-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
EnpCm2sUPDik6F88Nr0VUGwx9OqXVGzquMn+GOri2o1L7AlDt9lPPX/L053f2Hi7
qxGF/C6UNYvOj9Hoa7MCRg==
<SEC-DOCUMENT>0000950123-01-002909.txt : 20010402
<SEC-HEADER>0000950123-01-002909.hdr.sgml : 20010402
ACCESSION NUMBER: 0000950123-01-002909
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 18
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010330
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MBIA INC
CENTRAL INDEX KEY: 0000814585
STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351]
IRS NUMBER: 061185706
STATE OF INCORPORATION: CT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-09583
FILM NUMBER: 1585665
BUSINESS ADDRESS:
STREET 1: 113 KING ST
CITY: ARMONK
STATE: NY
ZIP: 10504
BUSINESS PHONE: 9142734545
MAIL ADDRESS:
STREET 1: 113 KING ST
CITY: ARMONK
STATE: NY
ZIP: 10504
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>y46810e10-k.txt
<DESCRIPTION>MBIA INC.
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2000.
Commission file number 1-9583
MBIA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Connecticut 06-1185706
(State of Incorporation) I.R.S. Employer Identification No.)
113 King Street, Armonk, New York 10504
(Address of principal executive offices) (Zip Code)
(914) 273-4545
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 15, 2001 was $7,595,925,423.00.
As of March 15, 2001, 98,815,213 shares of Common Stock, par value $1
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE. Portions of Registrant's Annual Report to
Shareholders for the fiscal year ended December 31, 2000 are incorporated by
reference into Parts I and II. Portions of the Definitive Proxy Statement of the
Registrant, which will be filed on or before April 9, 2001 are incorporated by
reference into Parts I and III.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (SS 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
<PAGE> 2
PART I
ITEM 1. BUSINESS
MBIA Inc. (the "Company") is engaged in providing financial guarantee
insurance and investment management and financial services to public finance
clients and financial institutions on a global basis. Financial guarantee
insurance provides an unconditional and irrevocable guarantee of the payment of
the principal of, and interest or other amounts owing on, insured obligations
when due. The Company conducts its financial guarantee business through its
wholly-owned subsidiary, MBIA Insurance Corporation ("MBIA Corp."). MBIA Corp.
is the successor to the business of the Municipal Bond Insurance Association
(the "Association") which began writing financial guarantees for municipal bonds
in 1974. MBIA Corp. is the parent of MBIA Insurance Corp. of Illinois ("MBIA
Illinois") and Capital Markets Assurance Corporation ("CapMAC"), both financial
guarantee companies that were acquired by MBIA Corp. MBIA Corp. also owns MBIA
Assurance S.A. ("MBIA Assurance"), a French insurance company, which writes
financial guarantee insurance in the countries of the European Community.
Generally, throughout the text, references to MBIA Corp. include the activities
of its subsidiaries, MBIA Illinois, MBIA Assurance and CapMAC. In September
1995, MBIA Corp. entered into a joint venture agreement with Ambac Assurance
Corporation for the purpose of jointly marketing financial guarantee insurance
outside the United States. On March 21, 2000, the two companies restructured the
joint venture. Under the restructuring, the companies agreed to begin marketing
and originating financial guarantee insurance outside the United States
independently, and also to continue to maintain certain reciprocal reinsurance
arrangements for international business until at least the end of 2001. The
Company believes that the restructuring of the joint venture with Ambac will not
result in any reduction in premiums written from international business,
although no assurances can be given that such a reduction will not occur.
Additionally, during the third quarter of 2000, the Company and Ambac dissolved
the four-way joint venture in Japan with Mitsui Marine and Fire Insurance Co
Ltd. and the Yasuda Fire and Marine Insurance Co. Ltd.
MBIA Corp. primarily insures obligations which are sold in the new
issue and secondary markets, or which are held in unit investment trusts ("UIT")
and by mutual funds. It also provides financial guarantees for debt service
reserve funds. As a result of the triple-A ratings assigned to insured
obligations, the principal economic value of financial guarantee insurance to
the entity issuing the obligations is the savings in interest costs between an
insured obligation and the same obligation on an uninsured basis. In addition,
for complex financings and for obligations of issuers that are not well-known by
investors, insured obligations receive greater market acceptance than uninsured
obligations.
MBIA Corp. issues financial guarantees for municipal bonds,
asset-backed and mortgage-backed securities, investor-owned utility bonds, bonds
issued by highly rated sovereign and sub-sovereign entities and collateralized
obligations of corporations and financial institutions, both in the new issue
and secondary markets The municipal obligations that MBIA Corp. insures include
tax-exempt and taxable indebtedness of states, counties, cities, utility
districts and other political subdivisions, as well as airports, higher
education and health care facilities and similar authorities. The asset-backed
or structured finance obligations insured by MBIA Corp. typically consist of
securities that are payable from or which are tied to the performance of a
specified pool of assets that have a defined cash flow, such as residential and
commercial mortgages, a variety of consumer loans, corporate loans and bonds,
trade and export receivables, equipment and real property leases and
infrastructure projects.
MBIA Corp. has a Triple-A financial strength rating from Standard and
Poor's Corporation ("S&P"), which it received in 1974; from Moody's Investors
Service, Inc. ("Moody's"), which it received in 1984; from Fitch IBCA, Duff &
Phelps ("Fitch"), which it received in 1995; and from Rating and Investment
Information, Inc. ("RII"), which it received in 1998. Obligations which are
guaranteed by MBIA Corp. are rated Triple-A primarily based on these
claims-paying ratings of MBIA Corp. Both S&P and Moody's have also continued the
Triple-A rating on MBIA Assurance, MBIA Illinois and CapMAC guaranteed bond
issues. The Triple-A ratings are important to the operation of the Company's
business and any reduction in these ratings could have a material adverse effect
on MBIA Corp.'s ability to compete and could have a material adverse effect on
the business, operations and financial results of the Company.
The Company also provides investment management products and financial
services through a group of subsidiary companies, all of which are owned by our
wholly-owned subsidiary, MBIA Asset Management Corporation. These services
include cash management, the issuance of municipal investment agreements,
discretionary asset management, purchase and administrative services, and
municipal revenue enhancement services. MBIA Municipal Investors Service
Corporation ("MBIA-MISC") provides cash management and investment placement
services to local governments, school districts and other institutional clients,
providing those clients with fund administration services. MBIA Investment
Management Corp. ("IMC") offers guaranteed investment agreements primarily for
bond proceeds to states and municipalities. MBIA Capital Management Corp.
("CMC") performs fixed income investment management services for the investment
portfolios of the Company, MBIA Corp., MBIA-MISC, IMC and selected
<PAGE> 3
external clients. In 1998, the Company acquired what is now 1838 Investment
Advisors, LLC ("1838"), an investment advisor to equity mutual funds and to
third party clients.
MBIA MuniServices Company ("MuniServices") provides revenue enhancement
services and products (discovery, audit, collections/recovery, enforcement and
information services) to state and local governments. The Company continues to
own a majority interest in Capital Asset Holdings GP and certain affiliated
entities (collectively, "Capital Asset"). Capital Asset was in the business of
acquiring and servicing tax liens. The Company became a majority owner in
December, 1998 when it acquired the interest of Capital Asset's founder. In
1999, the Company announced that it was exiting the tax lien business. Capital
Asset's primary activity today is servicing the three securitizations of tax
liens that are insured by MBIA Corp.
Statements included in this Form 10-K which are not historical or
current facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the private Securities Litigation Reform Act of 1998. The words
"believe," "anticipate," "project," "plan," "expect," "intend," "will likely
result," or "will continue," and similar expressions identify forward-looking
statements. These statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. We wish to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of their respective dates. The following are some of the factors that could
cause actual results to differ materially from estimates contained in or
underlying the Company's forward-looking statements: (1) fluctuations in the
economic, credit or interest rate environment in the United States or abroad;
(2) level of activity within the national and international credit markets; (3)
competitive conditions and pricing levels; (4) legislative or regulatory
developments; (5) technological developments; (6) changes in tax laws; (7) the
effects of mergers, acquisitions and divestitures; and (8) uncertainties that
have not been identified at this time. The Company undertakes no obligation to
publicly correct or update any forward-looking statement if it later becomes
aware that such result is not likely to be achieved.
MBIA CORP. INSURED PORTFOLIO
At December 31, 2000, the net par amount outstanding on MBIA Corp.'s
insured obligations (including insured obligations of MBIA Illinois, MBIA
Assurance and CapMAC, but excluding the guarantee of $5.3 billion of investment
management transactions) was $418.4 billion, comprised of $349.8 billion in new
issues and $68.6 billion in secondary market issues. Net insurance in force was
$680.9 billion.
Since generally MBIA Corp. guarantees to the holder of the underlying
obligation the timely payment of amounts due on such obligation in accordance
with its original payment schedule, in the case of a default on an insured
obligation, payments under the insurance policy cannot be accelerated unless
MBIA Corp. consents to the acceleration. Otherwise, MBIA Corp. is required to
pay principal, interest or other amounts only as originally scheduled payments
come due.
MBIA Corp. seeks to maintain a diversified insured portfolio designed
to manage and diversify risk based on a variety of criteria including revenue
source, issue size, type of asset, industry concentrations, type of bond and
geographic area. As of December 31, 2000, MBIA Corp. had 35,154 policies
outstanding. These policies are diversified among 10,105 "credits," which MBIA
Corp. defines as any group of issues supported by the same revenue source.
2
<PAGE> 4
The table below sets forth information with respect to the original par
amount written per issue in MBIA Corp.'s portfolio as of December 31, 2000:
MBIA CORP. ORIGINAL PAR AMOUNT PER ISSUE
AS OF DECEMBER 31, 2000 (1)
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF NUMBER OF NET PAR % OF NET
ORIGINAL PAR AMOUNT ISSUES ISSUES AMOUNT PAR AMOUNT
WRITTEN PER ISSUE OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
(IN BILLIONS)
<S> <C> <C> <C> <C>
Less than $10 million 27,193 77.4% $50.8 12.2%
$10-25 million 3,299 9.4 42.8 10.2
$25-50 million 1,938 5.5 51.0 12.2
$50-100 million 1,334 3.8 64.5 15.4
Greater than $100 million 1,390 3.9 209.3 50.0
----------------- ----------------- -------------- ---------------
Total 35,154 100.0% $418.4 100.0%
================= ================= ============== ===============
</TABLE>
- ------------------------------
(1) Excludes $5.3 billion relating to investment management transactions
guaranteed by MBIA Corp.
3
<PAGE> 5
MBIA Corp. underwrites financial guarantee insurance on the assumption
that the insurance will remain in force until maturity of the insured
obligations. MBIA Corp. estimates that the average life (as opposed to the
stated maturity) of its insurance policies in force at December 31, 2000 was
11.0 years. The average life was determined by applying a weighted-average
calculation, using the remaining years to maturity of each insured obligation,
and weighting them on the basis of the remaining debt service insured. No
assumptions were made for any future refundings of insured issues. Average
annual debt service on the portfolio at December 31, 2000 was $51.7 billion.
MBIA Corp. had, until the early-1990's, written only financial
guarantees for municipal issuers in the United States. Municipal bonds consist
of both taxable and tax-exempt bonds and notes that are issued by states,
cities, political subdivisions, utility districts, airports, health care
institutions, higher educational facilities, housing authorities and other
similar agencies. These types of obligations are supported by taxes,
assessments, fees related to use of projects, lease payments, etc. By the
mid-1990's, MBIA Corp. had begun to write guarantees for the structured finance
and asset-backed market. In general, structured finance and asset-backed
obligations are secured by or payable from a specific pool of assets having an
ascertainable cash flow. These obligations are either "pass-through"
obligations, which represent interests in the related assets, or "pay-through"
obligations, which generally are debt obligations collateralized by the related
assets. MBIA Corp. also insures payments due under credit derivatives, including
termination payments, that may become due upon the occurrence of certain events.
These types of obligations also generally have the benefit of
over-collateralization, excess cash flow or one or more forms of credit
enhancement to cover credit risks associated with the related assets. Structured
finance and asset-backed obligations contain certain risks: asset risk, which
relates to the amount and quality of asset coverage; and structural risk, which
relates to the extent to which the transaction structure protects the interests
of the investors. In general, the asset risk is addressed by sizing the asset
pool based on the historical performance of the assets. The ability of the
servicer (the entity which is responsible for collecting the cash flow from the
asset pool) to properly service and collect on the underlying assets is also a
factor in determining future asset performance. Structural risks include
bankruptcy and tax risks. Structured and asset-backed securities are usually
designed to protect the investors from the bankruptcy or insolvency of the
entity that originated the underlying assets as well as from the bankruptcy or
insolvency of the servicer. These issues concern whether the sale of the assets
by the originator to the issuer would be upheld in the event of the bankruptcy
or insolvency of the originator and whether the servicer of the assets may be
required to delay the remittance of any cash collections held by it or received
by it after the time it becomes subject to bankruptcy or insolvency proceedings.
In addition, servicer risk, the risk that problems at the servicer level could
result in a decline in the collection of cash payments, may also be present in
the transaction. These issues are addressed through MBIA Corp.'s underwriting
guidelines and procedures.
Outside of the United States, sovereign and sub-sovereign, structured
and asset-backed, utilities and other issuers are increasingly using financial
guarantee insurance. Ongoing privatization efforts have shifted the burden from
the government to public and private capital markets, where investors may seek
the security of financial guarantee insurance. There is also growing interest in
asset-backed securitization. While the principles of securitization have been
increasingly applied in overseas markets, development in particular countries
has varied due to the sophistication of the local capital markets and the impact
of financial regulatory requirements, accounting standards and legal systems. It
is expected that securitization will continue to expand internationally, at
varying rates in each country. MBIA Corp. insures both asset-backed and
structured transactions, sovereign and sub-sovereign debt issues, utilities,
project financings and other obligations in selected international markets. MBIA
Corp. believes that the risk profile of the international business it insures is
generally the same as in the United States, but recognizes that there are
particular risks related to each country and region. These risks include the
legal and political situation, the capital markets and currency exchange risks.
MBIA Corp. monitors these risks carefully.
4
<PAGE> 6
MBIA CORP. INSURED PORTFOLIO BY BOND TYPE
AS OF DECEMBER 31, 2000
(IN BILLIONS)
<TABLE>
<CAPTION>
BOND TYPE NET PAR % OF NET
AMOUNT PAR AMOUNT
OUTSTANDING OUTSTANDING
<S> <C> <C>
Domestic
Public Finance
General Obligation $ 91.6 21.9%
Utilities 44.6 10.6
Health Care 37.9 9.1
Special Revenue 33.2 7.9
Transportation 25.0 6.0
Higher Education 16.0 3.8
Investor Owned Utilities 15.4 3.7
Housing 12.3 2.9
----------------------------------
Total Public Finance 276.0 65.9
----------------------------------
Structured Finance
Mortgage Backed:
Home Equity 28.4 6.8
Other 14.2 3.4
First Mortgage 8.8 2.1
Asset Backed:
Other 18.2 4.4
Auto 13.2 3.1
Leasing 4.5 1.1
Pooled Corp. Obligations & Other 12.6 3.0
Financial Risk 5.1 1.2
----------------------------------
Total Structured Finance 105.0 25.1
----------------------------------
----------------------------------
Total Domestic 381.0 91.0
----------------------------------
International
Structured Finance* 31.9 7.7
Infrastructure 5.5 1.3
----------------------------------
Total International 37.4 9.0
----------------------------------
TOTAL $418.4 100.0%
==================================
</TABLE>
*Asset/mortgage-backed, Pooled Corporate Obligations and Financial Risk
- -----------------------------
(1) Excludes $5.3 billion relating to investment management transactions
guaranteed by MBIA Corp.
5
<PAGE> 7
As of December 31, 2000, of the $418.4 billion outstanding net par
amount of obligations insured, $276.0 billion, or 66%, consisted of municipal
bonds, $105.0 billion, or approximately 25%, consisted primarily of
asset/mortgage-backed transactions and investor-owned utility obligations and
$37.4 billion or approximately 9% consisted of transactions done in the
international market.
The table below shows the diversification by type of insurance written
by MBIA Corp. in each of the last five years:
MBIA CORP. NET PAR AMOUNT BY BOND TYPE (1)
<TABLE>
<CAPTION>
BOND TYPE 1996 1997 1998 1999 2000
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Domestic
Public Finance
General Obligation $12,010 $14,068 $15,468 $ 9,981 $ 9,829
Special Revenue 4,140 4,384 7,369 4,627 5,746
Utilities 6,535 6,944 6,475 2,440 2,747
Transportation 3,040 6,097 4,174 709 2,637
Investor Owned Utilities 1,655 1,548 1,477 1,340 2,523
Higher Education 2,017 2,537 4,072 1,434 1,645
Housing 1,743 1,817 2,093 1,872 1,294
Health Care 4,235 7,523 8,174 3,529 1,276
------------ ------------ ------------ ----------- ------------
Total Public Finance 35,375 44,918 49,302 25,932 27,697
Structured Finance
Asset Backed:
Other 2,952 3,493 5,639 3,993 10,676
Auto 2,158 3,452 3,424 5,872 10,400
Leasing 929 3,883 1,044 1,726 1,408
Mortgage Backed:
Home Equity 14,319 17,895 16,041 10,191 4,656
First Mortgage 4,009 2,536 2,434 5,205 2,171
Other 1,196 911 2,145 10,098 1,893
Pooled Corp. Obligations & Other 331 223 5,065 3,179 7,593
Financial Risk 3,985 3,338 2,441 1,409 1,905
------------ ------------ ------------ ----------- ------------
Total Structured Finance 29,879 35,731 38,233 41,673 40,702
Total Domestic 65,254 80,649 87,535 67,605 68,399
------------ ------------ ------------ ----------- ------------
International
Structured Finance* 5,189 3,852 6,708 5,061 15,424
Infrastructure 1,030 1,023 1,038 692 1,437
------------ ------------ ------------ ----------- ------------
Total International 6,219 4,875 7,746 5,753 16,861
------------ ------------ ------------ ----------- ------------
TOTAL $71,473 $85,524 $95,281 $73,358 $85,260
============ ============ ============ =========== ============
</TABLE>
*Asset/mortgage-backed, Pooled Corporate Obligations and Financial Risk
- -----------------------------
(1) Par amount insured by year, net of reinsurance.
6
<PAGE> 8
MBIA Corp. is licensed to write business in all 50 states, the District
of Columbia, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, Puerto
Rico, the Kingdom of Spain and the Republic of France. MBIA Assurance is
licensed to write business in France. The following table sets forth by
geographic location the areas in which MBIA Corp. has at least 2% of its total
net par amount outstanding:
MBIA CORP. INSURED PORTFOLIO BY LOCATION
AS OF DECEMBER 31, 2000 (1)
<TABLE>
<CAPTION>
NET PAR % OF NET
AMOUNT PAR AMOUNT
OUTSTANDING OUTSTANDING
(IN BILLIONS)
<S> <C> <C>
DOMESTIC
New York $44.7 10.7%
California 43.2 10.3
Florida 19.9 4.7
Texas 14.4 3.4
New Jersey 14.2 3.4
Pennsylvania 14.0 3.3
Illinois 12.2 2.9
Massachusetts 11.6 2.8
Michigan 8.2 2.0
Ohio 8.0 1.9
------------- -------------
Sub-Total 190.4 45.4
All Other States 102.0 24.4
Nationally Diversified 88.6 21.2
------------- -------------
Total United States 381.0 91.0
INTERNATIONAL
Regional Specific 19.3 4.7
Internationally Diversified 18.1 4.3
------------- -------------
Total International 37.4 9.0
------------- -------------
Total $418.4 100.0%
============= =============
</TABLE>
- -----------------------------
(1) Excludes $5.3 billion relating to investment management transactions
guaranteed by MBIA Corp.
MBIA Corp. has underwriting guidelines that limit the net insurance in
force for any one insured credit and is subject to both rating agency and
regulatory single-risk limits with respect to any bond issue insured by it. As
of December 31, 2000, MBIA Corp.'s net par amount outstanding for its ten
largest insured municipal credits totaled $19.0 billion, representing 4.6% of
MBIA Corp.'s total net par amount outstanding, and for its ten largest
structured finance credits (without aggregating common issuers), the net par
outstanding was $18.3 billion, representing 4.4% of the total.
7
<PAGE> 9
MBIA CORP. INSURANCE PROGRAMS
MBIA Corp. offers financial guarantee insurance in both the new issue
and secondary markets. At present, no new financial guarantee insurance is being
offered by MBIA Illinois or CapMAC, but it is possible that either of those
entities may insure transactions in the future. MBIA Corp. and MBIA Assurance
offer financial guarantee insurance in Europe, Asia, Latin America and other
areas outside the United States. In September 1995, MBIA Corp. entered into a
joint venture agreement with Ambac Assurance Corporation for the purpose of
jointly marketing financial guarantee insurance outside the United States. On
March 21, 2000, the two companies restructured the joint venture. Under the
restructuring, the companies agreed to begin marketing and originating financial
guarantee insurance outside the United States independently, and also to
continue to maintain certain reciprocal reinsurance arrangements for
international business until at least the end of 2001. The Company believes that
the restructuring of the joint venture with Ambac will not result in any
reduction in premiums written from international business, although no
assurances can be given that such a reduction will not occur. Late in 2000, the
companies dissolved a four-way joint venture in Japan. In the first quarter of
2001, the Company entered into a memorandum of understanding with Mitsui Marine
and Fire Insurance Co. Ltd. relating to financial guarantee insurance in Japan,
including certain reciprocal reinsurance arrangements.
Transactions in the new issue market are sold either through negotiated
offerings or competitive bidding. In the first case, either the issuer or the
underwriter purchases the insurance policy directly from MBIA Corp. For
municipal bond issues involving competitive bidding, the insurance is offered as
an option to the underwriters bidding on the transaction. The successful bidder
would then have the option to purchase the insurance.
In the secondary market, MBIA Corp. provides insurance on whole and
partial maturities in response to requests from bond traders and institutions
who trade in the secondary market. MBIA Corp. also offers insurance to the unit
investment trust market through ongoing arrangements with investment banks and
financial service companies. Each issue in the trust is insured, in some cases
until maturity, in others only while it is held in the trust. Lastly, insurance
is offered in the mutual fund sector through ongoing arrangements with the fund
sponsors. All fund issues are insured on a "while-in-trust" basis, but in some
cases, MBIA Corp. is committed to offer insurance to maturity to the sponsor for
an additional premium.
The following table indicates the percentage of net par outstanding
with respect to each type of insured program:
MBIA CORP. TYPES OF INSURED PROGRAMS
AS OF DECEMBER 31, 2000 (1)
<TABLE>
<CAPTION>
NET PAR AMOUNT % OF NET PAR
TYPE OF PROGRAM OUTSTANDING AMOUNT OUTSTANDING
(IN BILLIONS)
<S> <C> <C>
New Issue $349.8 83.6%
Secondary market issues
Unit investment trusts 28.1 6.7
Other secondary market issues 40.5 9.7
--------------- -----------------
Total $418.4 100.0%
=============== =================
</TABLE>
- -----------------------------
(1) Excludes $5.3 billion relating to investment management transactions
guaranteed by MBIA Corp.
8
<PAGE> 10
OPERATIONS
The insurance operations of MBIA Corp. are conducted through the Public
Finance Division, the Structured Finance Division, the International Division,
and the Risk Management Group. Due to the restructuring of the joint venture
with Ambac, effective March 21, 2000, all marketing and origination of
international transactions will be conducted through MBIA Corp.'s International
Division, with the help of the other Divisions. The Public Finance Division has
underwriting authority with respect to certain categories of business up to
pre-determined par amounts based on a risk-ranking system. In order to ensure
that the guidelines are followed, Risk Management monitors and periodically
reviews underwriting decisions made by the Public Finance Division. With respect
to larger, complex, or unique transactions, underwriting is performed by a
committee consisting of senior representatives of Public Finance, Risk
Management, Insured Portfolio Management, and the Company's Finance Department.
For all transactions done by the Structured Finance Division or for
International deals, MBIA Corp.'s review and approval procedure has two stages.
The first stage consists of screening, credit review and structuring by the
appropriate business unit, in consultation with Risk Management officers. The
second stage, consisting of the final review and approval of credit and
structure, is performed by a committee consisting of the head of the applicable
business unit, one officer from Risk Management and a third officer from either
Risk Management or Insured Portfolio Management. Certain transactions, based on
size, complexity, or other factors, must also be approved by a division-level
committee consisting of senior representatives of Structured Finance, Risk
Management, Insured Portfolio Management, Legal and the Company's Finance
Department. Premium rates for all groups within the insurance operations
enterprise are established by a Pricing Committee with representation from the
Business Analysis Group (pricing and quantitative analysis) and the relevant
insurance operations group.
Risk Management
The Risk Management Group is responsible for adherence to MBIA Corp.'s
underwriting guidelines and procedures which are designed to maintain an insured
portfolio with low risk characteristics. MBIA Corp. maintains underwriting
guidelines based on those aspects of credit quality that it deems important for
each category of obligation considered for insurance. For public finance,
structural finance and international finance transactions, these include
economic and social trends, debt management, financial management, adequacy of
anticipated cash flow, satisfactory legal structure and other security
provisions, viable tax and economic bases, adequacy of loss coverage and project
feasibility, including a satisfactory consulting engineer's report, if
applicable. For structured finance and international structured finance
transactions, MBIA Corp's underwriting guidelines, analysis and due diligence
focus primarily on seller/servicer credit and operational quality, the quality
and historical and projected performance of the asset pool, and the strength of
the structure, including legal segregation of the assets, cash flow analysis,
the size and source of first loss protection, and asset performance triggers and
financial covenants. Such guidelines are subject to periodic review by senior
committees which are responsible for establishing and maintaining underwriting
standards and criteria for all insurance products.
The Financial Institution and Corporate Analysis Group within Risk
Management underwrites and monitors MBIA Corp.'s direct and indirect exposure to
financial institutions and other corporate entities with respect to
seller/servicer exposure, investment contracts, letters of credit, swaps,
liquidity and other facilities supporting MBIA-insured issues, and recommends
limits on such exposures. The department provides in-depth financial analyses of
financial institutions for which there is existing or proposed direct or
indirect exposure.
Insured Portfolio Management:
The Insured Portfolio Management Group is responsible for monitoring
outstanding issues insured by MBIA Corp. This group's first function is to
detect any deterioration in credit quality or changes in the economic or
political environment which could interrupt the timely payment of debt service
on an insured issue. Once a problem is detected, the group then works with the
issuer, trustee, bond counsel, servicers, underwriters, and other interested
parties to deal with the concern in order to try to avoid a default. The Insured
Portfolio Management Group works closely with Risk Management and New Business
Departments to provide feedback on insured issue performance and credit risk
parameters.
To-date, MBIA Corp. has had 31 insured issues requiring claim payments.
There are currently 5 additional insured issues for which case loss reserves
have been established but claims have not yet been paid (see "Losses and
Reserves" below). Other potential losses have been avoided through the early
detection of problems and subsequent negotiations with the issuer and other
parties involved. In a limited number of instances, the solution involved the
restructuring of insured issues or underlying security arrangements. More often,
MBIA Corp. utilizes a variety of other techniques to resolve problems, such as
enforcement of covenants, assistance in resolving management problems and
working with the issuer to develop potential political solutions. Issuers are
under no obligation to restructure insured issues or underlying security
arrangements in order to prevent losses. Moreover, MBIA Corp. is obligated to
pay amounts equal to defaulted payments on insured obligations on their
respective due dates even if the issuer or other parties involved
9
<PAGE> 11
refuse to restructure or renegotiate the terms of the insured bonds or
related security arrangements. The Company's experience is that early detection
and continued involvement by the Insured Portfolio Management Group are crucial
in avoiding or minimizing claims on insurance policies. There can be no
assurance, however, that there will be no material losses in the future in
respect of any issues guaranteed by MBIA Corp., MBIA Illinois or CapMAC.
Once an obligation is insured, the issuer and the trustee are typically
required to furnish financial and asset related information, including audited
financial statements, periodically to the Insured Portfolio Management Group for
review. Potential problems uncovered through this review, such as poor financial
results, low fund balances, covenant violations, trustee or servicer problems,
or excessive litigation, could result in an immediate surveillance review and an
evaluation of possible remedial actions. The Insured Portfolio Management Group
also monitors state finances and budget developments and evaluates their impact
on local issuers.
During the underwriting process, issues are given an internal credit
rating. All credits are monitored according to a frequency of review schedule
that is based on risk type and credit quality. Issues that experience financial
difficulties, deteriorating economic conditions, excessive litigation or
covenant violations are placed on the appropriate review list and are subject to
surveillance reviews at intervals commensurate to the problem which has been
detected.
There are three departments in the Insured Portfolio Management Group.
The Global Public Finance Group handles all types of domestic and international
municipal issues such as general obligation, utility and special revenue bonds.
It also follows project financings, future flow and collateralized debt
obligation issues. The Global Structured Finance Group is responsible for
domestic and international asset backed and other structured transactions. The
Enterprise Group is responsible for all health care, housing and student loan
transactions. Each of the three groups is responsible for processing waiver and
consent requests and other deal modifications within their areas.
The Global Public Finance Group reviews and reports on the major credit
quality factors of risks insured by the Company, evaluates the impact of new
developments on insured weaker credits and carries out remedial activity. In
addition, it performs analysis of financial statements and key operating data on
a large-scale basis and maintains various databases for research purposes. This
department is responsible for preparing special reports which include analyses
of regional economic trends, proposed tax limitations, the impact of employment
trends on local economies or legal developments affecting bond security.
