As filed with the Securities and Exchange Commission on August 5, 1999
to
New York 13-3261323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Park Avenue
New York, New York 10022
(212) 826-0100
|
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Bruce E. Stern, Esq.
General Counsel and Secretary
Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, New York 10022
(212) 826-0100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William H. Widen, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019-7475
Approximate date of commencement of proposed sale to public: From time to time after the effective date of this registration statement, as determined by market conditions and other factors.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.|_|
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.|_| ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.|_| ______
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.|_|
(Continued on following page)
(Continued from previous page)
CALCULATION OF REGISTRATION FEE
=================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Offering Aggregate Amount of
Securities to be Amount to be Price Offering Registration
Registered Registered(1)(2)(3) Per Unit(4) Price(3)(4) Fee(5)
-------------------------------------------------------------------------------------------------
Debt Securities
Common Stock
Stock Purchase Contracts(6)
Stock Purchase Units (7)
Preferred Stock
TOTAL ............................ $230,000,000 100% $230,000,000 $63,940
=================================================================================================
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(1) Securities registered by the registrant under Registration Statement No. 333-34181 and not previously sold in the amount of $20,000,000 are consolidated in this registration statement pursuant to Rule 429 under the Securities Act. Registration fees with respect to such unsold securities in the amount of $6,060.61 have previously been paid. The total amount registered under this registration statement as so consolidated is $250,000,000.
(2) Includes such indeterminate principal amount of debt securities, such indeterminate number of shares of common stock and such indeterminate number of stock purchase contracts, as may from time to time be issued at indeterminate prices.
(3) Represents the aggregate initial offering price of all securities sold. Amounts represent United States Dollars or the equivalent in one or more other currencies or currency units.
(4) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933 and exclusive of accrued interest and dividends, if any.
(5) Previously paid.
(6) Each stock purchase contract of the registrant obligates the registrant to sell, and its holder to purchase, a number of shares of common stock.
(7) Each stock purchase unit consists of a stock purchase contract and debt securities or preferred securities registered under this registration statement or debt obligations of third parties.
Pursuant to Rule 429 under the Securities Act, the prospectus filed as part of this registration statement also relates to the securities registered by the registrant under Registration Statement No. 333-34181 that remain unsold in the amount of $20,000,000. This registration statement also constitutes Post-Effective Amendment No. 1 with respect to the registrant's Registration Statement No. 333-34181.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS Subject to Completion
Preliminary Prospectus
Dated August 5, 1999
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[LOGO]
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
$250,000,000
DEBT SECURITIES, COMMON STOCK,
STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS AND PREFERRED STOCK
We may offer these securities in one or more offerings having an aggregate initial public offering price of up to $250,000,000. When we decide to sell a particular series of securities, we will prepare a prospectus supplement describing those securities and our plan of distribution. You should read this prospectus and any prospectus supplement carefully.
Our common stock is listed on the New York Stock Exchange under the symbol "FSA".
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
FSA HOLDINGS
We are Financial Security Assurance Holdings Ltd. In this prospectus we refer to our company as "FSA Holdings", "we" or "us". We own 100% of Financial Security Assurance Inc., which we refer to as "FSA". FSA primarily provides financial guaranty insurance on asset-backed securities and municipal bonds. FSA was the first insurance company organized to insure asset-backed obligations. FSA has been a leading insurer of asset-backed obligations, based on number of transactions insured, since its organization in 1985. In 1990, FSA expanded the focus of its business to include writing financial guaranty insurance of municipal obligations and has since become a major insurer of municipal bonds.
FSA writes financial guaranty insurance that typically guarantees scheduled payments on an issuer's obligations. In the case of a default on these payments, FSA is generally required to pay the principal, interest or other amounts due either in accordance with the original payment schedule or, at FSA's option, on an accelerated basis. The underwriting policy of FSA is to insure asset-backed and municipal obligations that would otherwise be investment grade without the benefit of FSA's insurance. The asset-backed obligations insured by FSA are generally issued in structured transactions backed by pools of assets such as residential mortgage loans, consumer or trade receivables, securities or other assets having an ascertainable cash flow or market value. The municipal obligations insured by FSA consist primarily of general obligation bonds, supported by the issuers' taxing power, and special revenue bonds and other special obligations of state and local governments, supported by the issuer's ability to impose and collect fees and charges for public services or specific projects.
Our business objective is to remain a leading insurer of asset-backed obligations and to become a more prominent insurer of municipal obligations. We believe that the demand for our financial guaranty insurance will grow over the long term as a result of the anticipated continuation of three trends:
o expansion of asset securitization outside the residential mortgage sector;
o growth in the insurance of municipal obligations due, in part, to the increased use of municipal bonds to finance repairs and improvements to the nation's infrastructure and the increased municipal bond purchases by individuals who generally purchase insured obligations; and
o increased volume of new domestic municipal bonds that are insured, insurance penetration having already grown every year since 1986 to reach 50.8% in 1998, according to published sources.
FSA Holdings or its subsidiaries maintain offices in New York City, San Francisco, Dallas, London, Paris, Madrid, Sydney, Tokyo, Singapore and Bermuda. In addition to our domestic business, we pursue international opportunities and currently operate in the European and Pacific Rim markets. We were the first financial guaranty insurance company to insure obligations in international markets.
We expect to continue to emphasize a diversified insured portfolio characterized by insurance of both asset-backed and municipal obligations, with a broad geographic distribution and a variety of revenue sources and transaction structures.
FSA's insurance financial strength is rated "Aaa" by Moody's Investors Service, Inc. FSA's insurer financial strength is rated "AAA" by Standard & Poor's Ratings Services ("S&P") and Standard and Poor's
(Australia) Pty. Ltd. FSA's claims-paying ability is rated "AAA" by Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc.
FSA is licensed to engage in the financial guaranty insurance business in all 50 states, the District of Columbia and Puerto Rico.
Our principal executive offices are located at 350 Park Avenue, New York, New York 10022. The telephone number at that location is (212) 826-0100.
USE OF PROCEEDS
Unless otherwise stated in the prospectus supplement, we will use the net proceeds from the sale of the securities for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and earnings to combined fixed charges and preferred stock dividends for FSA Holdings for the periods indicated. Earnings represent consolidated earnings before income taxes and fixed charges. Fixed charges consist of interest and one third of rental expense which is representative of the interest factor for this rental expense. We had no capitalized interest for the periods presented.
Years Ended December 31,
--------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Ratio of earnings to
fixed charges......... 51.2 70.0 33.9 21.2 14.3
Ratio of earnings to
combined fixed
charges and preferred
stock dividends....... 51.2 70.0 33.9 21.2 14.3
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DESCRIPTION OF DEBT SECURITIES
The following description provides general terms that may apply to our debt securities and summarizes material provisions of the indentures. The prospectus supplement relating to any debt securities offered will describe the particular terms of those debt securities and may vary the terms of the indenture for that series.
The summary below does not restate the indentures in their entirety. We urge you to read the indentures because they, and not this description, define your rights as holders of the debt securities. We have made copies of the indentures available as described under the heading "Where You Can Find More Information" below.
Ranking; Issuance in Series; Tax Considerations
The debt securities will be our direct and unsecured obligations and will be either senior debt securities or subordinated debt securities. The senior debt securities will be issued under an existing senior indenture, as supplemented from time to time, between FSA Holdings and First Union National Bank, as trustee. The subordinated debt securities will be issued under a subordinated indenture, as supplemented from time to time, between FSA Holdings and a trustee to be named in the prospectus supplement. The senior indenture and the subordinated indenture are collectively referred to as the indentures.
The senior debt securities will rank equally and ratably with all of our other unsecured and unsubordinated obligations. The subordinated debt securities will be subordinate and junior in right of payment to the extent and in the manner set forth in the subordinated indenture to all of our senior debt. As of December 31, 1998, we had $230 million of outstanding senior debt.
We are a non-operating holding company and most of our assets are owned by our subsidiaries. As a result, we rely primarily on dividends or other payments from our subsidiaries to pay principal and interest on our outstanding debt obligations. Accordingly, the debt securities will be effectively subordinated to all existing and future liabilities, including debt obligations, of our subsidiaries. The principal liabilities of our subsidiaries relate to outstanding financial guarantee insurance policies. In addition, as of December 31, 1998, subsidiary debt consisted of $120 million of surplus notes owed to FSA Holdings. Furthermore, the payment of dividends or other amounts by FSA, our insurance company subsidiary, is limited under the applicable insurance laws and regulations of the State of New York.
Neither indenture limits the total amount of debt securities that we may issue under it, and we may issue debt securities under each indenture up to the aggregate principal amount authorized by our board of directors from time to time. Except as may be described in a prospectus supplement, neither the indentures nor the debt securities limit the amount of other secured or unsecured debt that we may incur or issue.
We may issue debt securities in one or more separate series of senior debt securities and/or subordinated debt securities. The prospectus supplement relating to an offering of a particular series of debt securities will specify the particular amounts, prices and terms of those debt securities. These terms may include:
o the title of the debt securities;
o any limit upon the total principal amount of the debt securities;
o the date or dates on which the principal of the debt securities is payable;
o the rate or rates at which the debt securities bear interest, if any, or the method by which that rate is determined, the date or dates from which interest accrues, the interest payment dates on which any interest is payable, our right, if any, to defer or extend an interest payment date, and the record dates for the determination of holders to whom interest is payable;
o the place or places where the principal and any interest on the debt securities is payable;
o the price or prices at which, the period or periods within which and the terms and conditions upon which the debt securities may be redeemed, in whole or in part, at our option, pursuant to any sinking fund or otherwise;
o our obligation, if any, to redeem, purchase or repay the debt securities pursuant to any sinking fund or analogous provisions or at the option of a holder and the price or prices at which and the period
or periods within which, the currency, currencies, currency unit or currency units in which, and the terms and conditions upon which the debt securities will be redeemed, purchased or repaid, in whole or in part, pursuant to that obligation;
o if other than denominations of $1,000 and any integral multiple of $1,000, the denominations in which any debt securities are issuable;
o if other than in U.S. Dollars, the currency, currencies, currency unit or currency units in which the principal of, and premium and interest, if any, on, the debt securities is payable, or in which the debt securities are denominated;
o whether the debt securities are issued in whole or in part in the form of one or more global securities and the depositary with respect to those global securities and the circumstances under which those global securities may be registered for transfer or exchange, or authenticated and delivered, in the name of a person other than the depositary or its nominee;
o the additions, modifications or deletions, if any, in the events of default or our covenants specified in the indenture;
o if other than the principal amount of a debt security, the portion of the principal amount of the debt securities that is payable upon declaration of acceleration of the maturity of that debt security or provable in bankruptcy;
o if the amount of payments of principal of, or premium or interest, if any, on, the debt securities may be determined by reference to an index, formula or other method, the manner in which those amounts will be determined and any commodities, currencies, currency units or indices, value, rate or price relevant to that determination;
o whether defeasance and/or covenant defeasance applies to the debt securities, as more fully described below under the heading "--Defeasance or Covenant Defeasance";
o the relative degree, if any, to which the debt securities are senior to or subordinated to other series of debt securities in right of payment;
o the terms of any right to convert or exchange the debt securities into or for our common stock or preferred stock;
o any other terms of the debt securities not inconsistent with the provisions of the applicable indenture; and
o any trustees, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the debt securities. (Section 2.03).
