October 29, 1999 Exhibit 1
White Mountains Insurance Group Ltd
Xxxxxxxxx Xxxxx
0 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
Attn: Mr. K. Xxxxxx Xxxx, President and Chief Executive Officer
Re: Sale of U.S.$50,000,000 of Common Stock of Financial Security
Assurance Holdings Ltd.
Ladies and Gentlemen:
Financial Security Assurance Holdings Ltd., a New York corporation
("FSA"), and White Mountains Insurance Group Ltd, a Bermuda corporation
("WMIG"), hereby agree that, upon the terms and subject to the conditions set
forth below, FSA shall sell to WMIG and WMIG shall purchase from FSA, shares of
FSA Common Stock, par value $.01 per share ("FSA Common Stock"), for
U.S.$50,000,000 (the "Aggregate Purchase Price").
1. Number of Shares. The purchase price per share (the "Per Share Price")
shall equal 97.5% of the average of the high sale price and the low sale price
of FSA common stock on the New York Stock Exchange on the date hereof, resulting
in a Per Share Price of $54.20. Accordingly, the number of shares of FSA Common
Stock to be sold by FSA to WMIG hereunder (the "Shares") shall equal the
quotient of the Aggregate Purchase Price divided by the Per Share Price, being
922,509 shares. At least 750,000 of the Shares will be registered under FSA's
current shelf registration statement and will not bear restricted legends. All
the Shares acquired by WMIG will be subject to demand registration rights under
same terms and conditions (on an aggregate basis) as the shares of FSA common
stock currently owned by WMIG and its affiliates.
2. Conditions to Parties Obligations Hereunder. The sole conditions (the
"Closing Conditions") to the performance by FSA and WMIG of their obligations
hereunder are (a) approval by the Board of Directors of WMIG of this Agreement
and the transaction contemplated hereby at its meeting to be held on November 1,
1999 or as promptly thereafter as practicable (the "WMIG Board Approval
Condition"); and (b) if applicable, (i) expiration or earlier termination of the
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder (the "HSR Act"), and (ii)
confirmation that the requirements of the New York Stock Exchange applicable to
the sale of Shares contemplated hereby will not require FSA shareholder approval
(the "NYSE Condition"). FSA and WMIG shall endeavor to (i) promptly make any
filing required under the HSR Act and use commercially reasonable efforts to
obtain expiration or earlier termination of the waiting period under the HSR Act
(the "HSR Condition") and satisfaction of the NYSE Condition, and (ii)
October 29, 1999
Page 2
consummate, and shall use their best efforts to consummate, the closing
hereunder. In furtherance of the foregoing, WMIG agrees to schedule a Board
meeting on November 1, 1999 or as promptly thereafter as practicable at which
the Board of WMIG shall consider this Agreement and the transaction contemplated
hereby. If the WMIG Board shall not approve this Agreement and the transaction
contemplated hereby at such meeting, then this Agreement shall terminate.
3. Closing Date. The closing hereunder shall occur on a date (the "Closing
Date") determined by FSA on which commercial banks are open for business in New
York following the date on which the Closing Conditions shall have been
satisfied. FSA shall provide WMIG at least 5 business days' notice of the
Closing Date.
4. Anti-Dilution Protection. Until the earlier of May 13, 2004 and the
date at which WMIG shall cease to own all the outstanding shares of White
Mountain Services Corporation, FSA agrees that, immediately prior to any
issuance of shares by FSA that would otherwise dilute WMIG's ownership from more
than 25% to less than 25% of the outstanding common stock of FSA, FSA will offer
WMIG the ability (on at least 5 business days notice) to retain WMIG's fully
diluted ownership in the common stock of FSA at a level equal to or greater than
25% by selling FSA common stock to WMIG for a purchase price per share equal to
the price per share of the diluting event as determined in good faith by FSA
(e.g. the price to public in the case of a public offering and the closing price
per share on the NYSE in the case of any shares issued in connection with any
FSA benefit plan); provided, however, that (a) any such purchase by WMIG shall
comply with law and any requirements or constraints applicable to FSA, including
the requirements of (i) any securities rating agency rating FSA or any FSA
subsidiary and (ii) any securities exchange on which shares of FSA are listed
and (b) FSA shall not be required to delay consummation of the diluting event in
order to close close the purchase by WMIG if such delay would be adverse to the
interests of FSA as determined in good faith by FSA.
5. Delivery of and Payment for Shares. At the closing hereunder, FSA will
deliver, or cause to be delivered to WMIG, the Shares, registered in the name of
WMIG or its nominee, and WMIG shall simultaneously deliver to FSA immediately
available funds in an amount equal to the Aggregate Purchase Price
6. Representations and Warranties of FSA. FSA hereby represents and
warrants that (a) FSA is a corporation duly organized and validly existing under
the laws of the State of New York, (b) FSA has the full corporate power and
authority to execute, deliver and perform its obligations hereunder, and (c) on
the date of consummation of the transaction contemplated hereby, FSA shall
transfer the Shares to WMIG, free and clear of any lien, charge, encumbrance or
restriction on transfer.
7. Representations and Warranties of WMIG. WMIG hereby represents and
warrants that it is acquiring the Shares hereunder for investment only and not
with a view toward distribution.
October 29, 1999
Page 3
8. Fees and Expenses. Each of FSA and WMIG shall pay its own respective
fees and expenses (including, without limitation, the fees of any attorneys,
accountants, or other representatives) incurred in connection with this letter
agreement and the transactions contemplated hereby, whether or not such
transactions are consummated, it being agreed that fees of Cravath, Swaine &
Xxxxx incurred to date in connection with a possible sale of White Mountains
Services Corporation shall be for the account of WMIG. Each of FSA and WMIG
represents that no broker, finder or investment banker has been retained or
engaged on its behalf or is entitled to any brokerage, finder's or other fee,
commission or compensation in connection with the transactions contemplated
hereby.
9. Communications. All notices and other communications provided for in
this letter agreement shall be in writing and shall be deemed effective upon
receipt at the party's address and facsimile number (a), in the case of WMIG, by
telephonic communication with Xxxxxxx Xxxxxxxx at 000-000-0000, with a facsimile
to his attention at telecopy number 000-000-0000, and (b) in the case of FSA, by
telephonic communication with Xxxxx Xxxxx at (000) 000-0000, with a facsimile to
his attention at telecopy number (000) 000-0000.
10. Assignment. The rights and obligations of FSA and WMIG hereunder may
not be assigned without the prior written consent of the other party.
11. Amendment. The terms and provisions of this letter agreement may not
be amended, modified or waived except by written instrument signed by both FSA
and WMIG.
12. Counterparts. This letter agreement may be executed in counterparts,
each of which when so executed and delivered shall be an original, but such
counterparts together shall constitute but one instrument.
13. Governing Law. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York.
If the foregoing is in accordance with WMIG understanding of our
agreement, please sign and return to us the enclosed copy of this Agreement,
whereupon it shall become a binding agreement between us.
October 29, 1999
Page 4
Very truly yours,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.,
By: /s/ Xxxxx Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director and General Counsel
Agreed and Accepted by:
WHITE MOUNTAINS INSURANCE GROUP LTD,
By: /s/ K. Xxxxxx Xxxx
--------------------------------------------
Name: K. Xxxxxx Xxxx
Title: President and Chief Executive Officer
