common shares entitled to vote at the election will have
the right to vote, in person or by proxy, the number of shares held by him or
her for as many persons as there are directors to be elected and for whose
election that holder has a right to vote. The directors will be divided into
three classes, with only one class being up for election each year. Those
nominees receiving the highest number of votes, up to the number of directors
elected shall be deemed elected.
The bye-laws contain provisions limiting shareholders' voting rights as set
forth in "Comparison of Rights of Shareholders--Voting of Shareholders--White
Mountains Insurance Group-Bermuda."
DIVIDENDS
As is the case with the White Mountains Insurance Group-Delaware common
stock, holders of White Mountains Insurance Group-Bermuda common shares will be
entitled to participate, on a share-for-share basis, with the holders of any
other common shares outstanding, with respect to any dividends declared by the
board of directors of White Mountains Insurance Group-Bermuda. Dividends will
generally be payable in U.S. dollars. During 1997, 1998 and 1999 to date, we
declared and paid quarterly cash dividends.
We currently intend to reconsider, and possibly reduce, after the
reorganization, quarterly dividends with due consideration given to the
financial characteristics of our remaining invested assets and operations, the
amount and regularity of our cash flow and our business opportunities. The
payment of any future cash dividends on the White Mountains Insurance
Group-Bermuda common shares is necessarily dependent upon the earnings and
financial needs of White Mountains Insurance Group-Bermuda, along with
applicable legal and contractual restrictions.
RIGHTS UPON LIQUIDATION
As is the case with the White Mountains Insurance Group-Delaware common
stock, on a liquidation of White Mountains Insurance Group-Bermuda, holders of
White Mountains Insurance Group-Bermuda common shares will be entitled to
receive any assets remaining after the payment of White Mountains Insurance
Group-Bermuda's debts and the expenses of the liquidation, subject to any
special rights as may be attached to any other class of shares.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
The following discussion is a summary of material changes in your rights as
a shareholder following the reorganization. We believe this summary is accurate.
However, it is subject to the complete text of the relevant provisions of the
Bermuda Companies Act 1981, the Delaware General Corporation Law, White
Mountains Insurance Group-Delaware's certificate of incorporation and by-laws
and White Mountains Insurance Group-Bermuda's memorandum of continuance and
bye-laws.
Your rights as a stockholder of White Mountains Insurance Group-Delaware
are governed by Delaware law and White Mountains Insurance Group-Delaware's
restated certificate of incorporation and amended and restated by-laws. After
the reorganization, you will become a shareholder of White Mountains Insurance
Group-Bermuda and your rights will be governed by Bermuda law and White
Mountains Insurance Group-Bermuda's memorandum of continuance and bye-laws.
There are differences between your rights under Delaware law and Bermuda
law, which is based on English legal principles. In addition, there are
differences between White Mountains Insurance Group-Delaware's certificate of
incorporation and by-laws and White Mountains Insurance Group-Bermuda's
memorandum of continuance and bye-laws. The most significant differences are:
o the board of directors of White Mountains Insurance Group-Bermuda
may redeem shares from a shareholder at fair market value if it
determines that share ownership by that shareholder may result in
adverse tax, regulatory or legal consequences to our company, any of
our subsidiaries or any of our shareholders;
o a provision limiting the voting rights of any person who owns
(directly, indirectly or constructively under the IRC) 10% or more
of the shares of White Mountains Insurance Group-Bermuda to 9.9%.
This 9.9% voting limitation provision will not be applicable to any
Byrne Entity with respect to any matter submitted to shareholders
other than with respect to the election of directors. This provision
is intended to prevent our company from being characterized as a
controlled foreign corporation which could cause U.S. persons owning
10% or more of our shares to suffer adverse U.S. tax consequences;
o a provision limiting the voting rights of any group (defined as two
or more persons acting as a partnership, syndicate or other group
for the purpose of acquiring, holding or disposing of the relevant
securities) which owns 10% or more of the shares to 9.9%, except
that this provision relating to groups will not apply to (a) any
Byrne Entity, or (b) any person or group that the board of
directors, by the affirmative vote of at least 75% of the entire
board of directors, may exempt from this provision;
o a provision (similar to that under Delaware corporate law) limiting
business combinations with interested shareholders. However, any
Byrne Entity will be exempt from this provision;
o shareholders will not have the right to remove directors for cause
(unless the Board determines otherwise);
o an increase in the number of authorized common shares from
15,000,000 to 50,000,000 and preference shares from 1,000,000 to
20,000,000;
o our bye-laws can only be amended with both prior approval of the
board of directors and approval by the holders of a majority of the
voting power of the shareholders present at a meeting of the
shareholders (subject to supermajority provisions in certain
circumstances); and
o shareholders' rights to bring derivative suits will be more limited.
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o A provision limiting the voting rights of any person who notifies
the board of directors of White Mountains Insurance Group-Bermuda to
that percentage so designated by such person (subject to acceptance
of such cut-back by the board in its sole discretion) so that (and
to the extent) such person may meet any applicable insurance or
other regulatory requirement or voting threshold or limitation that
may be applicable to such person or to evidence that such person's
voting power is no greater than such threshold.
QUORUM; MEETINGS OF SHAREHOLDERS
White Mountains Insurance Group-Delaware
Under Delaware law, shareholder meetings generally must be held every thirteen
months and a special meeting of stockholders may be called only by the board of
directors or by persons authorized in the charter or the by-laws. The by-laws of
White Mountains Insurance Group-Delaware provide for the calling of a special
meeting of stockholders only by the Chairman of the Board, the President or a
majority of the entire board of directors.
The by-laws of White Mountains Insurance Group-Delaware provide that a majority
of shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders.
White Mountains Insurance Group-Bermuda
Under Bermuda law, an annual general meeting must be convened at least once in
every calendar year. A special meeting of shareholders may be convened by the
directors at any time and must be convened upon the request of shareholders
holding at least 10% of the paid-up capital of the company carrying the right to
vote at shareholders' meetings. The bye-laws also provide that the Chairman of
the Board, the President or a majority of the entire board of directors may call
a special meeting of shareholders.
The bye-laws of White Mountains Insurance Group-Bermuda provide that the
presence of two or more persons representing, in person or by proxy, not less
than a majority of the voting power represented by shares issued and entitled to
vote shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by Bermuda law.
VOTING OF SHAREHOLDERS
White Mountains Insurance Group-Delaware
Under Delaware law, unless otherwise provided in the certificate of
incorporation, each stockholder is entitled to one vote for each share of
capital stock held by that stockholder.
White Mountains Insurance Group-Bermuda
The by-laws contain a provision limiting the voting rights of any person who
owns (directly, indirectly or constructively under the IRC) 10% or more of the
shares of White Mountains Insurance Group-Bermuda to 9.9%. This 9.9% voting
limitation provision will not be applicable to any Byrne Entity with respect to
any matter submitted to shareholders other than with respect to the election of
directors. This provision is intended to prevent White Mountains Insurance
Group-Bermuda from being characterized as a controlled foreign corporation,
which could cause U.S. persons
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owning 10% or more of its shares to suffer adverse U.S. tax consequences.
In addition, the bye-laws contain a provision limiting the voting rights of any
group (defined as two or more persons acting as a partnership, syndicate or
other group for the purpose of acquiring, holding or disposition of the relevant
securities) which owns 10% or more of the shares to 9.9%, except that this
provision will not restrict (a) any Byrne Entity, or (b) any person or group
that the board of directors, by the affirmative vote of at least 75% of the
entire board of directors, may exempt from this provision.
A provision limiting the voting rights of any person who notifies the board of
directors of White Mountains Insurance Group-Bermuda to that percentage so
designated by such person (subject to acceptance of such cut-back by the board
in its sole discretion) so that (and to the extent) such person may meet any
applicable insurance or other regulatory requirement or voting threshold or
limitation that may be applicable to such person or to evidence that such
person's voting power is no greater than such threshold.
MANDATORY REDEMPTION OF COMMON STOCK
White Mountains Insurance Group-Delaware
Under Delaware law, a corporation cannot mandatorily redeem shares of its common
stock.
White Mountains Insurance Group-Bermuda
The bye-laws contain a provision that the board of directors of White Mountains
Insurance Group-Bermuda may redeem shares at fair market value if it determines
that any shareholder's share ownership may result in adverse tax, regulatory or
legal consequences to the company or any shareholder.
PREFERRED STOCK
White Mountains Insurance Group-Delaware
Under Delaware law and the certificate of incorporation of White Mountains
Insurance Group-Delaware, the board of directors has the right to issue
preferred stock with such powers, rights and designations as it may so
determine.
White Mountains Insurance Group-Bermuda
Under the by-laws of White Mountains Insurance Group-Bermuda, the board of
directors has the right to issue preference shares with such powers, rights and
designations as it may so determine.
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ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
White Mountains Insurance Group-Delaware
The by-laws of White Mountains Insurance Group-Delaware provide that
stockholders seeking to bring business before an annual meeting of stockholders
or to nominate candidates for election as directors at an annual meeting of
stockholders must provide timely notice in writing. To be timely, a
stockholder's notice must be received by the Secretary of White Mountains
Insurance Group-Delaware by the earlier of:
o at least 90 days prior to the first anniversary of the preceding year's annual
meeting; or
o the 10th day following the day on which such notice of the date of the annual
meeting was mailed or publicly disclosed.
White Mountains Insurance Group-Bermuda
The bye-laws of White Mountains Insurance Group-Bermuda will provide that to be
properly brought before a shareholder meeting, business must be specified in the
notice of the meeting and will be substantially identical to the by-laws of
White Mountains Insurance Group-Delaware, subject to Bermuda law in this regard
with respect to nomination of candidates for election as directors. In addition,
Bermuda law provides that shareholders totaling at least 100 shareholders or
holding at least 5% of the total voting rights can, at their own expense,
require the company to:
o give notice of any resolution which those shareholders can properly propose
and intend to propose at the next annual general meeting of the company; or
o circulate a statement prepared by those shareholders in respect of any matter
referred to in a proposed resolution or any business to be dealt with at a
general meeting.
DISTRIBUTIONS AND DIVIDENDS; STOCK REPURCHASES
White Mountains Insurance Group-Delaware
Under Delaware law, a corporation may pay dividends out of surplus and, if there
is no surplus, out of net profits for the current and/or the preceding fiscal
year, unless the net assets of the corporation are less than the capital
represented by issued and outstanding stock having a preference on asset
distributions. Surplus is defined under Delaware law as the excess of the net
assets over capital, as such capital may be adjusted by the board of directors.
A Delaware corporation may purchase shares of any class except when its capital
is impaired or would be impaired by such purchase. A corporation may, however,
purchase out of capital shares that are entitled upon any distribution of its
assets to a preference over another class or series of its stock if these shares
are to be retired and the capital reduced.
White Mountains Insurance Group-Bermuda
Under Bermuda law and the by-laws, the board of directors of White Mountains
Insurance Group-Bermuda may declare dividends, or make distributions out of
contributed surplus, as long as there are no reasonable grounds for believing
that White Mountains Insurance Group-Bermuda is, or after the dividend or
distribution would be, unable to pay its liabilities as they became due or that
the realizable value of White Mountains Insurance Group-Bermuda's assets would
thereby be less than the aggregate of its liabilities and its issued share
capital and share premium accounts.
Under Bermuda law and the by-laws, White Mountains Insurance Group-Bermuda can
repurchase its own shares generally, to the extent it can otherwise pay a
dividend.
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Acquired shares can be reissued generally without shareholder action.
Acquired shares can be reissued generally without shareholder action.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
White Mountains Insurance Group-Delaware
Delaware law generally permits a corporation to provide indemnification and
advancement of expenses, by by-law provision, agreement or otherwise, against
judgments, fines, expenses and amounts paid in settlement actually and
reasonably incurred by the person in connection with a proceeding if the person
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation.
The by-laws of White Mountains Insurance Group-Delaware provide for
indemnification on the part of White Mountains Insurance Group-Delaware to the
fullest extent permitted by law.
White Mountains Insurance Group-Bermuda
Under Bermuda law, a company is permitted to indemnify any officer or director,
out of the funds of the company, against:
o any liability he or she incurs in defending any proceedings, whether civil or
criminal, in which (1) judgment is given in his or her favor, or (2) he or she
is acquitted, or (3) he or she is granted relief from liability by the court
in connection with any application under relevant Bermuda legislation; and
o any loss or liability resulting from negligence, default, breach of duty or
breach of trust, save for his or her fraud or dishonesty.
Through the bye-laws, White Mountains Insurance Group-Bermuda will indemnify its
officers and directors as well as their heirs, executors and administrators to
the fullest extent permitted by law. Bermuda law does not permit indemnification
of a person who is or may be found guilty of fraud or dishonesty.
White Mountains Insurance Group-Bermuda will advance all reasonable expenses
incurred by or on behalf of the indemnitee in connection with any related
proceeding.
LIMITED LIABILITY OF DIRECTORS
White Mountains Insurance Group-Delaware
Delaware law permits the adoption of a charter provision limiting or eliminating
the monetary liability of a director to a corporation or its stockholders by
reason of a director's breach of the fiduciary duty of care. However, Delaware
law does not permit any limitation of the liability of a director for:
o breaching the duty of loyalty to the corporation or its stockholders;
White Mountains Insurance Group-Bermuda
Under Bermuda law, a director must observe the statutory duty of care which
requires a director to act honestly and in good faith with a view to the best
interests of the company and exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances.
Bermuda law renders void any provision in the bye-laws or any contract between a
company
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o failing to act in good faith;
o engaging in intentional misconduct or a known violation of law;
o obtaining an improper personal benefit from the corporation; or
o paying a dividend or approving a stock repurchase in violation of Delaware
law.
The certificate of incorporation of White Mountains Insurance Group-Delaware
eliminates the monetary liability of a director to the fullest extent permitted
by Delaware law.
and any director exempting him or her from, or indemnifying him or her against,
any liability in respect of any fraud or dishonesty of which he or she may be
guilty in relation to the company.
The White Mountains Insurance Group-Bermuda bye-laws provide that no officer or
director of White Mountains Insurance Group-Bermuda will be personally liable to
White Mountains Insurance Group-Bermuda or its shareholders for monetary damages
for any breach of fiduciary duty, except where the person is or may be found to
be guilty of fraud or dishonesty. A director who has an interest in any material
contract or proposed material contract or in any person that is a party to such
a contract with the company or any of its subsidiaries and fails to disclose the
interest at the first opportunity at a meeting of the directors or by writing to
the directors is deemed to have breached that director's duty under Bermuda law.
INTERESTED DIRECTOR TRANSACTIONS
White Mountains Insurance Group-Delaware
Under Delaware law, no contract or transaction between a corporation and one or
more of its directors or officers, or between a corporation or another entity in
which one or more of its directors or officers have a financial interest, shall
be void or voidable solely for that reason or solely because the director or
officer is present at or participates in that meeting which authorizes the
contract or solely because those directors' votes are counted for that purpose
if:
o the material facts of the relationship or interest are known to the board of
directors and the board of directors in good faith authorizes the contract by
the affirmative vote of the disinterested directors,
o the material facts of the relationship or interest are known to the
stockholders and the contract is specifically approved in good faith by the
stockholders or
White Mountains Insurance Group-Bermuda
Under Bermuda law, without the consent of the holders of shares carrying at
least nine-tenths of the total voting rights or in other limited instances, a
company may not make a loan to or enter into any guarantee or provide security
in respect of any loan made to any person who is a director of that company or
of its holding company. Exceptions to this provision are:[nk]
o loans or guarantees by the company in the ordinary course of its business, if
the business includes lending money or giving guarantees; or
o loans for the purposes of the company or to enable its directors to perform
their duties, given with prior approval at a general meeting where the
purposes of the loan are disclosed; or if not given at that meeting, the
loan is repaid or discharged within six
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o the contract is fair to the corporation at the time it is authorized.