Debt securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. Important Federal income tax consequences and special considerations applicable to any series of debt securities will be described in the prospectus supplement. The prospectus supplement will also contain any special Federal income tax, accounting or other information relating to certain other kinds of debt securities that may be offered, including debt securities linked to an index or payable in currencies other than U.S. Dollars.
Denominations, Registration, Payment and Transfer
The debt securities will be issuable only in registered form without coupons. In the absence of any other specification in the prospectus supplement, a series of debt securities will be issued in denominations of $1,000 and any integral multiple of $1,000.
Debt securities of any series may be exchanged for debt securities of the same series in other authorized denominations, in an equal aggregate principal amount. Debt securities may also be presented for registration of transfer, and the transferee or transferees will receive new debt securities of the same series in authorized denominations in an equal aggregate principal amount. Debt securities to be exchanged or transferred must be presented at the office of the registrar or at the office of any transfer agent designated by us for that purpose with respect to any series of debt securities. Debt securities presented for exchange or registration of transfer must be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in a form satisfactory to us and the trustee duly executed by, the holder of these debt securities or his attorney who has been duly authorized in writing. We may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer. We will not assess a service charge.
We will appoint the trustees as registrars and paying agents under the indentures. We may at any time designate additional transfer agents or paying agents with respect to any series of debt securities or from time to time change those designations or approve a change in their locations.
We are not required to exchange or register a transfer of (a) any debt securities of any series for a period of 15 days preceding the first mailing of notice of redemption for those series to be redeemed, or (b) any debt securities selected, called or being called for redemption except for the portion of any debt security to be redeemed in part, which is not redeemed.
The payment of principal of, and premium and interest, if any, on, debt securities will be made at the office of the trustee for those debt securities in the City of New York or at the office of a paying agent or paying agents that we may designate from time to time. At our option, however, we may pay any interest by check mailed to the address of the person entitled to it as that address appears in the register for those debt securities. The payment of any interest on debt securities will be made to the person in whose name that debt security is registered at the close of business on any record date for that interest, except in the case of defaulted interest.
Global Debt Securities
Unless otherwise specified in a prospectus supplement for a particular series of debt securities, each series of debt securities will be issued in whole or in part in global form that will be deposited with, or on behalf of, a depository identified in the prospectus supplement relating to that series. Global securities will be registered in the name of the depository, which will be the sole direct holder of the global securities. Any person wishing to own a debt security must do so indirectly through an account with a broker, bank or other financial institution that, in turn, has an account with the depository.
Special Investor Considerations for Global Securities. Our obligations with respect to the debt securities, as well as the obligations of each trustee, run only to persons who are registered holders of debt securities. For example, once we make payment to the registered holder, we have no further responsibility for that payment even if that recipient is legally required to pass the payment along to an individual investor but fails to do so. As an indirect holder, an investor's rights relating to a global security will be governed by the account rules of the investor's financial institution and of the depository, as well as general laws relating to transfers of debt securities.
An investor should be aware that when debt securities are issued in the form of global securities:
o the investor cannot have debt securities registered in his or her own name;
o the investor cannot receive physical certificates for his or her interest in the debt securities;
o the investor must look to his or her bank or brokerage firm for payments on the debt securities and protection of his or her legal rights relating to the debt securities;
o the investor may not be able to sell interests in the debt securities to some insurance companies or other institutions that are required by law to hold the physical certificates of debt securities that they own;
o the depository's policies will govern payments, transfers, exchanges and other matters relating to the investor's interest in the global security. Neither FSA Holdings nor the trustees have any responsibility for any aspect of the depository's actions or for its records of ownership interests in the global security, and neither FSA Holdings nor the trustees supervise the depository in any way; and
o the depository will usually require that interests in a global security be purchased or sold within its system using same-day funds.
Special Situations When the Global Security Will Be Terminated. In a few special situations described below, the global security will terminate and interests in it will be exchanged for physical certificates representing debt securities. After that exchange, the choice of whether to hold debt securities directly or indirectly through an account at an investor's bank or brokerage firm will be up to the investor. In that event, investors must consult their banks or brokers to find out how to have their interests in debt securities transferred to their own names so that they may become direct holders.
The special situations where a global security is terminated are:
o when the depository notifies us that it is unwilling, unable or no longer qualified to continue as depository, unless a replacement is named;
o when an event of default on the debt securities has occurred and has not been cured; or
o when and if we decide to terminate a global security.
A prospectus supplement may list situations for terminating a global security that would apply only to a particular series of debt securities. When a global security terminates, the depository is solely responsible for deciding the names of the institutions that will be the initial direct holders. Unless otherwise provided in a prospectus supplement, debt securities will be issued in denominations of $1,000 and integral multiples of $1,000, and will be issued in registered form only, without coupons.
Covenants of FSA Holdings
FSA Holdings' principal covenants under the indentures relate to limitations on liens, restrictions on stock dispositions and maintenance of corporate existence. The following summarizes these covenants.
Limitations on Liens. Under the senior indenture, so long as senior debt securities are outstanding, neither we nor any of our subsidiaries will be allowed to, directly or indirectly, create, issue, incur or guarantee any indebtedness for borrowed money which is secured by any mortgage, pledge, lien, security interest or other encumbrance of any nature on any of the present or future capital stock of any Restricted Subsidiary. However, we may take these actions if the senior debt securities then outstanding and, if we so elect, any of our other indebtedness ranking at least equally with the senior debt securities are secured equally and ratably
with, or prior to, that other secured debt so long as it is outstanding. This prohibition also applies to guarantees of any indebtedness for borrowed money which are secured by any mortgage, pledge, lien, security interest or other encumbrance of any nature on any of the present or future capital stock of any company, other than FSA Holdings, having direct or indirect control of any Restricted Subsidiary. (Section 3.06)
"Restricted Subsidiary", as defined in the indentures, means FSA or any successor to all or substantially all of its business, provided that the successor is a subsidiary of FSA Holdings. A "subsidiary" is a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by FSA Holdings and/or one or more of its subsidiaries.
Limitations on Disposition of Stock of Restricted Subsidiaries. Under the senior and subordinated indentures, so long as debt securities are outstanding, we will not, and will not permit any subsidiary to, sell, transfer or otherwise dispose of any shares of capital stock of any Restricted Subsidiary except for:
o a sale, transfer or other disposition of any capital stock of any Restricted Subsidiary to a wholly owned subsidiary of FSA Holdings or that subsidiary;
o a sale, transfer or other disposition of the entire capital stock of any Restricted Subsidiary for at least fair value; or
o a sale, transfer or other disposition of the capital stock of any
Restricted Subsidiary for at least fair value if, after giving
effect to it, we and our subsidiaries would own more than 80% of the
issued and outstanding voting stock of that Restricted Subsidiary.
(Section 3.07)
For the purposes of this limitation, our board of directors acting in good faith will determine what constitutes fair value.
Limitations on Consolidation, Merger, Sale or Conveyance. Under the senior and subordinated indentures, so long as debt securities are outstanding, we will not consolidate with or merge into any other corporation or convey, transfer or lease our properties and assets as an entirety or substantially as an entirety to any person, unless:
o the successor or purchaser is a corporation organized and existing under the laws of the United States of America, any State of the United States of America or the District of Columbia;
o the corporation formed by the consolidation or into which we have been merged, or which acquired that property, expressly assumes the due and punctual payment of the principal of, and any premium and interest on all the debt securities under that indenture, as well as the due and punctual performance and observance of all of our covenants and conditions under that indenture; and
o immediately after giving effect to that transaction, no event of
default under the applicable indenture, and no event which, after
notice or lapse of time or both, would become an event of default
under the applicable indenture, has occurred and is continuing.