The Global Structured Finance Group monitors insured structured finance
programs, focusing on the adequacy of reserve balances and investment of
earnings, the status of mortgage or loan delinquencies and underlying insurance
coverage and the performance of the trustee for insured issues. Monitoring of
issues typically involves review of records and statements, review of
transaction documents with regard to compliance, analysis of cash flow adequacy
and communication with trustees. Review of servicer performance is also
conducted through site visits with management, review of servicer financial
statements, review of servicer reports where available and contacts with program
administrators and trustees. The department also carries out remedial activity
on weaker credits.
The Enterprise Group, which monitors insured health care, student loan
and single and multi-family housing transactions as well as all pool programs,
performs similar functions to, and applies the same policies and procedures as,
the Global Public Finance and Global Structured Finance Groups. In addition, it
is responsible for remedial activities on weaker credits.
INVESTMENT MANAGEMENT SERVICES
Over the last nine years, the Company's investment management
businesses have expanded their services to the public sector and added new
revenue sources. MBIA Asset Management, LLC is the holding company under which
the resources and capabilities of our four investment management subsidiaries
have been consolidated.
MBIA-MISC provides cooperative cash management services directly to
local governments and school districts. It also provides investment and treasury
management consulting services for municipal and quasi-public sector clients. In
addition, MBIA-MISC performs investment fund administration services for
clients, which provide an additional source of revenue. MBIA-MISC is a
Securities and Exchange Commission registered investment adviser. MBIA-MISC
operates in 20 states and the Commonwealth of Puerto Rico.
10
<PAGE> 12
IMC provides customized guaranteed investment agreements and flexible
repurchase agreements for bond proceeds and other public funds. At year-end
2000, principal and accrued interest outstanding on investment and repurchase
agreements was $4.8 billion compared with $4.5 billion at year-end 1999. IMC may
use derivative contracts in the course of providing its investment agreements as
a protection against interest rate risks. While these derivatives are designed
to help manage interest rate risk, they may involve amounts at risk in excess of
those reflected in the financial statements.
In 1998, the Company acquired 1838, a full-service asset management
firm with a strong institutional focus. 1838 currently has over $14.3 billion in
equity, fixed income and balanced portfolios.
CMC provides investment management services for IMC's investment
agreements, MBIA-MISC's municipal cash management programs and MBIA Corp.'s
insurance related fixed-income investment portfolios, as well as third-party
accounts. CMC assumed full management for MBIA Corp.'s insurance related
fixed-income investment portfolios in 1996. CMC is an NASD member and both CMC
and 1838 are registered investment advisers.
MUNICIPAL FINANCIAL SERVICES
MuniServices
MuniServices provides revenue enhancement services and products
(discovery, audit, collections/recovery, enforcement and information services)
to municipal clients through a single national enterprise. MuniServices uses a
consultative marketing strategy to focus clients on its unique capability to
identify and recover revenues across the full range of tax sources under
performance-based, self-funding business contracts.
Capital Asset
Through its interest in Capital Asset Holdings GP, Inc.
and its affiliates (collectively, "Capital Asset"), between May, 1996 and
December 1998, the Company was involved in the business of acquiring and
servicing delinquent real estate tax liens from municipalities. In December,
1998, the Company became a majority owner of Capital Asset. During the first two
quarters of 1999, the company attempted to sell its interest in Capital Asset.
At the end of the second quarter of 1999, the Company ceased these efforts and
decided to limit the activities of Capital Asset primarily to the servicing of
the portfolios then being serviced by Capital Asset. In the second quarter of
1999, the Company completed an internal evaluation of Capital Asset's tax lien
portfolio, as a result of which the Company determined that it was necessary to
write down its investment in Capital Asset by $102 million. In the third quarter
of 1999, Capital Asset engaged a specialty servicer of residential mortgages to
help manage its business and operations and to assist in administering the tax
lien portfolios serviced by Capital Asset.
In the third quarter of 1999, Capital Asset also completed the
refinancing of substantially all of its remaining tax liens. These liens were
originally financed through a commercial paper warehouse facility that matured
at the end of the third quarter, and which was guaranteed by the Company. The
refinancing was accomplished through a securitization transaction in which the
tax liens were sold to a special purpose vehicle which in turn issued notes
secured by those liens. The proceeds of the securitization were used primarily
to extinguish the warehouse facility. This was Capital Asset's third
securitization of tax liens. MBIA Corp. has insured all of the notes issued by
these securitizations. The first transaction, done in 1997, had an original net
par insured of $328 million and at year-end 2000 had $90 million net par insured
outstanding; the second transaction, executed in 1998, had an original net par
insured of $132 million, with the year-end 2000 net par insured outstanding at
$63 million; the 1999 transaction was issued at $196 million net par insured
outstanding and at year-end 2000 had $165 million net par insured outstanding
(these net par insured outstanding amounts give no effect to the value of
collateral). MBIA Corp. has established case basis loss reserves related to
these policies, but there can be no assurance that such reserves will be
sufficient to cover potential losses under such policies.
Capital Asset continues to have certain contingent liabilities
outstanding, including various individual and class action lawsuits. The claims
giving rise to these lawsuits are a result of Capital Asset's business
activities that took place primarily before the Company assumed majority
ownership and Capital Asset is defending these lawsuits. The Company has no
reason to believe that it has financial liability for these lawsuits.
COMPETITION
The financial guarantee insurance business is highly competitive. In
2000, MBIA Corp. was the largest insurer of new issue long-term municipal bonds,
accounting for 28% of the par amount of such insured bonds. The other principal
insurers in 2000 were Ambac Assurance Corporation, Financial Guaranty Insurance
Company and Financial Security Assurance Inc., all of which, like
11
<PAGE> 13
MBIA Corp., have Aaa and AAA claims-paying ratings from Moody's and S&P,
respectively. The two principal competitors in the new issue
asset/mortgage-backed securities market in 2000 were Financial Security
Assurance and Ambac Assurance Corporation.
Financial guarantee insurance also competes with other forms of credit
enhancement, including senior-subordinated structures, over-collateralization,
letters of credit and guarantees (for example, mortgage guarantees where pools
of mortgages secure debt service payments) provided by banks and other financial
institutions, some of which are governmental agencies or have been assigned the
highest credit ratings awarded by one or more of the major rating agencies.
Letters of credit are most often issued for periods of less than 10 years,
although there is no legal restriction on the issuance of letters of credit
having longer terms. Thus, financial institutions and banks issuing letters of
credit compete directly with MBIA Corp. to guarantee short-term notes and bonds
with a maturity of less than 10 years. To the extent that banks providing credit
enhancement may begin to issue letters of credit with commitments longer than 10
years, the competitive position of financial guarantee insurers, such as MBIA
Corp., could be adversely affected. Letters of credit also are frequently used
to assure the liquidity of a short-term put option for a long-term bond issue.
This assurance of liquidity effectively confers on such issues, for the short
term, the credit standing of the financial institution providing the facility,
thereby competing with MBIA Corp. and other financial guarantee insurers in
providing interest cost savings on such issues. Financial guarantee insurance
and other forms of credit enhancement also compete in nearly all instances with
the issuer's alternative of foregoing credit enhancement and paying a higher
interest rate. If the interest savings from insurance or another form of credit
enhancement are not greater than the cost of such credit enhancement, the issuer
will generally choose to issue bonds without enhancement. MBIA Corp. also
competes in the international market with composite (multi-line) insurers.
There are minimum capital requirements imposed on a financial guarantee
insurer by Moody's and S&P to obtain Triple-A claims-paying ratings. Also, under
a New York law, multi-line insurers are prohibited from writing financial
guarantee insurance in New York State. See "Business-Regulation." However, there
can be no assurance that major multi-line insurers or other financial
institutions will not participate in financial guarantee insurance in the
future, either directly or through monoline subsidiaries.
REINSURANCE
State insurance laws and regulations, as well as Moody's and S&P,
impose minimum capital requirements on financial guarantee companies, limiting
the aggregate amount of insurance and the maximum size of any single risk
exposure which may be written. MBIA Corp. increases its capacity to write new
business by using treaty and facultative reinsurance to reduce its gross
liabilities on an aggregate and single risk basis.
From its reorganization in December 1986 through December 1987, MBIA
Corp. reinsured a portion of each policy through quota and surplus share
reinsurance treaties. Each treaty provides reinsurance protection with respect
to policies written by MBIA Corp. during the term of the treaty, for the full
term of the policy. Under its quota share treaty MBIA Corp. ceded a fixed
percentage of each policy insured. Since 1988, MBIA Corp. has entered into
primarily surplus share treaties under which a variable percentage of risk over
a minimum size is ceded, subject to a maximum percentage specified in the
treaty. Reinsurance ceded under the treaties is for the full term of the
underlying policy.
MBIA Corp. also enters into facultative reinsurance arrangements from
time to time primarily in connection with issues which, because of their size,
require additional capacity beyond MBIA Corp.'s retention and treaty limits.
Under these facultative arrangements, portions of MBIA Corp.'s liabilities are
ceded on an issue-by-issue basis. MBIA Corp. utilizes facultative arrangements
as a means of managing its exposure to single issuers to comply with regulatory
and rating agency requirements, as well as internal underwriting and portfolio
management criteria.
As a primary insurer, MBIA Corp. is required to honor its obligations
to its policyholders whether or not its reinsurers perform their obligations to
MBIA Corp. The financial position of all reinsurers is monitored by MBIA Corp.
on a regular basis.
As of December 31, 2000, MBIA Corp. retained approximately 83% of the
gross debt service outstanding of all transactions insured by it, MBIA
Assurance, CapMAC and MBIA Illinois, and ceded approximately 17% to treaty and
facultative reinsurers. The principal reinsurers of MBIA Corp., MBIA Assurance,
CapMAC and MBIA Illinois are Enhance Reinsurance Company, ACE Guaranty Re
Incorporated, AXA Re Finance, Ambac Assurance Corporation and Munich Reinsurance
Corp. These reinsurers, whose claims-paying ability is rated Triple-A by S&P,
reinsured approximately 77% of the total ceded insurance in force at December
31, 2000. All of the other reinsurers reinsured approximately 23% of the total
ceded insurance in force at December 31, 2000 and are diversified geographically
and by lines of insurance written. MBIA Corp.'s net retention on the policies it
writes varies from time to
12
<PAGE> 14
time depending on its own business needs and the capacity available in the
reinsurance market. The amounts of reinsurance ceded at December 31, 2000 and
1999 by bond type and by geographic location are set forth in Note 19 to the
Consolidated Financial Statements of MBIA Inc. and Subsidiaries. The downgrade
or default of one or more of the Company's reinsurers could have an adverse
impact on the Company's results of operations. MBIA Corp. and MBIA Assurance
have entered into a reinsurance agreement providing for MBIA Corp.'s
reinsurance of policies issued by MBIA Assurance and a net worth maintenance
agreement in which MBIA Corp. agrees to maintain the net worth of MBIA
Assurance, to remain its sole shareholder and not to pledge its shares. Under
the reinsurance agreement MBIA Corp. agrees to reimburse MBIA Assurance on an
excess of loss basis for losses incurred in each calendar year for net retained
insurance liability, subject to certain contract limitations. Under the net
worth maintenance agreement, MBIA Corp. agrees to maintain a minimum capital and
surplus position in accordance with French and New York State legal
requirements.
MBIA Corp. and MBIA Illinois entered into a reinsurance agreement under
which MBIA Corp. reinsured 100% of all business written by MBIA Illinois, net of
cessions by MBIA Illinois to third party reinsurers, in exchange for MBIA
Illinois' transfer of the assets underlying the related unearned premium and
contingency reserves. Pursuant to such reinsurance agreement, MBIA Corp.
reinsured all of the net exposure of $30.9 billion, or approximately 68% of the
gross debt service outstanding, of the municipal bond insurance portfolio of
MBIA Illinois, the remaining 32% having been previously ceded to treaty and
facultative reinsurers of MBIA Illinois. In 1990, 10% of this portfolio was
ceded back to MBIA Illinois to comply with regulatory requirements. Effective
January 1, 1999, MBIA Corp. and MBIA Illinois entered into a replacement
reinsurance agreement whereby MBIA Corp. agreed to accept as reinsurance from
MBIA Illinois 100 % of the net liabilities and other obligations of MBIA
Illinois, for losses paid on or after that date, thereby eliminating the 10%
retrocession arrangement previously in place.
MBIA Corp. and CapMAC have entered into a reinsurance agreement,
effective April 1, 1998, under which MBIA Corp. agreed to reinsure 100% of the
net liability and other obligations of CapMAC in exchange for CapMAC's payment
of a premium equal to the ceded reserves and contingency reserves. Pursuant to
such reinsurance agreement with CapMAC, MBIA Corp. reinsured all of the net
exposure of $31.6 billion, or approximately 78% of the gross debt service
outstanding, the remaining 22% having been previously ceded to treaty and
facultative reinsurers of CapMAC.
INVESTMENTS AND INVESTMENT POLICY
The Finance Committee of the Board of Directors of the Company approves
the general investment objectives and policies of the Company, and also reviews
more specific investment guidelines. On January 1, 1996, CMC assumed full
management of all of MBIA Corp.'s consolidated investment portfolios. Certain
investments of the Company and MBIA Assurance related to non-U.S. insurance
operations are managed by independent managers.
To continue to provide strong capital resources and claims-paying
capabilities for its insurance operations, the investment objectives and
policies for insurance operations set quality and preservation of capital as the
primary objective subject to an appropriate degree of liquidity. Maximization of
after-tax investment income and investment returns is an important but secondary
objective.
Investment objectives, policies and guidelines related to the Company's
municipal investment agreement business are also subject to review and approval
by the Finance Committee of the Board of Directors. The primary investment
objectives are to preserve capital, to achieve an investment duration that
closely approximates the expected duration of related liabilities, and to
maintain appropriate liquidity. The investment agreement assets are managed by
CMC subject to an investment management agreement between IMC and CMC.
13
<PAGE> 15
For 2000, approximately 64% of the Company's net income was derived from
after-tax earnings on its investment portfolio (excluding the amounts on
investment agreement assets which are recorded as a component of investment
management services revenues). The following table sets forth investment income
and related data for the years ended December 31, 1998, 1999, and 2000.
INVESTMENT INCOME OF THE COMPANY (1)
<TABLE>
<CAPTION>
1998 1999 2000
(IN THOUSANDS)
<S> <C> <C> <C>
Investment income before expenses (2) $337,565 $365,823 $400,754
Investment expenses 5,763 6,367 6,769
------------- ------------- ------------
Net investment income before income taxes 331,802 359,456 393,985
Net realized gains 34,976 25,160 32,884
------------- ------------- ------------
Total investment income before income taxes $366,778 $384,616 $426,869
============= ============= ============
Total investment income after income taxes $299,491 $312,200 $335,435
============= ============= ============
</TABLE>
- -----------------------------
(l) Excludes investment income from investment management services and
municipal services segments.
(2) Includes taxable and tax-exempt interest income.
14
<PAGE> 16
The tables below set forth the composition of the Company's investment
portfolios. The weighted average yields in the tables reflect the nominal yield
on market value as of December 31, 2000, 1999 and 1998.
INVESTMENT PORTFOLIO BY SECURITY TYPE
AS OF DECEMBER 31, 2000
<TABLE>
<CAPTION>
INVESTMENT
INSURANCE MANAGEMENT SERVICES
WEIGHTED WEIGHTED
FAIR VALUE AVERAGE FAIR VALUE AVERAGE
INVESTMENT CATEGORY (IN THOUSANDS) YIELD (1) (IN THOUSANDS) YIELD (1)
<S> <C> <C> <C> <C>
Fixed income investments:
Long-term bonds:
Taxable bonds:
U.S. Treasury & Agency obligations $ 841,683 6.34% $ 443,581 6.09%
GNMAs 156,284 7.04 149,989 6.49
Other mortgage & asset backed securities 317,964 6.64 2,954,242 6.20
Corporate obligations 1,388,535 6.87 919,547 7.15
Foreign obligations (2) 235,378 6.28 282,278 7.07
-------------- ------------ -------------- ----------
Total 2,939,844 6.66 4,749,637 6.43
Tax-exempt bonds:
State & municipal 3,800,283 7.62 -- --
-------------- ------------ -------------- ----------
Total long-term investments 6,740,127 7.20 4,749,637 6.43
Short-term investments (3) 376,604 6.57 246,971 6.05
-------------- ------------ -------------- ----------
Total fixed income investments 7,116,731 7.17% 4,996,608 6.42%
Other investments (4) 119,591 -- -- --
-------------- --------------
Total investments $7,236,322 -- $4,996,608 --
============== ==============
</TABLE>
- -----------------------------
(1) Prospective market yields as of December 31, 2000. Yield on tax-exempt
bonds is presented on a taxable bond equivalent basis using a 35% federal
income tax rate.
(2) Consists of U.S. denominated foreign government and corporate securities.
(3) Taxable and tax-exempt investments, including bonds with a remaining
maturity of less than one year.
(4) Consists of equity investments and other fixed income investments; yield
information not meaningful.
15
<PAGE> 17
INVESTMENT PORTFOLIO BY SECURITY TYPE
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
INVESTMENT
INSURANCE MANAGEMENT SERVICES
WEIGHTED WEIGHTED
FAIR VALUE AVERAGE FAIR VALUE AVERAGE
INVESTMENT CATEGORY (IN THOUSANDS) YIELD (1) (IN THOUSANDS) YIELD (1)
<S> <C> <C> <C> <C>
Fixed income investments:
Long-term bonds:
Taxable bonds:
U.S. Treasury & Agency obligations $ 600,350 7.45% $1,237,005 6.67%
GNMAs 146,976 7.68 67,950 7.16
Other mortgage & asset backed securities 267,531 7.94 1,880,944 6.94
Corporate obligations 1,148,565 7.50 766,180 7.61
Foreign obligations (2) 158,938 7.21 317,755 7.66
------------- ------------ ------------ --------
Total 2,322,360 7.53 4,269,834 7.04
Tax-exempt bonds:
State & municipal 3,461,619 8.72 -- --
------------- ------------ ------------ --------
Total long-term investments 5,783,979 8.24 4,269,834 7.04
Short-term investments (3) 274,022 5.92 219,717 6.17
------------- ------------ ------------ --------
Total fixed income investments 6,058,001 8.14% 4,489,551 7.00%
Other investments (4) 146,038 -- -- --
------------- ------------
Total investments $6,204,039 -- $4,489,551 --
============= ============
</TABLE>
- -----------------------------
(1) Prospective market yields as of December 31, 1999. Yield on tax-exempt
bonds is presented on a taxable bond equivalent basis using a 35% federal
income tax rate.
(2) Consists of U.S. denominated foreign government and corporate securities.
(3) Taxable and tax-exempt investments, including bonds with a remaining
maturity of less than one year.
(4) Consists of equity investments and other fixed income investments; yield
information not meaningful.
16
<PAGE> 18
INVESTMENT PORTFOLIO BY SECURITY TYPE
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
INVESTMENT
INSURANCE MANAGEMENT SERVICES
WEIGHTED WEIGHTED
FAIR VALUE AVERAGE FAIR VALUE AVERAGE
INVESTMENT CATEGORY (IN THOUSANDS) YIELD (1) (IN THOUSANDS) YIELD (1)
<S> <C> <C> <C> <C>
Fixed income investments:
Long-term bonds:
Taxable bonds:
U.S. Treasury & Agency obligations $ 487,132 6.15% $1,404,668 5.54%
GNMAs 154,088 6.58 100,033 6.42
Other mortgage & asset backed securities 206,171 6.25 849,922 5.33
Corporate obligations 1,026,847 5.85 842,330 6.05
Foreign obligations (2) 136,416 5.45 292,979 6.46
-------------- ----------- ------------ ----------
Total 2,010,654 5.99 3,489,932 5.71
Tax-exempt bonds:
State & municipal 3,873,399 7.15 -- --
-------------- ----------- ------------ ----------
Total long-term investments 5,884,053 6.76 3,489,932 5.71
Short-term investments (3) 423,194 4.94 188,297 5.03
-------------- ----------- ------------ ----------
Total fixed income investments 6,307,247 6.63% 3,678,229 5.68%
Other investments (4) 94,975 -- -- --
-------------- ------------
Total investments $6,402,222 -- $3,678,229 --
============== ============
</TABLE>
- -----------------------------
(1) Prospective market yields as of December 31, 1998. Yield on tax-exempt
bonds is presented on a taxable bond equivalent basis using a 35% federal
income tax rate.
(2) Consists of U.S. denominated foreign government and corporate securities.
(3) Taxable and tax-exempt investments, including bonds with a remaining
maturity of less than one year.
(4) Consists of equity investments and other fixed income investments; yield
information not meaningful.
17
<PAGE> 19
The average maturity of the insurance fixed income portfolio excluding
short-term investments as of December 31, 2000 was 12.9 years. After allowing
for estimated principal pre-payments on mortgage pass-through securities, the
duration of the portfolio was 7.2 years.
The table below sets forth the distribution by maturity of the
Company's consolidated fixed income investments:
FIXED INCOME INVESTMENTS BY MATURITY
AS OF DECEMBER 31, 2000
<TABLE>
<CAPTION>
INVESTMENT
INSURANCE MANAGEMENT SERVICES
FAIR VALUE % OF TOTAL FAIR VALUE % OF TOTAL
(IN FIXED INCOME (IN FIXED INCOME
MATURITY THOUSANDS) INVESTMENTS THOUSANDS) INVESTMENTS
<S> <C> <C> <C> <C>
Within 1 year $ 376,604 5.3% $ 246,971 4.9%
Beyond 1 year but within 5 years 1,042,342 14.7 1,872,702 37.5
Beyond 5 years but within 10 years 1,547,315 21.7 783,325 15.7
Beyond 10 years but within 15 years 1,203,493 16.9 448,697 9.0
Beyond 15 years but within 20 years 1,318,206 18.5 678,787 13.6
Beyond 20 years 1,628,771 22.9 966,126 19.3
----------- ------------ ------------ ----------
Total fixed income investments $7,116,731 100.0% $4,996,608 100.0%
=========== =========== ============ ==========
</TABLE>
The quality distribution of the Company's fixed income investments
based on ratings of Moody's was as shown in the table below:
FIXED INCOME INVESTMENTS BY QUALITY RATING (1)
AS OF DECEMBER 31, 2000
<TABLE>
<CAPTION>
INVESTMENT
INSURANCE MANAGEMENT SERVICES
FAIR VALUE % OF TOTAL FAIR VALUE % OF TOTAL
(IN THOUSANDS) FIXED INCOME (IN THOUSANDS) FIXED INCOME
QUALITY RATING INVESTMENTS INVESTMENTS
<S> <C> <C> <C> <C>
Aaa $4,469,758 65.0% $4,112,345 82.3%
Aa 1,481,489 21.5 325,652 6.5
A 892,398 13.0 547,704 11.0
Baa 31,092 0.5 10,907 0.2
-------------- --------------- -------------- ------------
$6,874,737 100.0% $4,996,608 100.0%
============== =============== ============== ============
</TABLE>
- -----------------------------
(1) Excludes short-term investments with an original maturity of less than one
year, but includes bonds having a remaining maturity of less than one year.
18
<PAGE> 20
REGULATION
MBIA Corp. is licensed to do insurance business in, and is subject to
insurance regulation and supervision by, the State of New York (its state of
incorporation), the 49 other states, the District of Columbia, Guam, the
Northern Mariana Islands, the U.S. Virgin Islands, Puerto Rico, the Kingdom of
Spain and the Republic of France. MBIA Assurance is licensed to do insurance
business in France and is subject to regulation under the corporation and
insurance laws of the Republic of France. MBIA Assurance has used the provisions
of the Third Non-life Insurance Directive to operate in the United Kingdom both
on a services and branch basis and is to a limited extent subject to supervision
by the Financial Services Authority. The extent of state insurance regulation
and supervision varies by jurisdiction, but New York, Illinois and most other
jurisdictions have laws and regulations prescribing minimum standards of
solvency, including minimum capital requirements, and business conduct which
must be maintained by insurance companies. These laws prescribe permitted
classes and concentrations of investments. In addition, some state laws and
regulations require the approval or filing of policy forms and rates. MBIA Corp.
is required to file detailed annual financial statements with the New York
Insurance Department and similar supervisory agencies in each of the other
jurisdictions in which it is licensed. The operations and accounts of MBIA Corp.
are subject to examination by these regulatory agencies at regular intervals.
MBIA Corp. is licensed to provide financial guarantee insurance under
Article 69 of the New York Insurance Law. Article 69 defines financial guarantee
insurance to include any guarantee under which loss is payable upon proof of
occurrence of financial loss to an insured as a result of certain events. These
events include the failure of any obligor on or any issuer of any debt
instrument or other monetary obligation to pay principal, interest, premium,
dividend or purchase price of or on such instrument or obligation when due.
Under Article 69, MBIA Corp. is licensed to transact financial guarantee
insurance, surety insurance and credit insurance and such other kinds of
business to the extent necessarily or properly incidental to the kinds of
insurance which MBIA Corp. is authorized to transact. In addition, MBIA Corp. is
empowered to assume or reinsure the kinds of insurance described above.
As a financial guarantee insurer, MBIA Corp. is required by the laws of
New York, California, Connecticut, Florida, Illinois, Iowa, New Jersey and
Wisconsin to maintain contingency reserves on its municipal bond, asset-backed
securities and other financial guarantee liabilities. Under New Jersey, Illinois
and Wisconsin regulations, contributions by such an insurer to its contingency
reserves are required to equal 50% of earned premiums on its municipal bond
business. Under New York law, such an insurer is required to contribute to
contingency reserves 50% of premiums as they are earned on policies written
prior to July 1, 1989 (net of reinsurance), and, with respect to policies
written on and after July 1, 1989, must make contributions over a period of 15
or 20 years (based on issue type), or until the contingency reserve for such
insured issues equals the greater of 50% of premiums written for the relevant
category of insurance or a percentage of the principal guaranteed, varying from
0.55% to 2.5%, depending upon the type of obligation guaranteed (net of
reinsurance, refunding, refinancings and certain insured securities).
California, Connecticut, Iowa and Florida laws impose a generally similar
requirement. In each of these states, MBIA Corp. may apply for release of
portions of the contingency reserves in certain circumstances.
The laws and regulations of these states also limit both the aggregate
and single municipal bond and asset-backed securities risks that MBIA Corp. may
insure on a net basis. California, Connecticut, Florida, Illinois and New York,
among other things, limit insured average annual debt service on insured
municipal bonds with respect to a single entity and backed by a single revenue
source (net of qualifying collateral and reinsurance) to 10% of policyholders'
surplus and contingency reserves. California, Connecticut, Florida, Illinois and
New York also limit the net insured unpaid principal on a municipal bond issued
by a single entity and backed by a single revenue source to 75% of
policyholders' surplus and contingency reserves. California, Connecticut, and
New York, among other things, require for each issue of asset-backed securities
issued by a single entity and for each pool of consumer debt obligations, the
lesser of: (1) the insured average debt service or (2) the insured unpaid
principal (reduced by the extent to which unpaid principal of the supporting
assets exceeds the insured unpaid principal) divided by nine. Each issue of
asset-backed securities issued by a single entity and each pool of consumer debt
obligations shall not exceed 10% of the aggregate of the insurer's
policyholders' surplus and contingency reserves, provided that no asset in the
pool supporting the asset-backed securities exceeds single risk limits. Florida
limits insured unpaid principal for any one risk to 10% of policyholders'
surplus and contingency reserves. In New Jersey, Virginia and Wisconsin, the
average annual debt service on any single issue of municipal bonds (net of
reinsurance) is limited to 10% of policyholders' surplus. Other states that do
not explicitly regulate financial guarantee or municipal bond insurance do
impose single risk limits, which are similar in effect to the foregoing.
Under New York, California, Connecticut, Florida, Illinois, New Jersey
and Wisconsin law, aggregate insured unpaid principal and interest under
policies insuring municipal bonds (in the case of New York, California,
Connecticut, Florida and Illinois, net of reinsurance) are limited to certain
multiples of policyholders' surplus and contingency reserves. New York,
California, Connecticut, Florida, Illinois and other states impose a 300:1 limit
for insured municipal bonds, although more restrictive limits on bonds of other
types do exist. For example, New York, California, Connecticut and Florida
impose a 100:1 limit for certain types of non-municipal bonds. Under New York,
California, Connecticut, Florida, and New Jersey law, aggregate insured unpaid
principal and
19
<PAGE> 21
interest under policies insuring asset-backed securities (again,
in the case of New York, California, Connecticut, and Florida, net of
reinsurance) are limited to certain multiples of policyholders' surplus and
contingency reserves. New York, California, Connecticut, Florida, and other
states impose a 150:1 limit for insured investment grade asset-backed
securities, although more restrictive limits on asset-backed securities of other
types exist. For example, New York, California, Connecticut, and Florida impose
a 50:1 limit for non-investment grade asset-backed securities.
The Company, MBIA Corp., MBIA Illinois, and CapMAC also are subject to
regulation under insurance holding company statutes of New York, Illinois and
other jurisdictions in which MBIA Corp., MBIA Illinois, and CapMAC are licensed
to write insurance. The requirements of holding company statutes vary from
jurisdiction to jurisdiction but generally require insurance holding companies,
such as the Company, and their insurance subsidiaries, to register and file
certain reports describing, among other information, their capital structure,
ownership and financial condition. The holding company statutes also generally
require prior approval of changes in control, of certain dividends and other
inter-corporate transfers of assets, and of transactions between insurance
companies, their parents and affiliates. The holding company statutes impose
standards on certain transactions with related companies, which include, among
other requirements, that all transactions be fair and reasonable and that those
exceeding specified limits receive prior regulatory approval.