Interested directors may be counted in determining the presence of a quorum at a
meeting which authorizes the contract or the transaction.
months from the conclusion of the next following annual general meeting.
This provision does not preclude the reimbursement of expenses or loans to
directors who are or were employees of the company, to enable them to acquire
shares or stock options.
SHAREHOLDERS' SUITS
White Mountains Insurance Group-Delaware
Delaware law requires only that the stockholder bringing a derivative suit must
have been a stockholder at the time of the wrong complained of or that the stock
devolved to him or her by operation of law from a person who was a stockholder
in that situation. In addition, the stockholder must remain a stockholder
throughout the litigation.
White Mountains Insurance Group-Bermuda
The Bermuda courts ordinarily would be expected to follow English precedent,
which would permit a shareholder to commence a derivative action in the name of
the company to remedy a wrong done to the company only:
o where the act complained of is alleged to be beyond the corporate power of the
company or illegal;
o where the act complained of is alleged to constitute a fraud against the
minority shareholders by those controlling the company; provided that the
majority shareholders have used their controlling position to prevent the
company from taking action against the wrongdoers;
o where an act requires approval by a greater percentage of the company's
shareholders than actually approved it; or
o where a derivative action is necessary to avoid a violation of the company's
memorandum of continuance or bye-laws.
SHAREHOLDER APPROVAL OF BUSINESS COMBINATIONS
White Mountains Insurance Group-Delaware
Under Delaware law, holders of a majority of the shares entitled to vote must
approve a merger or consolidation, sale, lease, exchange or other disposition of
all or substantially all of the property of the corporation not in the usual and
regular course of the corporation's business, or a dissolution of the
corporation. In
White Mountains Insurance Group-Bermuda
Bermuda law permits an amalgamation between two or more Bermuda companies, or
between one or more Bermuda exempted companies and one or more foreign
corporations, subject, unless the bye-laws otherwise provide, to obtaining a
majority vote of three-fourths of the shareholders of each of
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addition, under Delaware law, class voting rights exist with respect to
amendments to the charter that adversely affect the terms of the shares of a
class. See "Amendment of Governing Documents--White Mountains Insurance
Group-Delaware" below. These class voting rights do not exist as to other
extraordinary matters, unless the charter provides otherwise. The certificate of
incorporation of White Mountains Insurance Group-Delaware does not provide
otherwise.
The certificate of incorporation prohibits White Mountains Insurance
Group-Delaware from engaging in a business combination (as defined therein) with
an interested stockholder (as defined therein) unless:
o certain "fair price" provisions are satisfied; or
o a majority of the directors who are not affiliates of the interested
stockholder approve the business combination in a board of directors meeting
where at least two non-affiliated directors are present.
In addition, because White Mountains Insurance Group-Delaware is a Delaware
corporation, it has the benefit of a Delaware law that generally prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the time of
the transaction in which the person became an interested stockholder, unless:
o prior to that time, the board of directors approves the transaction or the
business combination;
o upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the outstanding voting stock, excluding for purposes of determining the
number of shares outstanding, shares owned by directors who are also officers
and by certain employee plans; or
o on or after that time the board of directors and the stockholders by an
affirmative vote of at least 66 2/3% of the outstanding voting
the companies, and of each class of shares, present and voting in person or by
proxy at a meeting called for that purpose. Unless the bye-laws otherwise
provide, Bermuda law also requires that the quorum at the meetings be one-third
of the issued shares of the company or the class. Each share carries the right
to vote in respect of an amalgamation, whether or not it otherwise carries the
right to vote.
Except as set forth in the next paragraph, the bye-laws of White Mountains
Insurance Group-Bermuda provide that any amalgamation approved by two-thirds of
the board of directors of White Mountains Insurance Group-Bermuda shall only
require approval by a majority of the voting power held by the shareholders
present at a meeting of the shareholders.
The bye-laws will contain provisions regarding "business combinations" with
"interested shareholders" that will be substantially similar in effect to the
provisions under Delaware law. However, the bye-laws provide that each Byrne
Entity is excepted from being an "interested shareholder."
Bermuda law also provides that where an offer is made for shares in a company by
another company and, within four months of the offer, the holders of at least
90% in value of the shares which are the subject of the offer (other than shares
already held by or on behalf of the offeror) accept, the offeror may by notice,
given within two months after the expiration of the said four months, require
any dissenting shareholders to transfer their shares on the terms of the offer.
Dissenting shareholders may apply to a court within one month of notice
objecting to the transfer and the court may make any order it thinks fit.
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stock which is not owned by the interested stockholder approve the transaction.
The definition of "business combinations" includes mergers, assets sales and
other transactions resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns or, within three years, did own 15% or more of
the corporation's voting stock.
AMENDMENT OF GOVERNING DOCUMENTS
White Mountains Insurance Group-Delaware
Under Delaware law, the certificate of incorporation may be amended if:
o the board of directors sets forth the proposed amendment in a resolution,
declares the amendment advisable and directs that it be submitted to a vote at
the meeting of stockholders; and
o unless the charter requires the vote of a greater number of shares, holders of
at least a majority of shares entitled to vote approve the amendment.
The charter of White Mountains Insurance Group-Delaware requires approval by an
affirmative vote of at least 75% of the voting power of shares entitled to vote
at an election of directors to amend specified provisions. If the holders of the
outstanding shares of a class are entitled to vote as a class upon a proposed
amendment, the holders of a majority of the outstanding shares of that class
must also vote in favor of the amendment.
Under Delaware law, the board of directors may amend by-laws if so authorized in
the charter. Our charter does so authorize The stockholders of a Delaware
corporation also have the power to amend by-laws.
White Mountains Insurance Group-Bermuda
Under Bermuda law, the bye-laws may be amended only by both (1) a resolution of
the board of directors and (2) a resolution of the shareholders approved by
shareholders with a majority of voting power voting on the amendment. In
addition, the bye-laws of White Mountains Insurance Group-Bermuda require the
affirmative vote of the holders of at least 75% of the voting power of the
shares entitled to vote at an election of directors to amend, alter or repeal
the following selected provisions:
o repurchase of shares;
o election of directors;
o removal of directors and vacancies on the board of directors;
o waiver of claims;
o call of special meetings;
o limitation on voting rights of controlled shares;
o qualification of voters voting at meetings;
o rights of shares;
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o power to issue shares; and
o provision governing the amendment of selected bye-laws.
In addition, any amendment, alteration, change or repeal of the business
combinations provision of the bye-laws requires the affirmative vote of (1) at
least 66 2/3% of the voting power of the votes entitled to be cast by holders of
all then outstanding shares entitled to vote at an election of directors,
excluding the shares beneficially owned by any interested shareholder or (2) the
affirmative vote of at least 75% of the members of the entire board of directors
if all of these directors are persons who are not affiliates of the interested
shareholder, as specified in the provision.
In addition, the consent of a majority of the shares held by the Byrne Entities
shall be required to amend, alter, change or repeal, or adopt any provision that
would adversely affect, the exemptions provided to them as described above under
"Shareholder Approval of Business Combinations--White Mountains Insurance
Group-Bermuda" or "Voting of Shareholders--White Mountains Insurance
Group-Bermuda."
APPRAISAL RIGHTS
White Mountains Insurance Group-Delaware
Under Delaware law, a stockholder of a corporation does not have appraisal
rights in connection with a merger or consolidation or, in the case of a
disposition, if:
o the shares of the corporation are listed on (1) a national securities exchange
or (2) designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
(3) held of record by more than 2,000 stockholders, as is presently the case
with White Mountains Insurance Group-Delaware; or
o the corporation will be the surviving corporation of the merger and approval
of
White Mountains Insurance Group-Bermuda
Under Bermuda law, a dissenting shareholder of a company participating in an
amalgamation, other than an amalgamation between a company and its wholly-owned
subsidiary or between two or more wholly-owned subsidiaries of the same holding
company, may apply to the court to appraise the fair value of his or her
shares.
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the merger requires no vote of the stockholders of the surviving corporation.
However, a stockholder is entitled to appraisal rights in the case of a merger
or consolidation if an agreement of merger or consolidation requires the
stockholder to accept in exchange for its shares anything other than:
o shares of stock of the corporation surviving or resulting from the merger or
consolidation;
o shares of any other corporation that on the effective date of the merger or
consolidation will be either (1) listed on a national securities exchange or
(2) designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
(3) held of record by more than 2,000 stockholders;
o cash in lieu of fractional shares of the corporation; or
o any combination thereof.
INSPECTION OF BOOKS AND RECORDS
White Mountains Insurance Group-Delaware
Under Delaware law, any stockholder may inspect the corporation's books and
records for a proper purpose.
White Mountains Insurance Group-Bermuda
Bermuda law provides the general public with a right of inspection of a Bermuda
company's public documents at the office of the Registrar of Companies in
Bermuda, and provides a Bermuda company's shareholders with a right of
inspection of the company's bye-laws, minutes of general shareholders' meetings
and audited financial statements. The register of shareholders is also open to
inspection by shareholders free of charge and, upon payment of a small fee, by
any other person.
A Bermuda company is required to maintain its share register in Bermuda but may
establish a branch register outside of Bermuda. A Bermuda company is required to
keep at its registered office a register of its directors and officers which is
open for inspection by members of the public without charge.
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REMOVAL OF DIRECTORS; VACANCIES ON THE BOARD OF DIRECTORS
White Mountains Insurance Group-Delaware
Under Delaware law and the by-laws of White Mountains Insurance Group-Delaware,
any director or the entire board of directors may be removed, only for cause, by
the holders of a majority of shares entitled to vote at an election of
directors.
Under the certificate of incorporation and bye-laws of White Mountains Insurance
Group-Delaware a vacancy that results from an increase of the number of
directors may by filled by a majority of the board of directors then in office
provided that 1/3 of the directors are present. Any other vacancy may be filled
by a majority of the board of directors even if less than a quorum is present,
or by a sole remaining director.
White Mountains Insurance Group-Bermuda
Under the bye-laws of White Mountains Insurance Group-Bermuda, the shareholders
of the company do not have a right to remove directors (unless the board
determines otherwise).
Under the bye-laws, a vacancy that results from an increase of the number of
directors may be filled by a majority of the directors then in office provided
that at least 1/2 of the directors are present at the meeting. The bye-laws of
White Mountains Insurance Group-Bermuda also provide that any other vacancies
may be filled in a manner similar to the provisions regarding vacancies
contained in the by-laws of White Mountains Insurance Group-Delaware.
CLASSIFIED BOARD OF DIRECTORS
White Mountains Insurance Group-Delaware
Under Delaware law, a Delaware corporation may establish up to three classes of
directors, as specified either in the corporation's by-laws or certificate of
incorporation.
The certificate of incorporation of White Mountains Insurance Group-Delaware
divided the directors into three classes designated Class I, Class II and Class
III. Class I directors were elected initially for a one year term, Class II
directors initially for a two-year term and Class II directors initially for a
three year term.
White Mountains Insurance Group-Bermuda
As permitted by Bermuda law, the bye-laws of White Mountains Insurance
Group-Bermuda establish a classified board of directors with terms substantially
similar to the provisions regarding a classified board of directors contained in
the certificate of incorporation of White Mountains Insurance Group-Delaware.
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MATERIAL TAX CONSIDERATIONS
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR TAX
CONSEQUENCES.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Cahill Gordon & Reindel, special U.S. federal income tax
counsel to White Mountains Insurance Group, the following discussion sets forth
the material U.S. federal income tax consequences to U.S. holders (as defined
below) of White Mountains Insurance Group-Delaware common stock with respect to
the reorganization and the ownership and disposition of White Mountains
Insurance Group-Bermuda common shares.
This discussion does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a decision to approve the
reorganization or to own or dispose of White Mountains Insurance Group-Bermuda
common shares. In particular, this discussion deals only with holders who hold
White Mountains Insurance Group-Delaware common stock, and will hold White
Mountains Insurance Group-Bermuda common shares, as capital assets. This
discussion does not address the tax treatment of the reorganization or of the
ownership and disposition of the White Mountains Insurance Group-Bermuda common
shares under applicable state or local tax laws or the laws of any jurisdiction
other than the United States.
In addition, this summary does not address federal alternative minimum tax
consequences and does not address all aspects of U.S. federal income taxation
that may be applicable to holders in light of their particular circumstances, or
to holders subject to special treatment under U.S. federal income tax law:
o securities dealers, financial institutions, insurance companies, or tax
exempt organizations;
o holders who are holding shares as part of a hedging or larger integrated
financial or conversion transaction;
o holders whose functional currency is a currency other than the U.S.
dollar; and
o holders who are holding shares pursuant to selected retirement plans,
pursuant to the exercise of employee stock options or otherwise as
compensation.
This discussion is based on current provisions of the IRC, current and
proposed Treasury regulations, and administrative and judicial interpretations
as of the date of this proxy statement/prospectus and all of which are subject
to change or reinterpretation by the Treasury or courts, possibly on a
retroactive basis. White Mountains Insurance Group holders should note that no
rulings have been or are expected to be sought from the IRS with respect to any
of the U.S. federal income tax consequences of the reorganization.
"U.S. holder" means a beneficial owner of White Mountains Insurance
Group-Delaware common stock or White Mountains Insurance Group-Bermuda common
shares who is:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in or under the laws of
the United States or any State thereof, unless, in the case of a
partnership, future Treasury regulations presently authorized under the
IRC otherwise provide,
o an estate, the income of which is subject to U.S. federal income tax
regardless of its source, or
o a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust.
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TAXATION OF WHITE MOUNTAINS INSURANCE GROUP
The Reorganization
At the time of the reorganization, the company will be treated as if it
sold all of its directly owned assets in a fully taxable transaction in which it
will recognize gains, if any, but not losses. In addition, the gains on assets
of any subsidiaries that changes domicile to a non-U.S. jurisdiction as part of
the reorganization will be taxed similarly. The company believes, based on
current estimates of the fair market values of its assets and tax attributes,
that it will incur a U.S. federal income tax liability of between $5.0 million
and $20.0 million at the time of the reorganization. However, this federal
income tax liability could be increased materially if the fair market values of
White Mountains Insurance Group-Delaware's assets at the time of the
reorganization were determined to be substantially in excess of current
estimates. The IRS is not obliged to accept the company's determination or the
methodologies we used.
After the Reorganization
After the reorganization, White Mountains Insurance Group-Bermuda will be
subject to U.S. federal income tax only to the extent that it derives some U.S.
source income that is subject to U.S. withholding tax or income that is
effectively connected with the conduct of a trade or business within the United
States and is not exempt from U.S. tax under an applicable U.S. income tax
treaty. The company's U.S. subsidiaries will continue to be subject to U.S. tax
on their worldwide income and each first tier U.S. subsidiary will file a U.S.
tax return separately from each other first-tier U.S. subsidiary.
The company may be subject to selected withholding taxes on dividends,
interest or other distributions it receives from its U.S. subsidiaries or
investments, which generally range from 0% to 30%, depending upon the
jurisdiction of the actual entity that holds the investments and the terms of
the actual treaty.
TAXATION OF WHITE MOUNTAINS INSURANCE GROUP STOCKHOLDERS
The Reorganization
The merger of White Mountains Insurance Group-Delaware with and into White
Mountains Insurance Group-Arizona, followed by the continuation of White
Mountains Insurance Group-Arizona as White Mountains Insurance Group-Bermuda
will be characterized for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the IRC.