(Section 9.01)
Events of Default
Any one of the following events will constitute an event of default with regard to any series of debt securities under an indenture:
(a) default continued for 30 days in payment of any installment of interest on any of the debt securities of that series when due and payable; or
(b) default in payment of all or any part of the principal on any of the debt securities of that series when due and payable either at maturity, upon any redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund instalment as and when the same becomes due and payable by the terms of the debt securities of that series; or
(d) default in the performance, or breach, of any of our covenants or warranties in respect of the debt securities of that series and continuance of that default or breach for a period of 60 days after written notice as provided in that indenture; or
(e) our failure to make any payment at maturity, including any applicable grace period, in respect of indebtedness in an amount in excess of $10,000,000, and that failure continues for a period of 10 days after written notice as provided in that indenture; or
(f) our default with respect to any indebtedness, which default results in the acceleration of indebtedness in an amount in excess of $10,000,000, without that indebtedness having been discharged or that acceleration having been cured, waived, rescinded or annulled for a period of 10 days after written notice as provided in that indenture; or
(g) the voluntary or involuntary bankruptcy, insolvency, or reorganization under any applicable law of FSA Holdings or any Restricted Subsidiary; or
(h) any other event of default provided in the supplemental indenture or resolution of our board of directors under which that series of debt securities is issued or in the form of debt security for that series. (Section 5.01)
Each indenture requires us to file with the trustee annually a written statement as to any defaults in the performance or fulfillment of any of our covenants, agreements or conditions contained in the indenture. (Section 3.05) Each indenture provides that if the trustee considers it in the interests of the holders of the debt securities of any series, the trustee may withhold notice to the holders of debt securities of that series of any default other than a default in the payment of principal of or interest on the debt securities of that series. (Section 5.11)
Either the trustee or a specified percentage of the holders of the debt securities may accelerate the maturity of the unpaid principal amount of and accrued interest on some or all of the debt securities, depending on the type of event of default which has occurred and is continuing. The table on the following page shows the percentage of holders required and the amount of securities which can be accelerated, for each type of event of default set forth above:
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Type of event of Percentage of holders required Principal and accrued
default specified above interest which may be
accelerated
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(a), (b) and (c) Not less than 25% in All debt securities of
principal amount of the debt that series then
securities of the affected outstanding
series then outstanding
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(d), with respect to Not less than 25% in All debt securities of
less than all series, principal amount of the debt the affected series
and (h), unless securities of all affected then outstanding
otherwise specified in series then outstanding,
the applicable voting as a single class
supplemental indenture
------------------------------------------------------------------------------------
(d), with respect to Not less than 25% in All debt securities
all series, (e), (f) principal amount of all debt then outstanding
or (g) securities outstanding under
the indenture, treated as one
class
------------------------------------------------------------------------------------
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If debt securities of any series are original issue discount debt securities, then only the amount of the principal of those debt securities then outstanding as may be specified in the terms of that series and any accrued interest on that specified principal amount may be accelerated.
A specified percentage of holders of debt securities may waive all defaults and annul and rescind a declaration of maturity of some or all of the debt securities if all payments other than the accelerated amounts have been made and all events of default have been cured, waived or otherwise remedied as provided in the applicable indenture. Any such waiver, annulment and rescission must occur before a judgment or decree for amounts due has been obtained or entered. The table below shows the percentage of holders required for each type of event of default set forth above, and the debt securities:
------------------------------------------------------------------------------------
Type of event of Percentage of holders required Debt Securities Subject
default specified above to Waiver, Annulment
and Rescission
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(a), (b) and (c) Holders of a majority in All debt securities of
aggregate principal amount of that series then
the debt securities of the outstanding
affected series, voting as a
separate class, then
outstanding
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(d), with respect to Holders of a majority in All debt securities of
less than all series, aggregate principal amount of the affected series
and (h), unless all affected debt securities then outstanding
otherwise specified in then outstanding, voting as a
the applicable single class
supplemental indenture
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(d), with respect to Holders of a majority in All debt securities
all series, (e), (f) aggregate principal amount of then outstanding
or (g) the debt securities of all
series then outstanding,
voting as a single class
------------------------------------------------------------------------------------
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It is not necessary that payments of principal due as a result of acceleration be paid or that the event of default caused by non-payment of the principal due as a result of acceleration be cured, waived or otherwise remedied in order to for the applicable holders to rescind and annul a declaration of acceleration of the maturity of the debt securities of any series as provided above.
Depending on the nature of the default, either the holders of a majority in principal amount of the outstanding debt securities of all series under the applicable indenture, voting as a single class, or the holders of a majority in principal amount of the outstanding debt securities of the affected series may waive an event of default and its consequences before declaring the acceleration of maturity of the debt securities of any series. However, the consent of each security holder affected is required in order to waive a default in the payment of the principal of or interest on any debt securities or any covenant or provision of the indenture which specifically requires the consent of the holder of each debt security affected.
Except for the trustee's duty during an event of default to act with the required standard of care, the trustee is under no obligation to exercise any of the trusts or powers vested in it by that indenture at the request, order or direction of any of the holders of debt securities, unless those holders have offered the trustee reasonable indemnity. (Sections 6.01 and 6.02) Subject to these provisions for indemnification, the holders of a majority in principal amount of the debt securities of each series affected, voting as a separate class, may direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee with respect to the debt securities of that series. (Section 5.09)
No holder of debt securities of any series will have any right by virtue of either indenture to institute any legal action or proceeding with respect to that indenture, unless
o that holder has previously given to the trustee written notice of a continuing default,
o the holders of not less than 25% in principal amount of the debt securities of that series then outstanding have made written request on the trustee to institute such action or proceeding and have offered to the trustee any reasonable indemnity that the trustee may require relating to their request,
o the trustee fails to institute the requested proceeding within 60 days and
o no direction inconsistent with such written request has been given to the trustee by the holders of a majority in principal amount of the debt securities of such series then outstanding. (Section 5.06)
These limitations do not apply to a suit for enforcement of payment of the principal of or interest on a debt security on or after the respective due dates. (Section 5.07)
Defeasance and Covenant Defeasance
The indentures contain a provision that, if made applicable to any series of debt securities, permits us to elect, subject to certain conditions:
o to be discharged from our obligations with respect to the debt securities of that series, subject to limited exceptions ("defeasance") and/or
o to be released from our obligations with respect to that series of debt securities under the covenant in the indentures relating to limitations on disposition of stock of Restricted Subsidiaries and, in the case of the senior indenture, also the covenant relating to limitations on liens ("covenant defeasance").
To make either of these elections, we must irrevocably deposit with the trustee as trust funds monies, United States Government Obligations or a combination of the two sufficient, without reinvestment, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of and interest on the outstanding debt securities of that series on the maturity of that principal or interest. (Sections 13.01 through 13.04)
Each indenture provides that, to effect defeasance or covenant defeasance, we must deliver to the trustee an opinion of counsel stating that defeasance or covenant defeasance, as applicable, will not cause the holders of the debt securities to recognize income, gain or loss for Federal income tax purposes. The opinion must also state that holders will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if defeasance or covenant defeasance had not occurred. In addition, in the case of defeasance, that opinion of counsel must state that a private letter ruling or a general revenue ruling to the same effect has been issued by the United States Internal Revenue Service or state that since the date of the applicable indenture there has been a change in the applicable Federal income tax law or the interpretation of the applicable Federal income tax law to the same effect. (Section 13.04)
In addition to the requirements described above, in order to effect defeasance or covenant defeasance under the subordinated indenture:
o no default in the payment of principal of, or premium or interest, if any, on, any senior debt can have occurred and be continuing,
o no event of default with respect to senior debt can have occurred and be continuing and have resulted in that senior debt becoming or being declared due and payable prior to the date it would have become due and payable.
Modification and Waiver
Each indenture provides that FSA Holdings and the trustee may enter into supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of that indenture or of modifying in any manner the rights of the holders of the debt securities of that series. The consent of the holders of not less than a majority in principal amount of the debt securities at the time outstanding of all series affected by the proposed additions or changes is required for any such supplemental indenture, except that the consent of the holder of each debt security is required in order to:
o extend the final maturity of any debt security,
o reduce the principal amount of any debt security,
o reduce the rate or extend the time of payment of interest on any debt security,
o reduce any amount payable on redemption of any debt security,
o reduce the amount of the principal of an original issue discount debt security that would be due and payable upon an acceleration of the maturity of that debt security or the amount of that debt security provable in bankruptcy,
o impair or affect the right of any holder to institute suit for the payment of any debt security, if the debt securities provide for those rights,
o impair or affect any right of repayment of any debt security at the option of the holder or
o reduce the percentage of debt securities of any series, the consent
of the holders of which is required for any supplemental indenture.
(Section 8.02)
In addition, without the consent of the holders of any of the debt securities issued under that indenture, FSA Holdings and the trustee may enter into supplemental indentures to, among other things, cure any ambiguity or to correct or supplement any defective or inconsistent provision or to make other provisions in regard to matters or questions arising under the indenture or under any supplemental indenture as we may deem necessary or desirable and which do not adversely affect the interests of the holders of the debt securities.
The holders of at least a majority in principal amount of the debt securities of all series outstanding under an indenture voting as a class may waive compliance by us with the covenants contained in that indenture relating to limitations on liens, limitations on dispositions of stock of Restricted Subsidiaries and corporate existence. (Section 3.09)
Subordination under the Subordinated Indenture
To the extent provided in the subordinated indenture, payments of principal, premium and interest, if any, on all of the subordinated debt securities we issue will be subordinate in right of payment to the prior payment of all amounts due and payable in respect of all senior debt. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of FSA Holdings, the holders of the senior debt will first be entitled to receive payment in full of principal of, and premium and interest, if any, on, the senior debt before the holders of subordinated debt securities will be entitled to receive or retain any payment in respect of the principal of, and premium or interest, if any, on, the subordinated debt securities. (Sections 14.01 and 14.02)
If the maturity of any subordinated debt securities is accelerated, the holders of all senior debt outstanding at the time of that acceleration will first be entitled to receive payment in full of all amounts due on the senior debt before the holders of subordinated debt securities will be entitled to receive any payment upon the principal of, or premium or interest, if any, on, the subordinated debt securities. (Section 14.03)
No payments on account of principal of, or premium or interest, if any, on, the subordinated debt securities may be made if there shall have occurred and be continuing a default in any payment with respect to senior debt, or an event of default with respect to any senior debt resulting in the acceleration of the maturity of that senior debt, or if any judicial proceeding shall be pending with respect to that default. (Section 14.04)
The subordinated indenture defines "senior debt" as the principal of, and premium and interest, if any, on, Debt, as defined in the subordinated indenture, whether incurred on or prior to the date of the subordinated indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that those obligations are not superior in right of payment to the subordinated debt securities or to the other Debt which ranks equally with, or is subordinated to, the subordinated debt securities; provided, however, that senior debt does not include:
o any of our Debt which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Code was without recourse to us,
o any of our Debt to any of our subsidiaries,
o Debt to any of our employees,
o any liability for taxes,
o indebtedness or monetary obligations to trade creditors or assumed by us or any of our subsidiaries in the ordinary course of business in connection with the obtaining of goods, materials or services and
o the subordinated debt securities.
For the purposes of the definition of senior debt, interest on Debt includes any interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether or not that claim for post-petition interest is allowed in that proceeding.