Prior approval by the New York Insurance Department is required for any
entity seeking to acquire "control" of the Company, MBIA Corp, or CapMAC. Prior
approval by the Illinois Department of Insurance is required for any entity
seeking to acquire "control" of the Company, MBIA Corp., MBIA Illinois, or
CapMAC. In many states, including New York and Illinois, "control" is presumed
to exist if 10% or more of the voting securities of the insurer are owned or
controlled by an entity, although the supervisory agency may find that "control"
in fact does or does not exist when an entity owns or controls either a lesser
or greater amount of securities.
The laws of New York regulate the payment of dividends by MBIA Corp.
and provide that a New York domestic stock property/casualty insurance company
(such as MBIA Corp.) may not declare or distribute dividends except out of
statutory earned surplus. New York law provides that the sum of (i) the amount
of dividends declared or distributed during the preceding 12-month period and
(ii) the dividend to be declared may not exceed the lesser of (a) 10% of
policyholders' surplus, as shown by the most recent statutory financial
statement on file with the New York Insurance Department, or (b) 100% of
adjusted net investment income for such 12-month period (the net investment
income for such 12-month period plus the excess, if any, of net investment
income over dividends declared or distributed during the two-year period
preceding such 12-month period), unless the New York Superintendent of Insurance
approves a greater dividend distribution based upon a finding that the insurer
will retain sufficient surplus to support its obligations and writings. See Note
to the Consolidated Financial Statements of MBIA Inc. and Subsidiaries.
The foregoing dividend limitations are determined in accordance with
Statutory Accounting Practices ("SAP"), which generally produce statutory
earnings in amounts less than earnings computed in accordance with Generally
Accepted Accounting Principles ("GAAP"). Similarly, policyholders' surplus,
computed on a SAP basis, will normally be less than net worth computed on a GAAP
basis. See Note to the Consolidated Financial Statements of MBIA Inc. and
Subsidiaries.
MBIA Corp., MBIA Illinois, and CapMAC are exempt from assessments by
the insurance guarantee funds in the majority of the states in which they do
business. Guarantee fund laws in most states require insurers transacting
business in the state to participate in guarantee associations, which pay claims
of policyholders and third-party claimants against impaired or insolvent
insurance companies doing business in the state. In most states, insurers
licensed to write only municipal bond insurance, financial guarantee insurance
and other forms of surety insurance are exempt from assessment by these funds
and their policyholders are prohibited from making claims on these funds.
LOSSES AND RESERVES
The Company's policy is to provide (I) specific, identified loss
reserves to cover estimated losses on policies for which the Company has
determined that it is likely to incur losses ("case basis reserves"), and (II)
general, unallocated loss reserves to cover losses that may be reasonably
estimated to occur on its insured obligations over the lives of such
obligations. The aggregate loss reserves, at any financial statement date, are
the Company's best estimate of the reserves needed to cover both types of
losses, including expected costs of settlement.
To the extent that specific insured issues are identified as currently
or likely to be in default, the present value of the expected payments,
including costs of settlement, net of expected recoveries, is allocated within
the total loss reserve as a case basis reserves.
20
<PAGE> 22
The total reserve is calculated by applying a loss factor, determined based
on an independent rating agency study of bond defaults, to net debt service
written. At December 31, 2000, $209.2 million of the $467.9 million reserve for
loss and loss adjustment expenses represents case basis reserves, of which
$183.9 million is attributable to a health care facility in Pennsylvania. The
remaining case basis reserves represent various housing financings and
structured finance transactions, the largest of which is $9.9 million. Both MBIA
Illinois and CapMAC are currently inactive and their insurance business is in
run-off. MBIA Corp. has reinsured their respective net liabilities on financial
guarantee insurance business and maintains required reserves in connection
therewith.
The reserves for losses and loss adjustment expenses are based on
estimates, and there can be no assurance that the ultimate liability will not
exceed such estimates. To the extent that actual case losses for any period are
less than the unallocated portion of the total loss reserve, it is not likely
that there will be an impact on the Company's earnings for that period other
than an addition to the reserve which results from applying the loss rate factor
to new debt service insured or if the Company decides to make a one-time
adjustment to the reserves in the event of a loss that materially reduces the
unallocated portion of the reserve. To the extent that case losses, for any
period, exceed the unallocated portion of the total loss reserve, the excess
will be charged against the Company's earnings for that period. In 2000 and
1999, the Company reviewed its loss reserving methodology. The reviews included
an analysis of loss-reserve factors and the historical default and recovery
experience of certain sectors of the fixed-income market. The 1999 review
resulted in an increase in the Company's loss reserve factors.
SAP RATIOS
The financial statements in this Form 10-K are prepared on the basis of
GAAP. For reporting to state regulatory authorities, SAP is used. See Note 7 to
the Consolidated Financial Statements of MBIA Inc. and Subsidiaries.
The SAP combined ratio is a traditional measure of underwriting
profitability for insurance companies. The SAP loss ratio (which is losses
incurred divided by premiums earned), SAP expense ratio (which is underwriting
expenses divided by net premiums written) and SAP combined ratio (which is the
sum of the loss and expense ratios) for MBIA Corp. and for the financial
guarantee industry, which includes the monoline primary insurers (including MBIA
Corp.) and monoline reinsurers, are shown in the table below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
MBIA Corp.
Loss ratio 1.7% 1.2% 8.0% 12.3% 6.2%
Expense ratio 22.8 21.2 16.8 23.6 22.1
Combined ratio 24.5 22.4 24.8 35.9 28.3
Financial guarantee industry (1)
Loss ratio 4.9% 8.3% 22.8% 4.2% *
Expense ratio 31.6 28.1 22.7 24.1 *
Combined ratio 36.5 36.4 45.5 28.3 *
</TABLE>
- -----------------------------
(1) Industry statistics were taken from the 1999 Industry Financial Results of
the Association of Financial Guaranty Insurors.
* Not available.
21
<PAGE> 23
The SAP loss ratio differs from the GAAP loss ratio because the GAAP
ratio recognizes a provision for unidentified losses. The SAP expense ratio
varies from the GAAP expense ratio because the GAAP ratio recognizes the
deferral of policy acquisition costs and includes the amortization of purchase
accounting adjustments, principally goodwill. In addition, the SAP expense ratio
is calculated using premiums written while the GAAP expense ratio uses premiums
earned.
Net insurance in force, qualified statutory capital (which is comprised
of policyholders' surplus and the contingency reserve), and policyholders'
leverage ratios for MBIA Corp. and for the financial guarantee industry are
shown in the table below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996 1997 1998 1999 2000
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
MBIA Corp.
Net insurance in force $ 434,417 $ 513,736 $ 595,895 $ 635,883 $680,878
Qualified statutory capital 2,620 3,140 3,741 4,152 4,505
Policyholders' leverage ratio 166:1 164:1 159:1 153:1 151:1
Financial guarantee industry (1)
Net insurance in force $1,076,821 $1,262,697 $1,416,433 $1,616,226 *
Qualified statutory capital 7,350 8,851 9,833 11,139 *
Policyholders' leverage ratio 147:1 143:1 144:1 145:1 *
</TABLE>
- -----------------------------
(1) Industry statistics were taken from the 1999 Industry Financial Results of
the Association of Financial Guaranty Insurors. * Not available.
The policyholders' leverage ratio is the ratio of net insurance in
force to qualified statutory capital. This test is sometimes focused on as a
measure of a company's claims-paying capacity. The Company believes that the
leverage ratio has significant limitations since it compares the total debt
service (undiscounted) coming due over the next 30 years or so to a company's
current capital base. It thereby fails to recognize future capital that will be
generated during the period of risk being measured, arising from unearned
premium reserve and future installment premium commitments nor does it take into
account the Company's "soft" capital facilities (see "Business -- Credit
Agreement"). Further, the leverage ratio does not consider the underlying
quality of the issuers whose debt service is insured and thereby does not
differentiate among the risk characteristics of a financial guarantor's insured
portfolio, nor does it give any benefit for third-party commitments such as
standby lines of credit.
MBIA CORP. INSURANCE POLICIES
Virtually all of the insurance policies issued by MBIA Corp. provide an
unconditional and irrevocable guarantee of the payment to a designated paying
agent for the holders of the insured obligations of an amount equal to the
principal of and interest or other amounts due on the insured obligations that
have not been paid. In the event of a default in payment of principal, interest
or other insured amounts by an issuer, MBIA Corp. promises to make funds
available in the amount of the default on the next business day following
notification. MBIA Corp. has a Fiscal Agency Agreement with State Street Bank
and Trust Company, N.A. which provides for this payment upon receipt of proof of
ownership of the obligations due, as well as upon receipt of instruments
appointing MBIA Corp. as agent for the holders and evidencing the assignment of
the rights of the holders with respect to the payments made by MBIA Corp. Even
if the holders are permitted by the terms of the insured obligations to have the
full amount of principal, accrued interest or other amounts due declared due and
payable immediately in the event of a default, MBIA Corp. is required to pay
only the amounts scheduled to be paid, but not in fact paid, on each originally
scheduled payment date.
MBIA Assurance writes policies that are substantially similar in
coverage and manner of payment to the MBIA Corp. policies. The MBIA Illinois
insurance policies provide for payments on default in substantially the same
manner as the MBIA Corp. policies. Financial guaranty insurance written by
CapMAC generally guarantees to the holder of the guaranteed obligation the
timely payment of principal and interest in accordance with the obligation's
original payment schedule. In the case of a default on the insured obligation,
payment under the insurance policy generally may not be accelerated by the
holder without the consent of CapMAC, even though the underlying obligation may
be accelerated.
22
<PAGE> 24
RATING AGENCIES
Moody's, S&P, Fitch and RII perform periodic reviews of MBIA Corp. and
other companies providing financial guarantee insurance. Their reviews focus on
the insurer's operations, financial condition, underwriting policies and
procedures and on the issues insured. Additionally, each rating agency has
certain criteria as to exposure limits and capital requirements for financial
guarantors.
The rating agencies have reaffirmed their Triple-A claims-paying
ratings assigned to MBIA Corp., CapMAC, MBIA Illinois and to MBIA Assurance. The
ratings for MBIA Illinois and CapMAC are based in significant part on
reinsurance agreements between MBIA Corp. and MBIA Illinois and MBIA Corp. and
CapMAC, respectively. The rating of MBIA Assurance is based in significant part
on the reinsurance agreement between MBIA Corp. and MBIA Assurance and the net
worth maintenance agreement between the two parties. See "Business-Reinsurance."
Although MBIA Corp. intends to comply with the requirements of the
rating agencies, no assurance can be given that these requirements will not
change or that, even if MBIA Corp. complies with these requirements, one or more
rating agencies will not reduce or withdraw their rating. MBIA Corp.'s ability
to attract new business and to compete with other financial guarantors, and its
results of operations and financial condition would be materially adversely
affected by any reduction in its ratings.
INVESTMENT CONSIDERATIONS
Claims-Paying Ability Rating
----------------------------
MBIA Corp.'s ability to attract new business and to compete with other
triple-A rated financial guarantors is largely dependent on the Triple-A claims
paying ratings assigned to it by the major rating agencies. Although MBIA Corp.
intends to comply with the requirements of the rating agencies to maintain such
ratings, no assurance can be given that these requirements will not change or
that, even if MBIA Corp. complies with these requirements, one or more of such
rating agencies will not reduce or withdraw their claims-paying ability ratings
of MBIA Corp. in the future. MBIA Corp.'s ability to attract new business and to
compete with other triple-A rated financial guarantors, and its results of
operations and financial condition, would be materially adversely affected by
any reduction in its ratings. See "Business - Rating Agencies".
Competition
-----------
The businesses engaged in by MBIA Corp. are highly competitive. MBIA
Corp. faces competition from other financial guaranty insurance companies, other
providers of third-party credit enhancement, such as multi line insurance
companies and banks, and alternative executions which do not employ third-party
credit enhancement. To the extent that there is no increase in the dollar volume
of obligations that require guaranties, increased competition, either in terms
of price or new providers of credit enhancement, would likely have an adverse
effect on MBIA Corp.'s business. See "Business - Competition".
Market and Other Factors
------------------------
The demand for financial guaranty insurance depends upon many factors,
some of which are beyond the control of MBIA Corp. While all the major financial
guaranty insurers have triple-A claims-paying ability ratings from the major
rating agencies, investors may from time to time distinguish among financial
guarantors on the basis of various factors, including size, insured portfolio
concentration and financial performance. These distinctions may result in
differentials in trading levels for securities insured by particular financial
guarantors which, in turn, may provide a competitive advantage to those
financial guarantors with better trading characteristics. Conversely, various
investors may, due to regulatory or internal guidelines, lack additional
capacity to purchase securities insured by certain financial guarantors, which
may provide a competitive advantage to guarantors with fewer insured obligations
outstanding.
Prevailing interest rate levels affect demand for financial guaranty
insurance to the extent that lower interest rates are accompanied by narrower
spreads between insured and uninsured obligations. The purchase of insurance
during periods of relatively
23
<PAGE> 25
narrower interest rate spreads will generally provide lower cost savings to the
issuer than during periods of relatively wider spreads. These lower cost savings
generally are accompanied by a corresponding decrease in demand for financial
guaranty insurance.
The perceived financial strength of financial guaranty insurers also
affects demand for financial guaranty insurance. Should a major financial
guaranty insurer, or the industry generally, have its claims-paying ability
rating lowered, or suffer for some other reason deterioration in investors'
confidence, demand for financial guaranty insurance may be reduced
significantly.
Premium rates are affected by factors such as the insurer's appraisal
of the insured credit, the spread between interest rates prevailing on insured
and uninsured obligations and capital charges associated with these exposures as
determined by the rating agencies and regulators, as well as competition for
such business among financial guaranty insurance providers and other forms of
credit enhancement. Lower interest rates generally result in lower premium
amounts to the extent that premium amounts are based on the total dollar amount
of principal interest and other amounts insured.
Regulation
----------
The financial guaranty insurance industry has historically been and
will continue to be subject to the direct and indirect effects of governmental
regulation, including changes in tax laws and legal precedents affecting
asset-backed and municipal obligations. No assurance can be given that future
legislative regulatory or judicial changes will not adversely affect MBIA
Corp.'s business. See "Business - Regulation" for a description of current
insurance regulations affecting MBIA Corp.
Adequacy of Loss Reserves
-------------------------
The financial guaranties issued by MBIA Corp. insure the financial
performance of the obligations guaranteed over an extended period of time, in
some cases over 30 years, under policies that MBIA Corp. cannot cancel. As a
result of the lack of statistical loss data due to the low level of losses in
MBIA Corp.'s financial guaranty business and in the financial guaranty industry
in general, particularly in the structured asset-backed area, MBIA Corp. does
not use traditional actuarial approaches to determine its loss reserves.
Instead, a general loss reserve is established in an amount deemed adequate to
cover the expected levels of losses and loss adjustment expense on MBIA's
overall portfolio. The size of the general loss reserve is determined by a
formula, the components of which are reviewed regularly. Management believes
that the current level of general loss reserves is adequate to cover the
estimated liability for claims and the related adjustment expenses with respect
to financial guaranties issued by MBIA Corp. The establishment of the
appropriate level of loss reserves is an inherently uncertain process involving
numerous estimates and subjective judgments by management, and therefore there
can be no assurance that losses in MBIA Corp.'s insured portfolio will not
exceed the loss reserves. Losses from future defaults, depending on their
magnitude, could have a material adverse effect on the results of operations and
financial condition of MBIA Corp. See "Business - Losses and Reserves".
Realization of Installment Premiums
-----------------------------------
Due to the annuity nature of a significant percentage of its premium
income, MBIA Corp. has an embedded future revenue stream. The amount of
installment premiums actually realized by MBIA Corp. could be reduced in the
future due to factors such as accelerated prepayments of underlying obligations.
Although increases in installment premium due to renewals of existing insurance
contracts historically have been greater than reductions, there can be no
assurance that future circumstances might not cause a net reduction overall,
resulting in lower revenues.
24
<PAGE> 26
Reinsurance
___________
MBIA Corp.'s ability to maintain reinsurance capacity is important to
its business. In order to comply with regulatory, rating agency or internal
single risk retention limits for transactions of significant size, MBIA Corp.
needs access to sufficient reinsurance capacity to underwrite large
transactions. If MBIA Corp. were to become unable to obtain sufficient
reinsurance, this could have an adverse impact on its ability to issue policies
for large transactions. See "Business - Reinsurance". MBIA Corp. remains liable
for insurance ceded to reinsurers to the extent such reinsurers are unable to
meet their obligations.
Anti-Takeover Provisions
________________________
The Company's Charter and Bylaws contain special notice and other
provisions the effect of which could be to discourage non-negotiated takeover
attempts, which takeovers some stockholders might otherwise deem to be in their
interests. In addition, the Company has a Rights Plan in place that would also
deter non-negotiated takeovers. Given the importance of MBIA Corp.'s triple-A
ratings to the Company's business, as a practical matter, a change of control
would require confirmation in advance from the rating agencies that such
transaction would not result in a downgrading of the claims-paying ability
rating assigned to MBIA Corp.
The insurance laws of New York provide that no person, other than an
authorized insurer, may acquire control of the Company and thus indirect control
of MBIA Corp., or any other New York-domiciled insurance subsidiary of the
Company, unless it has given prior written notice to MBIA Corp. and any such
subsidiary and received the prior approval of the Superintendent of Insurance of
the State of New York. Furthermore, any purchaser of 10% or more of the
outstanding shares of the Company's Common Stock would be presumed to have
acquired such control unless the Superintendent of Insurance determined
otherwise. Therefore, any takeover of the Company effectively requires
regulatory approval. This regulatory restriction may effectively reduce the
probability of a takeover without the cooperation of management.
Investment Management Services Businesses
_________________________________________
The Company's Investment Management Services businesses have grown as a
proportion of its overall business (see "Investment Management Businesses"). As
their contribution continues to grow, events that negatively affect the
performance of the Investment Management Services businesses could affect the
overall performance of the Company.
CREDIT AGREEMENT
MBIA Corp. entered into a Credit Agreement, dated as of December 29,
1989, which has been amended from time to time (the "Credit Agreement"), to
provide MBIA Corp. with an unconditional, irrevocable line of credit. The line
of credit is available to be drawn upon by MBIA Corp., in an amount up to $900
million, after MBIA Corp. has incurred, during the period commencing October 27,
2000 and ending October 31, 2007, cumulative losses (net of any recoveries) in
excess of $900 million or 5.6% of average annual debt service. The obligation to
repay loans made under the Credit Agreement is a limited recourse obligation of
MBIA Corp. payable solely from, and secured by a pledge of, recoveries realized
on defaulted insured obligations, from certain pledged installment premiums and
other collateral. Borrowings under the Credit Agreement are repayable on the
expiration date of the Credit Agreement. The current expiration date of the
Credit Agreement is October 31, 2007, subject to annual extensions under certain
circumstances. The Credit Agreement contains covenants that, among other things,
restrict MBIA Corp.'s ability to encumber assets or merge or consolidate with
another entity.
EMPLOYEES
As of March 15, 2001, the Company had 745 employees. No employee is
covered by a collective bargaining agreement. The Company considers its employee
relations to be satisfactory.
EXECUTIVE OFFICERS
The executive officers of the Company and their present ages and
positions with the Company are set forth below. All these individuals are also
directors of MBIA Corp.
25
<PAGE> 27
<TABLE>
<CAPTION>
NAME AGE POSITION AND TERM OF OFFICE
---- --- ---------------------------
<S> <C> <C>
Joseph W. Brown 52 Chairman and Chief Executive Officer (officer since January 1999)
Gary C. Dunton 45 President and Chief Operating Officer (officer since January, 1998)
Richard L. Weill 58 Vice President and Secretary (officer since 1989)
Neil G. Budnick 46 Vice President and Chief Financial Officer (officer since 1992)
John B. Caouette 56 Vice President (officer since February, 1998)
Ram D. Wertheim 46 Vice President and General Counsel (officer since January, 2000)
Kevin D. Silva 47 Vice President and Chief Administrative Officer (officer since 1995)
Ruth M. Whaley 45 Vice President and Chief Risk Officer (officer since 1999)
Robert T. Wheeler 58 Vice President and Chief Technology Officer (officer since May, 2000)
John S. Pizzarelli 45 Vice President (officer since November, 2000)
Mark S. Zucker 52 Vice President (officer since November, 2000)
</TABLE>
Joseph W. Brown is Chairman and Chief Executive Officer of the Company
(effective January 7, 1999) and a director of the Company. Prior to joining the
Company in January 1999, Mr. Brown was Chairman of the Board of Talegen
Holdings, Inc.
Gary C. Dunton is President and Chief Operating Officer of the Company
and a director of the Company. Mr. Dunton was, prior to joining the Company as
an officer, a director of the Company and President of the Family and Business
Insurance Group, USF&G Insurance.
Richard L. Weill is Vice President and Secretary of the Company. From
1989 through 1991, Mr. Weill was General Counsel and Corporate Secretary of the
Company.
Neil G. Budnick is Vice President and Chief Financial Officer of the
Company. Mr. Budnick has been primarily involved in the insurance operations
area of MBIA Corp. since joining the Company in 1983.
John B. Caouette is Vice President of the Company. Mr. Caouette was,
until February of 1998, the Chairman and Chief Executive Officer of CapMAC
Holdings Inc.
Ram D. Wertheim is Vice President and General Counsel of the Company.
From February of 1998 until January, 2000, he served in various capacities in
the Structured Finance Division. Mr. Wertheim was, until February of 1998, the
General Counsel of CapMAC Holdings Inc.
Kevin D. Silva is Vice President and Chief Administrative Officer of
the Company. He has been in charge of the Management Services Division of MBIA
Corp. since joining the Company in late 1995.
Ruth M. Whaley is Vice President and Chief Risk Officer of the Company.
She was, until February of 1998, the Chief Underwriting Officer of CapMAC
Holdings Inc.
Robert T. Wheeler is Vice President and Chief Technology Officer of the
Company. From 1985 until April of 2000, he was the Managing Director and Chief
Information Officer of US Fire Insurance Company.
John S. Pizzarelli is Vice President of the Company and head of the
Public Finance Division of MBIA Corp. Since joining MBIA Corp. in 1985, he has
been primarily involved in the public finance area.
Mark D. Zucker is Vice President of the Company and head of the
Structured Finance Division of MBIA Corp. Prior to joining the Company he was
Chief Credit Officer of Investment Banking for Rabobank International.
ITEM 2. PROPERTIES
MBIA Corp. owns the 265,000 square foot office building on
approximately 15.5 acres of property in Armonk, New York, in which the Company
and MBIA Corp. have their headquarters. The Company also has rental space in New
York, New York, San Francisco, California, Paris, France, Madrid, Spain, Sydney,
Australia and London, England. The Company believes that these facilities are
adequate and suitable for its current needs.
26
<PAGE> 28
ITEM 3. LEGAL PROCEEDINGS
In the normal course of operating its businesses, the Company may be
involved in various legal proceedings. There are no material lawsuits pending
or, to the knowledge of the Company, threatened, to which the Company or any of
its subsidiaries is a party; however, Capital Asset continues to have certain
contingent liabilities outstanding, including various individual and class
action lawsuits, which they are defending. The Company has no reason to believe
that it has financial liability for these lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
27
<PAGE> 29
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information concerning the market for the Company's Common Stock
and certain information concerning dividends appears under the heading
"Shareholder Information" on page 65 of the Company's 2000 Annual Report to
Shareholders and is incorporated herein by reference. As of March 15, 2001,
there were 945 shareholders of record of the Company's Common Stock. The
information concerning dividends on the Company's Common Stock is under
"Business - Regulation" in this report.
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Financial and Statistical
Data" as set forth on pages 34-35 of the Company's 2000 Annual Report to
Shareholders is incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as set forth on pages 36-42 of
the Company's 2000 Annual Report to Shareholders is incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See the information under the heading "Market Risk" in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as set
forth on page 42 of the Company's 2000 Annual Report to Shareholders which is
incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company, the Report of
Independent Accountants thereon by PricewaterhouseCoopers LLP and the unaudited
"Quarterly Financial Information" are set forth on pages 43-62 of the Company's
2000 Annual Report to Shareholders and are incorporated by reference.
Subsequent Event - Stock Split (Unaudited)
On March 15, 2001 the Company's Board of Directors approved a 3 for 2
stock split by means of a stock dividend. The 3-for-2 stock split will be
accomplished through a stock dividend which will be distributed on April 20,
2001 to shareholders of record as of April 2, 2001. The pro-forma per share
amounts on a post-split basis for the years ended December 31, 2000, 1999 and
1998 would be as follows:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Net income per common share:
Basic $ 3.58 $ 2.15 $ 2.91
Diluted $ 3.56 $ 2.13 $ 2.88
Book value per share $ 28.59 $ 23.56 $ 25.43
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
28
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is set forth under "Election of
Directors" in the Company's Proxy Statement, which will be filed on or before
April 9, 2001, which is incorporated by reference.
Information regarding executive officers is set forth under Item 1,
"Business - Executive Officers," in this report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of the Company's executive officers
is set forth under "Compensation of Executive Officers" in the Company's Proxy
Statement, which will be filed on or before April 9, 2001, which is incorporated
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management is set forth under "Election of Directors" and "Security
Ownership of Certain Beneficial Owners" in the Company's Proxy Statement, which
will be filed on or before April 9, 2001, which is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding relationships and related transactions is set
forth under "Certain Relationships and Related Transactions" in the Company's
Proxy Statement which will be filed on or before April 9, 2001, which is
incorporated by reference.
29
<PAGE> 31
PART IV
ITEM 14.
(a) Financial Statements and Financial Statement Schedules and
Exhibits.
1. Financial Statements
MBIA Inc. has incorporated by reference from the 2000 Annual Report to
Shareholders the following consolidated financial statements of the Company:
<TABLE>
<CAPTION>
Annual Report to Shareholders
Page(s)
<S> <C>
MBIA INC. AND SUBSIDIARIES
Report of independent accountants. 43
Consolidated balance sheets as of December 31, 2000 and 44
1999.
Consolidated statements of income for the years ended 45
December 31, 2000, 1999 and 1998.
Consolidated statements of changes in shareholders' 46
equity for the years ended December 31, 2000, 1999 and
1998.
Consolidated statements of cash flows for the years ended December
31, 2000, 1999 and 1998. 47
Notes to consolidated financial statements. 48-62
</TABLE>
2. Financial Statement Schedules
The following financial statement schedules are filed as part of
this report.
<TABLE>
<CAPTION>
Schedule Title
<S> <C>
I Summary of investments, other than investments in
related parties, as of December 31, 2000.
II Condensed financial information of Registrant
for December 31, 2000, 1999 and 1998. IV Reinsurance for
the years ended December 31, 2000, 1999 and 1998.
</TABLE>
The report of the Registrant's independent accountants with
respect to the above listed financial statement schedules is included with the
schedules.
All other schedules are omitted because they are not applicable
or the required information is shown in the consolidated financial statements or
notes thereto.
3. Exhibits
(An exhibit index immediately preceding the Exhibits indicates
the page number where each exhibit filed as part of this report can be
found.)
3. Articles of Incorporation and By-Laws.
3.1. Restated Certificate of Incorporation, dated August 17,
1990, incorporated by reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990 (Comm. File 1-9583) (the
"1990 10-K"), as amended December 20, 1995.
3.2. By-Laws as Amended as of March 19, 1998, incorporated by
reference to Exhibit 3.2 of the 1998 10-K.
30
<PAGE> 32
4. Instruments Defining the Rights of Security Holders, including
Indentures.
4.1 Indenture, dated as of August 1, 1990, between MBIA Inc. and
The First National Bank of Chicago, Trustee, incorporated by reference to
Exhibit 10.72 to the 1992 10-K.
4.2 Bond Purchase and Paying Agent Agreement between MBIA Inc.
and various banks, entered into as of December 12, 2000 in connection with CHF
175,000,000 4.5% Bonds, due June 15, 2010.
10. Material Contracts
10.01. Amended and Restated Tax Allocation Agreement, dated as of
January 1, 1990, between the Company and MBIA Corp., incorporated by reference
to Exhibit 10.66 to the 1989 10-K, as supplemented by the Amended and Restated
Tax Allocation Agreement Supplement No. 1, dated as of August 31, 1999,
incorporated by reference to Exhibit 10.06 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,1999 (Comm. File No. 1-9583)
(the "1999 10-K").
10.02. Rights Agreement, dated as of December 12, 1991, between
the Company and Mellon Bank, N.A., incorporated by reference to the Company's
Current Report on Form 8-K, filed on December 31, 1991, incorporated by
reference to Exhibit 10.62 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (Comm. File No. 1-9583) (the "1993 10-K"),
as amended by Amendment to Rights Agreement, dated as of October 24, 1994,
incorporated by reference to Exhibit 10.49 to the 1994 10-K.