Accordingly, a U.S. holder will not recognize any gain or loss on the
deemed exchange of its White Mountains Insurance Group-Delaware common stock for
White Mountains Insurance Group-Bermuda common shares. An exchanging holder's
tax basis and holding period with respect to White Mountains Insurance
Group-Bermuda common shares will be the same as that holder's tax basis and
holding period for the White Mountains Insurance Group-Delaware common stock it
exchanged.
However, under Section 367(d) of the IRC, a U.S. holder who directly,
indirectly or by attribution owns 10% or more by vote or value of the
outstanding stock of White Mountains Insurance Group-Delaware at the effective
time of the reorganization could be treated as annually receiving a deemed
royalty to the extent certain intangibles described in Section 367(d) are deemed
sold by White Mountains Insurance Group-Delaware to White Mountains Insurance
Group-Bermuda. The company believes it has no intangibles to which Section
367(d) of the IRC applies.
After the Reorganization
Taxation of Dividends
Dividends paid by White Mountains Insurance Group-Bermuda will not qualify
for the dividends received deduction otherwise generally available to corporate
shareholders, except to the extent from earnings and profits accumulated by
White Mountains Insurance Group-Delaware.
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Passive Foreign Investment Company Rules
A foreign corporation will constitute a "passive foreign investment
company" with respect to a taxable year if 75% or more of its gross income for
that taxable year consists of passive income, or 50% or more of its average
assets, measured by value held during that taxable year consists of passive
assets. A U.S. holder treated as owning PFIC stock is subject to special rules
that are generally intended to reduce or eliminate any benefits from the
deferral of U.S. federal income tax that the holder could derive from investing
in a foreign investment company that does not distribute all of its earnings on
a current basis. If White Mountains Insurance Group-Bermuda is or becomes a
PFIC, then unless the U.S. holder makes either a "qualified electing fund"
election or a "mark-to-market" election, the U.S. holder generally will be
subject to tax upon the disposition of appreciated White Mountains Insurance
Group-Bermuda shares or upon certain distributions as if the gain or
distribution were ordinary income earned ratably and subject to tax at the
highest rate applicable to the U.S. holder over the period during which the
White Mountains Insurance Group-Bermuda common shares were held, including any
periods in which White Mountains Insurance Group-Bermuda was not a PFIC, and
will be subject to an interest charge on the deferred tax. The company believes
White Mountains Insurance Group-Bermuda will not be a PFIC.
Should White Mountains Insurance Group-Bermuda determine that it is a PFIC
in any taxable year, it intends to provide U.S. holders with all information for
such holders to make a timely qualified electing fund election for that taxable
year.
Controlled Foreign Corporation Rules
Special U.S. federal income tax rules apply to certain holders in a foreign
corporation classified as a "controlled foreign corporation." A foreign
corporation will not constitute a CFC unless U.S. shareholders owning 10% or
more of its voting power ("10% Voting U.S. Shareholders") collectively own more
than 50% (more than 25% in the case of an insurance company) of the total
combined voting power or total value of the corporation's stock. Any U.S. person
owning, directly or indirectly through foreign persons, or is considered to own
(by application of certain constructive ownership rules) 10% or more of the
total combined voting power of all classes of stock of a foreign corporation
will be considered to be a 10% Voting U.S. Shareholder. Based on the company's
current ownership and the bye-law provisions limiting voting rights as set forth
in "Comparison of Rights of Shareholders--Voting of Shareholders--White
Mountains Group-Bermuda," the company believes that White Mountains Insurance
Group-Bermuda will not be a CFC.
Foreign Personal Holding Company and Personal Holding Company Rules
Special U.S. federal income tax rules apply to a holder in a "foreign
personal holding company" and to the U.S. source income of a foreign corporation
that is a "personal holding company." A foreign corporation will not constitute
a FPHC, unless five or fewer individuals who are U.S. citizens or residents own
more than 50% of the voting power or the value of its shares. A corporation will
not constitute a "personal holding company" unless five or fewer individuals
owns more than 50% of the value of its shares. Based upon the company's current
ownership, the company believes White Mountains Insurance Group-Bermuda will not
be a FPHC or PHC.
Foreign Investment Company Rules
Special rules also apply to treat as ordinary income any gain realized on
the sale of shares of a "foreign investment company." The company believes White
Mountains Insurance Company-Bermuda will conduct its business and obtain
controlling interests in subsidiaries so as not to be a "foreign investment
company."
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Related Person Insurance Income Rules
Special provisions of the IRC apply to foreign insurance companies that
have "related person insurance income" (essentially investment income and
premium income from insuring or reinsuring risks of certain U.S. persons). After
the redomestication, White Mountains Insurance Group-Bermuda may form a foreign
insurance company subsidiary. Based on the company's current ownership, the
company believes that the premium income of any foreign subsidiary that may be
formed by White Mountains Insurance Group-Bermuda and which may reinsure risks
of its U.S. affiliates will not constitute "related person insurance income"
because no such affiliate will be treated as a related U.S. person for this
purpose.
U.S. Backup Withholding Tax and Information Reporting
Generally, 31% "backup" withholding tax and information reporting
requirements will apply to dividends paid on White Mountains Insurance
Group-Bermuda common shares to a non-corporate U.S. holder, if that holder fails
to provide a correct taxpayer identification number and other information or
fails to comply with certain other requirements. The proceeds from the sale of
White Mountains Insurance Group-Bermuda common shares by a U.S. holder will be
subject to U.S. backup withholding tax and information reporting, unless the
holder has provided the required certification or has otherwise established an
exemption.
A U.S. holder can establish an exemption from the imposition of backup
withholding tax by providing a duly completed IRS Form W-9 to the holder's
broker or paying agent, reporting the holder's taxpayer's identification number,
which for an individual will be his or her social security number, or by
otherwise establishing its corporate or exempt status.
Any amounts withheld under the backup withholding tax rules from a payment
to a holder will be allowed as a refund or a credit against that holder's U.S.
federal income tax, provided that the required information is furnished to the
IRS.
BERMUDA TAX CONSEQUENCES
In the opinion of Conyers Dill & Pearman, special Bermuda tax counsel to
the company, the following discussion sets forth the material Bermuda tax
consequences to U.S. holders of the reorganization and the ownership and
disposition of White Mountains Insurance Group-Bermuda common shares.
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by a Bermuda exempted company or its shareholders, other than
shareholders ordinarily resident in Bermuda.
White Mountains Insurance Group-Bermuda will apply for and expects to
obtain a written assurance from the Minister of Finance under the Exempted
Undertakings Tax Protection Act 1966 that, in the event that any legislation is
enacted in Bermuda imposing any tax computed on profits or income, or computed
on any capital asset, gain or appreciation, or any tax in the nature of estate
duty or inheritance tax, that tax shall not be applicable until March 28, 2016
to White Mountains Insurance Group-Bermuda or to any of its operations or to the
shares or its other obligations except insofar as the tax applies to persons
ordinarily resident in Bermuda or to any land owned or leased by it. Therefore,
there will be no Bermuda tax consequences, including any taxes imposed by way of
withholding, with respect to the sale or exchange of the White Mountains
Insurance Group-Bermuda common shares or with respect to distributions in
respect of the White Mountains Insurance Group-Bermuda common shares. As an
exempted company, White Mountains Insurance Group-Bermuda will be liable to pay
in Bermuda an annual government fee based upon its authorized share capital and
the premium on its issued shares.
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MANAGEMENT OF WHITE MOUNTAINS INSURANCE GROUP-BERMUDA
After the reorganization, the board of directors of White Mountains
Insurance Group-Bermuda will consist of those persons who, at the effective
time, are serving as directors of White Mountains Insurance Group-Delaware. Each
director will serve the term of office for which he or she was elected or
appointed. After the reorganization, White Mountains Insurance Group-Bermuda's
executive officers will be the same as those persons who are presently employed
as executive officers of White Mountains Insurance Group-Delaware.
COMMITTEES OF THE BOARD OF DIRECTORS
The committees of the board of directors of White Mountains Insurance
Group-Delaware immediately prior to the effective time will continue to exist as
committees of the board of directors of White Mountains Insurance Group-Bermuda
after the reorganization with identical members and functions.
LEGAL MATTERS
Conyers Dill & Pearman, Hamilton, Bermuda, as Bermuda counsel, has passed
upon certain legal matters in connection with White Mountains Insurance
Group-Bermuda common shares. Conyers Dill & Pearman has also rendered an opinion
regarding Bermuda tax consequences of the reorganization referred to in
"Material Tax Considerations." Cahill Gordon & Reindel (a partnership including
a professional corporation), New York, New York, has rendered an opinion
regarding the United States federal income tax consequences of the
reorganization referred to in "Material Tax Considerations." Certain legal
matters in connection with the merger agreement and to the White Mountains
Insurance Group-Arizona shares have been passed upon by Arizona counsel, Bryan
Cave LLP, Phoenix, Arizona.
EXPERTS
The financial statements of White Mountains Insurance Group-Delaware
incorporated by reference in this proxy statement/prospectus and elsewhere in
the registration statement, as defined herein, to the extent and for the periods
indicated in their reports, appearing in White Mountains Insurance
Group-Delaware's Annual Report on Form 10-K for the year ended December 31, 1998
have been audited, in whole or in part, by PricewaterhouseCoopers LLP, KPMG LLP
and Ernst & Young LLP, independent accountants, as indicated in their reports
with respect thereto and are incorporated by reference herein in reliance on the
reports and given on the authority of said firms as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
White Mountains Insurance Group, Inc. has filed with the Commission a
registration statement on Form S-4 under the Securities Act of 1933. This proxy
statement/prospectus, which constitutes a part of the registration statement,
does not contain all of the information set forth in the registration statement,
some parts of which are omitted as permitted by the rules and regulations of the
Commission. For further information, reference is made to the registration
statement.
Statements made in this proxy statement/prospectus as to the contents of
any contract, agreement or other document are not necessarily complete. With
respect to each contract, agreement or other document filed as an exhibit to the
registration statement or otherwise filed with the Commission, reference is made
to the copy so filed, and each such statement shall be deemed qualified in its
entirety by this reference.
White Mountains Insurance Group-Delaware is, and after the reorganization,
White Mountains Insurance Group-Bermuda will be, subject to the informational
requirements of the Securities
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Exchange Act of 1934. Reports, proxy statements and other information contain
additional information about our company. You can inspect and copy these
materials at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can obtain information about the Public Reference
Room by calling the Commission at 1-800-SEC-0330. Copies of reports, proxy and
information statements and other information regarding registrants that file
electronically, which includes White Mountains Insurance Group-Delaware are
available on the Commission's Web Site at http://www.sec.gov.
Upon completion of the reorganization, we expect that the White Mountains
Insurance Group-Bermuda common shares will be traded on the NYSE. At the time of
commencement of this trading, the White Mountains Insurance Group-Delaware
common stock will be delisted and will no longer be registered pursuant to
Section 12 of the Exchange Act.
The following documents filed by White Mountains Insurance Group-Delaware
with the Commission pursuant to the Exchange Act are hereby incorporated by
reference in this proxy statement/prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (File No. 1-8993);
(2) Quarterly Reports on Form 10-Q for the quarterly periods ended
June 30, 1999 and March 31, 1999;
(3) Current Reports on Form 8-K filed on July 9, 1999, July 7, 1999,
June 21, 1999, June 17, 1999 ( as amended by Form 8-K/A filed on August 17,
1999), June 9, 1999, May 28, 1999, April 6, 1999 (as amended by Form 8-K/A
filed on April 6, 1999), March 16, 1999 and September 22, 1999; and
(4) The description of the White Mountains Insurance Group-Delaware
common stock in the Registration Statement on Form S-8 dated filed on July
9, 1999, including any amendment or report for the purpose of updating this
description (Registration No. 333-82563).
Any statement contained in this proxy statement/prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this proxy statement/prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statements so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this proxy statement/prospectus.
THE COMMISSION ALLOWS US TO "INCORPORATE BY REFERENCE" INFORMATION INTO
THIS PROXY STATEMENT/PROSPECTUS, WHICH MEANS THAT WE CAN DISCLOSE IMPORTANT
INFORMATION BY REFERRING YOU TO ANOTHER DOCUMENT FILED SEPARATELY WITH THE
COMMISSION. COPIES OF THE INCORPORATED DOCUMENTS, OTHER THAN EXHIBITS TO THOSE
DOCUMENTS, UNLESS THOSE EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE,
WILL BE FURNISHED UPON REQUEST WITHOUT CHARGE TO EACH PERSON TO WHOM WE DELIVER
THIS PROXY STATEMENT/PROSPECTUS. WRITTEN OR TELEPHONE REQUESTS SHOULD BE
DIRECTED TO WHITE MOUNTAINS INSURANCE GROUP, INC., 80 SOUTH MAIN STREET,
HANOVER, NEW HAMPSHIRE 03755, ATTENTION: SECRETARY (TELEPHONE (603)-643-1567).
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US PLEASE DO SO BY OCTOBER 15, 1999,
TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
WHITE MOUNTAINS
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INSURANCE GROUP-BERMUDA IS PROHIBITED FROM MAKING ANY INVITATION TO THE PUBLIC
IN BERMUDA TO SUBSCRIBE FOR ANY OF ITS SHARES.
Neither delivery of this proxy statement/prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in our affairs since the date of this proxy statement/prospectus.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This document, and the documents
incorporated by reference, or any other written or oral statements made by or on
behalf of our company may include forward-looking statements which reflect our
current views with respect to future events and financial performance. These
statements include forward-looking statements both with respect to our company
and the businesses in which we operate and/or invest, including the insurance
and reinsurance sectors in general, both as to underwriting and investment
matters. Statements which include the words "expect", "intend", "plan",
"believe", "project", "anticipate", "will" and similar statements of a future or
forward-looking nature identify forward-looking statements for purposes of the
PSLRA.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause actual results to differ materially from those indicated in those
statements. We believe that these factors include, but are not limited to, the
following:
o ineffectiveness or obsolescence of our business strategy, including the
planned reorganization, due to changes in current or future market
conditions or law, rule or regulation; these changes in law, rule or
regulation could result from changes in U.S. tax law, rule or regulation
or policy; changes in the U.S.-Bermuda tax treaty; changes in OECD
policy; changes in the political climate of Bermuda;
o developments in the world's financial and capital markets which, among
other things, adversely affect the performance of our operating
subsidiaries or investments or the availability, on terms deemed
attractive to our company, of new investments or acquisitions;
o changes in tax or other laws, rules or regulations or in the
interpretation or enforcement thereof, including differences between our
understanding thereof, and the resulting structuring of our business and
business relationships, and regulatory or judicial interpretation or
enforcement thereof;
o the impact of Year 2000-related issues on our technology systems and
underwriting exposures;
o loss of key personnel or advisors;
o the effects of mergers, acquisitions and divestitures;
o increased competition on the basis of pricing, excess capacity, coverage
terms or other factors;
o greater frequency or severity of claims and loss activity than our
underwriting, reserving or investment practices anticipate;
o changes in the availability, cost or quality of reinsurance;
o increased consolidation of insurers and/or brokers;
o changes in rating agency policies or practices;
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o changes in accounting policies or practices; and
o changes in general economic conditions, including inflation, foreign
currency exchange rates, and other factors.
The foregoing review of important factors should not be construed as
exhaustive and should be read in conjunction with other cautionary statements
that are included herein or elsewhere. We undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
OF
WHITE MOUNTAINS INSURANCE GROUP, INC.