The subordinated indenture places no limitation on the amount of additional senior debt that may be incurred by us. We may from time to time incur additional indebtedness constituting senior debt.
The subordinated indenture provides that the foregoing subordination provisions, insofar as they relate to any particular issue of subordinated debt securities, may be changed prior to that issuance. Any change will be described in the prospectus supplement relating to those subordinated debt securities.
Conversion or Exchange
The debt securities of any series may be convertible or exchangeable into common stock or preferred stock registered under the registration statement relating to this prospectus. The specific terms and conditions on which debt securities of any series may be so converted or exchanged will be set forth in the applicable prospectus supplement. Those terms may include the conversion or exchange price, provisions for conversion or exchange, either mandatory, at the option of the holder, or at our option, and provisions under which the number of shares of common stock or other securities to be received by the holders of debt securities would be calculated as of a time and in the manner stated in the applicable prospectus supplement.
DESCRIPTION OF COMMON STOCK
We are authorized to issue up to 200,000,000 shares of common stock. At May 20, 1999, 31,533,781 shares of our common stock were outstanding. This number of shares outstanding includes shares owned by a trust on our behalf and excludes 742,520 shares of treasury stock.
The following description of our common stock does not purport to be complete. It does not give full effect to the provisions of statutory or common law applicable to securities like our common stock. The description is qualified in its entirety by reference to our certificate of incorporation and by-laws, which have been incorporated by reference as exhibits to the registration statement of which this prospectus is a part.
The amount of dividends we pay in the future will be reviewed periodically by our board of directors in light of our earnings, financial condition and capital and other cash requirements. It is the policy of our board of directors that we retain an adequate portion of our earnings to support the growth of our business. We cannot assure you that any dividends will be paid.
Most of our operations are conducted through FSA and thus our ability to pay dividends is dependent on FSA's financial condition, results of operations, cash requirements and other related factors. FSA is also subject to restrictions contained in the insurance laws and related regulations of New York and other states.
We will ordinarily be required to withhold United States Federal income taxes in the amount of 30% of any dividends paid to non-United States shareholders who are not subject to United States Federal income taxation, unless a tax treaty between the United States and the country of the shareholder's residence provides for withholding at a reduced rate.
Our common stock is traded on the New York Stock Exchange under the symbol "FSA". The transfer agent for our common stock is The Bank of New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
As may be specified in a prospectus supplement, we may issue stock purchase contracts obligating holders to purchase from us, and us to sell to the holders, a number of shares of our common stock at a future date or dates. The stock purchase contracts may be issued separately or as part of stock purchase units consisting of a stock purchase contract and an underlying debt or preferred security covered by this prospectus or a U.S. Treasury security. The holder of the unit may be required to pledge the debt or preferred security or U.S. Treasury security to secure its obligations under the stock purchase contract. The prospectus supplement will specify the material terms of the stock purchase contracts, the stock purchase units and any applicable pledge or depository arrangements, including one or more of the following:
o The stated amount that a holder will be obligated to pay under the stock purchase contract in order to purchase our common stock.
o The settlement date or dates on which the holder will be obligated to purchase shares of our common stock. The prospectus supplement will specify whether the occurrence of any events may cause the settlement date to occur on an earlier date and the terms on which any early settlement would occur.
o The events, if any, that will cause our obligations and the obligations of the holder under the stock purchase contract to terminate.
o The settlement rate, which is a number that, when multiplied by the stated amount of a stock purchase contract, determines the number of shares of our common stock that we will be obligated to sell and a holder will be obligated to purchase under that stock purchase contract upon payment of the stated amount of that stock purchase contract. The settlement rate may be determined by the application of a formula specified in the prospectus supplement. If a formula is specified, it may be based on the market price of our common stock over a specified period or it may be based on some other reference statistic.
o Whether the stock purchase contracts will be issued separately or as part of stock purchase units consisting of a stock purchase contract and an underlying debt or preferred security with an aggregate principal amount or liquidation amount equal to the stated amount.
o The type of underlying security, if any, that is pledged by the holder to secure its obligations under a stock purchase contract. Underlying securities may be debt securities, preferred securities or U.S. Treasury securities.
o The terms of the pledge arrangement relating to any underlying securities, including the terms on which distributions or payments of interest and principal on any underlying securities will be retained by a collateral agent, delivered to us or be distributed to the holder.
o The amount of the contract fee, if any, that may be payable by us to the holder or by the holder to us, the date or dates on which the contract fee will be payable and the extent to which we or the holder, as applicable, may defer payment of the contract fee on those payment dates. The contract fee may be calculated as a percentage of the stated amount of the stock purchase contract or otherwise.
The descriptions of the stock purchase contracts, stock purchase units and any applicable pledge or depository arrangements in this prospectus and in any prospectus supplement are summaries of the material provisions of the applicable agreements. These descriptions do not restate those agreements in their entirety. We urge you to read the applicable agreements because they, and not the summaries, define your rights as holders of the stock purchase contracts or stock purchase units. We will make copies of the relevant agreements available as described under the heading "Where You Can Find More Information" below.
DESCRIPTION OF PREFERRED STOCK
General
Our restated certificate of incorporation vests our board of directors with authority to issue up to 20,000,000 shares of preferred stock from time to time in one or more series, as may be adopted by resolutions of the board of directors, and to fix, so far as not inconsistent with our restated certificate of incorporation:
o the rate and times at which, and the conditions under which, dividends shall be payable on shares of that series, and the status of those dividends as cumulative or non-cumulative and as participating or non-participating;
o the price or prices, times and terms and conditions, if any, upon which or at which shares of that series shall be subject to redemption;
o the rights, if any, of holders of shares of that series to convert those shares into, or to exchange those shares for, shares of other classes of our stock, or series of other classes of our stock, and the terms and conditions of that conversion or exchange;
o the rights of the holders of shares of that series upon the liquidation, dissolution or winding up of our affairs or upon any distribution of our assets;
o the limitations, if any, applicable while that series is outstanding, on the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for the purchase of, our common stock;
o the full or limited voting rights, if any, to be provided for the shares of that series; and
o any other designations, preferences and relative, participating, optional or other similar special rights, and qualifications, limitations or restrictions of or on the shares of that series.
All shares of our preferred stock will be identical and of equal rank except as otherwise provided in our restated certificate of incorporation or as may be fixed by our board of directors as described above. In any event, all shares of the same series will be identical and of equal rank except as to the times from which cumulative dividends, if any, on those shares will be cumulative. We may from time to time amend our
restated certificate of incorporation to increase or decrease the number of authorized shares of preferred stock.
The material terms of any series of preferred stock being offered by us will be described in the prospectus supplement relating to that series of preferred stock. That prospectus supplement may not restate the amendment to our restated certificate of incorporation or the board resolution that establishes a particular series of preferred stock in its entirety. We urge you to read that amendment or board resolution because it, and not the description in the prospectus supplement, will define your rights as a holder of preferred stock. The certificate of amendment to our restated certificate of incorporation or board resolution will be filed with the Secretary of State of the State of New York and with the SEC.
Dividend Rights. The preferred stock will be preferred over our common stock as to payment of dividends. Before any dividends or distributions on our common stock, other than dividends or distributions payable in common stock, shall be declared and set apart for payment or paid, the holders of shares of each series of preferred stock will be entitled to receive dividends when, as and if declared by our board of directors. We will pay those dividends either in cash, shares of common stock or preferred stock or otherwise, at the rate and on the date or dates indicated in the applicable prospectus supplement. With respect to each series of preferred stock, the dividends on each share of that series will be cumulative from the date of issue of the share unless some other date is set forth in the prospectus supplement relating to the series. Accruals of dividends will not bear interest.
Rights upon Liquidation. The preferred stock will be preferred over common stock as to our assets so that the holders of each series of preferred stock will be entitled to be paid, upon or voluntary or involuntary liquidation, dissolution or winding up and before any distribution is made to the holders of common stock, the amount set forth in the applicable prospectus supplement. However, in this case the holders of preferred stock will not be entitled to any other or further payment. If upon any liquidation, dissolution or winding up our net assets are insufficient to permit the payment in full of the respective amounts to which the holders of all outstanding preferred stock are entitled, our entire remaining net assets will be distributed among the holders of each series of preferred stock in an amount proportional to the full amounts to which the holders of each series are entitled.
Redemption. All shares of any series of preferred stock will be redeemable to the extent set forth in the prospectus supplement relating to the series. All shares of any series of preferred stock will be convertible into shares of common stock or into shares of any other series of preferred stock to the extent set forth in the applicable prospectus supplement.
Voting Rights. Except as indicated in the prospectus supplement, the holders of preferred stock shall be entitled to one vote for each share of preferred stock held by them on all matters properly presented to shareholders. The holders of common stock and the holders of all series of preferred stock will vote together as one class.
Most of our operations are conducted through FSA and thus our ability to pay dividends on any series of preferred stock is dependent on FSA's financial condition, results of operations, cash requirements and other related factors. FSA is also subject to restrictions contained in the insurance laws and related regulations of New York and other states.
Outstanding Preferred Stock
As of the date of this prospectus, we have outstanding 2,000,000 shares of Series A, non-dividend paying, voting, convertible preferred stock having an aggregate liquidation preference of $700,000. This preferred stock is convertible, at the option of the holder upon payment of the conversion price, into an equal number of shares of common stock, subject to anti-dilutive adjustment. The conversion price per share, subject to anti-dilutive adjustment, is $29.65. This preferred stock will be redeemed on May 13, 2004 if still outstanding on that date at a redemption price of $0.35 per share. The holder of this preferred stock is entitled to one vote per share of preferred stock, voting together as a single class with the holders of common stock on all matters upon which holders of common stock are entitled to vote. The holder of this preferred stock is not entitled to receive dividends or other distributions of any kind payable to our shareholders, except that, in the event of our liquidation, dissolution or winding up, that holder is entitled to receive out of our assets available for this purpose, before any distribution or payment is made to the holders of our common stock, liquidation payments in the amount of $0.35 per share. The holder of this preferred stock may not transfer this preferred stock, except to one of its majority-owned subsidiaries.
PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for a public offering by them. We may also sell securities to investors directly or through agents or dealers. The supplemental prospectus will include the names of any underwriters, agents or dealers to be used in the distribution.
The securities may be offered and sold at a fixed price or prices, which may be changed from time to time. They may also be offered and sold from time to time at market prices prevailing at the time of sale, at prices related to these prevailing market prices or at negotiated prices. We may also, from time to time, authorize underwriters acting as our agents to offer and sell the securities. A prospectus supplement will include the terms of these arrangements. If securities are sold through an underwritten offering, we will execute an underwriting agreement with an underwriter or underwriters. The prospectus supplement will include the names of the specific managing underwriter or underwriters and other underwriters, and the amount of securities to be underwritten by those underwriters. The prospectus supplement will also have the terms of the transaction, including commissions, discounts and any other compensation of the underwriters and dealers. The underwriters will use this prospectus and the prospectus supplement to sell the securities. The underwriting agreement will provide that the obligations of the underwriters are subject to specified conditions precedent and that the underwriters will be obligated to purchase all the securities if any are purchased.
In connection with the sale of securities, underwriters may be considered to have received compensation from us in the form of underwriting discounts or commissions. They may also receive commissions from purchasers of securities for whom they may act as agent. Underwriters may sell securities to or through dealers. These dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters, and they may also receive commissions from the purchasers for whom they may act as agent.
The prospectus supplement will set forth any underwriting compensation paid by us to underwriters or agents in connection with the offering of securities, as well as any discounts, concessions or commissions allowed by underwriters to participating dealers. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters under the Securities Act. Also any discounts
and commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and agents may be entitled under agreements with us to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by us for various expenses.
If we use a dealer in the sale of the securities, we will sell the securities to the dealer, as principal. The dealer may then resell these securities to the public at varying prices to be determined by the dealer at the time of resale. The prospectus supplement will name these dealers and the terms of these arrangements.
We may offer and sell the securities directly to institutional investors or others. These parties may be deemed to be underwriters under the Securities Act with respect to their resales. The prospectus supplement will include the terms of these transactions.
The securities may or may not be listed on a national securities exchange or a foreign securities exchange. The securities may not have an established trading market. No assurances can be given that there will be a market for any of the securities.
Agents, underwriters and dealers may be customers of, engage in transactions with or perform services for, us and our subsidiaries in the ordinary course of business.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the SEC utilizing a "shelf" registration process. Under this shelf process, we may from time to time sell any combination of the securities described in this prospectus in one or more offerings up to a total amount of $250,000,000 or the equivalent of this amount in foreign currencies or foreign currency units.
This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. We will file each prospectus supplement with the SEC. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading "Where You Can Find More Information" below.
You should rely only on the information provided in this prospectus and in any prospectus supplement, including the information incorporated by reference. We have not authorized anyone to provide you with different information. You should not assume that the information in this prospectus, or any supplement to this prospectus, is accurate at any date other than the date indicated on the cover page of these documents.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities Act that registers the distribution of these securities. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and the securities. For example, the indentures relating to
our debt securities are attached to the registration statement as exhibits. The rules and regulations of the SEC allow us to omit certain information included in the registration statement from this prospectus.
In addition, we file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy this information and the registration statement at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
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You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC. The address of that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York.
The SEC allows us to "incorporate by reference" information into this prospectus. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this prospectus, except for any information that is superseded by other information that is included in or incorporated by reference into this document.
This prospectus incorporates by reference the documents listed below that we have previously filed with the SEC. These documents contain important information about us.
o The description of our common stock in our Form 8-A that was filed on December 3, 1993
o Our Annual Report on Form 10-K, as amended, for the year ended December 31, 1998
o Our Proxy Statement on Schedule 14A that was filed on March 25, 1999
o Our Quarterly Report on Form 10-Q, as amended, for the fiscal quarter ended March 31, 1999
We incorporate by reference any additional documents that we may file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act between the date of this prospectus and the termination of the offering of the securities. These documents may include periodic reports, like Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as Proxy Statements. Any material that we subsequently file with the SEC will automatically update and replace the information previously filed with the SEC.
You can obtain any of the documents incorporated by reference in this prospectus from the SEC on its web site (http://www.sec.gov). You can also obtain these documents from us without charge by visiting our web site (http://www.FSA.com) or requesting them in writing or by telephone at the following address:
Peter E. Hoey, Managing Director, Investor Relations, or Robert S. Tucker, Vice President, Investor Relations Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, New York 10022
Telephone (212) 826-0100
LEGAL MATTERS
The legality of the securities will be passed upon for us by Bruce E. Stern, Esq., our General Counsel, and for any underwriters or agents by counsel to be named in the prospectus supplement. Bruce E. Stern beneficially owns 6,114 shares of our common stock, of which 2,100 shares are held in a trust for the benefit of his children, and has economic ownership of the equivalent of another 81,040 shares of our common stock.
EXPERTS
The consolidated financial statements and the related financial statement schedule of Financial Security Assurance Holdings Ltd. and Subsidiaries included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 1998, and the consolidated financial statements of Financial Security Assurance Inc. and Subsidiaries included as an exhibit to that Form 10-K, as amended, have been incorporated by reference in this prospectus in reliance on the reports of PricewaterhouseCoopers LLP, given on the authority of that firm as experts in accounting and auditing and incorporated in this prospectus by reference.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions:
Registration ................. $ 63,940
Trustee Fees ................. 7,500
Printing ..................... 30,000
Accounting Fees .............. 30,000
Legal Fees ................... 80,000
Rating Agency Fees ........... 60,000
Miscellaneous ................ 2,000
========
$273,440
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Item 15. Indemnification of Officers and Directors.
Pursuant to the New York Business Corporation Law (the "NYBCL"), we have the power to indemnify certain persons, including our officers and directors, under stated circumstances and subject to certain limitations in connection with services performed in good faith for us.
Under our by-laws, any person made or threatened to be made a party to any civil or criminal action or proceeding by reason of the fact that he or she or his or her testator or intestate is or was our director or officer, or served any other corporation or entity of any type or kind, domestic or foreign, in any capacity, at our request, shall be indemnified against judgments, fines, amounts paid in settlement and reasonable expenses, unless (a) his or her acts were committed in bad faith or were the result of his or her active and deliberate dishonesty and were material to such action or proceedings or (b) he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled.
The indemnification provided in the NYBCL is not exclusive of any other rights to which a director or officer may be entitled, whether contained in the certificate of incorporation or by-laws or, when authorized by the certificate of incorporation or the by-laws, a shareholders' or directors' resolution or an indemnification agreement, except that no indemnification may be made in any case if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled.
We maintain directors' and officers' liability insurance which insures against liabilities that our directors or officers may incur in such capacities.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1.1 Form of Underwriting Agreement.*
3.1 Restated Certificate of Incorporation.**
3.2 Amended and Restated By-Laws, as amended and restated on February
14, 1996 (incorporated by reference to Exhibit 5 to registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996).
4.1 Amended and Restated Trust Indenture dated as of February 24, 1999,
between the registrant and First Union National Bank, as Trustee.+
4.2 Form of Subordinated Indenture.+
4.3 Form of senior debt security (contained in Exhibit 4.1).++
4.4 Form of subordinated debt security (contained in Exhibit 4.2).++
4.5 Form of Purchase Contract Agreement (including as Exhibit A the Form
of the Security Certificate).++
5.1 Opinion of Bruce E. Stern, Esq.++
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends. **
23.1 Consent of PricewaterhouseCoopers LLP. **
23.2 Consent of Bruce E. Stern, Esq. (contained in Exhibit 5.1).
24.1 Power of Attorney.+
25.1 Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, as amended, of the trustee under the
Amended and Restated Trust Indenture filed as Exhibit 4.1 to this
registration statement.+
25.2 Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, as amended, of the trustee under the
Subordinated Indenture filed as Exhibit 4.2 to this registration
statement.*
* To be filed by a report on Form 8-K pursuant to Item 601 of Regulation
S-K.
** Filed herewith
+ Previously filed with initial registration filing.
++ Previously filed on Pre-Effective Amendment No. 1.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with the SEC by such registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in said Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee under subsection (a) of Section 310 of the Trust Indenture Act (the "Act") in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on August 5, 1999.
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
By: *
-------------------------------------
Robert P. Cochran
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
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registration statement has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
* Chairman of the Board, Chief August 5, 1999
-------------------------- Executive Officer and Director
Robert P. Cochran (principal executive officer)
* President and Director August 5, 1999
--------------------------
Roger K. Taylor
* Executive Vice President and August 5, 1999
-------------------------- Director
Sean W. McCarthy
* Chief Financial Officer August 5, 1999
-------------------------- (principal financial officer)
John A. Harrison
* Controller August 5, 1999
-------------------------- (principal accounting officer)
Jeffrey S. Joseph
* Director August 5, 1999
--------------------------
Robert N. Downey
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Signature Title Date
--------- ----- ----
* Director August 5, 1999
--------------------------
Anthony M. Frank
* Director August 5, 1999
--------------------------
Fudeji Hama
* Director August 5, 1999
--------------------------
K. Thomas Kemp
* Director August 5, 1999
--------------------------
David O. Maxwell
* Director August 5, 1999
--------------------------
James M. Osterhoff
* Vice Chairman August 5, 1999
and Director
--------------------------
James H. Ozanne
* Director August 5, 1999
--------------------------
Richard A. Post
* Director August 5, 1999
--------------------------
Howard M. Zelikow
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* Bruce E. Stern, by signing his name hereto, does hereby execute this registration statement on behalf of the directors and officers of Financial Security Assurance Holdings Ltd. indicated above by asterisks, pursuant to powers of attorney duly executed by such directors and officers and filed as Exhibit 24.1 to the registration statement.
By:
/s/ Bruce Stern -------------------- Bruce E. Stern Attorney-in-Fact |
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Under Section 807 of the Business Corporation Law of the State of New York
We, the undersigned, being the Chairman and Chief Executive Officer and Secretary of Financial Security Assurance Holdings Ltd., a corporation organized and existing under the Business Corporation Law of the State of New York (the "Corporation"), do hereby execute this Restated Certificate of Incorporation and do hereby certify as follows:
FIRST: The name of the Corporation is Financial Security Assurance Holdings Ltd. The name under which the Corporation was formed was American Financial Assurance Holdings Ltd.