10.03. Trust Agreement, dated as of December 31, 1991, between
MBIA Corp. and Fidelity Management Trust Company, incorporated by reference to
Exhibit 10.64 to the 1992 10-K, as amended by the Amendment to Trust Agreement,
dated as of April 1, 1993, incorporated by reference to Exhibit 10.64 to the
1993 10-K, as amended by First Amendment to Trust Agreement, dated as of January
21, 1992, as further amended by Second Amendment to Trust Agreement, dated as of
March 5, 1992, as further amended by Third Amendment to Trust Agreement, dated
as of April 1, 1993, as further amended by the Fourth Amendment to Trust
Agreement, dated as of July 1, 1995, incorporated by reference to Exhibit 10.47
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (Comm. File No. 1-9583) (the "1995 10-K"), as amended by Fifth
Amendment to Trust Agreement, dated as of November 1, 1995, as further amended
by Sixth Amendment to Trust Agreement, dated as of January 1, 1996, incorporated
by reference to Exhibit 10.46 to the 1996 10-K, further amended by Seventh
Amendment to Trust Agreement, dated as of October 15, 1997, incorporated by
reference to Exhibit 10.36 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (Comm. File No. 1-9583) (the "1997 10-K") as
further amended by the Eighth Amendment to Trust Agreement, dated as of January
1, 1998 and by the Ninth Amendment to Trust Agreement, dated as of March 1,
1999, incorporated by reference to Exhibit 10.10 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 (Comm. File No. 1-9583)
(the "1998 10-K").
10.04. First Restated Credit Agreement, dated as of October 1,
1993, among MBIA Corp., Credit Suisse, New York Branch, as Agent, Credit Suisse,
New York Branch, Caisse Des Depots Et Consignations, Deutsche Bank AG,
Bayerische Landesbank Girozentrale and Landesbank Hessen-Thuringen Girozentrale,
as amended by an Assignment and Assumption Agreement, dated as of December 31,
1993, among MBIA Corp., Credit Suisse, New York Branch, as Agent and Assignor
and Deutsche Bank AG, New York Branch, as further amended by a Modification
Agreement, dated as of January 1, 1994, among Deutsche Bank, AG, New York
Branch, MBIA Corp. and Credit Suisse, New York Branch, as Agent, as amended by a
Joinder Agreement, dated December 31, 1993, among Credit Suisse, New York
Branch, as Agent, Sudwestdeutsche Landesbank Girozentrale and MBIA Corp.,
incorporated by reference to Exhibit 10.78 to the 1993 10-K, as amended by the
First Amendment to First Restated Credit Agreement, dated as of September 23,
1994, incorporated by reference to Exhibit 10.63 to the 1994 10-K, as further
amended by the Second Amendment to the First Restated Credit Agreement, dated as
of January 1, 1996, and as further amended by the Third Amendment to the First
Restated Credit Agreement, dated as of October 1, 1996, incorporated by
reference to Exhibit 10.57 to the 1996 10-K, as further amended and restated by
the Second Amended and Restated Credit Agreement, dated as of October 1, 1997,
incorporated by reference to Exhibit 10.46 to the 1997 10-K, as further amended
by the First Amendment to Second Amended and Restated Credit Agreement, dated as
of October 1, 1998, incorporated by reference to Exhibit 10.13 to the 1998 10-K,
as further amended and restated by the Second Amendment to the Second Amended
and Restated Credit Agreement, dated as of October 29, 1999, incorporated by
reference to Exhibit 10.13 to the 1999 10-K, as further amended and restated by
the Third Amendment to the Second Amendment and Restated Credit Agreement, dated
as of October 27, 2000.
31
<PAGE> 33
10.05. Net Worth Maintenance Agreement, dated as of November 1,
1991, between MBIA Corp. and MBIA Assurance S.A., as amended by Amendment to Net
Worth Agreement, dated as of November 1, 1991, incorporated by reference to
Exhibit 10.79 to 1993 10-K.
10.06. Reinsurance Agreement, dated as of January 1, 1993,
between MBIA Assurance S.A. and MBIA Corp., incorporated by reference to Exhibit
10.80 to the 1993 10-K.
10.07. Investment Services Agreement, effective as of April 28,
1995, between MBIA Insurance Corporation and MBIA Securities Corp., as amended
by Amendment No. 1, dated as of December 29, 1995, incorporated by reference to
Exhibit 10.65 to the 1995 10-K, as further amended by Amendment No. 2 to
Investment Services Agreement, dated January 14, 1997, incorporated by reference
to Exhibit 10.53 to the 1997 10-K.
10.08. Investment Services Agreement, effective January 2, 1996,
between MBIA Insurance Corp. of Illinois and MBIA Securities Corp., incorporated
by reference to Exhibit 10.66 to the 1995 10-K.
10.09. Agreement and Plan of Merger among the Company, CMA
Acquisition Corporation and CapMAC Holdings Inc. ("CapMAC"), dated as of
November 13, 1997, incorporated by reference to the Company's Form S-4 (Reg. No.
333-41633) filed on December 5, 1997.
10.10. Amendment No. 1 to Agreement and Plan of Merger among the
Company, CMA Acquisition Corporation and CapMAC Holdings Inc. ("CapMAC"), dated
January 16, 1998, incorporated by reference to the Company's Post Effective
Amendment No. 1 to Form S-4 (Reg. No. 333-41633) filed on January 21, 1998.
10.11. Reinsurance Agreement, dated as of April 1, 1998, between
CapMAC and MBIA Corp., incorporated by reference to Exhibit 10.30 to the 1998
10-K.
10.12. Reinsurance Agreement, dated as of January 1, 1999,
between MBIA Illinois and MBIA Corp., incorporated by reference to Exhibit 10.31
to the 1998 10-K.
10.13. Agreement and Plan of Merger by and among the Company,
MBIA Acquisition, Inc. and 1838 Investment Advisors, Inc., dated as of June 19,
1998, incorporated by reference to Exhibit 10.32 to the 1998 10-K.
10.14. Credit Agreement (364 day agreement) among the Company,
MBIA Corp., various designated borrowers, various lending institutions, Deutsche
Bank AG, New York Branch, as Administrative Agent, The First National Bank of
Chicago, as Syndication Agent and Fleet National Bank, as Documentation Agent,
dated as of August 28, 1998, incorporated by reference to Exhibit 10.33 to the
1998 10-K, incorporated by reference to Exhibit 10.33 to the 1999 10-K, as
amended by a Notice of Extension of Final Maturity Date, with various lending
institutions, dated as of August 2000.
10.15. Credit Agreement (5 year agreement) among the Company,
MBIA Corp., various designated borrowers, various lending institutions, Deutsche
Bank AG, New York Branch, as Administrative Agent, The First National Bank of
Chicago, as Syndication Agent and Fleet National Bank, as Documentation Agent,
dated as of August 28, 1998, incorporated by reference to Exhibit 10.34 to the
1998 10-K, incorporated by reference to Exhibit 10.34 to the 1999 10-K, as
amended by a Notice of Extension of Final Maturity Date, with various lending
institutions, dated as of August 2000.
10.16. Ambac Assurance Corporation, AMBAC Insurance UK Limited,
MBIA Insurance Corporation, and MBIA Assurance S.A. Agreement Regarding A Global
Joint Venture, effective as of January 15, 1999, incorporated by reference to
Exhibit 10.48 to the 1998 10-K.
10.17. Special Excess Of Loss Reinsurance Agreement, between MBIA
Insurance Corporation and/or MBIA Assurance S.A. and/or any other insurance or
reinsurance company subsidiaries of MBIA Inc. listed in Exhibit No. 1 and
Muenchener Rueckversicherungs-Gesellshaft, effective September 1, 1998,
incorporated by reference to Exhibit 10.49 to the 1998 10-K.
10.18. Second Special Per Occurrence Excess Of Loss Reinsurance
Agreement, between MBIA Insurance Corporation and/or MBIA Assurance S.A. and/or
any other insurance or reinsurance company subsidiaries of MBIA Inc. listed in
Exhibit No. 1 and AXA Re Finance S.A., effective September 1, 1998, incorporated
by reference to Exhibit 10.50 to the 1998 10-K.
32
<PAGE> 34
10.19. ISDA Master Agreement, dated May 2, 2000, between Deutsche
Bank AG and MBIA Inc., as supplemented by the Schedule to the ISDA Master
Agreement and the Credit Support Annex.
Executive Compensation Plans and Arrangements
The following Exhibits identify all existing executive compensation
plans and arrangements:
10.20. MBIA Inc. 2000 Stock Option Plan, effective May 11, 2000.
10.21. MBIA Inc. Deferred Compensation and Excess Benefit Plan,
incorporated by reference to Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988 (Comm. File No. 1-9583)
(the "1988 10-K"), as amended as of July 22, 1992, incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 (Comm. File No. 1-9583) (the "1992 10-K").
10.22. MBIA Inc. Employees Pension Plan, amended and restated
effective January 1, 1987, incorporated by reference to Exhibit 10.28 of the
Company's Amendment No. 1 to the 1987 S-1, as further amended and restated as of
December 12, 1991, incorporated by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (Comm.
File No. 1-9583) (the "1991 10-K"), as further amended and restated effective
January 1, 1994, incorporated by reference to Exhibit 10.16 of the Company's
Annual Report on Form 10-K for fiscal year ended December 31, 1994 (Comm. File
No. 1-9583) (the "1994 10-K").
10.23. MBIA Inc. Employees Profit Sharing Plan, as amended and
restated effective January 1, 1987, incorporated by reference to Exhibit 10.29
to Amendment No. 1 to the 1987 S-1, as further amended by Amendment dated
December 8, 1988, incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (Comm.
File No. 1-9583) (the "1989 10-K"), as further amended and restated as of
December 12, 1991, incorporated by reference to Exhibit 10.19 to the 1991 10-K,
as further amended and restated as of May 7, 1992, incorporated by reference to
Exhibit 10.17 to the 1992 10K, as further amended and restated effective January
1, 1994, incorporated by reference to Exhibit 10.17 to the 1994 10-K.
10.24. MBIA Corp. Split Dollar Life Insurance Plan, dated as of
February 9, 1988, issued by Aetna Life Insurance and Annuity Company,
incorporated by reference to Exhibit 10.23 to the 1989 10-K.
10.25. MBIA Inc. Employees Change of Control Benefits Plan,
effective as of January 1, 1992, incorporated by reference to Exhibit 10.65 to
the 1992 10-K.
10.26. MBIA Inc. 1996 Incentive Plan, effective as of January 1,
1996, incorporated by reference to Exhibit 10.70 to the 1995 10-K.
10.27. MBIA Inc. 1996 Directors Stock Unit Plan, effective as of
December 4, 1996, incorporated by reference to Exhibit 10.70 to the 1996 10-K.
10.28. CapMAC Employee Stock Ownership Plan, incorporated by
reference to Exhibit 10.18 to the CapMAC Form S-1, as Amended and Restated,
effective January 1, 1999.
10.29. CapMAC Employee Stock Ownership Plan Trust Agreement,
incorporated by reference to Exhibit 10.19 to the CapMAC Form S-1, as amended by
Amendment No. 2 to the CapMAC Employee Stock Ownership Plan, executed December
22, 1998, incorporated by reference to Exhibit 10.25 to the 1998 10-K.
10.30. ESOP Loan Agreement by and between MBIA Inc. and the
CapMAC Employee Stock Ownership Plan Trust, dated June 30, 1999.
10.31. Deferred Compensation and Restricted Stock Agreement,
dated as of December 7, 1995, between John B. Caouette and CapMAC, incorporated
by reference to Exhibit 10.28 of the CapMAC Annual Report on Form 10-K for the
year ended December 31, 1995 (the "CapMAC 1995 10-K").
33
<PAGE> 35
10.32. Deferred Compensation and Restricted Stock Agreement,
dated as of December 7, 1995, between Ram D. Wertheim and CapMAC, incorporated
by reference to Exhibit 10.35 of the CapMAC 1995 10-K.
10.33. Retirement and Consulting Agreement, between the Company
and David H. Elliott, dated as of January 7, 1999 and Summary Retirement and
Consulting Agreement, between the Company and David H. Elliott, dated as of
January 7, 1999, incorporated by reference to Exhibit 10.35 to the 1998 10-K.
10.34. Terms of Employment letter between MBIA and Joseph W.
Brown, Jr., dated January 7, 1999, incorporated by reference to Exhibit 10.36 to
the 1998 10-K.
10.35. Stock Option Agreement between MBIA Inc. and Joseph W.
Brown, Jr., dated January 7, 1999, incorporated by reference to Exhibit 10.37 to
the 1998 10-K.
10.36. Key Employee Employment Protection Agreement between MBIA
Inc. and Joseph W. Brown, Jr., dated January 20, 1999, incorporated by reference
to Exhibit 10.38 to the 1998 10-K.
10.37. Key Employee Employment Protection Agreement between MBIA
Inc. and Neil G. Budnick, dated January 25, 1999, incorporated by reference to
Exhibit 10.39 to the 1998 10-K.
10.38. Key Employee Employment Protection Agreement between MBIA
Inc. and W. Thacher Brown, dated January 25, 1999, incorporated by reference to
Exhibit 10.40 to the 1998 10-K.
10.39. Key Employee Employment Protection Agreement between MBIA
Inc. and John B. Caouette, dated January 25, 1999, incorporated by reference to
Exhibit 10.41 to the 1998 10-K.
10.40. Key Employee Employment Protection Agreement between MBIA
Inc. and Gary C. Dunton, dated January 25, 1999, incorporated by reference to
Exhibit 10.42 to the 1998 10-K.
10.41. Key Employee Employment Protection Agreement between MBIA
Inc. and Louis G. Lenzi, dated January 25, 1999, incorporated by reference to
Exhibit 10.43 to the 1998 10-K.
10.42. Key Employee Employment Protection Agreement between MBIA
Inc. and Kevin D. Silva , dated January 25, 1999, incorporated by reference to
Exhibit 10.44 to the 1998 10-K.
10.43. Key Employee Employment Protection Agreement between MBIA
Inc. and Richard L. Weill, dated January 25, 1999, incorporated by reference to
Exhibit 10.45 to the 1998 10-K.
10.44. Key Employee Employment Protection Agreement between MBIA
Inc. and Ruth M. Whaley, dated January 25, 1999, incorporated by reference to
Exhibit 10.46 to the 1998 10-K.
10.45. Key Employee Employment Protection Agreement between MBIA
Inc. and Michael J. Maguire, dated March 19, 1999, incorporated by reference to
Exhibit 10.47 to the 1998 10-K.
10.46. Key Employee Employment Protection Agreement between MBIA
Inc. and John S. Pizzarelli, dated March 14, 2000.
10.47. Key Employee Employment Protection Agreement between MBIA
Inc. and Ram D. Wertheim, dated January 24, 2000.
10.48. Key Employee Employment Protection Agreement between MBIA
Inc. and Robert T. Wheeler, dated April 17, 2000.
10.49. Key Employee Employment Protection Agreement between MBIA
Inc. and Mark S. Zucker, dated March 14, 2000.
34
<PAGE> 36
13. Annual Report to Shareholders of MBIA Inc. for fiscal year
ended December 31, 2000. Such report is furnished for the information of the
Commission only and, except for those portions thereof which are expressly
incorporated by reference in this Annual Report on Form 10-K, is not to be
deemed filed as part of this report.
21. List of Subsidiaries
23. Consent of PricewaterhouseCoopers LLP
99. Additional Exhibits - MBIA Corp. GAAP Financial Statements
(b) Reports on Form 8-K: The Company filed no report on Form 8-K in the
fourth quarter of 2000.
35
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MBIA Inc.
(Registrant)
Dated: March 30, 2001 By /s/ Joseph W. Brown
------------------------------------
Name: Joseph W. Brown
Title: Chairman
Pursuant to the requirements of Instruction D to Form 10-K under the
Securities Exchange Act of 1934, this Report has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Joseph W. Brown Chairman and Director March 30, 2001
- ------------------------------------------
Joseph W. Brown
/s/ Douglas C. Hamilton Vice President and March 30, 2001
- ------------------------------------------ Controller
Douglas C. Hamilton
/s/ David H. Elliott Director March 30, 2001
- ------------------------------------------
David H. Elliott
/s/ David C. Clapp Director March 30, 2001
- ------------------------------------------
David C. Clapp
/s/ Gary C. Dunton Director March 30, 2001
- ------------------------------------------
Gary C. Dunton
/s/ Claire L. Gaudiani Director March 30, 2001
- ------------------------------------------
Claire L. Gaudiani
</TABLE>
36
<PAGE> 38
<TABLE>
<S> <C> <C>
/s/ William H. Gray, III Director March 30, 2001
- ------------------------------------------
William H. Gray, III
/s/ Freda S. Johnson Director March 30, 2001
- ------------------------------------------
Freda S. Johnson
/s/ Daniel P. Kearney Director March 30, 2001
- ------------------------------------------
Daniel P. Kearney
/s/ James A. Lebenthal Director March 30, 2001
- ------------------------------------------
James A. Lebenthal
/s/ John A. Rolls Director March 30, 2001
- ------------------------------------------
John A. Rolls
</TABLE>
37
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
TO THE BOARD OF DIRECTORS OF MBIA INC.:
Our audits of the consolidated financial statements referred to in our report
dated February 2, 2001 appearing in the 2000 Annual Report to Shareholders of
MBIA Inc. (which report and consolidated financial statements are incorporated
by reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedules listed in Item 14 (a)(2) of this Form 10-K. In our
opinion, these financial statement schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
New York, New York
February 2, 2001
<PAGE> 40
SCHEDULE I
MBIA INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS, OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2000
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
AMOUNT AT WHICH
FAIR SHOWN IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED-MATURITIES
Bonds:
United States Treasury
and Government
agency obligations $ 630,694 $ 664,713 $ 664,713
State and municipal
obligations 3,684,653 3,800,284 3,800,284
Corporate and other
obligations 5,126,890 5,131,748 5,131,748
Mortgage-backed 1,870,943 1,893,019 1,893,019
--------------- --------------- ----------------
Total fixed-maturities 11,313,180 11,489,764 11,489,764
SHORT-TERM INVESTMENTS 623,575 XXXXXXXXXX 623,575
OTHER INVESTMENTS 132,646 XXXXXXXXXX 119,591
--------------- --------------- ----------------
Total investments $12,069,401 XXXXXXXXXX $12,232,930
=============== =============== ================
</TABLE>
<PAGE> 41
SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
ASSETS
<S> <C> <C>
Investments:
Municipal investment agreement portfolio
held as available-for-sale at fair value
(amortized cost $4,452,992 and $3,917,335) $4,474,647 $3,832,370
Fixed maturity securities held as available-for-sale
at fair value (amortized cost $72,607) 74,594 ---
Short-term investments, at amortized cost
(which approximates fair value) 106,001 ---
---------------- ---------------
Total investments 4,655,242 3,832,370
Cash and cash equivalents 30,684 21,289
Securities borrowed or purchased under
agreements to resell 559,624 385,171
Investment in and amounts due from
wholly-owned subsidiaries 4,809,122 4,284,732
Accrued investment income 43,299 33,514
Receivables for investments sold 11,275 21,915
Other assets 26,776 41,819
---------------- ---------------
Total assets $10,136,022 $8,620,810
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Municipal investment agreements $3,461,095 $3,063,050
Municipal repurchase agreements 757,643 811,288
Long-term debt 783,802 674,114
Short-term debt 99,992 ---
Securities loaned or sold under
agreements to repurchase 734,624 412,749
Deferred income taxes 8,376 ---
Payable for investments purchased 5,566 83,602
Dividends payable 20,205 20,406
Other liabilities 41,306 42,500
---------------- ---------------
Total liabilities 5,912,609 5,107,709
---------------- ---------------
Shareholders' Equity:
Preferred stock, par value $1 per share;
authorized shares - 10,000,000;
issued and outstanding shares - none --- ---
Common stock, par value $1 per share;
authorized shares - 200,000,000;
issued shares - 100,773,295 and 100,072,846 100,773 100,073
Additional paid-in capital 1,219,587 1,191,108
Retained earnings 2,934,608 2,486,478
Accumulated other comprehensive income (loss),
net of deferred income tax provision (benefit)
of $57,141 and $(112,920) 85,707 (224,511)
Unallocated ESOP shares (2,950) (4,363)
Unearned compensation - restricted stock (10,659) (9,986)
Treasury stock - 2,209,358 in 2000 and
520,722 shares in 1999 (103,653) (25,698)
---------------- ---------------
Total shareholders' equity 4,223,413 3,513,101
---------------- ---------------
Total liabilities and shareholders' equity $10,136,022 $8,620,810
================ ===============
</TABLE>
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.
<PAGE> 42
SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------
2000 1999 1998
------------------ ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Net investment income $223,575 $188,826 $ (178)
Net realized gains (losses) 8,386 (8,639) ---
Investment management
services income 23,088 12,733 4,553
Investment management
services realized gains (loss) (1,820) 1,185 4,253
------------------ ----------------- -----------------
Total revenues 253,229 194,105 8,628
------------------ ----------------- -----------------
Expenses:
Interest expense 54,460 52,857 38,875
Operating expenses 19,452 135,737 67,252
------------------ ----------------- -----------------
Total expenses 73,912 188,594 106,127
------------------ ----------------- -----------------
Gain (loss) before income taxes
and equity in earnings
of subsidiaries 179,317 5,511 (97,499)
Benefit for income taxes (16,742) (17,617) (13,888)
------------------ ----------------- -----------------
Gain (loss) before equity in
earnings of subsidiaries 196,059 23,128 (83,611)
Equity in earnings of subsidiaries 332,578 297,402 516,339
------------------ ----------------- -----------------
Net income $528,637 $320,530 $432,728
================== ================= =================
</TABLE>
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.
<PAGE> 43
SCHEDULE II
MBIA INC. (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------
2000 1999 1998
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 528,637 $ 320,530 $ 432,728
Adjustments to reconcile net income
to net cash provided by
operating activities:
Equity in undistributed
earnings of subsidiaries (332,578) (297,402) (516,339)
Net realized (gains) losses on
sales of investments (6,566) 7,454 (4,253)
Benefit for deferred income taxes (118) (52) (30)
Other, net (11,421) 1,364 27,823
-------------- --------------- ---------------
Total adjustments to net income (350,683) (288,636) (492,799)
-------------- --------------- ---------------
Net cash provided (used) by
operating activities 177,954 31,894 (60,071)
-------------- --------------- ---------------
Cash flows from investing activities:
Purchase of fixed-maturity
securities (4,433,020) (4,776,543) ---
Sale of fixed-maturity securities 4,360,435 4,767,905 ---
(Purchase) sale of short-term investments (106,001) --- 2,300
Purchases for municipal investment
agreement portfolio, net of payable
for investments purchased (5,346,474) (2,541,312) (2,351,385)
Sales from municipal investment
agreement portfolio, net of receivable
for investments sold 4,754,985 1,324,531 1,707,407
Contributions to subsidiaries (130) (3,178) (17,616)
Advances to subsidiaries, net 56,310 135,690 (62,085)
-------------- --------------- ---------------
Net cash used by investing activities (713,895) (1,092,907) (721,379)
-------------- --------------- ---------------
Cash flows from financing activities:
Net proceeds from issuance
of long-term debt 196,108 --- 197,113
Net repayment from retirement of
short-term debt --- --- (20,000)
Dividends paid (80,708) (79,764) (85,667)
Purchase of treasury stock (77,955) (24,698) ---
Proceeds from issuance of municipal
investment and repurchase agreements 2,478,519 2,547,714 2,065,200
Payments for drawdowns of
municipal investment agreements (2,141,733) (1,373,250) (1,306,389)
Securities loaned or sold under
agreements to repurchase, net 147,422 (7,493) (98,229)
Exercise of stock options 23,683 14,616 30,708
-------------- --------------- ---------------
Net cash provided by financing activities 545,336 1,077,125 782,736
-------------- --------------- ---------------
Net increase in cash and
cash equivalents 9,395 16,112 1,286
Cash and cash equivalents
- beginning of year 21,289 5,177 3,891
-------------- --------------- ---------------
Cash and cash equivalents
- end of year $ 30,684 $ 21,289 $ 5,177
============== =============== ===============
Supplemental cash flow disclosures:
Income taxes paid $ 1,411 $ 149 $ 618
Interest paid:
Long-term debt 52,388 52,338 39,499
Short-term debt --- --- 1,057
</TABLE>
The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto and the accompanying notes.
<PAGE> 44
SCHEDULE II
MBIA INC. (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. CONDENSED FINANCIAL STATEMENTS
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the Company's
consolidated financial statements and the notes thereto.
2. SIGNIFICANT ACCOUNTING POLICIES
The Parent company carries its investments in subsidiaries under the equity
method.
3. DIVIDENDS FROM SUBSIDIARIES
During 2000 and 1999, MBIA Corp. declared and paid dividends of $197.3
million and $180.0 million to MBIA Inc. In addition, MBIA Asset Management
Corp. declared and paid dividends of $25.0 million and $9.0 million to MBIA
Inc. during 2000 and 1999, respectively. No dividends were paid by MBIA
Corp. to MBIA Inc. in 1998.
4. OBLIGATIONS UNDER MUNICIPAL INVESTMENT AND REPURCHASE AGREEMENTS
The municipal investment and repurchase agreement business, as described in
footnotes 2 and 17 to the consolidated financial statements of MBIA Inc.
and Subsidiaries (which are incorporated by reference in the 10-K), is
conducted by both the Registrant and its wholly owned subsidiary, MBIA
Investment Management Corp.
<PAGE> 45
SCHEDULE IV
MBIA INC. AND SUBSIDIARIES
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
PERCENTAGE
INSURANCE GROSS CEDED TO OTHER ASSUMED FROM OF AMOUNT
PREMIUMS WRITTEN AMOUNT VALUE OTHER COMPANIES NET AMOUNT ASSUMED TO NET
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 $641,452 $189,316 $45,956 $498,092 9.2%
---- -------- -------- ------- -------- ----
1999 $590,597 $171,256 $34,274 $453,615 7.6%
---- -------- -------- ------- -------- ----
1998 $664,269 $156,064 $12,781 $520,986 2.5%
---- -------- -------- ------- -------- ----
</TABLE>
<PAGE> 46
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO. 1-9583
- --------------------------------------------------------------------------------
MBIA INC.
<PAGE> 47
EXHIBIT INDEX
3.1. Restated Certificate of Incorporation, dated August 17, 1990,
incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1990 (Comm. File 1-9583) (the "1990
10-K"), as amended December 20, 1995.
4.2 Bond Purchase and Paying Agent Agreement between MBIA Inc. and
various banks, entered into as of December 12, 2000 in connection with CHF
175,000,000 4.5% Bonds, due June 15, 2010.
10.04. First Restated Credit Agreement, dated as of October 1, 1993,
among MBIA Corp., Credit Suisse, New York Branch, as Agent, Credit Suisse, New
York Branch, Caisse Des Depots Et Consignations, Deutsche Bank AG, Bayerische
Landesbank Girozentrale and Landesbank Hessen-Thuringen Girozentrale, as amended
by an Assignment and Assumption Agreement, dated as of December 31, 1993, among
MBIA Corp., Credit Suisse, New York Branch, as Agent and Assignor and Deutsche
Bank AG, New York Branch, as further amended by a Modification Agreement, dated
as of January 1, 1994, among Deutsche Bank, AG, New York Branch, MBIA Corp. and
Credit Suisse, New York Branch, as Agent, as amended by a Joinder Agreement,
dated December 31, 1993, among Credit Suisse, New York Branch, as Agent,
Sudwestdeutsche Landesbank Girozentrale and MBIA Corp., incorporated by
reference to Exhibit 10.78 to the 1993 10-K, as amended by the First Amendment
to First Restated Credit Agreement, dated as of September 23, 1994, incorporated
by reference to Exhibit 10.63 to the 1994 10-K, as further amended by the Second
Amendment to the First Restated Credit Agreement, dated as of January 1, 1996,
and as further amended by the Third Amendment to the First Restated Credit
Agreement, dated as of October 1, 1996, incorporated by reference to Exhibit
10.57 to the 1996 10-K, as further amended and restated by the Second Amended
and Restated Credit Agreement, dated as of October 1, 1997, incorporated by
reference to Exhibit 10.46 to the 1997 10-K, as further amended by the First
Amendment to Second Amended and Restated Credit Agreement, dated as of October
1, 1998, incorporated by reference to Exhibit 10.13 to the 1998 10-K, as further
amended and restated by the Second Amendment to the Second Amended and Restated
Credit Agreement, dated as of October 29, 1999, incorporated by reference to
Exhibit 10.13 to the 1999 10-K, as further amended and restated by the Third
Amendment to the Second Amendment and Restated Credit Agreement, dated as of
October 27, 2000.
10.14. Credit Agreement (364 day agreement) among the Company, MBIA
Corp., various designated borrowers, various lending institutions, Deutsche Bank
AG, New York Branch, as Administrative Agent, The First National Bank of
Chicago, as Syndication Agent and Fleet National Bank, as Documentation Agent,
dated as of August 28, 1998, incorporated by reference to Exhibit 10.33 to the
1998 10-K, incorporated by reference to Exhibit 10.33 to the 1999 10-K, as
amended by a Notice of Extension of Final Maturity Date, with various lending
institutions, dated as of August 2000.
10.15. Credit Agreement (5 year agreement) among the Company, MBIA
Corp., various designated borrowers, various lending institutions, Deutsche Bank
AG, New York Branch, as Administrative Agent, The First National Bank of
Chicago, as Syndication Agent and Fleet National Bank, as Documentation Agent,
dated as of August 28, 1998, incorporated by reference to Exhibit 10.34 to the
1998 10-K, incorporated by reference to Exhibit 10.34 to the 1999 10-K, as
amended by a Notice of Extension of Final Maturity Date, with various lending
institutions, dated as of August 2000.