("WHITE MOUNTAINS INSURANCE GROUP-DE")
(A DELAWARE CORPORATION)
AND
WHITE MOUNTAINS INSURANCE GROUP (ARIZONA), INC.
("WHITE MOUNTAINS INSURANCE GROUP-AZ")
(AN ARIZONA CORPORATION)
AGREEMENT AND PLAN OF MERGER (this "Agreement") entered into as of
September 23, 1999 by and between White Mountains Insurance Group-DE and White
Mountains Insurance Group-AZ.
WHEREAS, White Mountains Insurance Group-DE is a business corporation of
the State of Delaware with its registered office therein located at c/o CSC
United States Corporation Company, 1013 Centre Road, Wilmington, Delaware 19805;
and
WHEREAS, the total number of shares of stock which White Mountains
Insurance Group-DE has authority to issue is 15,000,000 shares of common stock,
each with a par value of $1.00 per share (each, a "White Mountains Insurance
Group-DE Common Share") and 1,000,000 shares of preferred stock, each with a par
value of $1.00 per share; and
WHEREAS, White Mountains Insurance Group-AZ is a business corporation of
the State of Arizona with its registered office therein located at Corporation
Service Company, 3636 North Central Avenue, Phoenix, Arizona 85012; and
WHEREAS, the total number of shares of stock which White Mountains
Insurance Group-AZ has authority to issue is 50,000,000 shares of common stock,
each with a par value of $1.00 per share (each, a "White Mountains Insurance
Group-AZ Common Share") and 20,000,000 shares of preferred stock, each with a
par value of $1.00 per share; and
WHEREAS, neither White Mountains Insurance Group-DE nor White Mountains
Insurance Group-AZ has any shares of preferred stock outstanding; and
WHEREAS, the General Corporation Law of the State of Delaware permits a
merger of a business corporation of the State of Delaware with and into a
business corporation of another jurisdiction; and
WHEREAS, the Arizona Business Corporation Act permits the merger of a
business corporation of another jurisdiction with and into a business
corporation of the State of Arizona; and
WHEREAS, White Mountains Insurance Group-DE and White Mountains Insurance
Group-AZ and the respective Boards of Directors thereof deem it in the best
interests of said corporations and their respective shareholders to merge White
Mountains Insurance Group-DE with and into White Mountains Insurance Group-AZ
pursuant to the provisions of the General Corporation Law of the State of
Delaware and pursuant to the provisions of the Arizona Business Corporation Act
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by White
Mountains Insurance Group-DE and approved by a resolution adopted by its board
of directors (but subject to approval by its stockholders) and being thereunto
duly entered into by White Mountains Insurance Group-AZ and approved by a
resolution adopted by its board of directors and further approved by its
shareholder, this Agreement and the terms and conditions hereof and the mode of
carrying the same into effect, together with any provisions required or
permitted to be set forth herein, are hereby determined and agreed upon as
hereinafter set forth.
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1. Merger. White Mountains Insurance Group-DE shall, pursuant to the
provisions of the General Corporation Law of the State of Delaware and the
provisions of the Arizona Business Corporation Act, be merged with and into
White Mountains Insurance Group-AZ, which shall be the surviving corporation
from and after the effective time of the merger (as hereinafter defined), and
which is sometimes herein referred to as the "surviving corporation," and which
shall continue to exist as said surviving corporation under the name "White
Mountains Insurance Group, Inc." pursuant to the provisions of the Arizona
Business Corporation Act. The separate existence of White Mountains Insurance
Group-DE, which is sometimes herein referred to as the "terminating
corporation," shall cease at said effective time in accordance with the
provisions of the General Corporation Law of the State of Delaware.
2. Effective Time. In the event that this Agreement shall have been fully
approved and adopted on behalf of the terminating corporation in accordance with
the provisions of the General Corporation Law of the State of Delaware and on
behalf of the surviving corporation in accordance with the provisions of the
Arizona Business Corporation Act and as soon thereafter as the Board of
Directors of White Mountains Insurance Group-DE shall determine, following the
satisfaction or waiver of the other conditions set forth in Section 10, the said
corporations agree that they will cause to be executed and filed and recorded
any document or documents prescribed by the laws of the State of Delaware
(including without limitation a Certificate of Merger) and by the laws of the
State of Arizona (including without limitation a Certificate and Articles of
Merger), and that they will cause to be performed all necessary acts within the
State of Delaware and the State of Arizona and elsewhere to effectuate the
merger herein provided for. The merger shall become effective at the close of
business on the date that appropriate certificates of merger are duly filed with
the Secretary of State of the State of Delaware and the Secretary of State of
the State of Arizona, or at such later time as the parties shall agree should be
specified in such certificates of merger (the time the merger becomes effective
being herein referred to as the "effective time of the merger").
3. Articles of Incorporation. Annexed hereto as Exhibit A and made a part
hereof is a copy of the Amended and Restated Articles of Incorporation of the
surviving corporation as the same shall be in force and effect at the effective
time in the State of Arizona of the merger herein provided for; and said
Articles of Incorporation shall continue to be the Articles of Incorporation of
said surviving corporation until amended and changed pursuant to the provisions
of the Arizona Business Corporation Act.
4. By-laws. The present by-laws of the terminating corporation will be the
by-laws of the surviving corporation and will continue in full force and effect
until changed, altered or amended as therein provided and in the manner
prescribed by the provisions of the Arizona Business Corporation Act.
5. Directors and Officers. The directors and officers in office of the
terminating corporation at the effective time of the merger shall be the members
of the first board of directors and the first officers of the surviving
corporation, all of whom shall hold their directorships and offices until the
election and qualification of their respective successors or until their tenure
is otherwise terminated in accordance with the by-laws of the surviving
corporation.
6. Conversion of Shares. (a) Except as set forth in Section 6(b), each
issued White Mountains Insurance Group-DE Common Share shall, at the effective
time of the merger, be converted into one White Mountains Insurance Group-AZ
Common Share.
(b) The issued shares of White Mountains Insurance Group-AZ prior to the
merger shall not be converted or exchanged in any manner, but each said share
which is issued as of the effective date of the merger shall cease to be
outstanding.
7. Exchange of Shares. (a) Following the effective time of the merger,
each holder of an outstanding certificate or certificates theretofore
representing White Mountains Insurance Group-DE Common Shares may, but shall not
be required to, surrender the same to the surviving corporation for cancellation
and exchange or transfer, and each such holder or transferee will be entitled to
receive certificates representing the same number of shares of common stock of
the surviving corporation as the number of White Mountains Insurance Group-DE
Common Shares previously represented by the stock certificates surrendered. If
any certificate representing common stock of
I-2
<PAGE>
the surviving corporation is to be issued in a name other than that in which the
certificate theretofore representing White Mountains Insurance Group-DE Common
Shares surrendered is registered, it shall be a condition to such issuance that
the certificate surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such issuance shall either:
(i) pay the surviving corporation or its agents any taxes or other governmental
charges required by reason of the issuance of such new certificates in a name
other than that of the registered holder of the certificate so surrendered; or
(ii) establish to the satisfaction of the surviving corporation or its agents
that such taxes or governmental charges have been paid. Until so surrendered for
cancellation and exchange or transfer, all outstanding certificates representing
White Mountains Insurance Group-DE Common Shares shall represent the ownership
of the same number of shares of common stock of the surviving corporation as
though such surrender for cancellation and exchange or transfer had taken place.
(b) All shares of common stock of the surviving corporation issued upon
the surrender for exchange of certificates in accordance with the terms of this
Section 7 shall be deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the White Mountains Insurance Group-DE Common Shares
theretofore represented by such certificates, subject, however, to the surviving
corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the effective time of the merger which may have been
declared or made by White Mountains Insurance Group-DE on such White Mountains
Insurance Group-DE Common Shares prior to the date of this Agreement and which
remain unpaid at the effective time of the merger, and there shall be no further
registration of transfers on the stock transfer books of the surviving
corporation of the White Mountains Insurance Group-DE Common Shares which were
outstanding immediately prior to the effective time of the merger. If, after the
effective time of the merger, certificates are presented to the surviving
corporation they shall be canceled and exchanged as provided in this Section 7,
except as otherwise provided by law.
8. Stock Options. (a) At the effective time of the merger, each
outstanding option to purchase White Mountains Insurance Group-DE Common Shares
(a "Stock Option"), whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Stock Option, the same number of shares of common stock of the surviving
corporation as the holder of such Stock Option would have been entitled to
receive pursuant to the merger had such holder exercised such option in full
immediately prior to the effective time of the merger (not taking into account
whether or not such option was in fact exercisable). In the case of any Stock
Option to which Section 421 of the Internal Revenue Code of 1986 applies by
reason of its qualification under any of Sections 422-423 of the IRC ("qualified
stock options"), the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall comply
with Section 424(a) of the IRC.
(b) Following the effective time of the merger, each such Stock Option
shall continue in effect on the same terms and conditions. The surviving
corporation shall comply with the terms of all such Stock Options and will
ensure, to the extent required by, and subject to the provisions of, any plan
governing such Stock Options that Stock Options which qualified as qualified
stock options prior to the effective time of the merger continue to qualify as
qualified stock options after the effective time of the merger. The surviving
corporation shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of common stock of the surviving corporation for
delivery pursuant to the terms set forth in this Section 8.
9. Existing Plans. (a) At the effective time of the merger, each
incentive, compensation or benefit plan of White Mountains Insurance Group-DE,
unless terminated prior to the effective time of the merger, shall be deemed to
have been assumed by and assigned to the surviving corporation and, to the
extent that any such plan provides for the issuance of White Mountains Insurance
Group-DE Common Shares and/or options to acquire same, shall be deemed to have
been amended to provide for the issuance of common stock of the surviving
corporation and/or options to acquire same on the same terms and conditions, and
in the same number, as provided for in the corresponding plan of White Mountains
Insurance Group-DE.
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<PAGE>
(b) Following the effective time of the merger, each such plan shall
continue in effect as a plan of the surviving corporation, on the same terms and
conditions, as amended as provided in Section 9(a).
10. Conditions. The respective obligation of each party to effect the
merger is subject to the satisfaction or waiver of the following conditions:
(a) Stockholder Approval. The affirmative vote of the holders of a
majority of the outstanding White Mountains Insurance Group-DE Common
Shares shall have been obtained.
(b) Third Party Consents. All requisite third party consents shall
have been obtained, if any.
11. Termination. This Agreement may be terminated at any time prior to the
effective time of the merger, whether before or after approval by the
stockholders of White Mountains Insurance Group-DE of matters presented in
connection with the merger, for any reason, by action of the board of directors
of White Mountains Insurance Group-DE. In the event of termination of this
Agreement, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of White Mountains Insurance
Group-DE or White Mountains Insurance Group-AZ.
12. Amendment. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the merger by the stockholders of White Mountains Insurance Group-DE, provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
13. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
IN WITNESS WHEREOF, this Agreement is hereby executed upon behalf of each
of the constituent corporations parties thereto.
Executed as of September 23, 1999.
WHITE MOUNTAINS INSURANCE GROUP,
INC. (a Delaware corporation)
By: /s/ K. THOMAS KEMP
-----------------------------
K. Thomas Kemp
President and Chief Executive
Officer
WHITE MOUNTAINS INSURANCE GROUP
(ARIZONA), INC.
(an Arizona corporation)
By: /s/ RAYMOND BARRETTE
------------------------------
Raymond Barrette
Executive Vice President and
Chief Financial Officer
I-4
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF WHITE MOUNTAINS INSURANCE GROUP (ARIZONA), INC.
I.
NAME
The name of the Corporation is White Mountains Insurance Group, Inc.
II.
ADDRESS
A. CORPORATION
The address of its registered office in the State of Arizona is 3636 North
Central Avenue, Phoenix, Arizona 85012. The name of its registered agent at such
address is Corporation Service Company.
B. DIRECTORS
<TABLE>
<CAPTION>
NAME ADDRESS
- --------------------------------------------- --------------------------------------------
<S> <C>
Patrick M. Byrne 80 South Main Street
Hanover, New Hampshire 03755
K. Thomas Kemp 80 South Main Street
Hanover, New Hampshire 03755
Gordon S. Macklin 80 South Main Street
Hanover, New Hampshire 03755
John J. Byrne 80 South Main Street
Hanover, New Hampshire 03755
George J. Gillespie, III 80 South Main Street
Hanover, New Hampshire 03755
John D. Gillespie 80 South Main Street
Hanover, New Hampshire 03755
Frank A. Olson 80 South Main Street
Hanover, New Hampshire 03755
Terry L. Baxter 80 South Main Street
Hanover, New Hampshire 03755
Howard L. Clark, Jr. 80 South Main Street
Hanover, New Hampshire 03755
Robert P. Cochran 80 South Main Street
Hanover, New Hampshire 03755
Arthur Zankel 80 South Main Street
Hanover, New Hampshire 03755
</TABLE>
III.
BUSINESS
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act, or activity for which corporations may be organized
under the Arizona Business Corporation Act. The Corporation is to have perpetual
existence.
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<PAGE>
IV.
STOCK STRUCTURE
The Corporation shall be authorized to issue two classes of stock to be
designated, respectively, "preferred stock" and "common stock"; the total number
of shares of both classes of stock authorized to be issued by the Corporation
shall have no preemptive or preferential rights of subscription concerning
further issuance or authorization of any of the Corporation's shares.
A. COMMON STOCK
The total number of shares of common stock authorized to be issued by the
Corporation shall be 50,000,000 shares and each such share of common stock shall
have a par value of $1.00. The common stock may be issued from time to time in
one or more series.
B. PREFERRED STOCK
The total number of shares of preferred stock authorized to be issued by
the Corporation shall be 20,000,000 shares and each such share of preferred
stock shall have a par value of $1.00.
V.
RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF PREFERRED STOCK
The preferred stock may be issued from time to time in one or more series
consisting of such number of shares (which number may be increased or decreased,
but not below the number of shares thereof then outstanding) and with such
distinctive serial designations as shall be stated and expressed in the
resolution or resolutions creating such series adopted by the Board of
Directors; and such series (a) may have such voting powers, full or limited, or
may be without voting powers; (b) may be redeemable for cash, property or
rights, including securities of any other corporation, at the option of either
the holder or the Corporation or upon the happening of a specified event, at
such time or times, such price or prices, or such rate or rates, and with such
adjustments; (c) may be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rate or rates, on such conditions, and at such times,
and payable in preference and priority to the common stock and on a par with, or
in such relation to, the dividends payable on any other class or classes or
series of stock (but not in preference or priority to the preferred stock);
(d) may have such rights upon the dissolution of, or upon any distribution of
the assets of, the Corporation, including the right to receive such distribution
in preference to the common stock, and on a par with, or in such relation to,
the distribution to any other class or classes or series of stock (but not in
preference or priority to the preferred stock); (e) may be made convertible
into, or exchangeable for, at the option of either the holder or the Corporation
or upon the happening of a specified event, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation, at such price or prices or at such rate or rates of exchange, and
with such adjustments; and (f) may have such other powers, preferences and
relative, participating, optional or special rights and qualifications,
limitations or restrictions thereof, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the creation of each
such series of preferred stock from time to time adopted by the Board of
Directors pursuant to authority so to do which is hereby expressly vested in the
Board of Directors.
VI.
LIMITATION ON DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for money damages for any action taken or any
failure to take any action as a director, except liability for any of the
following: (a) the amount of a financial benefit received by a director to which
the director is not entitled; (b) an intentional infliction of harm on the
Corporation or the shareholders; (c) a violation of section 10-833 of the
Arizona Revised Statutes or any successor
I-A-2
<PAGE>
statute; or (d) an intentional violation of criminal law. The limitation of
liability provided herein shall continue after a director has ceased to occupy
such position as to acts or omissions occurring during such director's term or
terms of office, and no amendment or repeal of this Article 6 shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
VII.