SECOND: The Certificate of Incorporation of the Corporation was filed with the Department of State on April 20, 1984.
THIRD: The Certificate of Incorporation of the Corporation is hereby further amended, as authorized by Section 801 of the New York Business Corporation Law, to increase the aggregate number of shares which the Corporation shall have authority to issue from 53,000,000 shares of stock with a par value of $.01 per share to 220,000,000 shares of stock with a par value of $.01 per share. Such increase of authorized shares consists of (A) an increase in the number of shares of common stock with a par value of $.01 per share which the Corporation shall have authority to issue from 50,000,000 to 200,000,000, and (B) an increase in the number of shares of preferred stock with a par value of $.01 per share which the Corporation shall have authority to issue from 3,000,000 to 20,000,000. The Board of Directors remains expressly vested with authority to issue preferred stock from time to time, without further shareholder approval, having terms, limitations, rights and preferences, including voting, dividend, redemption, conversion, liquidation and other rights, as the Board of Directors by resolution shall determine.
FOURTH: To accomplish the aforesaid amendment, the introductory sentence and Sections A and B of Article IV of the Certificate of Incorporation of the Corporation are amended to state the following (Section C of Article IV remains in effect without any amendment thereto):
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have authority to issue is 220,000,000 shares of stock with a par value of $.01 per share.
A. Common Stock
Of the aggregate number of shares which the Corporation shall have authority to issue, 200,000,000 of such shares shall be designated as a single class of common stock with a par value of $.01 per share.
B. Preferred Stock
Of the aggregate number of shares which the Corporation shall have authority to issue, 20,000,000 of such shares shall be designated as preferred stock with a par value of $.01 per share. The Board of Directors is expressly vested with authority to issue preferred stock from time to time in one or more series, of such rank and with such distinctive serial designations as may be stated or expressed in the resolution or resolutions providing for the issue of such stock, and in such resolution or resolutions providing for the issue of shares of each particular series. The Board of Directors is also expressly vested with authority to fix the number of shares constituting such series and to fix:
(1) the rate and times at which, and the conditions under which, dividends shall be payable on shares of such series, and the status of such dividends as cumulative or non-cumulative and as participating or non-participating;
(2) the price or prices, times and terms and conditions, if any, upon which or at which shares of such series shall be subject to redemption;
(3) the rights, if any, of holders of shares of such series to convert such shares into, or to exchange such shares for, shares of other classes of stock, or series thereof, of the Corporation and the terms and conditions of such conversion or exchange;
(4) the rights of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation;
(5) the limitations, if any, applicable while such series is outstanding, on the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for the purchase of, common stock;
(6) the full or limited voting rights, if any, to be provided for shares of such series; and
(7) any other designations, preferences and relative, participating, optional or other such special rights, and qualifications, limitations or restrictions thereof, of shares of such series;
in each case, so far as not inconsistent with the provisions of this Certificate of Incorporation, as amended to the date of such resolution or resolutions, and to the full extent now or hereafter permitted by the laws of the State of New York. All shares of preferred stock shall be identical and of equal rank except as otherwise provided in this Certificate of Incorporation or as may be fixed by the Board of Directors as provided above; provided, however, that all shares of the same series shall be identical and of equal rank except as to the times from which cumulative dividends, if any, thereon shall be cumulative. The amount of the authorized preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares of stock of the Corporation entitled to vote, without any requirement that such increase or decrease be approved by a class vote on the part of the preferred stock or any series thereof, or on the part of any other class of stock of the Corporation, except as may be otherwise provided in this Certificate of Incorporation or in the above mentioned resolution or resolutions fixing the voting rights of any series of the preferred stock.
The Board of Directors is also expressly vested with authority to amend any of the provisions of any resolution or resolutions providing for the issue of any series of preferred stock, subject to any class voting rights of the holders of any series of preferred stock contained in this Certificate of Incorporation or in the resolution or resolutions providing for the issue of such series and subject to the requirements of the laws of the State of New York.
FIFTH: The Restated Certificate of Incorporation, as previously amended to include the terms and conditions of the Series A Preferred Stock, and as further amended by the foregoing, is hereby restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation (hereinafter referred to as the
"Corporation") is : "FINANCIAL SECURITY ASSURANCE HOLDINGS LTD."
ARTICLE II
PURPOSE
The purpose for which the Corporation is formed is to engage in any lawful act of activity for which corporations may be organized under the Business Corporation Law, but the Corporation is not formed to engage in any act or activity
requiring the consent or approval of any state official, department, board, agency or any other body without such consent or approval first being obtained.
ARTICLE III
OFFICE
The office of the Corporation is to be located in the City of New York, County of New York, State of New York.
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have authority to issue is 220,000,000 shares of stock with a par value of $.01 per share.
A. Common Stock
Of the aggregate number of shares which the Corporation shall have authority to issue, 200,000,000 of such shares shall be designated as a single class of common stock with a par value of $.01 per share.
B. Preferred Stock
Of the aggregate number of shares which the Corporation shall have authority to issue, 20,000,000 of such shares shall be designated as preferred stock with a par value of $.01 per share. The Board of Directors is expressly vested with authority to issue preferred stock from time to time in one or more series, of such rank and with such distinctive serial designations as may be stated or expressed in the resolution or resolutions providing for the issue of such stock, and in such resolution or resolutions providing for the issue of shares of each particular series. The Board of Directors is also expressly vested with authority to fix the number of shares constituting such series and to fix:
(1) the rate and times at which, and the conditions under which, dividends shall be payable on shares of such series, and the status of such dividends as cumulative or non-cumulative and as participating or non-participating;
(2) the price or prices, times and terms and conditions, if any, upon which or at which shares of such series shall be subject to redemption;
(3) the rights, if any, of holders of shares of such series to convert such shares into, or to exchange such shares for, shares of other classes of stock, or series thereof, of the Corporation and the terms and conditions of such conversion or exchange;
(4) the rights of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation;
(5) the limitations, if any, applicable while such series is outstanding, on the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for the purchase of, common stock;
(6) the full or limited voting rights, if any, to be provided for shares of such series; and
(7) any other designations, preferences and relative, participating, optional or other such special rights, and qualifications, limitations or restrictions thereof, of shares of such series;
in each case, so far as not inconsistent with the provisions of this Certificate of Incorporation, as amended to the date of such resolution or resolutions, and to the full extent now or hereafter permitted by the laws of the State of New York. All shares of preferred stock shall be identical and of equal rank except as otherwise provided in this Certificate of Incorporation or as may be fixed by the Board of Directors as provided above; provided, however, that all shares of the same series shall be identical and of equal rank except as to the times from which cumulative dividends, if any, thereon shall be cumulative. The amount of the authorized preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares of stock of the Corporation entitled to vote, without any requirement that such increase or decrease be approved by a class vote on the part of the preferred stock or any series thereof, or on the part of any other class of stock of the Corporation, except as may be otherwise provided in this Certificate of Incorporation or in the above mentioned resolution or resolutions fixing the voting rights of any series of the preferred stock.
The Board of Directors is also expressly vested with authority to amend any of the provisions of any resolution or resolutions providing for the issue of any series of preferred stock, subject to any class voting rights of the holders of any series of preferred stock contained in this Certificate of Incorporation or in the resolution or resolutions providing for the issue of such series and subject to the requirements of the laws of the State of New York.
C. Series A Preferred Stock
Section 1. Designation and Amount.
The shares of such series shall be designated as Series A Convertible Redeemable Preferred Stock, par value $0.01 per share (the "Series A Preferred
Stock"), and the number of shares constituting such series shall be two million (2,000,000).
Section 2. Dividends.
The holders of shares of Series A Preferred Stock shall not be entitled to receive any cash dividends on the shares of Series A Preferred Stock.
Section 3. Redemption; Limitations on Transfer.
(a) Mandatory Redemption. On May 13, 2004, to the extent (i) the Corporation shall have funds legally available therefor and (ii) the Corporation shall not have been rendered insolvent pursuant to the U.S. Bankruptcy Code, the Corporation shall redeem all remaining outstanding shares of Series A Preferred Stock, at a redemption price of $0.35 per share in cash without interest. If, for any reason, the Corporation shall fail to discharge its mandatory redemption obligations pursuant to this Section 3(a), such mandatory redemption obligations shall be discharged as soon as the Corporation is able to discharge such obligations. If and so long as any mandatory redemption obligations with respect to the shares of Series A Preferred Stock shall not be fully discharged, (i) no dividends (other than dividends in shares of the Common Stock) shall be paid or declared or set aside for payment or other distribution made upon the Common Stock or any other capital stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to payment upon liquidation, or any warrants, rights, calls or options exercisable for or convertible into Common Stock or any such capital stock, (ii) nor shall any shares of the Common Stock or shares of any other capital stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to payment upon liquidation, or any warrants, rights, calls or options exercisable for or convertible into Common Stock or any such capital stock be redeemed, purchased or otherwise acquired for any consideration (or any payment made to or available for a sinking or other similar fund for the redemption of any such shares) by the Corporation or any direct or indirect subsidiary of the Corporation (except, in the case of clause (ii), by conversion into or exchange for shares of capital stock of the Corporation ranking junior to the Series A Preferred Stock as to payment upon liquidation).
(b) Limitations on Transfer and Related Optional Redemption. The shares of Series A Preferred Stock may not be sold, assigned, pledged, hypothecated or otherwise transferred by Fund American Enterprise Holdings, Inc. ("FFC"); provided, however, that FFC may transfer shares of the Series A Preferred Stock to any majority-owned subsidiary of FFC which subsidiary shall be subject to the same restrictions on transfer as FFC; provided, further, that such subsidiary may hold shares of Preferred Stock only so long as such subsidiary remains a majority-owned subsidiary of FFC. Any such transfer in contravention of this provision (including the shares of Series A Preferred Stock held by a person which is no longer a majority-owned subsidiary of FFC) shall be void ab initio. If the holder attempts to transfer any shares of Series A Preferred Stock in contravention of this provision, the Corporation may, at its option,
call for redemption, in accordance with Section 3(c) hereof, all shares of Series A Preferred Stock which were proposed to be transferred, sold, hypothecated or assigned by the holder thereof at a redemption price of $0.35 per share.