10.19. ISDA Master Agreement, dated May 2, 2000, between Deutsche Bank
AG and MBIA Inc., as supplemented by the Schedule to the ISDA Master Agreement
and the Credit Support Annex.
10.20. MBIA Inc. 2000 Stock Option Plan, effective May 11, 2000.
10.28. CapMAC Employee Stock Ownership Plan, incorporated by reference
to Exhibit 10.18 to the CapMAC Form S-1, as Amended and Restated, effective
January 1, 1999.
10.30. ESOP Loan Agreement by and between MBIA Inc. and the CapMAC
Employee Stock Ownership Plan Trust, dated June 30, 1999.
10.46. Key Employee Employment Protection Agreement between MBIA Inc.
and John S. Pizzarelli, dated March 14, 2000.
<PAGE> 48
10.47. Key Employee Employment Protection Agreement between MBIA Inc.
and Ram D. Wertheim, dated January 24, 2000.
10.48. Key Employee Employment Protection Agreement between MBIA Inc.
and Robert T. Wheeler, dated April 17, 2000.
10.49. Key Employee Employment Protection Agreement between MBIA Inc.
and Mark S. Zucker, dated March 14, 2000.
13. Annual Report to Shareholders of MBIA Inc. for fiscal year ended
December 31, 2000. Such report is furnished for the information of the
Commission only and, except for those portions thereof which are expressly
incorporated by reference in this Annual Report on Form 10-K, is not to be
deemed filed as part of this report.
21. List of Subsidiaries
23. Consent of PricewaterhouseCoopers LLP
99. Additional Exhibits - MBIA Corp. GAAP Financial Statements
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>y46810ex3-1.txt
<DESCRIPTION>RESTATED CERTIFICATE OF INCORPORATION
<TEXT>
<PAGE> 1
Exhibit 3.1
MBIA INC.
(Stock Corporation)
----------------------------
RESTATED
CERTIFICATE OF INCORPORATION
----------------------------
1. The name of the Corporation is MBIA Inc.
2. The future of the business to be transacted, or the purposes to be promoted
or carried out by the corporation, are as follows:
The Corporation shall have the power to engage in any lawful act or
activity for which corporations nay to formed under the Stock Corporation
Act of the State of Connecticut.
3 The designation of each class of shares, the authorized number of shares of
each such class, and the par value (if any) of each such share thereof,
are as follows:
The total number of shares of capital stock that the Corporation shall have
authority to issue is One Hundred Ten Million (110,000,000) shares, of
which One Hundred Million (100,000,000) shares shall be common stock, par
value $1.00 per share, and of which Ten Million (10,000,000) shares shall
be preferred stock, par value $1.00 per share.
Immediately following the effectiveness of the Amended and Restated
Certificate of incorporation filed with the Secretary of the State of the
State of Connecticut on May 21, 1987, there shall be a 736-for-1 stock
split applicable to each share of common stock of the Corporation
issued and outstanding immediately prior to such time, so that each share
of common stock of the Corporation issued arid outstanding immediately
prior to such tine shall be changed into 736 shares of such common stock.
4. The terms, limitations and- relative rights arid preferences of each class
of shares and series thereof (if any), or an express grant of authority
to the Board of Directors pursuant to Section 33-341 of the Stock
Corporation Act of the State of Connecticut, Connecticut General Statutes
Section 33-341, are as follows:
<PAGE> 2
-2-
Each share of common stock share have pane vote on all matters on which
shareholders are entitled to vote by this Amended and Restated Certificate
of Incorporation, the By-Laws of the Corporation, or the statutes of
Connecticut. Each share of common stock share participate equally in any
dividend distribution and upon liquidation or dissolution.
Authority is hereby expressly vested in the Board of Directors of the
Corporation pursuant to the Stock Corporation Act of the State of
Connecticut to adopt from time to time resolutions and amendments to this
Amended and Restated Certificate of Incorporation providing for the
issuance of the Corporation's authorized and unissued shares of preferred
stock, fixing and determining the terms, limitations, and relative rights
and preferences of the preferred stock, establishing series and fixing and
determining the variations as among particular series of the preferred
stock. The resolution or resolutions providing for the issue of shares of a
particular series shall fix, subject to applicable laws, the designation,
rights, preferences and limitations of the shares of each such series. The
authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) the number of shares constituting such series, including the
authority to increase or decrease such number, and the distinctive
designation sub series;
(b) the dividend rate of the shares of such series, whether the
dividends shall be cumulative and, if so, the date from which they shall be
cumulative and the relative rights of priority, if any, of payment of
dividends on shares of such series;
(c) the right, if any, of the Corporation to redeem shares of such
series and the terms and conditions of such redemption, including the
redemption price;
(d) the rights of the shares in case of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of such series;
<PAGE> 3
-3-
(e) the voting rights, if any, of the shares of such series and the
terms and conditions under which such voting rights may be exercised;
(f) the obligation, if any, of the Corporation provide a retirement or
sinking fund or funds of a similar nature and the terms and conditions of
such obligation;
(g) the terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares of stock of any
other class or classes or of any other series of preferred stock, including
the price or prices or the rate or rates of conversion or exchange and the
terms of adjustment, if any; and
(h) any other terms, rights, preferences or limitations of the shares
of such series as may be permitted by law.
The Board of Directors may not make any change in the designations, terms,
limitations or relative rights or preferences of shares of preferred stock
after their issuance, except upon compliance with any applicable provisions
of the applicable law, of the By-Laws of the Corporation and of such
designations, terms, limitations and relative rights and preferences.
5. The minimum amount of stated capital with which the Corporation shall
commence business is Five Hundred Thousand Dollars ($500,000) and Five
Hundred Thousand Dollars ($500,000) in capital surplus.
6. Upon the offering or sale by the Corporation of its shares or securities
convertible into shares (including warrants, rights to subscribe and
options to acquire shares), no shareholder shall have the preemptive right
to purchase any such shares or securities.
7. The Corporation has expressly elected not to be governed by Sections
33-374a to 33-374c, inclusive, of the Stock Corporation Act Of the State of
Connecticut, Connecticut General Statutes Sections 33-374a to 33-374c,
inclusive, pursuant to the authority granted by Section 33-3740 (d)(B)
thereof.
8. The Board of Directors of the Corporation, when evaluating any offer of
another party to (a) make a tender or exchange offer for any equity
security of
<PAGE> 4
-4-
the Corporation, (b) merge or consolidate the Corporation into or with
another corporation, or (c) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, shall,
in connection with the exercise of its judgment in determining what is in
the best interests of the Corporation as a whole, be authorized to give due
consideration to such factors as the Board of Directors determines to be
relevant, including, without limitation:
(i) the interests of the Corporation's shareholders;
(ii) whether the proposed transaction might violate federal or
state laws;
(iii) the form and amount of consideration being offered in the
proposed, transaction, not only in relation to the then current
market price for the outstanding capital stock of the Corporation,
but also in relation to (1) the market price for the capital stock of
the Corporation over a period of years, (2) the estimated price that
might be achieved in a freely negotiated sale of the Corporation as a
whole or in part or through orderly liquidation, (3) the premiums over
market price paid for the securities of other corporations in similar
transactions, (4) current political, economic and other factors
bearing on securities prices, and (5) the Corporation's then current
value (including its financial condition and the unrealized value of
its properties and assets determined over a period of years), its
long-term plans and its future prospects as an independent going
concern; and
(iv) the social, legal, environmental and economic effects on (1)
policy holders, employees, clients, suppliers and other affected
persons, firms and corporations, (2) the communities and economic
regions in which the Corporation and its subsidiaries operate or are
located and (3) any of the businesses and properties of the
Corporation or of any of its subsidiaries.
In connection with such evaluation, the Board of Directors is authorized to
conduct such investigations and to engage in such legal proceedings as the
Board of Directors may determine.
<PAGE> 5
-5-
Notwithstanding anything to the contrary contained in this Amended and
Restated Certificate of Incorporation, the By-Laws of the Corporation or
otherwise (and notwithstanding the fact that a lesser percentage may be
specified by law, this Amended and Restated Certificate of Incorporation or
the By-Laws of the Corporation), the affirmative vote of the holders of at
least 80% of the voting power of all of the shares of the Corporation then
entitled to vote generally in the election of Directors shall be required
to amend or repeal, or adopt any provision inconsistent with, this Section
8.
Section 9. No person who is or was a director of the corporation shall he
personally liable to the Corporation or its shareholders for monetary
damages for breach of duty as a director in an amount that exceeds the
compensation received by the director for serving the Corporation during
the year of the violation if such breach did not (a) involve a knowing and
culpable violation of law by the director, (b) enable the director or an
associate, as defined in subdivision (3) of section 33-374d of the
Connecticut Stock Corporation Act as in effect on the effective date hereof
and as it may be amended, from time to time, to receive an improper
personal economic gain, (c) show a lack of good faith and a conscious
disregard for the duty of the director to the Corporation under
circumstances in which the director was aware that such conduct or omission
created an unjustifiable risk of serious injury to the corporation, (d)
constitute a sustained and unexcused pattern of inattention that amounted
to an abdication of the director's duty to the Corporation, or (e) create
liability under Section 33-321 of the Connecticut Stock Corporation Act as
in effect on the effective date hereof and as it may be amended from time
to time. This Section 9 shall not limit or preclude the liability of a
person who is or was a director for any act or omission occurring prior to
the effective date hereof. Any lawful repeal or modification of this
Section 9 or the adoption of any provision inconsistent herewith by the
Board of Directors and the shareholders of the Corporation shall not, with
respect to a person who is or was a director, adversely affect any
limitation of liability, right or protection of such person existing
hereunder with respect to any breach of duty occurring prior to the
effective date of such repeal, modification or adoption of a provision
inconsistent herewith.
<PAGE> 6
EXHIBIT A
RESOLVED, that the Board of Directors declares it advisable to amend the
Company's Restated Certificate of Incorporation by amending Section 3 to
read as follows:
3. The designation of each class of shares, the authorized number of shares of
each such class, and the par value (if any) of each such share thereof, are
as follows:
The total number of shares of capital stock that the corporation hall
have authority to issue is Two Hundred Ten Million (210,000,000)
shares, of which two Hundred Million (200,000,000) shares shall be
common stock, par value $1.00 per share, and of which Ten Million
(10,000,000) shares shall be preferred stock, par value share.
Immediately following the effectiveness of the Amended and Restated
Certificate of Incorporation filed with the Secretary of the State of
the State of Connecticut on May 21, 1987, there shall be a 736-for-1
stock split applicable to each share of common stock of the
Corporation issued and outstanding immediately prior to such time,
so that each share of common stock of the Corporation outstanding
immediately prior to such time shall be changed into 736 shares of
such common stock.
FILING #0001578603 PG 03 OF 03 VOL B-00041
FILED 12/21/1995 10:52 AM PAGE 02876
SECRETARY OF THE STATE
CONNECTICUT SECRETARY OF THE STATE
<PAGE> 7
UNITED STATES OF AMERICA
BEFORE THE
SECURITIES AND EXCHANGE COMMISSION
AUGUST 7, 1998
_________________________________________________
In the Matter of MBIA INC.
Issuer(s) 113 King Street ORDER DECLARING THE
Arwak, New York 10504 REGISTRATION STATEMENT
EFFECTIVE PURSUANT TO
SECTION 8(a) OF THE
SECURITIES ACT OF 1933,
File No(s) 333-60039 AS AMENDED
_________________________________________________
Request having been made that registration statement refereed to in the
caption hereof be made effective pursuant to Section 8(a) of the Securities Act
of 1933.
IT IS ORDERED that the sold statement Is hereby declared effective at 10:30
AM EDST AUGUST 7, 1998.
For the Commission, by the Division of Corporation Finance, pursuant to
delegated authority.
/s/ Jonathon G. Katz
Jonathon G. Katz
Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>3
<FILENAME>y46810ex4-2.txt
<DESCRIPTION>BOND PURCHASE AND PAYING AGENT AGREEMENT
<TEXT>
<PAGE> 1
Exhibit 4.2
BOND PURCHASE AND PAYING AGENCY AGREEMENT
MBIA Inc.
Armonk, New York, U.S.A.
CHF 175,000,000
4.50 % Bonds 2000 - 2010
(with reopening clause)
Lead-Manager:
Deutsche Bank Aktiengesellschaft
Frankfurt a.M., Zurich Branch
HOMBURGER RECHTSANWALTE
ZURICH, SWITZERLAND
<PAGE> 2
TABLE OF CONTENTS PAGE
Parties 3
I. Subject 5
II. Annexes 5
III. Selling Restrictions
IV. Banking Syndicate 9
V. Commission and Expenses 9
VI. Representations and Warranties 10
VII. Payment to the Issuer 12
VIII. Closing Documentation 12
IX. Prospectus, Listing and Reporting Obligations 13
X. Global Bond Certificate and Printing of the Bonds 15
XI. Paying Agency and Servicing of the Bonds 17
XII. Covenants 19
XIII. Right of Termination 19
XIV. Communications 20
XV. Currency indemnity 20
XVI. Reopening of the Issue 20
XVII. Applicable Law and Jurisdiction 21
XVIII. Counterparts 21
Annex A Terms of the Bonds 22
Annex B Global Bond Certificate 37
Annex C-1 Individual Bond (Face) 39
Annex C-2 Interest Coupon (Face) 40
Annex C-3 Specimen Signature Form 41
Annex D Certificate of No Material Adverse Change 42
<PAGE> 3
-3-
Entered into as of December 12, 2000
between
MBIA Inc.
113 King Street, Armonk,
New York 10504, U.S.A.
(hereinafter called the "issuer")
of the first part
and
DEUTSCHE BANK AKTIENGESELLSCHAFT
Frankfurt a.M., acting through its registered Zurich branch at
Bahnhofquai 9/11, 3023 Zurich, Switzerland
(hereinafter called "DBZH")
and
BANCA DEL GOTTARDO
Viale Stefano Franscini 8, 6901 Lugano, Switzerland
and
CREDIT SUISSE FIRST BOSTON
Uetlibergstrasse 231, 8045 Zurich, Switzerland
and
UBS AG
acting through its business group UBS Warburg
Bahnhofstrasse 45, 8098 Zurich, Switzerland
and
BANK JULIUS BAER & CO. LTD.
Bahnhofstrasse 36, 8001 Zurich, Switzerland
and
BANK VONTOBEL AG
Bahnhofstrasse 3, 8001 Zurich, Switzerland
and
BNP PARIBAS (SUISSE) SA
2, place de Hollande, 1204 Geneva, Switzerland
<PAGE> 4
-4-
and
UNION BANCAIRE PRIVEE
Rue du Rh6ne 96-98,1211 Geneva, Switzerland
(each a "Manager" and hereinafter collectively with DBZH called the "Managers")
of the second part
<PAGE> 5
-5-
I. SUBJECT
1. Subject to the terms and conditions hereof, the Issuer agrees to issue and
sell to the Managers at, a price of 100.925 % of the principal amount (the
"Issue Price"), and the Managers agree to purchase severally but not
jointly
4.50 % Bonds 2000 - 2010, due June 15, 2010, in the principal amount
of CHF 175,000,000 (one hundred seventy-five million Swiss Francs)
(the "Bonds")
subject to reopening as provided in the Terms of the
Bonds.
2. The issuance of the Bonds has been authorized by the Board of Directors of
the Issuer by resolution passed on November 9, 2000.
3. The net proceeds of the issue of the Bonds will be applied by the Issuer
for general corporate purposes and for the repayment of the Issuer's $100
million 9% notes maturing February 15, 2001. None of the Managers shall
have any responsibility for or be obliged to concern itself with the
application of the net proceeds of the issue of the Bonds.
4. DBZH shall represent the Managers toward the Issuer in all matters
concerning the entering into and execution of this Agreement and
represents to the lssuer that it has been authorized by each of the
Managers so to act. DBZH further represents that it has been duly
authorized by and holds valid powers of attorney of the Managers which it
represents at the signing of this Agreement.
II. ANNEXES
The content of each of the Annexes attached hereto, i.e
Annex A: Terms of the Bonds
Annex B: Global Bond Certificate
Annex C: Individual Bond (Face) (C-1)
Interest Coupon (Face) (C-2)
Specimen Signature Form (C-3)
Annex D: Certificate of No material Adverse Change
shall constitute an integral part of this Bond Purchase and Paying Agency
Agreement (hereinafter referred to as the "Agreement").
III. SELLING RESTRICTIONS
United States of America
Each of the Managers represents and covenants that it has observed and covenants
that it will observe the following restrictions in offers and sales of the Bonds
and the distribution of documents relating to the Bonds.
<PAGE> 6
-6-
A. For the purpose of this Article III, "United States," "U.S. person" and
"Restricted Period" have the meanings set forth in Section E below.
B. Each Manager understands that the Bonds have not been and will not be
registered under the United States Securities Act of 1933, as amended (the
"Securities Act") and each Manager understands that the Bonds are intended
to be obligations that are not required to be in registered form for the
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder.
C. Each Manager represents that it has not offered or sold, and agrees that
it will not, during the Restricted Period, offer or sell, directly or
indirectly, in the United States or to or for the account or benefit of
any U.S. person any Bonds no matter how acquired. In connection with the
sale of a Bond during the Restricted Period, each Manager agrees that it
has not delivered and will not deliver such Bond in definitive form within
the United States. Each Manager which is a U.S. person (disregarding the
exclusion for Distributors set forth in the definition of "U.S. person")
represents and agrees that it is buying the Bonds for the purpose of
resale in connection with the original issuance thereof, and, with respect
to any Bonds that it retains for its own account, that it will do so only
in compliance with the requirements of United States Treasury Regulation
Section 1.163-5(c)(2)(i)(D)(6), including providing a certificate within a
reasonable period of time stating that it agrees to com ply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Code, and the
regulations thereunder.
D. Each Manager understands that an offer or sale would be considered to be
made in the United States if, among other factors, such Manager who is the
offeror or seller of such Bonds has an address within the United States
for the offeror or seller of such Bonds with respect to such offer or
sale.
E. Each Manager further agrees to deliver (at prior to the confirmation of
sale thereof) to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases from it any of the
Bonds during the Restricted Period, a confirmation or other notice stating
substantially the following:
"The Securities referred to in the accompanying confirmation (the
"Securities") have not been registered under United' States Securities
Act of 1933, as amended (the "Securities Act").
By your purchase of the Securities, you represent and agree that you
have not offered or sold and will not, during the Restricted Period,
offer, sell or deliver, directly or indirectly, in the United States or
to or for the account or benefit of any U.S. person any of such
Securities, no matter how acquired.
As used herein, "United States" means the United States of America
(including the States and District of Columbia), its territories and
its possessions; the term "U.S. person" means (a) a citizen or resident
of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States (or any
of its political subdivi-
<PAGE> 7
-7-
sions), (c) an estate or trust 'the income of which is subject to
United States federal income taxation regardless of its source or (d)
any other person or entity included in the definition of U.S. person
under Regulation S under the Securities Act; provided, however, that
the term "U.S. person" shall not include the Managers named in the Bond
Purchase and Paying Agency Agreement dated as of December 12, 2000,
relating to the Securities or any other person that is both a
distributor within the meaning of Rule 902(d) under the Securities Act
and an exempt distributor within the meaning of Treasury Regulations
Section 1.163-5(c)(2)(i)(D)(5) (each a "Distributor").
"Restricted Period" means the period which begins on the earlier of the
Payment Date ("December 15, 2000") or the first date on which the
Securities are offered to persons other than the Distributors, and
which ends 40 days after the Payment Date, provided that with respect
to a Security held as part of an unsold allotment or subscription, any
offer or sale of such Security by the Issuer or a Distributor shall be
deemed to be made during the Restricted Period."
F. Each Manager represents and agrees that if it enters into any contractual
agreement for the distribution or delivery of the Bonds (other than this
Agreement) such arrangement will contain the selling restrictions set
forth in this Article III.
G. Each Manager acting on its own behalf and on behalf of its affiliates and
any person acting on its behalf represents that any payment of interest or
principal with respect to any Bond made as Paying Agent, as such term is
defined in Article XI, shall be made within Switzerland.
H. Each Manager represents and agrees that the issuance of the Bonds is
subject to guidelines or restrictions imposed by governmental, banking or
securities authorities in the Confederation of Switzerland.
I. Each of the Mangers (acting on its behalf and on behalf of its affiliates
and any person acting on its behalf) represents and agrees that; (A) the
Bonds will be offered and sold in accordance with the practices and
documentation customary in the Confederation of Switzerland; (B) it will
use reasonable efforts to sell the Bonds within the Confederation of
Switzerland; (C) neither DBZH nor any of the other Managers has applied,
nor will any of them apply, for listing of the Bonds on any exchange
outside the Confederation of Switzerland; and (D) more than 80% by value
of the Bonds included in this offering are or will be offered and sold to
persons who are not distributors (as defined in United States Treasury
Regulation Section 1.163-5(c)(2)(i)(D)(4)) by distributors (as so defined)
maintaining an office located in the Confederation of Switzerland.
J. Each Manager represents and agrees that neither it nor any of its
affiliates nor any person acting on its behalf has undertaken, or will
undertake any directed selling efforts (as defined in Regulation S under
the Securities Act) with respect to the Bonds in the United States,
including without limitation, any activity for
<PAGE> 8
-8-
the purpose of, or that could reasonably be expected to have the effect
of, conditioning the market for the Bonds in the United States, and that
it will have in effect, in connection with the offer and sale of the Bonds
during the Restricted Period, Procedures reasonably designed to ensure
that its employees or agents who are directly engaged in selling Bonds are
aware that the Bonds may not be offered or sold during the Restricted
Period to a U.S. person or within the United States and each Manager, its
affiliates and any person acting on its behalf have complied with or will
comply with the offering restriction requirements of Regulation S under
the Securities Act.
K. With respect to each affiliate (as defined in United States Treasury
Regulation Section 1.163-5(c)(2)(i)(D)(4)) of a Manager and person that
acquires Bonds from a Manager for the purpose of offering or selling such
Bonds during the Restricted Period pursuant to a written agreement with
such Manager, such Manager repeats and confirms the representations and
agreements contained in 'this Article 111.
L. With the exception of this Agreement, each Manager represents and agrees
that it has not entered into and will not enter into any contractual
arrangements with respect to the distribution and delivery of the Bonds,
except with I affiliates or with 'the prior written consent of the Issuer.
M. The Global Bond Certificate, Bonds and Coupons shall bear a statement on
their face to the effect that any U.S. person who holds such obligation
will be subject to limitations under the United States income tax laws,
including the limitations provided in Sections 165(j) and 1287(a) of the
Code.
N. Each Manager has been advised by the Issuer and acknowledges and confirms
that it is aware (a) that a violation or breach of any of the terms and
conditions of Article III of 'this Agreement could directly cause the
Issuer to become subject to damages and liabilities (including, but not
limited to, excise taxes, a loss of the interest deduction and assumption
of withholding taxes) under various United States securities and tax laws,
and (b) that, as a consequence, such Manager could be held liable under
Swiss law for damages and liabilities, in the event it violated or
breached such terms and conditions.
United Kingdom
Each Manager listed on the front page of this Prospectus has represented and
agreed that: (i) it has not offered or sold and prior to the expiry of six
months from the Closing Date (December 15, 2000) will not offer or sell any
Bonds to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Bonds in, from or otherwise involving the
United Kingdom, and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issue of the Bonds to a
<PAGE> 9
-9-
person who is of a kind described in article 11(3) of the Financial Services Act
1986 (investment Advertisements) (Exemptions) Order 1996, as amended by the
Financial Services Act 1986 (investment Advertisements (Exemptions) Order 1997,
or is a person to whom such document may otherwise lawfully be issued or passed
on.
IV. BANKING SYNDICATE
The Issuer agrees to issue to the Managers, and the Managers agree to subscribe
severally but not jointly for, the Bonds in the aggregate principal amount of
CHF 175,000,000 (one hundred seventy-five million Swiss Francs) in the
denominations of CHF 10,000 or multiples thereof according to the following
quotas:
Quota
CHF
Lead-Manager:
Deutsche Bank Aktiengesellschaft, Zurich Branch 151,000,000
Co-Lead-Managers:
Banca del Gottardo 5,000,000
Credit Suisse First Boston 5,000,000
UBS AG 5,000,000
Bank Julius Baer & Co. Ltd. 3,000,000
Bank Vontobel AG 2,000,000
BNP PARIBAS (SUISSE) SA 2,000,000
Union Bancaire Privee 2,000,000
Total 175,000,000
V. COMMISSION AND EXPENSES
1. The Issuer will pay on December 15., 2000 (hereinafter
called "the Closing Date") to DBZH for account of the
Managers:
(a) an underwriting commission and management fee of 1.30 % to be
calculated on the CHF 175,000,000 principal amount, and
(b) a fixed amount of CHF 500,000 which represents a lump sum for the
full and complete reimbursement for all out-of-pocket expenses
incurred by DBZH.
The payment by the Issuer of (a) and (b) above shall be set off against
the payment on the Closing Date by the Managers to the Issuer of the Issue
Price pursuant to Article I above, resulting in the net proceeds as per
Article VII, so that there shall be no actual transfer of funds required
to be made by the Issuer.
2. The Issuer shall further bear, when ascertainable and due:
<PAGE> 10
-10-
(a) all costs and expenses, including legal or other fees incurred by the
Issuer in connection with the preparation of the documents required by
Article VIII;
(b) all present or future taxes, duties or other charges levied by or within
the United States of America in connection with the execution and delivery
of this Agreement,
(c) the commissions and expenses for the servicing of the Bonds as per Article
XI; and
(d) the expenses incurred in connection with the publication of all notices
relating to the Bonds pursuant to the Terms of the Bonds.
3. The Issuer will reimburse the Managers on first demand for customary bank
charges, legal fees and other costs and expenses incurred or to be
incurred by the Managers in case of or in connection with a
reorganization, merger or restructuring which necessitates any material
amendment to the documentation relating to the Bonds or a default, actual
or threatened, of the issuer as well as in connection with the
preservation and enforcement of any rights under this Agreement, the
Global Bond Certificate, the Bonds or the Coupons (if printed).
VI. REPRESENTATIONS AND WARRANTIES
1. The Issuer represents and warrants to the Managers that :
1.1 Status: it is a corporation duly incorporated and validly existing under
the laws of the State of Connecticut, United Skates of America, capable of
suing and being sued and has the power and authority to own its assets and
to conduct 'he business which it presently conducts and to conclude the
transactions contemplated by this Agreement;
1.2 Powers: it has the power to enter into, to exercise its
rights and perform and comply with its obligations under,
this Agreement;
1.3 Authorization and Consents: all actions, conditions and things (if any)
required by the laws of the State of Connecticut and the United States of
America have been taken, fulfilled and done (including the obtaining of
any necessary consent) in order:
(a) to enable it lawfully to enter into, and exercise its rights and
perform and comply with its obligations under, this Agreement, the
Bonds and the Coupons; and
(b) to ensure that those obligations are legally valid and binding and
enforceable in accordance with their terms;
1.4 Non-Violation of Laws, etc.: its entry into, and exercise of its rights
and/or performance of or compliance with its obligations under this Agreement,
the Global
<PAGE> 11
-11-
Bond Certificate, the Bonds and the Coupons does not violate in any material
way:
(a) any law to which it is subject; or
(b) its constituent documents; or
(c) any agreement or undertaking to which it is a party or which is binding on
it or any of its assets, nor results in the creation of, or obliges it to
increase any security over those assets;
1.5 Obligations Binding: its obligations under this Agreement, the Global Bond
Certificate, the Bonds and the Coupons are valid, binding and enforceable
in accordance with its terms, subject to any laws from time to time in
effect relating to bankruptcy, insolvency, reorganization, moratorium or
liquidation and any other laws or procedures of general applicability
relating to or affecting creditors' rights;
1.6 Prospectus: the Issuer has taken all reasonable care to ensure that the
information contained in the Prospectus (as defined in Article IX.1) is
accurate in all here are no other material facts the omission of which
would, in the context of the issue of the Bonds, make any statement
therein misleading;
1.7 Accounts: the financial statements contained in the Prospectus present a
true and fair view of the results and financial position of the issuer for
the periods and as of the dates thereof in all material respects, all in
conformity with generally accepted accounting principles in the United
States of America;
1.8 No Material Adverse Change: save as disclosed in the Prospectus, there has
been no material adverse change in the consolidated financial condition or
operations of the Issuer since December 31, 1999, which would materially
affect its ability to carry out its obligations hereunder or under the
Global Bond Certificate, the Bonds and Coupons;
1.9 Litigation: except as disclosed in the Prospectus, with regard to itself,
and its subsidiaries, no litigation, arbitration, governmental or
administrative proceeding is current or pending or, so far as is aware,
threatened:
(a) to restrain its entry into, exercise of its rights under, or
performance of or compliance with the obligations of the Issuer
under this Agreement, the Global Bond Certificate or the Bonds or
Coupons; or
(b) which has or could have a material adverse effect on the financial
position or operations of the Issuer and its subsidiaries taken as a
whole;
1.10 No Default: none of the events described in Sections 9 and 10 of the Terms
of the Bonds has occurred and is continuing.
1.11 Listing Rules: it will comply with the reporting requirements of the SWX
Swiss Exchange as described in Article IX hereof and submit to the
procedure and
<PAGE> 12
-12-
the decision. of the Admission Board, the Disciplinary Commission and the
Arbitration Panel of the SWX Swiss Exchange pursuant to Articles 81-83a of
the Listing Rules.