BY-LAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, or repeal the
by-laws of the Corporation.
Elections of directors need not be by written ballot unless the by-laws of
the Corporation shall so provide.
Meetings of shareholders may be held within or without the State of
Arizona, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Arizona at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the Corporation.
VIII.
ELECTION OF DIRECTORS
The Board shall consist of not less than two directors nor more than
eighteen directors with the exact number of directors to be determined from time
to time by resolution adopted by the affirmative vote of a majority of the Board
of Directors.
The directors shall be divided into three classes designated Class I, Class
II and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of Directors constituting the entire Board of
Directors. Class I directors, with a term ending in 2001, are Patrick M. Byrne,
K. Thomas Kemp and Gordon S. Macklin; Class II directors, with a term ending in
2002, are John J. Byrne, George J. Gillespie, III, John D. Gillespie and Frank
A. Olson; and Class III directors, with a term ending in 2000, are Terry L.
Baxter, Howard L. Clark, Jr., Robert P. Cochran and Arthur Zankel. At each
succeeding annual meeting of stockholders beginning in 2000, successors to the
class of directors whose term expires at that annual meeting shall be elected
for a three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
IX.
ELECTION OF OPT-OUT OF
ARIZONA CORPORATE TAKEOVER ACT
The Corporation hereby elects (i) pursuant to Section 10-2721(A)(1) of the
Arizona Business Corporation Act, not to be subject to Article 2 (Control Share
Acquisition) of Chapter 23 of Title 10 of the Arizona Revised Statutes, and
(ii) pursuant to Section 10-2743(A)(1) of the Arizona Business Corporation Act,
not to be subject to Article 3 (Business Combinations) of Chapter 23 of
Title 10 of the Arizona Revised Statutes. This election shall apply to any
successor provisions to any of the foregoing.
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<PAGE>
X.
AMENDMENT OF ARTICLES OF INCORPORATION
Subject to the provision of Section 10-101 of the Business Corporation Act
of the State of Arizona, the Corporation reserves the right to amend, alter,
change, or repeal any provision contained in these Articles in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, White Mountains Insurance Group (Arizona), Inc. has
caused this Certificate to be signed by K. Thomas Kemp, its President and Chief
Executive Officer, this
day of , 1999.
WHITE MOUNTAINS INSURANCE GROUP
(ARIZONA), INC.
By: _________________________________
K. Thomas Kemp
President and Chief Executive
Officer
I-A-4
<PAGE>
ANNEX II
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF CONTINUANCE OF
COMPANY LIMITED BY SHARES
(SECTION 132C(2))
MEMORANDUM OF CONTINUANCE
OF
WHITE MOUNTAINS INSURANCE GROUP, LTD.
(HEREINAFTER REFERRED TO AS THE "COMPANY")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. The Company is an exempted company as defined by the Companies Act 1981.
3. The authorized share capital of the Company is US$70,000,000 divided into
50,000,000 common shares of par value US$1.00 each and 20,000,000 preference
shares of par value US$1.00 each.
4. The Company shall not have power to hold land situated in Bermuda.
5. Details of Incorporation:
The Company was incorporated under the name "White Mountains Insurance Group
(Arizona), Inc." in the State of Arizona, U.S.A. on August 31, 1999, as a
wholly-owned subsidiary of White Mountains Insurance Group, Inc., a
corporation which was incorporated in the State of Delaware, U.S.A. on
September 4, 1980. On , 1999, White Mountains Insurance Group,
Inc. merged with and into White Mountains Insurance Group (Arizona), Inc.,
which, as the surviving corporation, changed its name to "White Mountains
Insurance Group, Inc."
6. The objects of the Company from the date of continuance are:
(1) to carry on any and all functions of a holding company and/or to
provide and/or to coordinate management, advisory and administrative
services to any or all of the following: (i) any affiliated company
(as such term is understood in the Companies Act 1981, irrespective
of the jurisdiction of incorporation) of the Company and (ii) any
entity (wherever formed or existing) controlled, directly or
indirectly, by the Company;
(2) to provide and/or procure financing and financial investment,
management and advisory services to any or all of the following:
(i) any affiliated company (as such term is understood in the
Companies Act 1981, irrespective of the jurisdiction of
incorporation) of the Company and (ii) any entity (wherever formed or
existing) controlled, directly or indirectly, by the Company, and in
this connection, to provide and/or procure credit, financial
accommodation, loans and/or advances with or without interest to any
such company or entity and to lend to and/or deposit with any
financial institutions, fund, trust or other entity, any property of
the company and/or any interest therein to provide collateral for
loans or other forms of financing provided to such Company or entity;
and
(3) as set out in paragraphs (b) to (n) and to (p) to (u) inclusive of
the Second Schedule to the Companies Act 1981.
II-1
<PAGE>
7. From the date of continuance the Company shall, pursuant to Section 42 of
the Companies Act 1981, have the power to issue preference shares which are,
at the option of the holder, liable to be redeemed.
8. From the date of continuance, the Company shall, pursuant to Section 42A of
the Companies Act 1981, have the power to purchase its own shares.
Signed by duly authorized persons in the presence of at least one witness
attesting the signature thereof:
- ----------------------------------- --------------------------------
Director Witness
- ----------------------------------- --------------------------------
Director Witness
Dated this day of , 1999
II-2
<PAGE>
ANNEX III
B Y E - L A W S
OF
WHITE MOUNTAINS INSURANCE GROUP, LTD.
III-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
BYE-LAW PAGE
- ------- ------
<S> <C> <C>
1. Interpretation................................................................................ III-4
2. Management of the Company..................................................................... III-5
3. Power to appoint managing director or chief executive officer................................. III-5
4. Power to appoint manager...................................................................... III-6
5. Power to authorize specific actions........................................................... III-6
6. Power to appoint attorney..................................................................... III-6
7. Power to delegate to a committee.............................................................. III-6
8. Power to appoint and dismiss employees........................................................ III-6
9. Power to borrow and charge property........................................................... III-6
10. Exercise of power to purchase shares of or discontinue the Company............................ III-7
11. Election of Directors......................................................................... III-7
12. Defects in appointment of Directors........................................................... III-8
13. Notification of Nominations................................................................... III-8
14. Alternate Directors........................................................................... III-8
15. Vacancies on the Board, Etc................................................................... III-8
16. Notice of meetings of the Board; Adjournment.................................................. III-9
17. Quorum at meetings of the Board............................................................... III-9
18. Meetings of the Board......................................................................... III-9
19. Regular Board Meetings........................................................................ III-9
20. Special Board Meetings........................................................................ III-10
21. Chairman of meetings.......................................................................... III-10
22. Unanimous written resolutions................................................................. III-10
23. Contracts and disclosure of Directors' interests.............................................. III-10
24. Remuneration of Directors..................................................................... III-10
25. Register of Directors and Officers............................................................ III-10
26. Principal Officers............................................................................ III-10
27. Other Officers................................................................................ III-11
28. Remuneration of Officers...................................................................... III-11
29. Duties of Officers............................................................................ III-11
30. Election...................................................................................... III-11
31. Removal....................................................................................... III-11
32. Obligations of Board to keep minutes.......................................................... III-11
33. Right to Indemnification...................................................................... III-11
34. Waiver of claims.............................................................................. III-12
35. Indemnification of Employees.................................................................. III-13
36. Place of Meeting.............................................................................. III-13
37. Annual Meeting................................................................................ III-13
38. Business to be conducted at Meetings.......................................................... III-13
39. Notice of general meeting..................................................................... III-13
40. Accidental omission of notice of general meeting.............................................. III-13
41. Call of Special Meeting....................................................................... III-13
42. Postponement of meetings...................................................................... III-14
43. Quorum for general meeting.................................................................... III-14
44. Adjournment of meetings....................................................................... III-14
45. Written resolutions........................................................................... III-14
46. Attendance of Directors....................................................................... III-14
47. Limitation on voting rights of Controlled Shares.............................................. III-14
48. Voting at meetings............................................................................ III-15
49. Presiding Officer............................................................................. III-16
50. Conduct of meeting; Decision of chairman...................................................... III-16
51. Seniority of joint holders voting............................................................. III-16
</TABLE>
III-2
<PAGE>
<TABLE>
<CAPTION>
BYE-LAW PAGE
--- ------
<S> <C> <C>
52. Proxies....................................................................................... III-16
53. Representation of corporations at meetings.................................................... III-17
54. Rights of shares.............................................................................. III-17
55. Power to issue shares......................................................................... III-18
56. Variation of rights, alteration of share capital and
purchase of shares of the Company........................................................... III-18
57. Registered holder of shares................................................................... III-19
58. Death of a joint holder....................................................................... III-19
59. Share certificates............................................................................ III-19
60. Determination of record dates................................................................. III-19
61. Instrument of transfer........................................................................ III-20
62. Restriction on transfer....................................................................... III-20
63. Transfers by joint holders.................................................................... III-20
64. Representative of deceased Member............................................................. III-20
65. Registration on death or bankruptcy........................................................... III-20
66. Declaration of dividends by the Board......................................................... III-21
67. Unclaimed Dividends........................................................................... III-21
68. Undelivered Payments.......................................................................... III-21
69. Interest on Dividends......................................................................... III-21
70. Issue of bonus shares......................................................................... III-21
71. Financial year end............................................................................ III-22
72. Appointment of Auditor........................................................................ III-22
73. Remuneration of Auditor....................................................................... III-22
74. Notices to Members of the Company............................................................. III-22
75. Notices to joint Members...................................................................... III-22
76. Service and delivery of notice................................................................ III-22
77. Certain Subsidiaries.......................................................................... III-22
78. The seal...................................................................................... III-23
79. Winding-up/distribution by liquidator......................................................... III-23
80. Business Combinations......................................................................... III-23
81. Alteration of Bye-laws........................................................................ III-28
</TABLE>
III-3
<PAGE>
INTERPRETATION
1. INTERPRETATION
(1) In these Bye-laws the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:
"Act" means the Companies Act 1981 as amended from time to time;
"Alternate Director" means an alternate Director appointed in
accordance with these Bye-laws and the Act;
"Auditor" includes any individual or partnership;
"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;
"Byrne Entity" has the meaning set forth in Bye-law 80(3)(e);
"Company" means the company for which these Bye-laws are approved and
confirmed;
"Controlled Shares" has the meaning set forth in Bye-law 47;
"Director" means a director of the Company and shall include an
Alternate Director;
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder;
"Fair Market Value" means, with respect to a repurchase of any shares
of the Company in accordance with Bye-law 10, (i) if such shares are listed
on a securities exchange (or quoted in a securities quotation system), the
average closing sale price of such shares on such exchange (or in such
quotation system), or, if such shares are listed on (or quoted in) more
than one exchange (or quotation system), the average closing sale price of
the shares on the principal securities exchange (or quotation system) on
which such shares are then traded, or, if such shares are not then listed
on a securities exchange (or quotation system) 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 in good
faith by the Board, provided that 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;
"general meeting" means either an annual or a special meeting of the
Members;
"Member" means the person registered in the Register of Members as the
holder of shares in the Company 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 one of such joint holders or all of
such persons as the context so requires;
"notice" means written notice as further defined in these Bye-laws
unless otherwise specifically stated;
"Officer" means any person appointed by the Board to hold an office in
the Company;
"person" means any individual, partnership, limited liability company,
joint venture, firm, corporation, association, trust, fund or other
enterprise;
"Purchase Notice" has the meaning set forth in Bye-law 10;
III-4
<PAGE>
"Purchase Price" has the meaning set forth in Bye-law 10;
"Register of Directors and Officers" means the Register of Directors
and Officers referred to in these Bye-laws;
"Register of Members" means the Register of Members referred to in
these Bye-laws;
"Resident Representative" means any person appointed to act as
resident representative and includes any deputy or assistant resident
representative; and
"Secretary" means the person appointed to perform any or all the
duties of secretary of the Company and includes any deputy or assistant
secretary.
(2) In these Bye-laws, where not inconsistent with the context:
(a) words denoting the plural number include the singular number and
vice versa;
(b) words denoting the masculine gender include the feminine gender;
(c) words importing persons include companies, associations or bodies
of persons whether corporate or not;
(d) the word:
(i) "may" shall be construed as permissive;
(ii) "shall" shall be construed as imperative; and
(e) 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 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. MANAGEMENT OF THE COMPANY
(1) The business of the Company shall be managed and conducted by the
Board. In managing the business of the Company, the Board may exercise all
corporate and other powers of the Company as are not, by statute or by these
Bye-laws, required to be exercised by the Company in general meeting, and the
business and affairs of the Company shall be so controlled by the Board. The
Board may also present any petition and make any application in connection with
the liquidation or reorganization of the Company.
(2) No regulation or alteration to these Bye-laws made by the Company in
general meeting shall invalidate any prior act of the Board.
(3) The Board may procure that the Company pays all expenses incurred in
promoting and incorporating the Company.
3. 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.
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4. 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.
5. POWER TO AUTHORIZE SPECIFIC ACTIONS
The Board may from time to time and at any time authorize any 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.
6. 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 authorise 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 authorised 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.
7. POWER TO DELEGATE TO A COMMITTEE
(1) The Board may appoint Board Committees from among its members to
consist of not less than one (1) director for each Board Committee. The Board
may designate one or more Directors as alternate members of any Board Committee,
who may replace any absent or disqualified members at a meeting of such Board
Committee. The Board Committees shall have such of the powers and authority of
the Board in the management of the business and affairs of the Company as shall,
from time to time, so be delegated to them by the Board.
(2) The Board may appoint other committees to consist of such number of
members as may be fixed by the Board, none of whom need be a member of the
Board, and may prescribe the powers and authority of such committees.
(3) Meetings and actions of Board Committees and other committees of the
Company shall be governed by, held and taken in accordance with these Bye-laws,
with such changes in the context of those Bye-laws as are necessary to
substitute the committee and its members for the Board and its members, except
that the time of regular meetings of committees may also be called by resolution
of the Board and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. Further, the Board or the committee may adopt rules for the
governance of any committee not inconsistent with the provisions of these
Bye-laws.
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.
9. POWER TO BORROW AND CHARGE PROPERTY
The Board may exercise all the powers of the Company to borrow 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.
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10. EXERCISE OF POWER TO PURCHASE SHARES OF OR DISCONTINUE THE COMPANY
(1) The Board may exercise all the powers of the Company to purchase all or
any part of its own shares pursuant to Section 42A of the Act.
(2) Without limiting the foregoing, subject to Section 42A of the Act, if
the Board in its absolute and unfettered discretion 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 its Members, the
Company will have the option, but not the obligation, to purchase 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) with immediately available funds in an amount equal to the
Fair Market Value of such shares on the date the Company sends the Purchase
Notice referred to below (the "Purchase Price"); provided, that the Board will
use reasonable efforts to exercise this option equally among similarly situated
Members (to the extent possible under the circumstances). The Company will also
be entitled to assign its purchase right to a third party, which party may be a
Member. Each Member shall be bound by the determination by the Company to
purchase or assign its right to purchase 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 purchase any
such shares, the Company shall provide each Member concerned with written notice
of such determination (a "Purchase Notice") at least seven (7) calendar days
prior to such purchase or such shorter period as each such Member may authorize,
specifying the date on which any such shares are to be purchased and the
Purchase Price. The Company may revoke the Purchase Notice at any time before it
(or its assignee(s)) pays for the shares. Neither the Company nor its
assignee(s) shall be obligated to give general notice to the Members of any
intention to purchase or the conclusion of any purchase of shares. The Board may
authorize any person to sign, on behalf of any Member who is the subject of a
Purchase Notice, an instrument of transfer relating to any of such Member's
shares which the Company has an option to purchase. Payment of the Purchase
Price by the Company or its assignee(s) shall be by wire transfer or certified
check and made at a closing to be held no less than seven (7) calendar days
after receipt of the Purchase Notice by the Member.