(c) General Procedures for Redemption. At least 30 days but not more than 60 days prior to the date fixed for the redemption of shares of the Series A Preferred Stock, a written notice shall be given to each holder of record of shares of the Series A Preferred Stock to be redeemed by certified or registered mail in a postage prepaid envelope or by a nationally recognized overnight courier (appropriately marked for overnight delivery) addressed to such holder at its post office address as shown on the records of the Corporation (and shall be deemed given only upon the earlier of (i) the date when received by the holder and (ii) three days after the Corporation has sent such notice), notifying such holder of the election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (the "Redemption Date"), that the shares shall be deemed to be redeemed at 5:00 p.m., New York time, on such date and the redemption price, and calling upon such holder to surrender to the Corporation on the Redemption Date at the place designated in such notice its certificate or certificates representing the number of shares specified in such notice of redemption. Each notice of redemption shall be irrevocable. On or after the Redemption Date, upon surrender by each holder of its certificate or certificates for shares of the Series A Preferred Stock to be redeemed at the place designated in such notice the redemption price of such shares shall be paid in immediately available funds to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares, without cost to the holder thereof. From and after the Redemption Date (unless notice of redemption is not received by each holder of shares as aforesaid, or default shall be made by the Corporation in payment of the redemption price), all rights of the holders thereof as shareholders of the Corporation, except the right to receive the redemption price of such shares upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not be deemed to be outstanding for any purpose whatsoever.
(d) Shares Redeemed or Repurchased. Shares of the Series A Preferred Stock redeemed, repurchased or retired by the Corporation pursuant to the provisions of this Section 3 or surrendered to the Corporation upon conversion, shall thereupon be retired and may not be reissued as shares of the Series A Preferred Stock but shall thereafter have the status of authorized but unissued shares of the Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series of the Preferred Stock.
Section 4. Voting Rights.
Except as otherwise provided in Section 7 or as required by law, the holders of shares of the Series A Preferred Stock shall be entitled to vote, together with the holders of the Common Stock as a single class, on any matter on which the holders
of the Common Stock shall be entitled to vote, without discrimination, with one share of Series A Preferred Stock voting the number of shares of Common Stock it would then be convertible into.
Section 5. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or otherwise, the holders of shares of the Series A Preferred Stock shall be entitled to receive, in cash, out of the assets of the Corporation available for distribution to stockholders, the amount of Thirty-five Cents ($0.35) for each share of the Series A Preferred Stock before any distribution shall be made to the holders of shares of the Common Stock or any other capital stock of the Corporation ranking (as to any such distribution) junior to the Series A Preferred Stock. If upon any liquidation, dissolution or winding up of the Corporation, the assets distributable among the holders of shares of the Series A Preferred Stock and all other classes and series of preferred stock ranking (as to any such distribution) on a parity with the Series A Preferred Stock are insufficient to permit the payment in full to the holders of all such shares of all preferential amounts payable to all such holders, then the entire assets of the Corporation thus distributable shall be distributed ratably among the holders of the shares of the Series A Preferred Stock and such other classes and series of preferred stock ranking (as to any such distribution) on a parity with the Series A Preferred Stock in proportion to the respective amounts that would be payable per share if such assets were sufficient to permit payment in full.
(b) For purposes of this Section 5, a distribution of assets in any dissolution, winding up or liquidation shall not include (i) any consolidation or merger of the Corporation with or into any other corporation, (ii) any dissolution, liquidation, winding up or reorganization of the Corporation immediately followed by reincorporation of another corporation or (iii) a sale or other disposition of all or substantially all of the Corporation's assets to another corporation; provided, however, that, in each case, effective provision is made in the certificate of incorporation of the resulting and surviving corporation or otherwise for the protection of the rights of the holders of shares of the Series A Preferred Stock.
After the payment of the full preferential amounts provided for herein to the holders of shares of the Series A Preferred Stock, such holders shall be entitled to no other or further participation in the distribution of the assets of the Corporation.
Section 6. Conversion.
(a) Holders of shares of the Series A Preferred Stock shall have the right, exercisable at any time (and from time to time) from the later of (i) the issue date or (ii) November 13, 1994 until 5:00 p.m., New York time, on the Redemption Date, to convert all or any such shares of the Series A Preferred Stock for shares of the common stock, par value $0.01 per share ("Common Stock"), of the Corporation (calculated as to each conversion to the nearest 1/100th of a share), at the conversion
price of $29.65 per share of the Common Stock (the "Conversion Price"; equivalent to a conversion rate of one share of Common Stock for each share of the Series A Preferred Stock so converted (the number of shares of Common Stock issuable upon conversion being, the "Conversion Rate")), subject to adjustment as described below. In the case of shares of the Series A Preferred Stock called for redemption, conversion rights shall expire at the close of business on the last business day preceding the Redemption Date.
(b) Any holder of a share or shares of the Series A Preferred Stock electing to convert such share or shares thereof shall deliver the certificate or certificates therefor to the principal office of the Corporation, with the form of notice of election to convert as the Corporation shall prescribe fully completed and duly executed and (if so required by the Corporation or any conversion agent) accompanied by instruments of transfer in form satisfactory to the Corporation and to any conversion agent, duly executed by the registered holder or its duly authorized attorney, by wire transfer in immediately available funds of an amount equal to the Conversion Price per share multiplied by the number of shares so converted (the "Conversion Funds") and transfer taxes, stamps or funds therefor or evidence of payment thereof if required pursuant to Section 6(d) hereof. The conversion right with respect to any such shares shall be deemed to have been exercised at the date upon which the certificates therefor accompanied by such duly executed notice of election and instruments of transfer, the Conversion Funds and such taxes, stamps, funds, or evidence of payment shall have been so delivered. The Corporation shall, as promptly as practicable (and in any event within five business days) after such date of conversion, deliver to the record holder of shares of Series A Preferred Stock to be converted at such holder's address as the same appears on the stock register of the Corporation, a certificate for the number of full shares of Common Stock to which such holder shall be entitled as aforesaid and shall make payments in cash for any fractional shares as provided below.
(c) No fractional shares of the Common Stock shall be delivered upon conversion of the Series A Preferred Stock. If more than one share of the Series A Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of the Common Stock that shall be deliverable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Series A Preferred Stock so surrendered. Instead of any fractional shares of the Common Stock that would otherwise be deliverable upon conversion of any shares of the Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price for the Common Stock on the last business day preceding the date of conversion. The closing price for such day shall be the last reported sales price regular way or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices regular way, in either case on the New York Stock Exchange, or if the Common Stock is not listed or admitted to trading on such exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the
closing sale price of the Common Stock or in case no reported sale takes place, the average of the closing bid and asked prices, on NASDAQ, or if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on NASDAQ or any comparable system, the average of the closing bid and asked prices per share of Common Stock in the over-the-counter market as furnished by any New York Stock Exchange member firm that makes a market in the Common Stock selected by the Board of Directors of the Corporation for that purpose.
(d) If a holder converts a share or shares of the Series A Preferred Stock, the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the delivery of the Common Stock upon the exchange. The holder, however, shall pay to the Corporation the amount of any tax that is due (or shall establish to the satisfaction of the Corporation payment thereof) if the shares are to be delivered to a person other than such holder.
(e) All shares of Common Stock that may be delivered upon conversion of shares of the Series A Preferred Stock shall be validly issued, fully paid and nonassessable, free and clear of any liens or other encumbrances.
(f) If, after the date hereof, the Corporation, directly or indirectly, (i) pays a dividend, or makes any other distribution, on its Common Stock in shares of its Common Stock, (ii) subdivides the outstanding Common Stock into a greater number of shares (by reclassification or otherwise than by a dividend or distribution referred to in clause (i)) or (iii) combines the outstanding Common Stock into a lesser number of shares, in each such case, the Conversion Rate in effect at the record date for the dividend or distribution or the effective date of the subdivision or combination, will be adjusted so that, upon conversion of Series A Preferred Stock after the record date or effective date with respect to a specified number of shares of Common Stock, the holder will receive the number and kind of shares which the holder would have received if the holder had converted the Series A Preferred Stock with respect to that number of shares of Common Stock immediately before the first of those events and retained all the shares and other securities which the holder received as a result of each of those events.
(g)(i) In the event the Corporation shall, directly or indirectly, declare or pay any dividend (other than regular quarterly cash dividends, or dividends in the form of shares of Common Stock or other securities), or make any distribution in cash or property (other than shares of Common Stock or other securities), to holders of the Common Stock (whether in connection with a merger or consolidation in which the Corporation is the surviving or continuing corporation, exchange of securities, sale of assets, plan of liquidation, reorganization, restructuring, recapitalization or reclassification or otherwise), the Conversion Price shall be reduced by the amount of such dividend and/or distribution per share of Common Stock underlying the Series A Preferred Stock (except to the extent any such amount shall previously have been applied as an adjustment to the Conversion Price pursuant to this paragraph).
(ii) In the event the Corporation shall, directly or indirectly, issue any rights, warrants, options or other securities convertible into or exercisable for any underlying security ("Derivative Securities") to holders of the Common Stock (whether in connection with a merger or consolidation in which the Corporation is the surviving or continuing corporation, exchange of securities, sale of assets, plan of liquidation, reorganization, restructuring, recapitalization, reclassification or otherwise), the Conversion Price shall be reduced by an amount equal to the Value Per Share of the Common Stock. The "Value Per Share of the Common Stock" shall mean the value of the Derivative Securities issued in respect of one share of the Common Stock and shall be determined by an independent appraiser jointly retained and selected by the Corporation and the holder; the costs of the independent appraiser shall be borne equally by the Corporation, on the one hand, and the holder, on the other hand.