2. Since the commitment of the Managers to subscribe and pay for the Bonds is
made on the basis of the aforesaid warranties, the Issuer hereby undertake
with the Managers that it will hold the Managers indemnified against all
losses, liabilities, costs, charges and expenses, which they may incur as
a result of or in relation to any material misrepresentation or any
material breach of the above warranties.
As long as any of the Bonds are outstanding,. the Issuer shall give prompt
notice to DBZH of any claim, action or proceeding which might give rise to
a claim under this Subsection 2.
VII. PAYMENT TO THE ISSUER
Subject to the receipt by DBZH of the documents listed in Article VIII, on
December 15, 2000, DBZH, on behalf of the Managers will pay to the Issuer the
net proceeds of the Bonds (Issue Price minus the commission and expenses
mentioned in Article V) of CHF 173,843,750 in same day funds against delivery of
the Global Bond Certificate to DBZH pursuant to Article VIII.
Subject to any Swiss National Bank or other regulations which may be in force on
the Closing Date, such net proceeds will be at the free disposal of the Issuer
and shall not entitle the Issuer to any interest thereon.
The respective instruction(s) - also containing the transfer details - signed by
a duly authorized person of the Issuer, shall be received by DBZH, Zurich at the
latest at 09:00 a.m. (Zurich time) two business days in Zurich prior to the
Closing Date in order to ensure their execution with the value being the Closing
Date.
VIII. CLOSING DOCUMENTATION
DBZH hall have received from the Issuer not later than three business days in
Zurich prior to the Closing Date, or with the consent of DBZH thereafter, but on
or prior to file Closing Date, the following documents (unless otherwise
specified, one original or copy certified as a true copy by the Issuer shall be
submitted):
1. Power of Attorney (if necessary) of the Issuer conferring the necessary
authority upon the person(s) signing any document(s) and lists of specimen
signatures, such documents being:
- this Agreement,
- the Prospectus,
- the Global Bond Certificate.(as per Annex B),
- the Individual Bond (as per Annex C-1),
- the Specimen Signature Form (as per Annex C-3),
- the Certificate of No Material Adverse Change (as per Annex D):
<PAGE> 13
-13-
2. A copy of the Resolution of the Board of the Issuer of November 9, 2000
authorizing (i) the execution and the performance of the obligations under
this Agreement and (ii) the issue, sale and delivery of the Global Bond
Certificate and the Bonds, certified by the Issuer's Secretary;
3. A certificate of good standing issued by the Secretary of State of
Connecticut and two certified copies of the Articles of Incorporation and
of the By-Laws of the Issuer;
4. Three copies of the Consolidated Financial Statements of the Issuer for
each the year 1998 and '11999;
5. All quarters or semi-annual financial statements of the issuer published
during the current financial year;
6. Certificate of No Material Adverse Change (in the form of Annex D), signed
by the authorized person(s) of the Issuer;
7. Original Legal and Tax Opinion by the legal and tax advisers to the Issuer
on the laws of the United States of America and, with respect to the Legal
Opinion only, the State of Connecticut and with respect to the Issuer's
corporate status and its ability to issue the Global Bond Certificate and
the Bonds and in respect of taxes imposed by the United States of America,
dated as of the Closing Date;
8. Global Bond Certificate (in the form of Annex B), signed by authorized
person(s) of the issuer;
9. Specimen Signature Form (in the form of Annex C-3), signed by the
authorized person(s);
10. Five copies of the Prospectus signed by the authorized persons of the
Issuer, uncertified; and
11. Comfort Letter of the Issuer's independent accounts.
All documents shall be in English. Documents 6 to 8 and 11 shall be dated the
Closing Date, and documents 7 and 11 shall be substantially as agreed between
the Issuer and DBZH. All such documents shall be prepared or procured by the
Issuer, except for the Global Bond Certificate and the Prospectus which shall be
prepared by DBZH for signing by the Issuer.
IX. PROSPECTUS, LISTING AND REPORTING OBLIGATIONS
1. Prospectus
DBZH shall receive from the Issuer on behalf of the Managers in due time
all necessary material, information and documentation with respect to the
Issuer required for the preparation by DBZH of the prospectus (the
"Prospectus") in
<PAGE> 14
-14-
accordance with the listing rules of the SWX Swiss Exchange (the "Listing
Rules"). The Prospectus shall be reviewed, and approved by signing it, by
the Issuer.
2. Listing
DBZH shall take all necessary actions for the purpose of obtaining and
maintaining the admission and quotation of the Bonds during their whole
life on the SWX Swiss Exchange. DBZH will prepare the listing
advertisements in German and French and will arrange for its publication
in Swiss newspapers.
3. Reporting Obligations
The Issuer will use its best efforts in strictly adhering to the rules and
regulations of the SWX Swiss Exchange in order to maintain the listing
during the entire term of the Bonds. The Issuer shall adhere to the
conditions for maintaining the listing as set forth in the Listing Rules,
including, without limitation:
3.1. Periodic Publication of Annual Reports
The Issuer shall publish its business reports including the auditors'
reports. The business report shall include the annual report, the balance
sheet, the profit and loss account and, if required, the cash flow
account. These documents must be published within six months after the end
of every fiscal year and handed in to the Admissions Board of the SWX
Swiss Exchange not later than on the date of their publication. In
addition, the business reports must be freely obtainable at the office of
the Issuer.
3.2 Ad hoc-Publicity
Subject to and in accordance with Article 72 of the Listing Rules, the
Issuer shall inform the Admissions Board of the SWX Swiss Exchange and the
market of any price sensitive facts which have arisen in its sphere of
activity and are not public knowledge. Price sensitive facts mean new
facts which because of their considerable effect on the Issuer's assets
and liabilities or financial position or on the general course of business
are likely to result in substantial movements in the price of the Bonds.
The Issuer may postpone the disclosure of such information if the new
facts are based on a plan or decision of the Issuer, and its dissemination
is likely to prejudice the legitimate interest of the Issuer.
3.3 Disclosure of changes in the right attached to the Bonds
The Issuer must inform the public immediately upon any change in a right
attached to the Bonds.
<PAGE> 15
-15-
3.4 Further disclosure obligations of the Issuer
The Issuer must provide the Admissions Board of the SWX Swiss Exchange
with all the information necessary to protect investors and insure the
smooth operation of the market.
4. Sanctions and means of legal redress
The Issuer confirms that it is aware of the conduct deserving of sanctions
according to Article 81 of the Listing Rules and of the sanctions that may
be imposed in accordance with Article 82 of the Listing Rules, and it
undertakes to use any means to avoid such conduct deserving of sanctions.
If, as a result of the Issuer's conduct, sanctions should be imposed, the
Issuer shall take on the obligations and bear any costs resulting from
such sanctions and shall further indemnify DBZH for any damages.
The Issuer as well as DBZH shall have the right to make appeals in
accordance with Article 83 and Article 83a of the Listing Rules.
5. Annual Reports
As long as any of the Bonds is outstanding, the Issuer shall send four copies of
their Annual Reports to:
SWX Swiss Exchange
Admissions Board
Selnaustrasse 32
P.O. Box
CH-8021 Zurich/Switzerland
X. GLOBAL BOND CERTIFICATE AND PRINTING OF BONDS
1. Form and Denomination
This issue of Bonds is represented by a global bond certificate in the form of
Annex B hereto (the "Global Bond Certificate") and is divided into co-ownership
quotas of CHF 10,000 or multiples thereof entitling to payment of interest (the
"Coupons") and allocated to the co-owners (the "Bondholders" and the "Coupons
holders"), respectively, The Global Bond Certificate will be deposited by DBZH
with SIS SEGAINTERSETTLE AG, The Swiss Securities Services Corporation ("SIS"),
in Olten, Switzerland, or any other securities clearing system approved by the
Admission Board of the SWX Swiss Exchange (the "Depositories"). Except as
provided in this Article X and Section 1 of the Terms of the Bonds, individual
bonds shall not be printed or delivered.
<PAGE> 16
-16-
2. Printing of the Bonds
DBZH shall arrange for the printing of definitive Bonds at its cost and
arrange for delivery of definitive Bonds to SIS for distribution to the
Bondholders (i) if definitive Bonds are required to be printed by
applicable law, (ii) upon the request of any Bondholder or (iii) in case
of an Event of Default as provided for in Section 9 of the Terms of the
Bonds. However, the Bonds and Coupons may not be exchanged against the
Global Bond Certificate earlier than the 41st day following completion of
the distribution of the Bonds.
If printed, the Bonds and Coupons will be printed in accordance with the
rules and regulations of the SWX Swiss Exchange and shall be substantially
in the form of Annex C-1 and C-2 hereto, with the Terms of the Bonds on
the back of (as per Annex A), and shall be dated December 15, 2000. The
Bonds and Coupons so printed shall be exchanged against the Global Bond
Certificate by DBZH which shall cancel the Global Bond Certificate and
surrender it to the order of the Issuer.
The Issuer irrevocably authorizes DBZH to use the specimen signatures
deposited with DBZH in accordance with Article VIII. 9 for the printing of
the Bonds and Coupons with the same binding effect upon the Issuer as if
the Bonds had been issued and signed by the Issuer on the Closing Date.
Until individual Bonds and Coupons have been issued, the expressions
"Bonds" and "Coupons" herein shall mean and include the Global Bond
Certificate, and the expressions "Bondholders" and "Couponholders" shall
mean and include the bearer of the Global Bond Certificate and the persons
entitled to co-ownership rights therein.
3. Servicing of the Printed Bonds and Coupons.
If and when the Bonds are printed, DBZH shall destroy them after their
redemption, from time to time, and submit to the issuer lists containing the
serial numbers of the Bonds redeemed and destroyed.
If and when the Coupons are printed together with the definitive Bonds, DBZH
shall destroy them after payment in respect thereof has been made, from time to
time, submitting to the Issuer a statement of the number of Coupons destroyed,
classified according to due dates, without, however, keeping or submitting to
the Issuer lists containing the serial numbers of the Coupons destroyed. DBZH
reserves the right to record cashed Coupons as well as redeemed or replaced
Bonds on microfilm or other data carriers and to store them in this way instead
of keeping them physically during the period prescribed by law and to destroy
them subsequently. This reproduction of Coupons and Bonds will remain in
safekeeping at DBZH during the statutory limitation. *
If Bonds and Coupons have not been printed, DBZH shall cancel the Global Bond
Certificate and return it to the Issuer upon receipt from the Issuer of all
payments due and payable under the Terms of the Bonds and the Agreement.
<PAGE> 17
-17-
XI. PAYING AGENCY AND SERVICING OF THE BONDS
1. Paying Agents
The Issuer appoints DBZH as principal paying agent (the "Principal Paying
Agent") and the other financial institutions mentioned in Section 6 of the Terms
of the Bonds as paying agents (the "Paying Agents").
All Paying Agents (including any additional paying agents appointed by the
issuer as described below) shall act in such capacity only through their offices
located in Switzerland. Each Paying Agent shall be a person that, for U.S. tax
purposes, is a non-U.S. corporation that is not a controlled foreign corporation
and that has not in any 3-year period preceding any year in which it acts as
Paying Agent derived income that is effectively connected with a U.S. business
in an amount equal to 50% or more of its gross income for such period. By
agreeing to act as Paying Agent, each person appointed as such represents and
agrees that it will so act only for so long as it is not disqualified by the
foregoing.
Without the consent of DBZH, the Issuer shall not appoint any additional paying
agents other than DBZH and the other financial institutions mentioned in Section
6 of the Terms of the Bonds (if any) and shall not pay any commissions or
remuneration for the collection of Coupons and/or Bonds to others than the
Principal Paying Agent and the Paying Agents.
If, at any time during the life of the Bonds, DBZH shall resign or become
incapable of acting as Principal Paying Agent or as agent of the Bondholders as
contemplated by the Terms of the Bonds or shall be adjudged bankrupt or
insolvent, DBZH may be substituted as Principal Paying Agent by a major Swiss
bank chosen by the Issuer. In case of its resignation, DBZH shall give the
issuer due notification thereof and sufficient time to appoint a Substitute
Principal Paying Agent. In the event of any replacement of DBZH as Principal
Paying Agent, all references to DBZH shall be deemed to refer to such
replacement. Notice of appointment of any substitute Principal Paying Agent
shall be published in accordance with Section 13 of the Terms of the Bonds.
If any Paying Agent resigns or becomes incapable of acting as such or shall be
adjudged bankrupt or insolvent, the agency relationship between the Issuer and
that Paying Agent shall terminate and the issuer may appoint a successor Paying
Agent upon approval of DBZH which will not be unreasonably withheld. Notice to
the Bondholders of the appointment of any successor Paying Agent shall be made
in accordance with the provisions of Section 13 of the Terms of the Bonds.
Payments on the Bonds by the Issuer or any Paying Agent will, if made by mail,
be made only to an address that is within Switzerland or, if made by wire or
similar transfer, be made only to an account maintained by the holder in
Switzerland.
<PAGE> 18
-18-
2. Transfer of Funds
The Issuer will effect transfer of the funds required to make any payment of
principal and interest on the Bonds to DBZH as Principal Paying Agent on behalf
of all Paying Agents, for value the respective due date provided that, if such
due date does not fall on a Business Day, the Issuer shall be obliged to effect
transfer of such payments for value the Business Day immediately preceding such
due date.
DBZH is entitled to charge default interest at the higher of (i) the interest
rate for one day funds in Swiss Francs prevailing on the respective date, (ii)
the annual interest rate of the Bonds, or (iii) the interest rate generally
available under Article 104 of the Swiss Code of Obligations, as amended from
time to time, for any payment not received on the due date if DBZH advances
funds payable by the Issuer.
Except as required by law, any such transfer by the Issuer shall be made in
accordance with Sections 5 and 6 of the Terms of the Bonds, in freely disposable
Swiss Francs, irrespective of any present or future transfer restrictions and
notwithstanding any bilateral or multilateral payment or clearing agreement
which, may be applicable at the time of such transfer.
Any set-off by the issuer of its payment obligations against any claim of the
Issuer against DBZH shall not be valid payment, unless expressly agreed by DBZH.
Not later than five Business Days before each due date, DBZH will supply the
issuer with any necessary information, including reference numbers and the name
of a contact person for the receipt of funds. Not later than four Business Days
before each due date the issuer will telex or telefax to such contact person
transfer information including the name, address, telephone and telex number of
the Manager effecting the transfer as well as a confirmation by the issuer that
it has effected the irrevocable paying instruction to that Manager,
DBZH shall credit the funds received to separate non-interest bearing accounts
to be opened in the name of the Issuer with DBZH for each Coupon due date and/or
redemption date. The receipt by DBZH of the funds shall release the issuer from
its obligations under the Global Bond Certificate or the Bonds and Coupons (if
printed) for the interest and principal, to the extent of such payment.
Any funds held by DBZH which will not be used as a consequence of Coupons and
Bonds not having been collected within the relevant period described by the
Statute of Limitations shall be held by DBZH at the disposal of the Issuer. DBZH
shall promptly after the expiry of the relevant period inform the Issuer about
the respective amount.
"Business Day" means a day on which SIS SEGAINTERSETTLE AG, The Swiss Securities
Services Corporation ("SIS") is open for business and
<PAGE> 19
-19-
commercial banks are open in Zurich and New York for business and foreign
exchange (including dealings in Swiss Francs).
3. Commissions and Expenses
The Issuer will pay to DBZH for the servicing of the Bonds a commission of:
- 0.100% on the principal amount of Coupons to be paid, and
- 0.010% on the principal amount of Bonds to be redeemed.
Such commissions shall be distributed among the Paying Agents according to a
separate agreement.
XII. COVENANTS
1. As long as any of the Bonds remain outstanding, the Issuer shall:
1.1 send to DBZH as soon as practicable after release ten copies of the Issuer's
annual report on Form 10-K as filed with the SEC (which shall include or be
accompanied by the report of the Issuer's independent auditors) non-consolidated
and/or consolidated (if available); and
1.2 send to DBZH as :soon as practicable after release any interim financial
statements, in particular its quarterly reports on Form 10-Q; and
1.3 send to DBZH as soon as practicable after release any of its reports on Form
8-K; and
1.4 give notice in writing to DBZH of (i) any change in its constituent
documents which is relevant to the Bonds and (ii) of any event described under
Sections 9 and 10 of the Terms of the Bonds forthwith upon becoming aware
thereof and without waiting for DBZH to take any of the actions mentioned
herein.
2. The Issuer shall provide the said documents in English. DBIZH will hold
the documents available for inspection by investors.
XIII. RIGHT OF TERMINATION
The Managers, jointly but not severally, reserve the right to withdraw from this
Agreement if, prior to December 15, 2000, Zurich-time (i.e. prior to the Closing
Date), there occurs in the United State of America, in Switzerland or elsewhere
in the world a change in political; economic, financial or monetary conditions
which, in the reasonable opinion of the Managers, would be such as to jeopardize
materially the success of the placement of the Bonds. Any such decision of
withdrawal by the Managers shall be final and binding upon the Issuer.
Should the Managers decide to withdraw from this Agreement, DBZH, on behalf of
the Managers, shall notify the Issuer forthwith by fax, followed by registered
letter. In the event of such withdrawal in circumstances when the Managers are
entitled to withdraw, each party hereto shall pay the expenses incurred by it in
connection with this issue and no party shall have any claim against the others
with respect to such withdrawal.
<PAGE> 20
-20-
XIV. COMMUNICATIONS
All communications among the Managers and the Issuer regarding the Bonds shall
be made in the English language, by fax, followed by registered letter, and
shall be transmitted
by the Issuer to: Deutsche Bank Aktiengesellschaft- Frankfurt a.M., Zurich
Branch- Bahnhofquai 9/11- 8023 Zurich- Switzerland- Attn: CHF-Debt Capital
Markets- Telefax: 0041-1-224-52-70 by the Bank to: MBIA Inc.- 113 King Street-
Armonk, NY 10504- United States of America- Attn: Treasurer- Telefax:
001-914-765-3080 A notice or other communication hereunder given by fax shall be
deemed to be served when it would be received in the ordinary course of
transmission.
XV. CURRENCY INDEMNITY
If any payment obligation of the Issuer in favor of the Managers according to
this Agreement has to be changed from Swiss Francs into a currency other than
Swiss Francs (to obtain a judgment, execution, or for any other reason), the
Issuer undertakes as a separate and independent obligation to indemnify the
Managers for any shortfall caused by fluctuations of the exchange rates applied
for such conversions. The rates of exchange to be applied in calculating such
shortfall shall be Principal Paying Agent's spot rates of exchange prevailing
between Swiss and the currency other than Swiss Francs on the date on which such
conversions are necessary.
XVI. REOPENING OF THE ISSUE
The Issuer reserves the right to reopen the issue (a "Reopening") at any time
without the consent of the holders of Bonds through the issuance of additional
bonds which will be fungible with the Bonds (i.e., identical especially in
respect of the Terms of the Bonds, remaining duration, final maturity, interest
rate and security number). The term "Bonds" shall, in the case of such issue,
also comprise such additionally issued Bonds.
<PAGE> 21
-21-
XVII. APPLICABLE LAW AND JURISDICTION
This Agreement shall be governed by Swiss law.
Any dispute which might arise between the Managers on the one hand and the
Issuer on the other hand regarding this Agreement shall fall within the
jurisdiction of the ordinary Courts of Justice of the Canton of Zurich, the
place of venue being the City of Zurich, with the right of appeal to the Swiss
Federal Court of Justice in Lausanne where the law permits.
Solely for such purpose and for the purpose of execution of this Agreement, the
Global Bond Certificate, the Bonds and the Coupons in Switzerland, the Issuer,
so long as the Bonds are outstanding, elects legal and special domicile at DBZH,
Zurich, and appoints DBZH as its agent for service of process, and DBZH shall
send to the Issuer as soon as possible any documents received in this
connection.
The Managers shall also be at liberty to enforce their rights and to take legal
action against the Issuer before the competent courts in the United States of
America, in which case Swiss law shall be applicable with respect to this
Agreement.
XVIII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
<PAGE> 22
-22-
THUS DONE AND SIGNED in 10 originals as of December 12, 2000
MBIA INC.
/s/ Joseph Sevely
DEUTSCHE BANK AKTIENGESELLSCHAFT
Frankfurt a.M., Zurich Branch
/s/ illegible /s/ illegible
BANCA DEL GOTTARDO
CREDIT SUISSE FIRST BOSTON
UBS AG
BANK JULIUS BAER & CO. LTD.
BANK VONTOBEL AG
BNP PARIBAS (SUISSE) SA
UNION BANCAIRE PRIVEE
/s/ illegible
(Managers duly represented with power of attorney by
Deutsche Bank Aktiengesellschaft, Zurich Branch,)
<PAGE> 23
-23-
Annex A
TERMS OF THE BONDS
The Terms of the 4.50 % Bonds 2000 - 2010, in the principal amount of CHF
175,000,000 (the "Bonds") issued by MBIA Inc. (the "Issuer") under and in
accordance with a Bond Purchase and Paying Agency Agreement of December 12,
2000, between the Issuer, Deutsche Bank Aktiengesellschaft, Frankfurt a.M.,
Zurich Branch and several other Managers, are the following:
1. Form and Denomination, Reopening
The Bonds and Coupons, if printed, shall be evidenced in bearer form and title
thereto shall pass by delivery. The Bonds have not been and will not be
registered under the United States Securities Act of 1933, as amended, and may
not be converted into registered Bonds.
This issue of Bonds is represented by a global bond certificate (the "Global
Bond Certificate") and is divided into co-ownership quotas of CHF 10,000 or
multiples thereof, rendering the entitlement to payment of interest (the
"Coupons"). The persons rendered co-ownership quotas and the persons
entitlements to payment of interest will be herein referred to as the
"Bondholders" and the "Couponholders" respectively. The Global Bond Certificate
will be deposited by Deutsche Bank Aktiengesellschaft, Frankfurt a.M., Zurich
Branch ("DBZH") with SIS SEGAINTERSETTLE AG, the SwissSecurities Corporation
("SIS") in Olten, Switzeriand, or any other securities clearing system approved
by the Admission Board of the SWX Swiss Exchange (the "Depositories").
DBZH shall arrange for the printing of definitive Bonds at its cost and arrange
for delivery of definitive Bonds to SIS for distribution to the Bondholders (i)
if definitive Bonds are required to be printed by applicable law, (ii) upon the
request. of any Bondholder or (iii) in case of an Event of Default as provided
for in Section 9 of the Terms of the Bonds. However, the Bonds and coupons may
not be exchanged against the Global Bond Certificate earlier than the 41st day
following completion of the distribution of the Bonds.
So long as no individual Bonds and Coupons have been. issued, the expressions
"Bonds" and "Coupons" herein shall mean and include the Global Bond Certificate,
and "Bondholder" and "Couponholder" herein shall mean and include the persons
entitled to co-ownership quotas and the bearer of the Global Bond Certificate
therein.
If printed, Bonds, Coupon-sheets or Coupons which are mutilated, lost or
destroyed may be replaced at the office of DBZH in Zurich against payment by the
holder of the respective Bonds, Coupon-sheets or Coupons at such costs as may be
incurred in connection therewith and on such terms as to evidence and indemnity
as the Issuer and DBZH may require and, in the case of mutilation, upon
surrender of the Bonds, Coupon-sheets or Coupons.
The issuer reserves the right to reopen this issue at any time without the
consent of the Bondholders through the issuance of additional bonds which will
be fungible with the Bonds (i.e. identical especially in respect of the Terms of
the Bonds, remaining duration, security number, final maturity and interest
rate), The term "Bonds" shall, in the case of such issue, also comprise such
additionally issued Bonds.
<PAGE> 24
-24-
2. Use of Net Proceeds
The net proceeds of the issue of the Bonds will be applied by the Issuer for
general corporate purposes and for the repayment of the Issuer's $100 million 9%
notes maturing February 15, 2001.
3. Interest
As from December 15, 2000, the Bonds shall bear interest at a rate of 4.50% per
annum, payable annually in arrears on June 15 of each year (the "Interest
Payment Date"). For this purpose, the Bonds are furnished with annual Coupons.
The first Coupon will become due and payable on June 15, 2001 (short first
Coupon).
Interest is computed on the basis of twelve 30-day months of a 360-day year.
Bonds repaid (as per Subsection 4.1) or redeemed (as per Subsection 4.22) shall
cease to carry interest from the beginning of the day on which they become due
for redemption or repayment,
4. Redemption
4.1 Final Repayment
Unless previously redeemed (as per Subsection 4.2), the Issuer shall repay all
outstanding Bonds at 100% of their principal amount (hereinafter called "Final
Redemption Value") without further notice on June 15, 2010.
4.2 Redemption. for Tax Reasons
Should the Issuer at any time present evidence reasonably satisfactory to DBZH,
or should DBZH become aware, that there is a material possibility that the
Issuer has been required or, on the occasion of the next payment due in respect
of the Bonds, would be required (i) to pay Additional Amounts pursuant to the
provisions referred to in Section 7, or (ii) to report or account to any taxing
authority with respect to any amounts (other than any tax withheld or deducted
from interest payable on the Bonds) calculated by reference to any amount
payable in respect of the Bonds, then the Issuer may redeem all, but not some
only, of the Bonds prior the final maturity at par, plus in each case, the
interest accrued until the date of redemption. In case of such early redemption
the Bonds cease to bear interest from the date of redemption, The Issuer shall
notify DBZH of its intention to redeem all outstanding Bonds not less than 30
nor more than 60 days prior to the date fixed for redemption.
The notice of such early redemption will be published by DBZH in the newspapers
mentioned in Section 13, as soon as possible after receipt.
<PAGE> 25
-25-
5. Transfer of Funds by the Issuer
The amounts required for the servicing of the Bonds or Coupons will be made
available in good time on each due date in freely disposable Swiss Francs which
will be placed at the free disposal of DBZH, Zurich, as Principal Paying Agent,
on behalf of the Bondholders and/or Couponholders, irrespective of any present
or future transfer restrictions and notwithstanding any bilateral or
multilateral payment or clearing agreement which may be applicable at the time
of such payments. If the due date for any payment by the Issuer does not fall on
Business Day (as defined below), the Issuer undertakes to effect payment for
value on the Business Day immediately preceding such due date.
"Business Day" means a day on which SIS is open for business and commercial
banks are open in Zurich and New York for business and foreign exchange
(including dealings in Swiss Francs).
Upon receipt of the funds and under the same conditions as received, DBZH will
arrange payment to the Bondholders and Couponholders. The Issuer shall pay,
without costs for the Bondholders or Couponholders, under all circumstances and
notwithstanding any future transfer restrictions, irrespective of nationality or
domicile of the Bondholders or Couponholders and without requiring any affidavit
or the fulfillment of any other formality, except as required by law, any sums
due pursuant to the Terms of the Bonds in freely disposable Swiss Francs,
outside of any bilateral or multilateral payment or clearing agreement which may
exist on the due dates between the United States of America and Switzerland, to
DBZH which shall act for this purpose as representative of the Bondholders or
Couponholders.
The receipt by DBZH of the funds shall release the Issuer, from its obligations
under the Bonds and Coupons for the payment of interest and principal plus
premium, if any, to the extent of such payment.
6. Payments of Funds to the Bondholders and Couponholders
Interest and principal will be paid against surrender of the Bonds and Coupons,
as the case may be, in the lawful money of the Confederation of Switzerland
without any charges solely at the offices in Switzerland of any of the following
Managers (the "Paying Agents"):
Deutsche Bank Aktiengesellschaft, Zurich Branch (the "Principal Paying Agent")
Banca del Gottardo
Credit Suisse First Boston and Credit Suisse
UBS AG
Bank Julius Baer & Co. Ltd.
Bank Vontobel AG
BNP PARIBAS (SUISSE) SA
Union Bancaire Privee
<PAGE> 26
-26-
If printed, definitive Bonds must be presented and surrendered for payment at
one of the above offices with all unmatured Coupons attached, if any. The total
value of unmatured missing Coupons shall be deducted from the principal amount
of the Bonds payable, but such Coupons shall be paid on presentation until such
time as they become time-barred by virtue of the Statute of Limitations in
accordance with Swiss law.
Payments on the Bonds by the Issuer or any Paying Agent will, if made by mail,
be made only to an address that is within Switzerland or, if made by wire or
similar transfer, be made only to an account maintained by the holder in
Switzerland.
7. Taxation
All payments of interest and principal to any Bondholder that is a United States
Alien shall be made without deduction of any taxes, imposts, penalties, duties,
assessments or governmental charges of any kind or nature at source (hereinafter
referred to as "Taxes" or, individually, as a "Tax") present or future, which
are required to be withheld including, without limitation, back-up withholding)
by the Issuer or any Paying Agent as such), and which are levied or imposed or
to be levied or imposed in the United States of America or any political
subdivision or taxing authority thereof (the "Taxing Jurisdiction").
In the event that any such Taxes should at any time be required by any such
Taxing Jurisdiction to be deducted by the Issuer (or any Paying Agent as such)
from any payments, the Issuer shall (subject to Subsection 4.2 and the
limitations set forth below) remit to DBZH as the Principal Paying Agent such
additional amounts ("Additional Amounts") as may be necessary to ensure that
after deduction of any such Taxes of the Taxing Jurisdiction, but before any
deduction made in pursuance of Swiss law, every net payment of the principal
amount and interest on a Bond to any Bondholder that is a United States Alien
will not be less than the amount provided for in such Bond or Coupon to be then
due and payable.