(3) 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.
11. ELECTION OF DIRECTORS
(1) The Board shall consist of not less than two Directors nor more than
eighteen Directors with the exact number of Directors to be determined from time
to time by resolution adopted by the affirmative vote of a majority of the
Board.
(2) The Directors shall be divided into three classes designated Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the total number of Directors constituting the entire Board. At
the date these Bye-laws become effective, the Class I directors, with a term
ending in 2001, are Patrick M. Byrne, K. Thomas Kemp and Gordon S. Macklin, the
Class II directors, with a term ending in 2002, are John J. Byrne, George J.
Gillespie, III, John D. Gillespie and Frank A. Olson and the Class III
directors, with a term ending in 2000, are Terry L. Baxter, Howard L. Clark,
Jr., Robert P. Cochran and Arthur Zankel. At each succeeding annual general
meeting beginning in 2000, successors to the class of directors whose term
expires at that annual general meeting shall be elected for a three-year term.
If the number of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of Directors in each
class as nearly equal as possible, and any additional Director of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of Directors shorten the term of any
incumbent Director. A Director shall hold office until the annual general
meeting for the year in which his term expires and until his successor shall be
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elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
(3) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preference Shares issued by the Company shall have the
right, voting separately by class or series, to elect Directors at an annual or
special general meeting, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of the Board
resolution creating such classes or series of Preference Shares, and such
directors so elected shall not be divided into classes pursuant to this Bye-law
11 unless expressly provided by such terms.
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. NOTIFICATION OF NOMINATIONS
Subject to the rights of the holders of any class or series of Preference
Shares, nominations for the election of Directors may be made by the Board or by
any Member entitled to vote for the election of Directors. Any Member entitled
to vote for the election of Directors may nominate persons for election as
Directors only if written notice of such Member's intent to make such nomination
is given, either by personal delivery or by mail, postage prepaid or any
recognized overnight delivery service, to the Secretary of the Company not later
than (i) with respect to an election to be held at an annual general meeting,
90 days prior to the anniversary date of the immediately preceding annual
meeting or not later than 10 days after notice or public disclosure of the date
of the annual meeting is given or made available to Members, whichever date is
earlier, and (ii) with respect to an election to be held at a special general
meeting for the election of Directors, the close of business on the seventh day
following the date on which notice of such meeting is first given to Members.
Each such notice shall set forth: (a) the name and address of the Member who
intends to make the nomination and of the person or persons to be nominated;
(b) 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 nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the Member and
each such nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
Member; (d) such other information regarding each nominee proposed by such
Member as would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the United States Securities and Exchange
Commission had each such nominee been nominated, or intended to be nominated, by
the Board; and (e) the consent of each such nominee to serve as a director of
the Company if so elected. The Chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
14. ALTERNATE DIRECTORS
An individual may be appointed an Alternate Director by or in accordance
with a resolution of the members. Unless otherwise determined by the Board (and
subject to such limitations as may be set by the Board), no Director shall have
the right to appoint another person to act as his Alternate Director.
15. VACANCIES ON THE BOARD, ETC.
(1) Except in the case of vacancies on the Board that under applicable law
must be filled by the Members, any vacancy on the Board that results from an
increase in the number of directors shall be filled by a majority of the Board
then in office, provided that a quorum is present, and any
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other vacancy occurring in the Board shall be filled by a majority of the
directors then in office, even if less than a quorum, or a sole remaining
director and the Board shall have the power to appoint an Alternate Director for
any Director appointed to fill a vacancy. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
(2) Unless otherwise determined by the Board, the Members shall not be
entitled to remove a Director.
16. NOTICE OF MEETINGS OF THE BOARD; ADJOURNMENT
(1) Notice of the time and place of each meeting of the Board, whether
regular or special, shall be served upon or telephoned or mailed or telegraphed
or transmitted by facsimile to each director at his residence or usual place of
business, at least twenty-four (24) hours before the time fixed for the meeting.
(2) A majority of the Directors present, whether or not a quorum is
present, may adjourn any Directors meeting to another time and place. Notice of
the time and place of holding an adjourned meeting need not be given to absent
Directors if the time and place be fixed at the meeting adjourned.
(3) Notice of any meeting or any irregularity in any notice may be waived
by any Director before the meeting is held. Attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting by such Director.
17. QUORUM AT MEETINGS OF THE BOARD
At all meetings of the Board, one half (1/2) of the Directors then in
office (but not less than two (2) Directors) if present in person at such
meeting shall be sufficient to constitute a quorum for a meeting of Directors.
18. MEETINGS OF THE BOARD
(1) All meetings of the Directors shall be held at the principal office of
the Company or at such other place either within or without Bermuda as shall be
designated by the Board.
(2) The Board may meet for the transaction of business, adjourn and
otherwise regulate its meetings as it sees fit.
(3) Directors may participate in a meeting of the Board through use of
conference telephone or similar communications equipment, so long as all
Directors participating in such meeting can hear one another. Participation in a
meeting of the Board by this means constitutes presence in person at such
meeting.
(4) Unless a greater number is otherwise expressly required by statute or
these Bye-laws, every act or decision done or made by a majority of the
Directors present at a meeting duly held, at which a quorum is present, shall be
regarded as the act of the Board.
19. REGULAR BOARD MEETINGS
The next meeting of the Board subsequent to the annual general meeting
shall be held for the purpose of organizing the Board, electing officers and
transacting such other business as may come before the meeting. Thereafter
regular meetings of the Board shall be held at such time as may be designated by
the Board. If the day fixed for any regular meeting shall fall on a holiday, the
meeting shall take place on the next business day, unless otherwise determined
by the Board.
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20. SPECIAL BOARD MEETINGS
Special meetings of the Board may be called by the Chairman of the Board,
or by the President, or by any two (2) Directors.
21. CHAIRMAN OF MEETINGS
The Chairman of the Board, or in the Chairman's absence, any Director
selected by the Directors present, shall preside as chairman at meetings of the
Board.
22. UNANIMOUS WRITTEN RESOLUTIONS
Any action required or permitted to be taken by the Board may be taken
without a meeting if all members of the Board shall consent thereto in writing.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. For the purposes of this Bye-law, "Director" shall not
include an Alternate Director.
23. CONTRACTS AND DISCLOSURE OF DIRECTORS' INTERESTS
(1) 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.
(2) 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.
(3) 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 proposed contract or arrangement in which such
Director is interested and may be counted in the quorum at such meeting.
24. REMUNERATION OF DIRECTORS
(1) The remuneration (if any) of the Directors shall be as determined by
the Directors and shall be deemed to accrue from day to day. The Directors shall
also be paid all travel, hotel and other expenses 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.
(2) The Directors may by resolution award special remuneration to any
Director of the Company undertaking any special work or services for, or
undertaking any special mission on behalf of, the Company other than his
ordinary routine work as a Director. Any fees paid to a Director who is also
counsel or solicitor to the Company, or otherwise serves it in a professional
capacity, shall be in addition to his remuneration as a Director.
25. REGISTER OF DIRECTORS AND OFFICERS
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.
OFFICERS
26. PRINCIPAL OFFICERS
The principal Officers of the Company shall be such officers as the Board
may determine. Any two or more of such offices, except those of President and
Secretary, may be held by the same person except as prohibited by the Act. The
Chairman of the Board need not be an executive officer of the Company.
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27. OTHER OFFICERS
The Board, the Chairman of the Board or the President may appoint such
other Officers as the conduct of the business of the Company may require, each
of whom shall hold office for such period as the Board, the Chairman of the
Board or the President may from time to time determine.
28. REMUNERATION OF OFFICERS
The Officers shall receive such remuneration as the Board may from time to
time determine.
29. DUTIES OF OFFICERS
Each Officer shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to him by
the Board, or, if such Officer was appointed by the Chairman of the Board or the
President, as may be delegated to him by either such person, from time to time.
30. ELECTION
Each principal Officer shall be elected annually by the Board at its
organization meeting after the annual general meeting, or any subsequent meeting
of the Board, and (subject to the power of removal by the Board) shall hold
office until a successor is elected and qualified or until the officer's death,
resignation, disqualification or removal.
31. REMOVAL
Any principal Officer may be removed either with or without cause by the
Board. Upon removal of an Officer, such office shall be deemed vacant.
MINUTES
32. OBLIGATIONS OF BOARD TO KEEP MINUTES
(1) 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) all resolutions and proceedings of general meetings of the
Members, meetings of the Board and meetings of committees
appointed by the Board.
(2) Minutes prepared in accordance with the Act and these Bye-laws shall be
kept by the Secretary at the registered office of the Company.
INDEMNITY
33. RIGHT TO INDEMNIFICATION
(1) The Company shall indemnify its officers and directors to the fullest
extent possible except as prohibited by the Act. Without limiting the foregoing,
the Directors, Secretary and other Officers (such term to include, for the
purposes of this Bye-law, any Alternate Director or any person appointed to any
committee by the Board or any person who is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, any employee benefit plan)) and every one of them, and their heirs,
executors and administrators, shall be indemnified and secured harmless out of
the assets of the Company from and against all actions, costs, charges, losses,
damages and expenses which they or any of them, their heirs, executors or
administrators, shall or may incur or sustain by or by reason of any act done,
concurred in or omitted (actual or alleged) in or about the
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execution of their duty, or supposed duty, or in their respective offices or
trusts, and none of them shall be answerable for the acts, receipts, neglects or
defaults of the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys or effects
belonging to the Company shall or may be lodged or deposited for safe custody,
or for insufficiency or deficiency of any security upon which any moneys of or
belonging to the Company shall be placed out on or invested, or for any other
loss, misfortune or damage which may happen in the execution of their respective
offices or trusts, or in relation thereto, provided that this indemnity shall
not extend to any matter in respect of which such person is, or may be, found
guilty of fraud or dishonesty.
(2) The Company may purchase and maintain insurance to protect itself and
any Director, Officer or other person entitled to indemnification pursuant to
this Bye-law to the fullest extent permitted by law.
(3) All reasonable expenses incurred by or on behalf of any person entitled
to indemnification pursuant to Bye-law 33(1) in connection with any proceeding
shall be advanced to such person by the Company within twenty (20) business days
after the receipt by the Company of a statement or statements from such person
requesting such advance or advances from time to time, whether prior to or after
final disposition of such proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by such person and, if required by law
or requested by the Company at the time of such advance, shall include or be
accompanied by an undertaking by or on behalf of such person to repay the
amounts advanced if it should ultimately be determined that such person is not
entitled to be indemnified against such expenses pursuant to this Bye-law.
(4) The right of indemnification and advancement of expenses provided in
this Bye-law shall not be exclusive of any other rights to which those seeking
indemnification may otherwise be entitled, and the provisions of this Bye-law
shall inure to the benefit of the heirs and legal representatives of any person
entitled to indemnity under this Bye-law and shall be applicable to proceedings
commenced or continuing after the adoption of this Bye-law, whether arising from
acts or omissions occurring before or after such adoption. Any repeal or
modification of the foregoing provisions of this section shall not adversely
affect any right or protection existing at the time of such repeal or
modification.
34. WAIVER OF CLAIMS
The Company and each Member agrees to waive any claim or right of action it
might have, whether individually or by or in the right of the Company, against
any Director or Officer, and no Director or Officer shall have any liability for
monetary damages, on account of any action taken by such Director or Officer, or
the failure of such Director or Officer to take any action in the performance of
his duties with or for the Company, provided that such waiver shall not extend
to any matter in respect of which such person is, or may be, found guilty of
fraud or dishonesty.
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35. INDEMNIFICATION OF EMPLOYEES
The Board may provide indemnification and advancement of expenses to the
employees of the Company for their acts or omissions as the Board may, from time
to time, determine.
MEMBERS MEETINGS
36. PLACE OF MEETING
All meetings of Members shall be held either at the principal office of the
Company or at any other place within or without Bermuda as may be designated by
the Board.
37. ANNUAL MEETING
(1) The annual general meeting shall be held on such date, at such time and
at such place as shall be designated by the Board and any annual general meeting
may be adjourned as provided by law or pursuant to these Bye-laws. At each
annual general meeting there shall be elected Directors to serve for the
designated term, and such other business shall be transacted as shall properly
come before the meeting.
(2) Any business properly brought before an annual general meeting of the
Members of the Company may be transacted at such meeting.
38. BUSINESS TO BE CONDUCTED AT MEETINGS
Subject to the Act, to be properly brought before a general meeting,
business must be specified in the notice of the meeting (or any supplement
thereto). Only business which the Board has concluded can be properly brought
before a general meeting of Members in accordance with these Bye-laws and
applicable law shall be conducted at such meeting, and the chairman of such
meeting may refuse to permit any business to be brought before such meeting
which has not been properly brought before it in accordance with these Bye-laws
and applicable law.
39. NOTICE OF GENERAL MEETING
Notice of each general meeting, whether annual or special, shall be given
in writing to the Members entitled to vote thereat, not less than then (10) nor
more than sixty (60) days before such meeting. Notice of any meeting of Members
shall specify the place, the day, and the hour of the meeting, as well as the
general nature of the business to be transacted. A notice may be given by the
Company to any Member either personally or by mail or other means of written
communication addressed to the Member at his address appearing on the Register
of Members.
40. 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.
41. CALL OF SPECIAL GENERAL MEETING
(1) Special general meetings for any purpose or purposes may be called only
(i) by the Chairman of the Board; (ii) by the President; (iii) by a majority of
the entire Board or (iv) as required by the Act.
(2) Only such business as is specified in the notice of any special general
meeting shall come before such meeting.
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42. POSTPONEMENT OF MEETINGS
The Secretary 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.
43. QUORUM FOR GENERAL MEETING
The presence of two or more persons representing, in person or by proxy,
not less than a majority of the voting power represented by the shares entitled
to vote thereat shall constitute a quorum for the transaction of business at any
general meeting.
44. ADJOURNMENT OF MEETINGS
(1) Any general meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
voting power represented by the shares represented at the meeting, either in
person or by proxy, but in the absence of a quorum no other business may be
transacted at that meeting.
(2) When any general meeting, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
date, time and place are announced at a meeting at which the adjournment occurs,
unless a new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than thirty (30) days from the date set for the original
meeting, in which case the Board shall set a new record date. Notice of any such
adjourned meeting, if required, shall be given to each Member of record entitled
to vote at the adjourned meeting in accordance with the provisions of Bye-law
39. At any adjourned meeting the Company may transact any business that might
have been transacted at the original meeting.
45. WRITTEN RESOLUTIONS
Subject to applicable law, no action required to be taken, or which may be
taken, at any annual or special general meeting may be taken without a meeting,
and the Members shall have no power to consent in writing, without a meeting, to
the taking of any action.
46. 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.
47. LIMITATION ON VOTING RIGHTS OF CONTROLLED SHARES
(1) Every Member of record owning shares conferring the right to vote
present in person or by proxy shall have one vote, or such other number of votes
as may be specified in the terms of the issue and rights and privileges
attaching to such shares or in these Bye-laws, for each such share registered in
such Member's name, provided that if and so long as the votes conferred by the
Controlled Shares of any person constitute ten percent (10%) or more of the
votes conferred by the issued shares of the Company, each issued share
comprised in such Controlled Shares shall confer only a fraction of a vote that
would otherwise be applicable according to the following formula:
{(T divided by 10)-1} divided by C.