(iii) In the event that the Corporation shall, directly or indirectly, issue any capital stock or any other securities, in each case other than shares of Common Stock and Derivative Securities ("Non-Derivative Securities"), to holders of the Common Stock (whether in connection with a merger or consolidation in which the Corporation is the surviving or continuing corporation, exchange of securities, sale of assets, plan of liquidation, reorganization, restructuring, recapitalization, reclassification or otherwise) (each issuance, a "Specified Adjustment Event"), the holder shall have the right, upon conversion of such Series A Preferred Stock after the record date (or, if there is no record date, the effective date) for such Specified Adjustment Event, to receive, in addition to the number of shares of Common Stock to which it is entitled to receive upon such conversion, the kind and amount of any such Non-Derivative Securities that it would have owned or been entitled to receive immediately following the occurrence of such Specified Adjustment Event had such Series A Preferred Stock been converted immediately prior to such Specified Adjustment Event or record date, as the case may be.
(iv) Any Non-Derivative Securities to which the holder is entitled upon conversion of the Series A Preferred Stock shall be held by the Corporation for the pro rata benefit of the holders. The Corporation shall be entitled to any interest or other cash income earned or accrued in respect of any Non-Derivative Securities held for the benefit of a holder of a share of Series A Preferred Stock; provided, however, that any dividend, distribution or issuance of cash, property or securities in respect of any such Non-Derivative Securities (other than regular quarterly cash dividends or any other regular or periodic interest or similar payments) shall be treated in the same manner as dividends, distributions or issuances in respect of Common Stock hereunder. Any Non-Derivative Securities held for the benefit of the holder of one share of Series A Preferred Stock shall be distributed, upon conversion of such share of Series A Preferred Stock by the holder.
(h) In case any other corporate event or transaction of the Corporation, outside the ordinary course of business consistent with past practice, not specified in Section 6(f) or 6(g) occurs which equitably requires an antidilutive
adjustment to the Series A Preferred Stock, the Corporation and the holders shall consult with each other in good faith and mutually agree upon appropriate adjustments so that the property (including securities) to be received by a holder of Series A Preferred Stock upon conversion of the Series A Preferred Stock after the effective date of such event, shall be substantially similar, as nearly as practicable, to those to which a holder would have been entitled had such holder converted the Series A Preferred Stock held by such holder immediately prior to such event.
(i) The Conversion Price in effect at any time shall be subject to adjustment from time to time upon the happening of an event set forth in Section 6(f) and shall be equal to the Conversion Price immediately prior to such event multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to such event and the denominator of which is the Conversion Rate immediately after such event.
(j) No adjustment in the Conversion Rate shall be required until cumulative adjustments result in a concomitant change of 1% or more of the Conversion Price as existed prior to the last adjustment of the Conversion Rate; provided, however, that any adjustments that by reason of this Section 6(j) are not required to be made shall be carried forward and taken into account in the earlier of (i) any subsequent adjustment and (ii) conversion. All calculations under this Section 6 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment to the Conversion Rate shall be made for cash dividends.
(k) The Corporation may make such increases in the Conversion Rate (or decreases in the Conversion Price), in addition to those required by Sections 6(f), (g), (h) and (i) as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients thereof.
(l) In the event that:
(i) the Corporation takes any action that would require an adjustment in the Conversion Rate,
(ii) the Corporation declares or distributes any dividend, distribution, security, instrument or other rights to its shareholders (other than regular quarterly cash dividends) that would require an adjustment in the Conversion Rate pursuant to Section 6(g),
(iii) the Corporation consolidates or merges with, or transfers all or substantially all of its assets to, or makes any statutory exchange of securities with, another corporation or engages in any reorganization, restructuring, recapitalization, reclassification of capital stock or other similar transaction, or
(iv) there is a dissolution or liquidation or other winding up of the Corporation,
a holder may wish to convert some or all of the Series A Preferred Stock prior to the record date for, or the effective date of, the action or transaction so that it may receive the rights, warrants, securities or assets that a holder of shares of the Common Stock on that date may receive. Therefore, not later than 10 days prior to the earliest of the proposed record or effective date, as the case may be, or any other applicable date with respect to any of the foregoing actions or transactions (including the date, if any is to be fixed, as of which holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon any such merger, consolidations, reorganization, restructuring, recapitalization, reclassification, transfer, dissolution, liquidation or winding up) the Corporation shall give the holder a notice stating such proposed record or effective date, as the case may be, or such other applicable date. All notices to a holder of the Series A Preferred Stock shall be deemed given only upon the earlier of (i) the date when received by the holder or (ii) three days after the Corporation has sent such notice.
Section 7. Limitations. In addition to any other rights provided by applicable law, so long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote, or the written consent as provided by law, of the holders of at least two-thirds (2/3) of the outstanding shares of the Series A Preferred Stock, voting separately, modify, amend or rescind the preferences, rights or powers with respect to the Series A Preferred Stock so as to affect the Series A Preferred Stock adversely; but (except as otherwise required by applicable law) nothing herein contained shall require such a vote or consent (i) in connection with any increase in the total number of authorized shares of the Common Stock, or (ii) in connection with the authorization or increase of any class or series of shares of preferred stock. The provisions of this Section 7 shall not in any way limit the right and power of the Corporation to issue its currently authorized but unissued shares or bonds, notes, mortgages, debentures, and other obligations, and to incur indebtedness to banks and to other lenders.
Section 8. No Preemptive Rights.
No holder of shares of the Series A Preferred Stock shall possess any preemptive rights to subscribe for or acquire any unissued shares of capital stock of the Corporation other than the Common Stock (whether now or hereafter authorized) or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares of capital stock of the Corporation.
Section 9. Rank.
Unless otherwise provided in the Restated Certificate of Incorporation ("Certificate of Incorporation") or a Certificate of Amendment relating to a subsequent
series of preferred stock of the Corporation, the Series A Preferred Stock shall rank junior to all other series of the Corporation's preferred stock as to the payment and distribution of assets on liquidation, dissolution, or winding up, whether voluntary or involuntary, of the Corporation and senior to the Common Stock of the Corporation as to the foregoing.
ARTICLE V
AGENT FOR SERVICE OF PROCESS
The Secretary of State of the State of New York is designated as the agent of the Corporation upon whom process against the Corporation may be served. The address to which the Secretary of State shall mail a copy of any such process so served upon him is: Financial Security Assurance Holdings Ltd., 350 Park Avenue, New York, New York 10022-6022.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of shares of any class, whether now or hereafter authorized, and no holder of any other security issued by the Corporation, shall have any preemptive or preferential or other right of subscription to, or purchase of, any shares of any class or any other security of Corporation, whether now or hereafter authorized; nor shall any such holder have any preferential or other right to purchase any such shares of any such other security which may have been acquired by and may be held in the treasury of the Corporation; and all such holders shall have only such right, if any, to subscribe for or purchase the same, as the Board of Directors, in its discretion, may from time to time fix.
ARTICLE VII
LIMITATION OF LIABILITY OF DIRECTORS
No director will have any personal liability to the Corporation or its shareholders for damages for any breach of duty in the director's capacity as such, except that this provision will not eliminate or limit (i) the liability of any director if a judgment or other final adjudication adverse to him or her establishes that his or her acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled or that his or her acts violated Section 719 of the New York Business Corporation Law or (ii) the liability of any director for any act or omission prior to the adoption of this provision of the Certificate of Incorporation.
SIXTH: The foregoing restatement of the Corporation's Restated Certificate of Incorporation, as amended hereby, was authorized on May 13, 1999, by resolution of the Board of Directors of the Corporation and approved by resolution of the Shareholders of the Corporation.
IN WITNESS WHEREOF, Financial Security Assurance Holdings Ltd. has made this Restated Certificate of Incorporation and caused it to be signed by its Chief Executive Officer and Secretary, who affirm that the statements made herein are true under the penalties of perjury this 13th day of May, 1999.
/s/ Robert P. Cochran ------------------------------------ Robert P. Cochran, Chairman and Chief Executive Officer /s/ Bruce Stern ------------------------------------ Bruce E. Stern, Secretary |
Exhibit 12.1
Financial Security Assurance Holdings Ltd. Computation of the Ratio of Earnings to Fixed Charges and the Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(in thousands except for ratios)
The information appearing below presents historical consolidated financial results for the Company
Year Ended December 31,
-------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Earnings:
Income before income taxes $ 78,290 $ 75,042 $105,563 $129,548 $157,251
Interest Expense 536 57 2,166 5,325 10,625
Portion of rental expense
deemed to be interest (1) 1,024 1,030 1,042 1,077 1,173
Earnings $ 79,850 $ 76,129 $108,771 $135,950 $169,049
Fixed Charges:
Interest Expense $ 536 $ 57 $ 2,166 $ 5,325 $ 10,625
Portion of rental expense
deemed to be interest (1) 1,024 1,030 1,042 1,077 1,173
Fixed Charges (2) $ 1,560 $ 1,087 $ 3,208 $ 6,402 $ 11,798
Preferred Stock Dividends $ 0 $ 0 $ 0 $ 0 $ 0
Ratio of Earnings to Fixed Charges 51.2 70.0 33.9 21.2 14.3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 51.2 70.0 33.9 21.2 14.3
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(1) One third of rental expense is estimated to be representative of the interest factor.
(2) The Company had no capitalized interest for the periods presented.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Pre-Effective Amendment No. 2 to the Registration Statement of Financial Security Assurance Holdings Ltd. on Form S-3 (File No. 333-74165), relating to the shelf registration of $230,000,000 of debt securities, common stock, stock purchase contracts, stock purchase units and preferred stock, of:
1. Our report dated January 26, 1999, except for the restatements and reclassifications section in Note 2 as to which the date is August 4, 1999, on our audits of the consolidated balance sheets of Financial Security Assurance Holdings Ltd. and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998, and financial statement schedule which appear in Financial Security Assurance Holdings Ltd.'s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 1998, which report is included in Item 8 of the Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 1998.
2. Our report dated January 26, 1999 on our audits of the consolidated balance sheets of Financial Security Assurance Inc. and Subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholder's equity and cash flows for each of the three years in the period ended December 31, 1998, which report is included in exhibit 99 to the Annual Report on Form 10-K, as amended.
We also consent to the reference to our Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP ------------------------------- PricewaterhouseCoopers LLP August 5, 1999 |