However, the Issuer will not be required to make any payment of Additional
Amounts to any such Bondholder for or on account of:
(a) any such Tax which would not have been so imposed but for (i) the
existence of any present or former connection between such Bondholder (or
between a fiduciary, settlor, beneficiary, member or shareholder of, or
possessor of a power over such Bondholder, if such Bondholder is an estate, a
trust, a partnership or a corporation) and the United States, including without
limitation, such Bondholder (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) being or having been a citizen or resident thereof or
being, or having been, engaged in a trade or business or present therein or
having, or having had, a permanent establishment therein, or (ii) the
presentation by the holder of any such Bond or Coupon for payment on a date more
than 15 days after 'the date on which such payment became due and payable or the
date on which payment thereof is duly provided for, whichever occurs later;
<PAGE> 27
-27-
(b) any estate, inheritance, gift, sales, transfer or personal property tax
or any similar Tax:
(c) any Tax imposed by reason of such Bondholder's past or present status
as a personal holding company, foreign personal holding company, controlled
foreign corporation related to the Issuer through stock ownership, private
foundation or other tax-exempt organization, in each case with respect to the
United States, or as a corporation which accumulates earnings to avoid United
States federal income tax;
(d) any Tax which is payable otherwise than by withholding from payments on
or in respect of any Bond or Coupon;
(e) any Tax required to be withheld by any Paying Agent from any payment of
principal of or interest on any Bond, if such payment can be made without such
withholding by any other Paying Agent in Switzerland;
(f) any Tax imposed by reason of such Bondholder's past or present status
the actual or constructive owner of 10% or more of the total combined voting
power of all classes of stock of the Issuer entitled to vote; or
(g) any combinations of items (a), (b), (c), (d), (e), or (f);
nor shall Additional Amounts be paid with respect to any payment in respect of a
Bond or Coupon to United States Alien Bondholder (i) that is a fiduciary or
partnership or other than the sole beneficial owner of such Bond or Coupon to
the extent that a beneficiary or settlor with respect to such fiduciary or a
member of such partnership or a beneficial owner would not have been entitled to
such Additional Amounts had such beneficiary, settlor, member or beneficial
owner been the Bondholder, or (ii) if such payment could be made without backup
withholding if certification were provided to the effect that the beneficial
owner of such Bond or Coupon is a United States Alien (but without any
requirement that the nationality, residence or identity of such beneficial owner
be disclosed to the Issuer or Paying Agent or any governmental authority).
The term "United States Alien" means any person who, for United states federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership to the extent one or more of the members is, as to the United
States, a foreign corporation, a non-resident alien individual or a non-resident
alien fiduciary of a foreign estate or trust.
The interest on the Bonds is, in accordance with Swiss law at present in force,
not subject to any Swiss withholding tax.
<PAGE> 28
-28-
8. Status and Limitations on Liens and Disposition of Stock of Restricted
Securities
8.1 Status
The Bonds and related interest constitute direct, general, unconditional,
unsecured and unsubordinated obligations of the Issuer and rank pari passu and
equally with all other present or future unsecured and unsubordinated
obligations of the Issuer.
8.2 Limitations on Liens
So long as Bonds are outstanding, the Issuer will not, and will not permit any
Subsidiary (as defined in Subsection 3.4) to, directly or indirectly, create,
issue, assume, incur or guarantee any indebtedness for borrowed money which is
secured by a Mortgage (as defined in Subsection 8.4) of any nature on any of the
present or future capital stock of any Restricted Subsidiary (as defined in
Subsection 8.4) (or any company, other than the Issuer, having direct or
indirect control of any Restricted Subsidiary) unless the Bonds then outstanding
and, if the Issuer so elects, any other indebtedness of the Issuer ranking at
least pari passu with the Bonds, shall be secured equally and ratably with, or
prior to, such other secured debt so long as it is outstanding
8.3 Limitations on Disposition of Stock of Restricted Subsidiaries
So long as Bonds are outstanding, the Issuer will not, and will not permit any
Subsidiary (as defined in Subsection 8.4) to, sell transfer or otherwise dispose
of any shares of capital stock of any Restricted Subsidiary (as defined in
Subsection 8.4) except for:
(a) a sale, transfer or other disposition of any capital stock of any Restricted
Subsidiary to a wholly-owned Subsidiary of the Issuer or such Subsidiary:
(b) a sale, transfer or other disposition of the entire capital stock of any
Restricted Subsidiary for at least fair value (as determined by the board of
directors of the Issuer acting in good faith); or
(c) a sale, transfer or other disposition of the capital stock of any Restricted
Subsidiary for at least fair value (as determined by the Board of Directors of
the Issuer acting in good faith) if, after giving effect thereto, the Issuer and
its Subsidiaries would own more than 80% of the issued and outstanding Voting
Stock (as defined in Subsection 8.4) of such Restricted Subsidiary.
8.4 Definitions
For the purposes of this Section 8:
"Mortgage" means any mortgage, pledge, lien, security interest or other
encumbrance.
<PAGE> 29
-29-
"Restricted Subsidiary" means MBIA Insurance Corporation, a New York
corporation, and any successor to all or substantially all of its business;
provided that such successor is a Subsidiary.
"Subsidiary" means a corporation more than 50% of the outstanding Voting Stock
of which is owned, directly or indirectly, by the Issuer or by one or more other
Subsidiaries, or by the Issuer and one or more other Subsidiaries,
"Voting Stock" means, with respect to any Subsidiary, stock of any class or
classes (or equivalent interests), if the holders of the stock of such class or
classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or persons
performing similar functions) of such Subsidiary, even though the right so to
vote has been suspended by the happening of such a contingency.
9. Events of Default
DBZH has the right but not the obligation to declare on behalf the holders of
Bonds and Coupons all outstanding Bonds plus accrued interest to be immediately
due and repayable at their Final Redemption Value, if:
(a) The Issuer is in default in making payment of principal when due and
payable; or
(b) The Issuer is in default for a continuous period of 30 days in making
any interest payment under the Bonds after the same shall become due and
payable; or
(c) The Issuer defaults in performance, or breach, of any covenant or
warranty of the Issuer in respect of the Bonds (other than a covenant or
warranty in respect of the Bonds a default in whose performance or whose breach
is elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of 60 days after there has been given to the
Issuer by DBZH a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(d) the Issuer fails to make any payment at maturity, including any
applicable grace period, in respect of indebtedness, which term as used herein
means obligations (other than the Bonds or non-recourse obligations) of, or
guaranteed or assumed by, the Issuer for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments ("Indebtedness"), in an amount in
excess of U.S.$10,000,000 or the equivalent thereof in any other currency or
composite currency and such failure shall have continued for a period of 10 days
after written notice thereof shall have been given to the Issuer by DBZH and
stating that such notice is a "Notice of Default" hereunder; or
(e) the Issuer defaults with respect to any Indebtedness, which default
results in the acceleration of Indebtedness in an amount in excess of
<PAGE> 30
-30-
U.S.$10,000,000 or the equivalent thereof in any other currency or composite
currency without such Indebtedness having been discharged or such acceleration
having been cured, waived, rescinded or annulled for a period of 10 days after
written notice thereof shall have been given to the issuer by DBZH and stating
that such notice is a "Notice of Default" hereunder; or
(f) a court having jurisdiction in the premises enters a decree or order
for relief in respect of the Issuer or any Restricted Subsidiary (as defined in
Subsection 8.4) in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law if
not dismissed within 30 days; or
(g) the Issuer or any Restricted Subsidiary (as defined in Subsection 3.4)
commences a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law.
10. Covenant Not to Merge, Consolidate, Sell or Convey Property Except
Under Certain Conditions
So long as Bonds are outstanding, the Issuer shall not consolidate with or merge
with or into any other corporation or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to any person, unless:
(a) The corporation formed by such consolidation or with or into which the
Issuer is merged or which purchases or acquires by conveyance or transfer, or
which leases, the properties and assets of the Issuer as an entirety or
substantially as an entirety, shall be a corporation organized and existing
under the laws of the United States of America, any State thereof or the
District' of Columbia;
(b) upon any such consolidation, merger, sale, lease or conveyance, the due
and punctual payment of the principal of, premium, if any, and interest on all
the Bonds, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Terms and Conditions of
the Bonds to be performed or observed by the Issuer, shall be expressly assumed,
executed and delivered to DBZH, by the corporation formed by such consolidation,
or into which the Issuer shall have been merged, or which shall have acquired
such property; and
(c) immediately after giving effect to such transaction, no event of
default, and no event which, after notice or lapse of time or both, would become
an event of default pursuant to Section 9 shall have occurred and be continuing.
In case of any such consolidation, merger, sale or conveyance, and following
such an assumption by the successor corporation, such successor corporation
shall succeed to and be substituted for the issuer, with the same effect as if
it had, been named herein.
<PAGE> 31
-31-
Such successor corporation may cause to be signed, and may issue either in its
own name or in the name of the Issuer prior to such succession any or all of the
Bonds issuable hereunder which theretofore shall not have been signed by the
Issuer and delivered to DBZH; and, upon the order of such successor corporation,
instead of the Issuer, and subject to all the terms, conditions and limitations
prescribed herein, DBZH shall authenticate and shall deliver any Bonds which
previously shall have been signed and delivered by the officers of the Issuer to
DBZH for authentication, and any Bonds which such successor corporation
thereafter shall cause to be signed and delivered to DBZH for that purpose. All
of the Bonds so issued shall in all respects have the same legal rank and
benefit as the Bonds 'theretofore or thereafter issued in accordance with these
Terms and Conditions as though all of such Bonds had been issued at the date of
the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance such
changes in phraseology and form (but not in substance), may be made in the Bonds
thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by way of
lease) the Issuer or any successor corporation which shall theretofore have
become such in the manner described in this Section shall be discharged from all
obligations and covenants under these Terms and Conditions and the bonds and may
be liquidated and dissolved.
DBZH, subject to the provisions, of this Section may receive an opinion of
counsel as conclusive evidence that any such consolidation, merger, sale, lease
or conveyance, and any such assumption, an any such liquidation or dissolution,
complies with the applicable provisions of these Terms and Conditions.
11. Listing
Application will be made by DBZH for the admission and listing of the Bonds on
the SWX Swiss Exchange.
12. Prescription
Claims for payment of principal and interest, respectively, cease to be
enforceable by legal action in accordance with the applicable Statute of
Limitations (presently after 10 years (in the case of principal) and 5 years (in
the case of interest) from their relevant due dates).
13. Notices
All notices regarding the Bonds shall be published by DBZH in a newspaper
regularly appearing in Zurich.
All notices to the Issuer by any Bondholder or Couponholder shall be transmitted
through DBZH exclusively.
<PAGE> 32
-32-
14. Application of Law and Jurisdiction
The Bonds and Coupons are governed by Swiss law.
Any dispute which might arise between the holders of the Bonds or Coupons on the
one hand and the Issuer on the other hand regarding the Bonds or the Coupons
shall fall within the jurisdiction of the ordinary Courts of Justice of the
Canton of Zurich, place of venue being the City of Zurich, with the right to
appeal to the Swiss Federal Court of Justice in Lausanne where the law permits.
Solely for that purpose and for the purpose of execution of the Bonds or Coupons
in Switzerland, the Issuer, so long as the Bonds are outstanding, elects legal
and special domicile at DBZH, Zurich, and appoints DBZH as its agent for service
of process, and DBZH shall send to the Issuer as soon as possible any documents
received in this connection.
The above-mentioned jurisdiction is also valid for the declaration of
cancellation of Bonds and Couponssheets and their subsequent replacement. The
Issuer shall be discharged by and to the extent of any payment made to a holder
recognized as creditor by an enforceable judgment of a Swiss court.
The holders of Bonds or Coupons are also at liberty to enforce their rights and
to take legal action against the Issuer before the competent courts in the
United States of America, in which case Swiss law shall be applicable with
respect to the Bonds or Coupons.
15. Currency Indemnity
If any payment obligation of the Issuer in favor of the Bondholders or
Couponholders has to be changed from Swiss Francs into a currency other than
Swiss Francs (to obtain a judgment, execution or for any other reason), the
issuer undertakes as a separate and independent obligation to indemnify the
Bondholders or Couponholders for any shortfall caused by fluctuations of the
exchange rates applied for such conversions. The rate of exchange to be applied
in calculating such shortfall shall be the Principal Paving Agent's spot rates
of exchange prevailing between Swiss Francs and the currency other than Swiss
Francs on the date on which such conversions are necessary.
16. Bondholders' Meeting
16.1 DBZH or the Issuer may at any time convene a meeting of the Bondholders
(a "Bondholders' Meeting").
In case of any event mentioned in Sections 9 and 10 above and as long as DBZH
has not exercised its rights thereunder, holders of Bonds who wish that a
Bondholders' Meeting should be convened and who represent at least 10% (ten
percent) of the aggregate principal amount then outstanding and who are entitled
to vote in accordance with Subsections 16.5 and 16.7 below may at any time
require DBZH to convene a Bondholders' Meeting, which shall convene such a
meeting as soon as practicably possible upon receipt of such request.
<PAGE> 33
-33-
16.2 A Bondholders' Meeting may consider any matter affecting the interests
of the holders of Bonds (other than matters on which DBZH has previously
exercised its rights contained in Sections 9 and 10 above and Section 17 below),
including any modification of or arrangement in respect of the terms and
conditions of the Bonds and Coupons.
16.3 Notice convening a Bondholders' Meeting shall be given at least 45 days
prior to the proposed date thereof. Such notice shall be given by way of one
announcement in accordance with Section 13 above, at the expense of the Issuer.
It shall state generally the nature of the business to be transacted at such
meeting. If an Extraordinary Resolution (as defined below) is being proposed,
the wording of the proposed resolution or resolutions shall be indicated. The
notice shall specify the day, hour and place of the meeting and also the formal
requirements referred to in Subsection 16.5 below. The Issuer and the Paying
Agents will each make a copy of such notice available for inspection of the
holders of Bonds during normal business hours at each of their respective head
offices,
Notice of any resolution passed at a Bondholders' Meeting will be published by
DBILH. on behalf in compliance with Section 13 above not less than 10 days after
the date of the meeting. Non-publication of such notice shall not invalidate
such resolution.
16.4 All Bondholders' Meetings shall be held in Zurich. A chairman (the
"Chairman") and a deputy chairman (the "Deputy Chairman") shall be nominated by
DBZH in writing. If no person has been so nominated or if the nominated person
shall not be present at the Bondholders' Meeting within 30 minutes after the
time fixed for holding the meeting, the holders of Bonds present shall choose
one of their number to be the Chairman and Deputy Chairman.
The Chairman shall lead and preside over the Bondholders' Meeting, Among others,
it shall be his duty to determine the presence persons entitled to vote and to
inquire if the necessary quorum (as set forth below) is present. He shall
instruct the holders of Bonds as to the procedure of the Bondholders' Meeting
and the resolutions to be considered. The Chairman shall sign the minutes
referred to in Subsection 16.11 below.
In the case of any equality of votes, the Chairman shall have a casting vote.
A declaration by the Chairman that a resolution has been carried or carried by a
particular majority or rejected or not carried by a particular majority shall be
conclusive evidence of the fact without proof of the number or proportion of the
votes recorded in favor of or against such resolution.
16.5 Each person who produces a Bond or a certificate by a Manager in
respect of such Bond relating to that Bondholders' Meeting is entitled to attend
and to vote on the resolutions proposed at such Bondholders' Meeting. Holders of
Coupons are not entitled to attend or vote at Bondholders' meetings. Said
certificate shall be dated before the date of the Bondholders' Meeting and
confirm that the Bond is deposited with the Manager and will remain deposited
with it until and
<PAGE> 34
-34-
including the date of the Bondholders' Meeting and that it has not issued any
other such certificate with respect to such Bond.
16.6 The quorum necessary in order to vote on resolutions proposed at a
Bondholders' Meeting shall be persons entitled under Subsections 16.5 above and
16.7 below holding or representing in the aggregate percentages (or more) of the
aggregate principal amount of all outstanding Bonds:
each Ordinary Resolution: 25%
each Extraordinary Resolution: 66%
The terms "Ordinary Resolution" and "Extraordinary Resolution" will be defined
below.
If within thirty minutes after the time appointed for any Bondholders' Meeting a
sufficient quorum is not present, the Meeting shall be dissolved.
16.7 Voting rights shall be determined according to the principal amount of
outstanding Bonds held. Each CHF 10,000 principal amount gives right to one
vote.
Bonds held by or on behalf of the Issuer or any other natural person or legal
entity (aa) which directly or indirectly owns or controls more than 50% of the
equity share capital of the issuer, or (bb) of which in the case of a legal
entity more than 50% of the equity share capital is controlled by the Issuer
directly or indirectly, or (cc) where the Issuer is in a position to exercise,
directly or indirectly, control over the decisions or actions of such natural
person or legal entity or representative thereof, irrespective of whether or not
the latter is affiliated to the Issuer, shall not be entitled to vote at such
Bondholders' Meeting.
16.8 A resolution shall be validly passed if approved by the following
percentages (or more) of votes cast at a duly convened Bondholders' Meeting held
in accordance with this Section 16:
each Ordinary Resolution: 51%
each Extraordinary Resolution: 66%
Every proposal submitted to a Bondholders' Meeting shall be decided upon by a
poll.
16.9 Any resolution which is not an Extraordinary Resolution (as defined in
the following Subsection) shall be deemed to be an Ordinary Resolution
(an "Ordinary "Resolution").
16.10 An Extraordinary Resolution (an "Extraordinary Resolution") shall be
necessary 'to decide on the following matters at a Bondholders'
Meeting:
- to postpone the maturity beyond the stated maturity of the
principal of any Bond, or
<PAGE> 35
-35-
to reduce the amount of principal or premium (if any) payable
on any Bond, or
to change the date of interest payment of any Bond, or
to change the rate of interest or the method of computation of
interest of any Bond, or
to change any provision for payment contained in the Terms of
the Bonds or the place or the currency of repayment of the
principal or payment of premium (if any) of any Bond or
interest on any Bond, or
to amend or modify or waive the whole or any parts of Sections
3, 7, 9 or 10 above or Subsections 16.7 through 16,10, or
to create unequal treatment between holders of Bonds of the
same class of an issue, or
to convert the Bonds into equity, or
to change the choice of law and the jurisdiction clause
contained in Section 14 above.
The above-mentioned list of issues for which an Extraordinary Resolution shall
be necessary is exclusive.
16.11 Any resolution approved at a Bondholders' Meeting held in accordance
with this Section 16 shall be conclusive and binding on all present or future
holders of Bonds whether present or not, and on all holders of the Coupons.
Minutes of all resolutions and proceedings at a Bondholders' Meeting shall be
prepared and signed by the Chairman pursuant to Section 16.4 above.
16.12 If no holder of a Bond or an insufficient number of holders of Bonds
shall attend a Bondholders' Meeting, the right to decide on an early repayment
of the Bonds or any other measures to protect the interests of the holders of
Bonds shall revert to the absolute discretion of DBZH, Any such decision of DBZH
shall be final and binding upon the Issuer and the holders of Bonds and Coupons.
Notice of any such decision shall be published in accordance with Section 13
above.
17. Amendment to the Terms of the Bonds
The Terms of the Bonds may be amended from time to time by the agreement between
the Issuer and DBZH on behalf of the holders of Bonds and Coupons, provided that
in the sole opinion of DBZH such amendment is of a formal, minor or technical
nature, is made to correct a manifest error or is not materially prejudicial to
the interests of the holders of Bonds and Coupons.
Notice of any such amendment shall be transmitted as per Section 13 above.
<PAGE> 36
-36-
Any such amendment shall be binding on the holders of Bonds and Coupons in
accordance with its terms.
18. Severability
If at any time any one or more of the provisions of the Terms of the Bonds is or
becomes unlawful, invalid, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions shall
not be in any way affected or impaired thereby.
<PAGE> 37
-37-
Annex B
GLOBAL BOND CERTIFICATE
ANY "UNITED STATES PERSON" WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE INCOME TAX LAWS OF THE UNITED STATES OF AMERICA INCLUDING
THE LIMITATIONS PROVIDED IN SECTIONS 165 (j) AND 1287 (a) OF THE INTERNAL
REVENUE CODE OF 1986 OF THE UNITED STATES OF AMERICA, AS AMENDED.
MBIA Inc.
Armonk, New York, U.S.A.
CHF 175,000,000
4.50% Bonds 2000 - 2010
due June 15, 2010
This Global Bond Certificate has not been and will not be registered under the
Securities Act of 1933, as amended, of the United States of America.
MBIA Inc., a corporation incorporated under the laws of the State of
Connecticut, promises to Pay to the holder of this Global Bond Certificate, upon
its surrender, the amount of CHF 175,000,000 (one hundred seventy-five million
Swiss Francs) and interest at 4.50% per annum, payable each year on June 15, in
accordance with the Terms of the Bonds set forth in the Bond Purchase and Paying
Agency Agreement dated as of December 12, 2000, between MBIA Inc. on the one
part, and Deutsche Bank Aktiengesellschaft, Frankfurt a.M., Zurich Branch as
principal paying agent and the other Managers named therein on the other part
(the "Agreement").
This Global Bond Certificate will be deposited in favor of the Bondholder with
SIS SEGAINTERSETTLE AG, The Swiss Securities Services Corporation ("SIS") in
Olten, Switzerland, or with any other securities clearing system approved by the
Admission Board of the SWX Swiss Exchange until final redemption of the Bonds,
or if earlier until such time as this Global Bond Certificate will be exchanged
for printed Bonds as provided for in the Terms of the Bonds.
Each Bondholder retains a co-ownership quota in this Global Bond Certificate to
the extent of his holding of Bonds. This Global Bond Certificate, which is
issued without coupons for interest, is a substitute for Bearer Bonds in the
denomination of Swiss francs 10,000 or multiples thereof each with annual
Coupons (the "Bonds"), the form of which is set forth in Annex C-1 to the
Agreement. This Global Bond Certificate is exchangeable against the Bonds free
of charge in accordance with Section 1 of the Terms of the Bonds and Article X.
of the Agreement. The Bonds become due and payable without further notice on
June 15, 2010 at 100% of their principal amount, unless previously redeemed for
tax reasons pursuant to Section 4.2 of the Terms of the Bonds.
December 15, 2000
MBIA INC.
<PAGE> 38
-38-
This Global Bond Certificate becomes valid only if countersigned by two
officials of Deutsche Bank Aktiengesellschaft, Frankfurt a.M., Zurich Branch.
DEUTSCHE BANK AKTIENGESELLSCHAFT
Frankfurt a.M., Zurich Branch
Swiss Security Number: 1155166 ISIN Code: CH0011551667 EC/CCC: 012074654
<PAGE> 39
-39-
Annex C-1
Individual Bond (Face)
ANY "UNITED STATES PERSON" WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE INCOME TAX LAWS OF THE UNITED STATES OF AMERICA INCLUDING
THE LIMITATIONS PROVIDED IN SECTIONS 165 (j) AND 1287 (a) OF THE INTERNAL
REVENUE CODE OF 1986 OF THE UNITED STATES OF AMERICA, AS AMENDED.
MBIA Inc.
Armonk, New York, U.S.A.
4.50% Bonds 2000 - 2010
due June 15, 2010
Bond of CHF 10,000
MBIA Inc, will pay to the holder of this Bond upon surrender the amount of ten
thousand Swiss Francs and upon surrender of the relevant interest coupon an
amount of interest at 4.50% per annum from December 15, 2000, payable annually
on June 15 of each year, in accordance with the conditions printed on the back
hereof.
December 15, 2000 MBIA Inc.
By:____
Swiss Security Number: 1155166 ISIN Code: CH0011551667 EC/CCC: 012074654
<PAGE> 40
-40-
Annex C-2
Interest Coupon
(Face)
ANY "UNITED STATES PERSON" WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE INCOME TAX LAWS OF THE UNITED STATES OF AMERICA INCLUDING
THE LIMITATIONS PROVIDED IN SECTIONS 165 (j) AND 1287 (a) OF THE INTERNAL
REVENUE CODE OF 1986 OF THE UNITED STATES OF AMERICA, AS AMENDED.
MBIA Inc.
Armonk, New York, U.S.A.
4.50 % Bonds 2000 - 2010 No.[ ]
BOND OF CHF 10,000
Annual interest due June 15, [2001 - 2010] CHF 450
(BACK)
Paying Agents.
Deutsche Bank Aktiengesellschaft, Frankfurt a,M., Zurich Branch, Banca del
Gottardo, Credit Suisse First Boston and Credit Suisse, UBS AG, Bank Julius Baer
& Co. Ltd., Bank Vontobel AG., BNP PARIBAS (SUISSE) SA, Union Bancaire Privee
<PAGE> 41
-41-
Annex C-3
SPECIMEN SIGNATURE FORM
MBIA Inc.
Armonk, New York, U.S.A.
CHF 175,000,000
4.50% Bonds 2000 - 2010
due 2010
Specimen signatures for use for the individual Bonds according to Article X.2 of
the Bond Purchase and Paying Agency Agreement.
Name
Title:
Name.
Title:
<PAGE> 42
-42-
Annex D
[Letterhead MBIA Inc.]
Dated: December 15, 2000
To: Deutsche Bank Aktiengesellschaft, Frankfurt a.M., Zurich Branch for
itself and on behalf of the Managers referred to in the "Agreement" referred to
below
Care of: Deutsche Bank Aktiengesellschaft, Frankfurt a.M., Zurich
Branch, Bahnhofquai 9/11, P.O.Box 7381, CH-8023 Zurich
Gentlemen,
RE: MBIA Inc. (the "Issuer")
Armonk, New York, U.S.A.
4.50% Bonds 2000 - 2010
in the aggregate principal amount of CHF 175,000,000 (the "Bonds")
Certificate of No Material Adverse Change
Pursuant to the Bond Purchase and Paying Agency Agreement dated as of December
12. 2000 (the "Agreement"), between the Issuer, Deutsche Bank
Aktiengesellschaft, Frankfurt a.M., Zurich Branch, and the other Managers named
therein covering the issue of the Bonds by the Issuer,
I: .................. ., being [ ] of MBIA
Inc, HEREBY CERTIFY on behalf of the Issuer that as of the date hereof:
a) except as disclosed in the Prospectus, since December 31, 1999 there
has been no material adverse change in the financial condition of the
issuer which is material in the context of the issue of the Bonds, and
b) no event has occurred rendering untrue or incorrect to an extent which
is material as aforesaid any of the representations and warranties set
forth in Article VI of the Agreement, and
c) no event has occurred which constitutes or which with the giving of
notice or lapse of time would constitute one of the events referred to
in Sections 9 and 10 of the Terms of the Bonds.
Yours truly,
MBIA Inc.
[Title]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.04
<SEQUENCE>4
<FILENAME>y46810ex10-04.txt
<DESCRIPTION>FIRST RESTATED CREDIT AGREEMENT
<TEXT>
<PAGE> 1
Exhibit 10.04
THIRD AMENDMENT
To
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
among
MBIA INSURANCE CORPORATION
(MBIA)
THE BANKS SIGNATORY HERETO
RABOBANK NEDERLAND
New York Branch
as Administrative Agent
and
DEUTSCHE BANK AG
New York Branch
as Documentation Agent
Dated as of October 27, 2000
<PAGE> 2
THIRD AMENDMENT
THIS THIRD AMENDMENT, dated as of October 27, 2000 (this "Amendment"),
between MBIA INSURANCE CORPORATION, a New York stock insurance corporation
("MBIA" the financial institutions which have executed this Amendment below as
Banks (as defined below), COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEN BANK B.A.
"RABOBANK NEDERLAND", New York Branch ("Rabobank"), as Administrative Agent for
the Banks (in such capacity, the "Administrative Agent") and individually as a
Bank, and DEUTSCHE BANK AG, New York Branch, as Documentation Agent for the
Banks (in such capacity, together with the Administrative Agent, the "Agents")
and individually as a Bank;
WHEREAS, the parties hereto are parties to the Second Amended and
Restated Credit Agreement, dated as of October 1, 1997, as amended by the First
Amendment thereto dated as of October 1, 1998, the Second Amendment thereto
dated as of October 29, 1999 and as further modified by certain Assignment and
Assumption Agreements (as defined therein) (as so amended and modified, the
"Credit Agreement"); and
WHEREAS, the parties hereto desire, upon the terms and subject to the
conditions hereinafter set forth, to extend the Expiration Date (as defined
below) and to otherwise modify the Credit Agreement in certain respects;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1.
MODIFICATIONS TO LOAN DOCUMENTS
Section 1.1. Defined Terms. Except as otherwise specified herein, terms used in
this Amendment and defined in Exhibit A of the Credit Agreement shall have the
meanings provided in such Exhibit A.
Section 1.2. Amendment (a) The definition of the term "Expiration Date"
contained in Exhibit A to the Credit Agreement is hereby amended and restated to
read in its entirety as follows:
"'Expiration Date' shall mean the date on which the night to obtain Loans
terminates, initially October 31, 2007, as such date may be extended pursuant to
Section 3.3."
(b) The definition of the term "Loan Commencement Event" contained in Exhibit A
to the Credit Agreement is hereby amended and restated to read in its entirety
as follows:
"Loan Commencement Event" shall mean the time at which Cumulative Losses for the
current Commitment Period first exceed the aggregate Pledged Recoveries received
by MBIA during the current Commitment Period by
<PAGE> 3
an amount equal to the greater of (a) the highest Maximum Commitment at any time
during the such Commitment Period and (b) five and six-tenths percent (5.6%) of
Average Annual Debt Service on the Covered Portfolio."
Section 1.3. Commitments. The aggregate Commitments of the Banks are hereby
amended so that, from and after October 27, 2000 until the termination or
further modification thereof as provided in the Credit Agreement, such
Commitments shall be as set forth on Schedule 1 to this Amendment.