Where: "T" is the aggregate number of votes conferred by all the issued shares
of the Company; and "C" is the number of votes conferred by the Controlled
Shares of such person.
"Controlled Shares" in reference to any person means:
(i) all shares of the Company directly, indirectly or
constructively owned by such person within the meaning of
Section 958 of the Internal Revenue Code of 1986, as
amended, of the United States of America; and
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(ii) all shares of the Company directly, indirectly or
constructively owned by any person or "group" of persons
within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, of the United States of
America and the rules and regulations promulgated
thereunder; provided that this clause (ii) shall not apply
to (a) any person (or any group that includes any person)
that is excluded from the definition of Interested Member
(set forth in Bye-law 80) or (b) any person or group that
the Board, by the affirmative vote of at least
seventy-five percent (75%) of the entire Board, may exempt
from the provisions of this clause (ii).
For the purposes of this Bye-law 47, "person" shall mean any individual,
firm, partnership, corporation, association, or other entity, or any "group" of
persons within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, of the United States of America and the rules and regulations
thereunder.
The limitations contained in this Bye-law 47(1) shall not apply to any
Member which is a Byrne Entity for any matter submitted to the vote of
shareholders, except with respect to the election of directors.
(2) If, as a result of giving effect to the forgoing provisions of Bye-law
47 or otherwise, the votes conferred by the Controlled Shares of any person
would otherwise represent 10% or more of the votes conferred by all the issued
shares of the Company, the votes conferred by the Controlled Shares of such
person shall be reduced in accordance with the foregoing provisions of Bye-law
47. Such process shall be repeated until the votes conferred by the Controlled
Shares of each person represent less than 10% of the votes conferred by all the
issued shares of the Company.
(3) Upon written notification by a Member to the Board, the number of votes
conferred by the total number of shares held by such Member shall be reduced to
that percentage of the total voting power of the Company, as so designated by
such Member (subject to acceptance of such reduction by the Board in its sole
discretion) so that (and to the extent that) such Member may meet any applicable
insurance or other regulatory requirement or voting threshold or limitation that
may be applicable to such Member or to evidence that such person's voting
power is no greater than such threshold.
(4) Notwithstanding the foregoing provisions of this Bye-law 47, after
having applied such provisions as best as they consider reasonably practicable,
the Board may make such final adjustments to the aggregate number of votes
conferred by the Controlled Shares of any person that they consider fair and
reasonable in all the circumstances to ensure that such votes represent less
than 10% (or the percentage designated by a Member pursuant to paragraph (3) of
this Bye-law 47) of the aggregate voting power of the votes conferred by all the
issued shares of the Company.
48. VOTING AT MEETINGS
(1) Unless a different number is otherwise expressly required by statute
(without modification of these Bye-laws) or these Bye-laws, every act or
decision (including any act or resolution regarding any amalgamation, scheme of
arrangement, merger, consolidation or sale or transfer of assets that has been
approved by the affirmative vote of at least two-thirds of the entire Board)
done or made by a majority of the voting power held by the Members present in
person or by proxy at a meeting duly held, at which a quorum is present, shall
be regarded as the act or resolution of the Members. At any election of
Directors, the nominees receiving the highest number of votes, up to the number
of Directors to be elected, at such election shall be deemed elected.
(2) No Member shall be entitled to vote at any general meeting unless he or
she is a Member on the record date for such meeting.
(3) No objection shall be raised to the qualification of any voter except
at the general meeting or adjourned general meeting at which the vote objected
to is given or tendered and every vote not
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disallowed at such general meeting shall be valid for all purposes. Any such
objection made in due time shall be referred to the Chairman of the general
meeting whose decision shall be final and conclusive. Notwithstanding, the
foregoing, however, the Chairman of the general meeting may, in his discretion,
whether or not an objection has been raised, and if the Chairman considers that
such action is necessary to determine accurately the vote count, defer until
after the conclusion of the general meeting a decision as to the proper
application of Bye-law 47 to any vote at such meeting. If the decision has been
so deferred, then the Chairman of the general meeting or, failing such decision
within ninety (90) days of the general meeting, the Board, shall make such
decision and such decision shall be final and conclusive.
49. PRESIDING OFFICER
The Chairman of the Board, the President, or another person selected by the
Board shall act as chairman of general meetings. The Secretary of the Company,
or, in the Secretary's absence, an Assistant Secretary of the Company, shall act
as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present, the meeting shall choose any person present to act as
secretary of the meeting.
50. CONDUCT OF MEETING; DECISION OF CHAIRMAN
(1) The chairman shall conduct each general meeting in a manner consistent
with the Act and these Bye-laws, but shall not be obligated to follow any
technical, formal or parliamentary rules or principles of procedure. The
chairman's rulings on procedural matters shall be conclusive and binding on all
Members, unless at the time of such ruling a request for a vote on the ruling is
made by a Member entitled to vote and represented in person or by proxy at the
meeting, in which case the decision of a majority of such Members shall be
conclusive and binding on all Members.
(2) At any general meeting if an amendment shall be proposed to any
resolution under consideration but shall be ruled out of order by the chairman
of the meeting the proceedings on the substantive resolution shall not be
invalidated by any error in such ruling.
(3) At any general meeting a declaration by the chairman of the meeting
that a question proposed for consideration has, on a show of hands, 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.
51. 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.
52. PROXIES
Every person entitled to vote shares has the right to do so either in
person or by one or more persons authorized by a written proxy executed by such
Member and filed with the Secretary. Any proxy duly executed shall continue in
full force and effect unless revoked by the person executing it by a writing
delivered to the Company stating that the proxy is revoked or by a subsequent
proxy executed by such Member presented to the meeting or by attendance at a
meeting and voting in person by such Member. However, no proxy shall be valid
after the expiration of eleven (11) months from the date of its execution unless
otherwise provided in the proxy. 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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53. 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 general meeting 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
54. RIGHTS OF SHARES
(1) At the date these Bye-laws become effective, the total number of
authorized common shares is fifty million (50,000,000) common shares having a
par value of U.S. one dollar ($1.00) per share (the "Common Shares"), and the
total number of authorized preference shares is twenty million (20,000,000)
preference shares having a par value of U.S. one dollar ($1.00) per share (the
"Preference Shares").
(2) The holders of Common Shares shall, subject to the provisions of these
Bye-laws:
(a) be entitled (subject to Bye-law 47) to one vote per share;
(b) be entitled to such dividends as the Board may from time to time
declare;
(c) 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
(d) generally be entitled to enjoy all of the rights attaching to
shares.
(3) The Board shall have the full power to issue any unissued shares of the
Company on such terms and conditions as it may, in its absolute discretion,
determine. The Board is authorized to provide for the issuance of the Preference
Shares in one or more series, and to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on
shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such
voting rights;
(d) Whether that series shall have conversion or exchange privileges
(including, without limitation, conversion into Common Shares),
and, if so, the terms and conditions of such conversion or
exchange, including provision for adjustment of the conversion or
exchange rate in such events as the Board shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the
manner of selecting shares for redemption if less than all shares
are to be redeemed, the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
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redemption, which amount may vary under different conditions and
at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(g) The right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of
the Company or any subsidiary, upon the issue of any additional
shares (including additional shares of such series or any other
series) and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other
acquisition by the Company or any subsidiary of any outstanding
shares of the Company;
(h) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Company, and the relative rights of priority, if any, of payment
of shares of that series; and
(i) Any other relative participating, optional or other special
rights, qualifications, limitations or restrictions of that
series.
55. POWER TO ISSUE SHARES
(1) The issuance of any authorized Common Shares or Preference Shares and
any other actions permitted to be taken by the Board pursuant to Bye-law 54 must
be authorized by the affirmative vote of at least sixty-six and two-thirds
percent (66 2/3%) of the entire Board.
(2) Any Preference Shares of any series which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of any other
class or classes shall have the status of authorized and unissued Preference
Shares of the same series and may be reissued as a part of the series of which
they were originally a part or may be reclassified and reissued as part of a new
series of Preference Shares to be created by resolution or resolutions of the
Board or as part of any other series of Preference Shares, all subject to the
conditions and the restrictions on issuance set forth in the resolution or
resolutions adopted by the Board providing for the issue of any series of
Preference Shares.
(3) At the discretion of the Board, whether or not in connection with the
issuance and sale of any of its shares or other securities, the Company may
issue securities, contracts, warrants or other instruments evidencing any
shares, option rights, securities having conversion or option rights, or
obligations on such terms, conditions and other provisions as are fixed by the
Board, including, without limiting the generality of this authority, conditions
that preclude or limit any person or persons owning or offering to acquire a
specified number or percentage of the outstanding Common Shares, other shares,
option rights, securities having conversion or option rights, or obligations of
the company or transferee of the person or persons from exercising, converting,
transferring or receiving the shares, option rights, securities having
conversion or option rights, or obligations.
56. VARIATION OF RIGHTS, ALTERATION OF SHARE CAPITAL AND PURCHASE OF SHARES OF
THE COMPANY
(1) If at any time 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 a majority of
the voting power represented by the issued shares of that class or with the
sanction of a resolution passed by a majority of the voting power represented by
the votes cast at a separate general meeting of the holders of the shares of the
class 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.
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(2) The Company may from time to time if authorized 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.
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 limiting the generality of the
foregoing, 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.
(3) The Company may from time to time, acting through the Board, purchase
its own shares in accordance with the provisions of Section 42A of the Act.
57. REGISTERED HOLDER OF SHARES
(1) The Company shall be entitled to treat the registered holder of any
share as the absolute owner thereof and accordingly shall not be bound to
recognise any equitable or other claim to, or interest in, such share on the
part of any other person.
(2) Any dividend, interest or other moneys 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 or more persons are registered as joint holders of
any shares any one can give an effectual receipt for any dividend paid in
respect of such shares.
58. DEATH OF A JOINT HOLDER
Where two 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 recognise no claim in respect of the estate of
any joint holder except in the case of the last survivor of such joint holders.
59. SHARE CERTIFICATES
(1) Share certificates shall be in such form as shall be required by law
and as shall be approved by the Board. Each certificate shall have the corporate
seal affixed thereto by impression or in facsimile and shall be signed by the
Chairman of the Board, the President, or any Vice President, and countersigned
by the Secretary or any Assistant Secretary; provided that certificates may be
signed, countersigned or authenticated by facsimile signatures as provided by
law.
(2) Except as provided in this Bye-law 59, new certificates for shares
shall not be issued to replace an old certificate unless the latter is
surrendered to the Company and cancelled at the same time. The Board may, in
case any share certificate or certificate for any other security is lost,
stolen, or destroyed, authorize the issuance of a replacement certificate on
such terms and conditions as the Board may require, including provision for
indemnification of the Company secured by a bond or other adequate security
which the Board deems sufficient to protect the Company against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
RECORD DATES
60. DETERMINATION OF RECORD DATES
Notwithstanding any other provision of these Bye-laws, the Board may fix
any date as the record date for:
(a) determining the Members entitled to receive any dividend; and
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(b) determining the Members entitled to receive notice of and to
vote at any general meeting of the Company.
TRANSFER OF SHARES
61. INSTRUMENT OF TRANSFER
(1) An instrument of transfer shall be in such common form as the Board may
accept. Such instrument of transfer shall be signed by or on behalf of the
transferor. 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.
(2) The Board may refuse to recognize any instrument of transfer unless it
is accompanied by the certificate in respect of 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.
62. RESTRICTION ON TRANSFER
(1) The Board shall refuse to register a transfer unless all applicable
consents, authorisations and permissions of any governmental body or agency in
Bermuda have been obtained.
(2) If the Board refuses to register a transfer of any share the Secretary
shall, within three months after the date on which the transfer was lodged with
the Company, send to the transferor and transferee notice of the refusal.
63. TRANSFERS BY JOINT HOLDERS
The joint holders of any share or shares may transfer such share or shares
to one or more of such joint holders, and the surviving holder or holders of any
share or shares previously held by them jointly with a deceased Member may
transfer any such share to the executors or administrators of such deceased
Member.
TRANSMISSION OF SHARES
64. 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 recognized by the Company as having any title to the deceased
Member's interest in the shares. Nothing herein contained shall release the
estate of a deceased joint holder from any liability in respect of any share
which had been jointly held by such deceased Member with other persons. 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 authorized to deal with the shares of a deceased Member.
65. REGISTRATION ON DEATH OR BANKRUPTCY
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 satisfactory
to the Board. On the presentation thereof to the Board, accompanied by such
evidence as the Board may require to prove the title of the transferor, the
transferee shall be registered as a Member but the Board shall, in either case,
have the same right to decline or suspend registration
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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.
DIVIDENDS AND OTHER DISTRIBUTIONS
66. DECLARATION OF DIVIDENDS BY THE BOARD
The Board may declare and make such dividends or other distributions (in
each case in cash or in specie, as valued by the Board, or a combination
thereof) to the Members as may be lawfully made out of the assets of the
Company.
67. UNCLAIMED DIVIDENDS
(1) Any dividend or other monies payable in respect of a share which has
remained unclaimed for 5 years from the date when it became due for payment
shall, if the Board so resolves, be forfeited and cease to remain owing by the
Company. The payment of any unclaimed dividend or other moneys payable in
respect of a share may (but need not) be paid by the Company into an account
separate from the Company's own account. Such payment shall not constitute the
Company a trustee in respect thereof.
68. UNDELIVERED PAYMENTS
The Company shall be entitled to cease sending dividend payments and
cheques by post or otherwise to a Member if those instruments have been returned
undelivered to, or left uncashed by, that Member on at least two consecutive
occasions, or, following one such occasion, reasonable enquiries have failed to
establish the Member's new address. The entitlement conferred on the Company by
this Bye-law in respect of any Member shall cease if the Member claims a
dividend or cashes a dividend warrant or cheque.
69. INTEREST ON DIVIDENDS
No dividend or distribution shall bear interest against the Company.
CAPITALIZATION
70. ISSUE OF BONUS SHARES
The Board may resolve to capitalize 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 bonus shares to the Members.
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FISCAL YEAR
71. FINANCIAL YEAR END
The financial year end of the Company may be determined by resolution of
the Board and failing such resolution shall be 31st December in each year.
AUDIT
72. 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.
73. REMUNERATION OF AUDITOR
The Board may fix the remuneration of the Auditor as it may determine.
NOTICES
74. 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 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.
75. NOTICES TO JOINT MEMBERS
Any notice required to be given to a Member shall, with respect to any
shares held jointly by two 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.
76. 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.
CERTAIN SUBSIDIARIES
77. CERTAIN SUBSIDIARIES
With respect to any company incorporated under the laws of Bermuda all of
the voting shares of which are owned by the Company, and any other subsidiary of
the Company designated by the Board of the Company (together, the "Designated
Companies"), the board of directors of each such Designated Company shall
consist of the persons who have been elected by the Members as Alternate
Directors of the Company in accordance with Bye-law 14 or as Designated Company
Directors. Notwithstanding the general authority set out in Bye-law 2(1), the
Board shall vote all shares owned by the Company in each Designated Company to
ensure the constitutional documents of such Designated Company require such
Alternate Directors of the Company or Designated Company Directors to be elected
as the directors of such Designated Company, and to elect such
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Alternate Directors or Designated Company Directors, as the case may be, as the
directors of such Designated Company. The Company shall enter into agreements
with each such Designated Company to effectuate or implement this Bye-Law.
SEAL OF THE COMPANY
78. 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.
WINDING-UP
79. 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 amongst 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.
BUSINESS COMBINATIONS
80. BUSINESS COMBINATIONS
(1) The Company shall not engage in any business combination with any
Interested Member for a period of three years following the time that such
Member became an Interested Member, unless:
(a) prior to such time the Board approved either the business
combination or the transaction which resulted in the Member
becoming an Interested Member, or
(b) upon consummation of the transaction which resulted in the Member
becoming an Interested Member, the Interested Member owned at
least 85% of the voting shares of the Company outstanding at the
time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned
(i) by persons who are Directors and also officers and (ii)
employee share plans in which employee participants do not have
the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer, or
(c) at or subsequent to such time the business combination is approved
by the Board and authorized at an annual or special general
meeting, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting shares which are not owned
by the Interested Member.
(2) The restrictions contained in this Bye-law shall not apply if:
(a) a Member becomes an Interested Member inadvertently and (i) as
soon as practicable divests itself of ownership of sufficient
shares so that the Member ceases to be an Interested Member and
(ii) would not, at any time within the 3 year period immediately
prior to a business combination between the Company and such
Member, have been an Interested Member but for the inadvertent
acquisition of ownership; or
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(b) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public
announcement or the notice required hereunder of a proposed
transaction which (i) constitutes one of the transactions
described in the second sentence of this paragraph; (ii) is with
or by a person who either was not an Interested Member during the
previous 3 years or who became an Interested Member with the
approval of the Board; and (iii) is approved or not opposed by a
majority of the members of the Board then in office (but not less
than 1) who were Directors prior to any person becoming an
Interested Member during the previous 3 years or were recommended
for election or elected to succeed such Directors by a majority of
such Directors. The proposed transactions referred to in the
preceding sentence are limited to (x) an amalgamation, scheme of
arrangement, merger, consolidation or similar transaction
involving the Company (except for any such transaction in respect
of which no vote of the Members of the Company is required);
(y) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions),
whether as part of a dissolution or otherwise, of assets of the
Company or of any direct or indirect subsidiary of the Company
(other than to any direct or indirect wholly-owned subsidiary of
the Company or to the Company) having an aggregate market value
equal to 50% or more of either that aggregate market value of all
of the assets of the Company determined on a consolidated basis or
the aggregate market value of all the outstanding shares of the
Company; or (z) a proposed tender or exchange offer for 50% or
more of the outstanding voting shares of the Company. The Company
shall give not less than 20 days notice to all Interested Members
prior to the consummation of any of the transactions described in
clauses (x) or (y) of the second sentence of this paragraph.
(3) As used in this Bye-law only, the term:
(a) "affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, another person.
(b) "associate," when used to indicate a relationship with any person,
means (i) any corporation, partnership, unincorporated association
or other entity of which such person is a director, officer or
partner or is, directly or indirectly, the owner of 20% or more of
any class of voting shares, (ii) any trust or other estate in
which such person has at least a 20% beneficial interest or as to
which such person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same residence as such
person.
(c) "business combination," when used in reference to the Company and
any Interested Member of the Company, means:
(i) any amalgamation, scheme of arrangement, merger,
consolidation or similar transaction involving the
Company or any direct or indirect subsidiary of the
Company with (A) the Interested Member, or (B) with
any other corporation, partnership, unincorporated
association or other entity if such transaction is
caused by the Interested Member and as a result of
such transaction subsection (a) of this section is not
applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series
of transactions), except proportionately as a Member
of such Company, to or with the Interested Member,
whether as part of a dissolution or otherwise, of
assets of the Company or of any direct or indirect
subsidiary of the Company which assets have an
aggregate market value equal to 10%
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or more of either the aggregate market value of all
the assets of the Company determined on a
consolidated basis or the aggregate market value of
all the outstanding shares of the Company;
(iii) any transaction which results in the issuance or
transfer by the Company or by any direct or indirect
subsidiary of the Company of any shares of the
Company or of such subsidiary to the Interested
Member, except (A) pursuant to the exercise,
exchange or conversion of securities exercisable
for, exchangeable for or convertible into shares of
the Company or any such subsidiary which securities
were outstanding prior to the time that the
Interested Member became such, (B) pursuant to a
Subsidiary Amalgamation; (C) pursuant to a dividend
or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable
for, exchangeable for or convertible into shares of
the Company or any such subsidiary which security is
distributed, pro rata to all holders of a class or
series of shares of the Company subsequent to the
time the Interested Member became such,
(D) pursuant to an exchange offer by the Company to
purchase shares made on the same terms to all
holders of said shares, or (E) any issuance or
transfer of shares by the Company, provided however,
that in no case under (C)-(E) above shall there be
an increase in the Interested Member's proportionate
share of the shares of any class or series of the
Company or of the voting shares of the Company;
(iv) any transaction involving the Company or any direct
or indirect subsidiary of the Company which has the
effect, directly or indirectly, of increasing the
proportionate share of the shares of any class or
series, or securities convertible into the shares of
any class or series, of the Company or of any such
subsidiary which is owned by the Interested Member,
except as a result of immaterial changes due to
fractional share adjustments or as a result of any
purchase or redemption of any shares of stock not
caused, directly or indirectly, by the Interested
Member; or
(v) any receipt by the Interested Member of the benefit,
directly or indirectly (except proportionately as a
Member of the Company) of any loans, advances,
guarantees, pledges, or other financial benefits
(other than those expressly permitted in subparagraphs
(i)-(iv) above) provided by or through the Company or
any direct or indirect subsidiary.
(d) "control," including the term "controlling," "controlled by" and
"under common control with," means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of voting stock, by contract, or otherwise. A person who is the
owner of 20% or more of the outstanding voting stock of any
corporation, partnership, unincorporated association or other
entity shall be presumed to have control of such entity, in the
absence of proof by a preponderance of the evidence to the
contrary. Notwithstanding the foregoing, a presumption of control
shall not apply where such person holds voting stock, in good
faith and not for the purpose of circumventing this Bye-law, as an
agent, bank, broker, nominee, custodian or trustee for one or more
owners who do not individually or as a group have control of such
entity.
(e) "Interested Member" means any person (other than the Company and
any direct or indirect subsidiary of the Company) that (i) is the
owner of 15% or more of the
III-25
<PAGE>
outstanding voting shares of the Company, or (ii) is an affiliate
or associate of the Company and was the owner of 15% or more of
the outstanding voting shares of the Company at any time within
the 3-year period immediately prior to the date on which it is
sought to be determined whether such person is an Interested
Member, and the affiliates and associates of such person;
provided, however, that the term "Interested Member" shall not
include (x) any person whose ownership of shares in excess of the
15% limitation set forth herein is the result of action taken
solely by the Company provided that such person shall be an
Interested Member if thereafter such person acquires additional
shares of voting shares of the Company, except as a result of
further corporate action not caused, directly or indirectly, by
such person or (y) any Byrne Entity. "Byrne Entity" means any of
John J. Byrne, any foundation or trust established by John J.
Byrne, Patrick Byrne, and any associate or affiliate of any of
them (or any group of which any of them is a part), as defined
under Section 13(d) of the United States Securities Exchange Act
of 1934, as amended. For the purpose of determining whether a
person is an Interested Member, the voting shares of the Company
deemed to be outstanding shall include shares deemed to be owned
by the person through application of paragraph (h) of this
subsection but shall not include any other unissued shares of such
Company which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(f) "stock" means, with respect to any corporation, capital stock and,
with respect to any other entity, any equity interest.
(g) "voting stock" means, with respect to any corporation, stock of
any class or series entitled to vote generally in the election of
directors and, with respect to any entity that is not a
corporation, any equity interest entitled to vote generally in the
election of the governing body of such entity.
(h) "owner" including the terms "own" and "owned" when used with
respect to any stock means a person that individually or with or
through any of its affiliates or associates:
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; provided, however, that a
person shall not be deemed the owner of stock tendered
pursuant to a tender or exchange offer made by such person or
any of such person's affiliates or associates until such
tendered stock is accepted for purchase or exchange; or (B)
the right to vote such stock pursuant to any agreement,
arrangement or understanding; provided, however, that a person
shall not be deemed the owner of any stock because of such
person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or
(iii) has any arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in item (B) of clause
(ii) of this paragraph), or disposing of such stock with any
other person that beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly, such
stock.
(i) "Subsidiary Amalgamation" means an amalgamation, scheme of
arrangement, merger, consolidation or similar transaction with or into a
single direct or indirect wholly-
III-26
<PAGE>
owned subsidiary of the Company if: (1) the Company and the direct or
indirect wholly-owned subsidiary of the Company are the only constituent
companies to such transaction; (2) each share or fraction of a share of
the Company outstanding immediately prior to the effective time of such
transaction is converted in such transaction into a share or equal
fraction of a share of shares of a holding company having the same
designations, rights, powers and preferences, and the qualifications,
limitations and restrictions thereof, as the share of the constituent
company being converted in such transaction; (3) the holding company and
each of the constituent companies to such transaction are companies
incorporated in Bermuda; (4) the memorandum of association and bye-laws
of the holding company immediately following the effective time of such
transaction contain provisions identical to the memorandum of
continuance and bye-laws of the Company immediately prior to the
effective time of such transaction (other than provisions, if any,
regarding the incorporator or incorporators, the corporate name, the
registered office and agent, the initial board of directors and the
initial subscribers for shares and such provisions contained in any
amendment to the charter documents as were necessary to effect a change,
exchange, reclassification or cancellation of shares, if such change,
exchange, reclassification or cancellation has become effective); (5) as
a result of such transaction the Company or its successor or continuing
company becomes or remains a direct or indirect wholly-owned subsidiary
of the holding company; (6) the directors of the Company become or
remain the directors of the holding company upon the effective time of
such transaction; (7) the memorandum of association and bye-laws of the
surviving or continuing company immediately following the effective time
of such transaction are identical to the memorandum of association and
bye-laws of the Company immediately prior to the effective time of such
transaction (other than provisions, if any, regarding the incorporator
or incorporators, the corporate name, the registered office and agent,
the initial board of directors and the initial subscribers for shares
and such provisions contained in any amendment to the charter documents
as were necessary to effect a change, exchange, reclassification or
cancellation of shares, if such change, exchange, reclassification or
cancellation has become effective); provided, however, that (i) the
memorandum of association and bye-laws of the surviving or continuing
company shall be amended in such transaction to contain a provision
requiring that any act or transaction by or involving the surviving or
continuing company that requires for its adoption under the Act or its
bye-laws the approval of the Members of the surviving or continuing
company shall, by specific reference to this subsection, require, in
addition, the approval of the Members of the holding company (or any
successor), by the same vote as is required by the Act and/or by its
bye-laws of the surviving or continuing company, and (ii) the bye-laws
of the surviving or continuing company may be amended in such
transaction to reduce the number of classes and shares of capital stock
that the surviving or continuing company is authorized to issue; and (8)
the Members of the Company do not recognize gain or loss for United
States federal income tax purposes as determined by the board of
directors of the constituent company.
(4) Notwithstanding any other provisions of these Bye-laws (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law or these Bye-laws), the affirmative vote of the holders of not
less than sixty-six and two-thirds percent (66 2/3%) of the voting power
represented by the votes entitled to be cast by the holders of all the then
outstanding voting shares voting together as a single class, excluding voting
shares beneficially owned by any Interested Member, shall be required to amend,
alter, change, or repeal, or adopt any provision as part of these Bye-laws
inconsistent with the purpose and intent of, this Bye-law 80; provided, however,
that this Bye-law 80(4) shall not apply to, and such sixty-six and two-thirds
percent (66 2/3%) vote shall not be required for, any such amendment, repeal or
adoption recommended by the affirmative vote of at least seventy-five percent
(75%) of the entire Board (not including Directors who are affiliates of any
Interested Member).
III-27
<PAGE>
ALTERATION OF BYE-LAWS
81. ALTERATION OF BYE-LAWS
No Bye-law shall be rescinded, altered or amended and no new Bye-law shall
be made until the same has been approved both by a resolution of the Board and
by a resolution of the Members, provided that, if under applicable law, action
by the Board would be sufficient to amend a Bye-law (in the absence of this
sentence), then only a resolution of the Board shall be required to amend such
Bye-law.
Notwithstanding any other provision of these Bye-laws, the affirmative vote
of the holders of at least seventy-five percent (75%) of the voting power of the
shares entitled to vote at an election of directors shall be required to amend,
alter, change or repeal, or adopt any provision inconsistent with the purpose or
intent of, Bye-laws 10(2), 11, 15, 34, 41, 47, 48(3), 54, 55 and 81. In
addition, the affirmative vote set forth in Bye-law 80(4) shall be required to
amend, alter, change or repeal, or adopt any provision inconsistent with the
purpose or intent of, Bye-law 80. In addition, the consent of a majority of the
shares held by the Byrne Entities shall be required to amend, alter, change or
repeal, or adopt any provision that would adversely affect, the exemptions
provided to the Byrne Entity (or its constituents members) under Bye-laws 47 or
80.
III-28
<PAGE>
[Logo]
WHITE MOUNTAINS INSURANCE GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS ON OCTOBER 22, 1999
The undersigned hereby appoints John J. Byrne and K. Thomas Kemp, and each
of them, with full power of substitution, as the proxy or proxies of the
undersigned to vote all shares of common stock of WHITE MOUNTAINS INSURANCE
GROUP, INC. which the undersigned is entitled to vote at the special meeting of
Stockholders of WHITE MOUNTAINS INSURANCE GROUP, INC. to be held at Hotel Plaza
Athenee, Le Trianon Room, 37 East 64th Street, New York, NY 10021, on October
22, 1999 at 10:00 a.m. local time, and at any adjournment or postponement
thereof, with all powers that the undersigned would have if personally present
thereat.
This proxy, when properly executed, will be voted in the manner directed,
or if no direction is made, for Proposal 1 listed on the reverse side.
Discretionary authority is hereby conferred as to all other matters that may
come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
(IMPORTANT--TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
INSTRUCTIONS FOR VOTING YOUR PROXY
Stockholders of record of White Mountains Insurance Group, Inc. may vote
their proxies by mail:
o Simply mark, sign and date your proxy card and return it in the
postage-paid envelope.
COMPANY NUMBER CONTROL NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
/x/ Please mark votes
as in this example
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BELOW.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. Proposal to approve the proposed corporate reorganization whereby White
Mountains Insurance Group, Inc. will change its domicile from Delaware to
Bermuda pursuant to (i) an Agreement and Plan of Merger, a copy of which is
attached as Annex I to the proxy statement/prospectus, pursuant to which
White Mountains Insurance Group, Inc. will be merged with and into White
Mountains Insurance Group (Arizona), Inc., a newly-formed, wholly-owned
subsidiary, and (ii) a memorandum of continuance, a copy of which is attached
as Annex II to the proxy statement/prospectus, upon the registration of which
White Mountains Insurance Group-Arizona will become a Bermuda company (with
bye-laws in the form of annex III to the proxy statement/prospectus) through
a continuance procedure under Arizona and Bermuda law and to authorize the
board of directors to exercise the powers of the board of directors set out
in such bye-laws and to take any and all actions deemed necessary or
advisable to give effect to the reorganization.
FOR / / AGAINST / / ABSTAIN / /
DATED:__________________________, 1999
_____________________________________,
_____________________________________,
SIGNATURE(S)
[IMPORTANT: Please sign exactly as
your name(s) appear(s) hereon. If you
are acting as attorney-in-fact,
corporate officer or in a fiduciary
capacity, please indicate the capacity
in which you are signing.]