Section 1.4. Amendment to Security Agreement. Each Bank and the Administrative
Agent hereby consent to an amendment to the Security Agreement which will
provide that the definition of the term "Special Event of Default" contained
therein be amended and restated to read in its entirety as follows:
"Special Event of Default" means any of (i) any Event of Default described in
clause (i) of paragraph (a) of Section 7.1 of the Credit Agreement in respect of
principal of or interest on the Loans or the Notes, (ii) any MBIA Event of
insolvency, or (iii) If MBIA shall have incurred Cumulative Losses during the
current Commitment Period of more than the greater of (A) 50% of the highest
Maximum Commitment at any time during, the current Commitment Period (or, if the
last Commitment Period has expired, at any time during such Commitment Period),
and (B) 2.8% of Average Annual Debt Service on the Covered Portfolio, any
failure of MBIA to perform or observe the covenant contained in Section 6.8 of
the Credit Agreement."
ARTICLE 2.
CONDITIONS PRECEDENT
Section 2. 1. Conditions Precedent to Amendment Effective Date. The provisions
of Article 1 hereof shall become effective as of October 27, 2000 when this
Amendment shall have been executed and delivered by MBIA, each Agent and
consented to by each Bank and when the following conditions have been fulfilled
to the reasonable satisfaction of the Agents. If such conditions shall not have
been satisfied on or prior to November 17, 2000, the provisions of Article 1
shall not be given effect unless otherwise consented to by the Agents and the
Majority Banks, but otherwise this Amendment shall remain in full force and
effect.
(a) There shall exist no Default or Event of Default, and all representations
and warranties made by MBIA herein or in any of the Loan Documents shall be true
and correct with the same effect as though such representations and warranties
had been made at and as of such time.
(b) The Administrative Agent shall have received each of the following, in form
and substance satisfactory to the Administrative Agent:
(i) a certificate of any two of the President, Vice Chairman, Managing Director,
any Vice President or the Treasurer of MBIA to the effect that the conditions
set forth in Section 2.1(a) hereof have been satisfied and that no governmental
filings,
<PAGE> 4
consents and approvals are necessary to be secured by MBIA in order to permit
the borrowing under the Credit Agreement, as modified hereby, the grant of the
Lien under the Security Agreement and the execution, delivery and performance in
accordance with their respective terms of this Amendment and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby, each of which shall be in full force and effect;
(ii) copies of the duly adopted resolutions of the Board of Directors of MBIA,
or an authorized committee thereof, authorizing the execution, delivery and
performance in accordance with their respective terms of this Amendment and the
other documents to be executed and delivered by MBIA described herein
(collectively, the "Amendment Documents"), accompanied by a certificate of the
Secretary or an Assistant Secretary of MBIA stating as to (A) the effect that
such resolutions are in full force and effect, (B) the incumbency and signatures
of the officers signing the Amendment Documents on behalf of MBIA, and (C) the
effect that, from and after October 29, 1999, there has been no amendment,
modification or revocation of the articles of incorporation or by-laws of MBIA;
(iii) opinions of the General Counsel of MBIA and Kutak Rock, MBIA's counsel,
each dated October 27, 2000, which are substantially to the effect set forth in
the forms attached hereto as, respectively, Exhibits A and B; and
(iv) such other documents, instruments, approvals (and, if reasonably requested
by the Administrative Agent or the Majority Banks, duplicates or executed copies
thereof certified by an appropriate governmental official or an authorized
officer of MBIA) or opinions as the Administrative Agent or the Majority Banks
may reasonably request.
(c) The Administrative Agent shall have received reasonably satisfactory
evidence that long-term obligations insured by MBIA are publicly assigned a
rating of Aaa by Moody's and AAA, by S&P by reason of such insurance.
(d) Each Bank which is becoming a party to the Credit Agreement or which is
increasing its Commitment shall have received a Note or an additional Note dated
as of October 27, 2000, in a principal amount equal to the amount of its
Commitment or of the increase in its Commitment, as applicable.
(e) The Security Agreement shall have been amended as contemplated by Section
1.4 hereof.
(f) The currently effective Fronting Bank Supplements and related Fronting Bank
Notes and fee letters shall have been modified in a manner satisfactory to MBIA,
the Administrative Agent and each Fronting Bank affected by such modifications.
(g) All corporate and legal proceedings and all instruments in connection with
the transactions contemplated by this Amendment and the Loan Documents shall be
satisfactory in form and substance to the Administrative Agent and its counsel.
- 3 -
<PAGE> 5
Section 2.2. Certificate as to Effective Date. A certificate of the
Agents delivered to MBIA stating that the provisions of Article 1 shall have
become effective shall be conclusive evidence thereof and shall be binding on
MBIA, each Agent and each Bank. In delivering such certificate, and without
limiting the general application of Section 8.8 or other provisions of Article 8
of the Credit Agreement to the actions of the Agents hereunder, the Agents shall
be entitled to rely conclusively on the certificate of officers of MBIA
delivered pursuant to Section 2. 1(b)(i) as to the satisfaction of the
conditions set forth in Section 2.1(a).
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
In order to induce the Agents and the Banks to enter into this Amendment and
proceed with the transaction contemplated hereby, MBIA makes the following
representations and warranties to the Agents and the Banks, which shall survive
the execution and delivery of this Amendment and the making of any Loans:
Section 3.1. Due Authorization. Etc. The execution, delivery and performance by
MBIA of the Amendment Documents and the Loan Documents as amended thereby are
within its corporate powers, have been duly authorized by all necessary
corporate action and do not and will not (i) violate any provision of any law,
rule, regulation (including, without limitation, the New York Insurance Law, the
Investment Company Act of 1940, as amended, or Regulations T, U or X of the
Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to MBIA or of corporate charter or by-laws of MBIA, (ii) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which MBIA is a party
or by which it or its properties may be bound or affected, or (iii) result in,
or require, the creation or imposition of any Lien upon or with respect to any
of the properties now owned or hereafter acquired by MBIA (other than as
contemplated by the Loan Documents), other than, in the case of clauses (ii) and
(iii), breaches, defaults or Liens which could not materially and adversely
affect the business, assets, operations or financial condition of MBIA or the
ability of MBIA to perform its obligations under any Loan Document.
Section 3.2. Approvals. No consent, approval or other action by, or any notice
to or filing with any court or administrative or governmental body is or will be
necessary for the valid execution, delivery or performance by MBIA of the
Amendment Documents or the Loan Documents as amended thereby.
Section 3.3. Enforceability. Each Amendment Document and each Loan Document as
amended thereby constitutes a legal, valid and binding obligation of MBIA,
enforceable against MBIA in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
the availability of equitable remedies, whether such matter is heard in a right
court of law or a court of equity.
Section 3.4. Financial Statements. etc. (a) MBIA has heretofore furnished to the
Agents (i) the audited consolidated and unaudited consolidating balance sheets
of MBIA Inc. and its subsidiaries at December 31, 1999, the related audited
consolidated statements of income,
<PAGE> 6
changes in stockholders' equity and financial position or cash flows, as the
case may be, and unaudited consolidating statements of income for the year ended
December 31, 1999, and (ii) the unaudited consolidated and consolidating
balance sheets of MBIA Inc. and its subsidiaries as of March 31 and June 30,
2000, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the three months ended March 31, 2000,
the six months ended June 30, 2000. Such financial statements were prepared in
accordance with generally accepted accounting principles consistently applied
and present fairly the consolidated financial position and consolidated results
of operations and cash flows of MBIA Inc. and its subsidiaries and the financial
position and results of operations and cash flows of MBIA at the dates and for
the periods indicated therein. There has been no material adverse change in the
consolidated financial position or consolidated results of operations or cash
flows of MBIA Inc. and its subsidiaries taken as a whole or of MBIA since June
30, 2000.
(b) MBIA has heretofore furnished to the Agents its annual statements
and its financial statements as filed with the Department for the year ended
December 31, 1999 and its quarterly statements and financial statements as
filed with the Department for the periods ended March 31, 2000 and June 30,
2000. Such annual and quarterly statements and financial statements were
prepared in accordance with the statutory accounting principles set forth in the
New York Insurance Law, all of the assets described therein were the absolute
property of MBIA at the dates set forth therein, free and clear of any liens or
claims thereon, except as therein stated, and each such Annual Statement is a
full and true statement of all the assets and liabilities and of the condition
and affairs of MBIA as of such dates and of its income and deductions therefrom
for the year or quarter ended on such dates.
c) MBIA has heretofore furnished to the Agents a copy of the annual report on
Form 10-K of MBIA Inc. for the fiscal year ended December 31, 1999, its
quarterly reports on Form 10-Q of MBIA Inc. for each of the quarters ended March
31, 2000 and June 30, 2000 and each current report on Form 8-K filed by MBIA
Inc. on or after January 1, 2000, each as filed with the Securities and Exchange
Commission. Such annual quarterly and current reports were prepared in
accordance with the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Section 3.5. Covered Portfolio. Substantially all of the Insured Obligations in
the Covered Portfolio are insured by MBIA under Insurance Contracts in the form
or forms heretofore supplied to the Agents in accordance with MBIA's
underwriting criteria as heretofore disclosed to the Agents, and in MBIA's
reasonable judgment such Insured Obligations represent an overall risk of loss
(based on all factors including without limitation investment quality and
geographical and market diversification) which is not materially greater than
the risk of loss represented by all of MBIA's Insured Obligations as of the date
hereof.
Section 3.6. Confirmation of Representations and Warranties. MBIA hereby
confirms that its representations and warranties set forth in the Credit
Agreement are true and correct as of the date hereof.
Section 3.7. Disclosure. There is no fact known to MBIA which materially
adversely affects the business, assets, operations or financial condition of
MBIA or the ability of MBIA to perform its obligations under any Amendment
Document or any Loan Document as amended.
- 5 -
<PAGE> 7
thereby which has not been set forth in this Amendment, in the financial
statements or reports required to be delivered pursuant to Section 3.4 hereof.
ARTICLE 4.
MISCELLANEOUS
Section 4.1. Credit Agreement. Except as expressly modified as contemplated
hereby, the Credit Agreement and the other Loan Documents are hereby confirmed
to be in full force and effect in accordance with their respective terms. This
Amendment is intended by the parties to constitute an amendment and modification
to, and otherwise to constitute a continuation of the Credit Agreement and the
Loan Documents, and is not intended by any party and shall not be construed to
constitute a novation thereof or of any Debt of MBIA hereunder.
Section 4.2. Survival. All covenants, agreements, representations and warranties
made herein or in any Loan Document or in any certificate, document or
instrument delivered pursuant hereto or thereto shall survive the effective date
hereof, the making of any Loan and the occurrence of the Expiration Date and
shall continue in full force and effect so long as principal of or interest on
any Loan, Note or Fronting Bank Note remains outstanding or unpaid, any other
amount payable by MBIA under the Credit Agreement as amended hereby, any Note,
Fronting Bank Note or any other Loan Document remains unpaid or any other
obligation of MBIA to perform any other act hereunder or under the Credit
Agreement as amended hereby, any Note, Fronting Bank Note or any other Loan
Document remains unsatisfied or the Banks have any obligation to make a Loan or
any other advance of moneys to MBIA under the Credit Agreement as amended
hereby.
Section 4.3. Severability. Any provision of this Amendment which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or nonauthorization without invalidating, the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
Section 4.4. Successors and Assigns. This Amendment is a continuing obligation
and binds, and the benefits hereof shall inure to, the parties hereto and their
respective successors and assigns; provided that MBIA may not transfer or assign
any or all of its rights or obligations hereunder except as permitted by Section
10.8 of the Credit Agreement.
Section 4.5. Amendments. No provision of this Amendment shall be waived, amended
or supplemented except as provided in Section 10.12 of the Credit Agreement.
Section 4.6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 4.7. Headings. Section headings in this Amendment are included herein
for convenience or reference only and shall not constitute a part of this
Amendment for any other purpose.
<PAGE> 8
Section 4.8. Counterparts. This Amendment may be executed in several
counterparts each of which shall be regarded as the original and all of which
shall constitute one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
MBIA INSURANCE CORPORATION
By /s/ Joseph L. Sevely
--------------------------------------
Name: Joseph L. Sevely
Title: Treasurer
COOPERATIEVE CENTRALE RAIFFEISEN
BOERENILEENBANK B.A. "RABOBANK
NEDERLAND", New York Branch, as
Administrative Agent and as a Bank
By /s/ Ian Reece
--------------------------------------
Name: Ian Reece
Title: Senior Credit Officer
By /s/ Angela R. Reilly
--------------------------------------
Name: Angela R. Reilly
Title: Vice President
DEUTSCHE BANK AG, New York Branch,
as Documentation Agent and as a Bank
By /s/ John S. McGill
--------------------------------------
Name: John S. McGill
Title: Director
By /s/ Clinton M. Johnson
--------------------------------------
Name: Clinton M. Johnson
Title: Managing Director
<PAGE> 9
SCHEDULE 1
TO THIRD AMENDMENT
BANKS, ADDRESSES AND COMMITMENTS
<TABLE>
<CAPTION>
Name and Notice Address of Bank Commitment
<S> <C>
Banco Santander Central Hispano S.A., $ 18,596,491
New York Branch
45 East 53rd Street
New York, NY 10022
Attn: Victoria Moreno
The Bank of America, N.A. $ 50,000,000
901 Main Street, 66th Floor
Dallas, Texas 75202
Attn: Joan D'Amico
The Bank of New York $ 37,192,982
Insurance Division
1 Wall Street, 17th Floor
New York, NY 10286
Attn: Evan Glass
The Bank of Nova Scotia $ 23,245,614
One Liberty Plaza
New York, NY 10006
Attn: David Schwartzbard
Bayerische Landesbank Girozentrale, $ 50,000,000
New York Branch
560 Lexington Avenue, 17th Floor
New York, NY 10022
Attn: Roberto Albano
Commonwealth Bank of Australia, $ 23,245,615
New York Branch
599 Lexington Avenue
New York, NY 10022
Attn: Randy Kase
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Name and Notice Address of Bank Commitment
<S> <C>
Credit Suisse First Boston, $ 75,000,000
New York Branch
Eleven Madison Avenue
New York, NY 10010-3629
Attn: James Lee
The Chase Manhattan Bank $ 23,245,614
270 Park Avenue, 201h Floor
New York, NY 10017
Attn: Marybeth Mullen
Dexia Public Finance Bank, New York Branch $ 9,298,246
f/k/a Credit Local de France, New York Branch
445 Park Avenue
New York, NY 10022
Attn: James Beck
Deutsche Bank AG, New York Branch $ 75,000,000
Deutsche Bank Securities Inc.
31 West 52nd Street
New York, NY 10019
Attn: John McGill
DGZ DekaBank Deutsche Kommunalbank $ 35,000,000
International Finance Department
Taunusanlage 10
D-60329 Frankfurt am Main
GERMANY
Attn: Stephan Wagner
Fleet National Bank $ 25,000,000
777 Main Street, CT-MO 0250
Hartford, CT 06115
Attn: Jan-Gee McCollam
Bayerische Hypo-und Vereinsbank AG, $ 46,491,228
New York Branch
150 East 42nd Street
New York, NY 10017-4679
Attn: David Lefkovits
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Name and Notice Address of Bank Commitment
<S> <C>
KBC Bank N.V. $ 18,596,491
125 West 55th Street
New York, NY 10019
Attn: Patrick Owens
Landesbank Hessen-Thuringen Girozentrale, $ 50,000,000
New York Branch
420 Fifth Avenue, 24th Floor
New York, NY 10018
Attn: John Sarno
Landesbank Baden Wurttemberg $100,000,000
535 Madison Avenue
New York, NY 10022
Attn: Robert O'Brien
Lloyds TSB Bank Plc $ 46,491,228
575 Fifth Avenue, 17th Floor
New York, NY 10017
Attn: Michelle White
Norddeutsche Landesbank Girozentrale, $ 18,596,491
New York Branch
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attn: Stephanie Finnen
Westdeutsche Landesbank Girozentrale $ 50,000,000
New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attn: Lillian Tung Lum, VP
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. $125,000,000
"Rabobank Nederland", New York Branch
245 Park Avenue, 37th Floor
New York, NY 10167
Attn: Angela R. Reilly
TOTAL $900,000,000
</TABLE>
<PAGE> 12
EXHIBIT A
TO THIRD AMENDMENT
Form of Opinion of General Counsel of MBIA
[date]
Each of the Banks which are
parties to the Credit Agreement
referred to herein
c/o Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank Nederland"), New York Branch
as Administrative Agent
245 Park Avenue
New York, New York 10167-0062
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank Nederland"), New York Branch,
as Administrative Agent
245 Park Avenue
New York, New York 10167-0062
Deutsche Bank AG, New York Branch,
as Documentation Agent
1 West 52nd Street
New York, NY 10019
Re: Third Amendment, dated as of October 27, 2000, to Second Amended and
Restated Credit Agreement dated as of October 1, 1997, with MBIA
Insurance Corporation
Ladies and Gentlemen:
I am General Counsel of MBIA Insurance Corporation, a New York stock insurance
corporation ("MBIA"). This opinion is being given in connection with Third
Amendment, dated as of October 27, 2000 (the "Amendment"), to the Second Amended
and Restated Credit Agreement dated as of October 1, 1997, as heretofore amended
(as amended by the Amendment, the "Credit Agreement") among MBIA, Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland), New York Branch,
as a Bank and as Administrative Agent, Deutsche Bank AG, New York Branch, as a
Bank and as Documentation Agent, and the other Banks signatory thereto. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned thereto in the Credit Agreement.
As General Counsel to MBIA, I am familiar with its Restated Charter and its
By-Laws, as amended to date, and I have responsibility for supervision of MBIA's
insurance regulatory compliance. I have examined such certificates of public
officials, such certificates of officers of
<PAGE> 13
MBIA and copies certified to my satisfaction of such corporate documents and
records of MBIA and of such other papers as I have deemed relevant and necessary
for the opinions set forth below. In all such examinations, I have assumed the
genuineness of all signatures, the authority to sign and the authenticity of all
documents submitted to me as originals. I have also assumed the conformity with
the originals of all documents submitted to me as copies. I have relied upon
certificates of public officials and of officers of MBIA with respect to the
accuracy of factual matters contained therein which were not independently
established.
Based upon the foregoing, it is my opinion that:
1. MBIA is a stock insurance corporation duly incorporated and validly existing
in good standing under the laws of the State of New York and has the corporate
power and all requisite licenses and franchises required to carry on its
insurance and other business, as now being conducted in the State of New York
and in each other jurisdiction where the nature of the business transacted by it
makes such qualification necessary, except any jurisdiction other than the State
of New York where failure to so qualify would not have a material adverse effect
on the business, assets, operations or financial condition of MBIA or the
ability of MBIA to perform its obligations under the Amendment, the Credit
Agreement and the additional Notes dated October 27, 2000 being issued to
certain parties (the "Transaction Documents").
2. The execution, delivery and performance of the Transaction Documents are
within the corporate powers of MBIA, have been duly authorized by all necessary
corporate powers of MBIA, have been duly authorized by all necessary corporate
action and do not (i) violate any provision of the Restated Charter of By-Laws
of MBIA, (ii) violate any provision of law, rule, regulation (including without
limitation, the New York insurance Law, the Investment Company Act of 1940, as
amended, or Regulations T, U or X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to MBIA the violation of which
would affect the validity or enforceability of any of the Transaction Documents
or the ability of MBIA to perform its obligations under the Transaction
Documents, (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which MBIA is a party or by which it or its properties may be
bound or affected or (iv) result in, or require, the creation or imposition of
any Lien upon or with respect to any of the properties now owned or hereafter
acquired by MBIA (other than as contemplated by the Loan Documents), other than,
in the case of clauses (iii) and (iv), breaches, defaults or Liens which could
not materially and adversely affect the business, assets, operations or
financial condition of MBIA or the ability of MBIA to perform its obligations
under the Transaction Documents.
3. To the best of my knowledge, no consent, approval or other action by, or any
notice to or filing with, any court or administrative or governmental body is
required in connection with the execution, delivery or performance by MBIA of
the Transaction Documents.
4. To the best of my knowledge, there is no action, suit, proceeding or
investigation before or by any court, arbitrator or administrative or
governmental body pending or threatened against MBIA, wherein an adverse
decision, ruling or finding would materially and adversely affect (i) the
business, assets, operations or financial condition of MBIA, (ii) the
transactions contemplated by the Credit Agreement or (iii) the validity or
enforceability of the Transaction Documents.
<PAGE> 14
5. To the best of my knowledge, MBIA is not in violation of any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to MBIA or of the Restated
Charter or By-Laws of MBIA, or in default under any material indenture,
agreement, lease or instrument to which it is a party or by which it or any of
its properties may be subject or bound, where such violation or default may
result in a material adverse effect on the business, assets, operations or
financial condition of MBIA or on its ability to perform its obligations under
the Transaction Documents.
6. To the best of my knowledge, MBIA is in compliance with the New York
Insurance Law and the regulations of the Department thereunder and with all
other applicable federal, state and other laws, rules and regulations relating
to its insurance and other business, except with respect to failures, if any, to
comply which singly or in the aggregate do not have a material adverse effect on
the business, assets, operations or financial condition of MBIA or the ability
of MBIA to perform its obligations under any of the Transaction Documents.
7. All of the issued and outstanding capital stock of MBIA is owned beneficially
and of record by MBIA Inc., subject to no Liens. There are no options or similar
rights of any Person to acquire any such capital stock or any other capital
stock of MBIA.
This opinion is being furnished to you and your participants in connection with
the execution of the Credit Agreement, and it is not to be used, circulated,
quoted or otherwise referred to for any purpose without my express written
consent.
Very truly yours,
[General Counsel]
<PAGE> 15
EXHIBIT B
TO THIRD AMENDMENT
Form of Opinion of Kutak Rock
[date]
Each of the Banks which are
parties to the Credit Agreement
referred to herein
c/o Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank Nederland"), New York Branch
as Administrative Agent
245 Park Avenue
New York, New York 10167-0062
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank Nederland"), New York Branch,
as Administrative Agent
245 Park Avenue
New York, New York 10167-0062
Deutsche Bank AG, New York Branch,
as Documentation Agent
1 West 52nd Street
New York, NY 10019
Re: Third Amendment, dated as of October 27, 2000, to Second Amended and
Restated Credit Agreement dated as of October 1, 1997, with MBIA
Insurance Corporation
Ladies and Gentlemen:
This opinion is furnished to you in connection with the Third
Amendment, dated as of October 27, 2000 (the "Amendment"), to the Second Amended
and Restated Credit Agreement dated as of October 1, 1997, as heretofore amended
(as amended by the Amendment, the "Credit Agreement") among MBIA, Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland), New York Branch,
as a Bank and as Administrative Agent, Deutsche Bank AG, New York Branch, as a
Bank and as Documentation Agent, and the other Banks signatory thereto. All
capitalized terms used herein and not otherwise defined have the meanings
assigned thereto in the Credit Agreement. As used herein, "Transaction
Documents" means the Amendment, the Credit Agreement and the additional Notes
dated October 27, 2000 being issued to certain parties.
<PAGE> 16
We have acted as special counsel to MBIA in connection with the
execution and delivery of the Transaction Documents. In this connection, we have
examined the Transaction Documents and such certificates of public officials,
such certificates of officers of MBIA, and copies certified to our satisfaction
of such corporate documents and records of MBIA, and such other documents as we
have deemed necessary or appropriate for the opinions set forth below. We have
relied upon such certificates of public officials and of officers of MBIA with
respect to the accuracy of factual matters contained therein which were not
independently established.
We have also assumed (i) the due execution and delivery, pursuant to
due authorization, of each document referred to in the immediately preceding
paragraph by all parties other than MBIA to such document, (ii) the authenticity
of all such documents submitted to us as originals, (iii) the genuineness of all
signatures and (iv) the conformity to the originals of all such documents
submitted to us as copies.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that:
1. MBIA is a stock insurance corporation, duly incorporated and validly existing
under the laws of the State of New York, and is licensed and authorized to carry
on its business under the laws of the State of New York.
2. Each Transaction Document has been duly executed and is a valid and binding
obligation of MBIA enforceable in accordance with its terms, except that such
enforceability may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and the
enforceability as to rights to indemnity thereunder as may be subject to
limitations of public policy.
3. The execution, delivery and performance of the Transaction Documents do not
(a) violate any provision of the Restated Charter or Bylaws of MBIA or (b)
violate any provision of law (including without limitation the New York
Insurance Law or the Investment Company Act of 1940, as amended) or, to the best
of our knowledge, any rule or regulation (including without limitation
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
presently in effect having applicability to MBIA the violation of which would
(i) affect the validity or enforceability of any Transaction Document or the
ability of MBIA to perform its obligations thereunder, (ii) adversely affect the
Banks or their rights under any Transaction Document or (iii) materially
adversely affect the business, assets, operations or financial condition of
MBIA.
4. To the best of our knowledge, no consent, approval or other action by or any
notice to or filing with any court or administrative or governmental body is
required in connection with the execution, delivery or performance by MBIA of
the Transaction Documents. No consent, approval or other action by or any notice
to or filing with the Department is required in connection with the execution,
delivery or performance by MBIA of the Transaction Documents.
5. Except with respect to MBIA's obligations to pay the principal of and
interest on the Loans, the obligations of MBIA under the Transaction Documents
will rank, under the New York Insurance Law, at least pari passu in priority of
payment with all other unsecured.
-2-
<PAGE> 17
obligations of MBIA, including without limitation MBIA's obligation to pay
claims under Insurance Contracts under the New York Insurance Law, subject,
however, to statutory priorities granted to certain claims under Sections 7426
and 7435 of the New York Insurance Law.
6. The effectiveness of the Transaction Documents does not adversely affect the
opinions set forth in paragraphs 6 and 7 of our opinion dated October 1, 1997,
delivered in connection with the Second Amended and Restated Credit Agreement,
dated as of such date, with respect to the Security Interest (as defined in such
opinion) and the collateral assignment of Collateral referred to therein. No
filings under the UCC are required to perfect or to continue the perfection of
the Security Interest (except for the financing statements described in our
October 1, 1997 opinion and subject to the matters described in the paragraph
following paragraph 7 of such opinion) in favor of the Collateral Agent for the
benefit of the Banks in all of MBIA's right, title and interest in and to the
Collateral, to the extent that the Security Interest can be perfected by the
filing of financing statements under the UCC.
In rendering the opinions expressed herein, we express no opinion as to
the laws of any jurisdiction other than the State of New York and the federal
laws of the United States of America.
This opinion is being furnished to you and your participants solely in
connection with the execution of the Amendment, and it is not to be used,
circulated, quoted or otherwise referred to for any purpose without our express
written consent.
Very truly yours,
-3-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>5
<FILENAME>y46810ex10-14.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
<PAGE> 1
Exhibit 10.14
Deutsche Bank
To: All Lenders party to the MBIA Credit Agreements dated August 28, 1998
From: Deutsche Bank
MBIA
Date: August 29, 2000
Re: Extension of MBIA's $650 Million Corporate Credit Facilities
We are pleased to report that the Credit Facilities totaling $650 million for
MBIA have been extended successfully. On behalf of MBIA, Deutsche Bank as the
Administrative Agent thanks you for your enthusiastic support for the
transaction.
The following provides a listing of all banks' commitments to the respective
facilities:
<TABLE>
<CAPTION>
Lender Multi-year 364-day Title
Commitment Commitment
(US$ millions) (US$ millions)
<S> <C> <C> <C>
Deutsche Bank AG, New $76.5 $38.5 Administrative Agent
York Branch
Banc One, NA $56.7 $28.3 Syndication Agent
Fleet National Bank $56.7 $28.3 Documentation Agent
Banca Monte Dei Paschi Di $50.0 $25.0 Lender
Siena Spa
Bank of Montreal $33.3 $16.7 Lender
Chase Manhattan Bank $33.3 $16.7 Lender
Fortis (USA) Finance LLC $33.0 $17.0 Lender
Bank of America National $26.7 $13.3 Lender
Trust & Savings Association
Banco Santander S.A., New $16.7 $8.3 Lender
York Branch
Commerzbank AG, New York $16.7 $8.3 Lender
Branch
National Australia Bank $16.7 $8.3 Lender
Limited, New York Branch
Norddeutsche Landesbank $16.7 $8.3 Lender
Girozentrale, New York
and/or
Cayman Islands Branches
Total $433.0 $217.0
</TABLE>
<PAGE> 2
The 364-Day Facility will be extended as of August 25, 2000 with a final
maturity of August 24, 2001 and the Four-Year Facility will be extended as of
August 28, 2000 with a final maturity of August 28, 2004. Extension fees will be
paid on August 30, 2000,
Should you have any questions, please don't hesitate to call John McGill,
Deutsche Bank at (212) 469-8666.
<PAGE> 3
Monte Dei Paschi Di Siena
August 11, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10501
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch as
Administrative Agent; The First National Bank of Chicago as Syndication Agent,
and Fleet National Bank as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $25,000,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Banca Monte dei Paschi di Siena S.p.A
By: /s/ Gurilio Nomilcchi
Senior Vice President & General Manager
By: /s/ Brian T. Landy
Vice President
<PAGE> 4
Deutsche Bank
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
August 29, 2000
Tel 212-469-8000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Director
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch as
Administrative Agent; The First National Bank of Chicago as Syndication Agent,
and Fleet National Bank as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $38,500,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Deutsche Bank AG, New York and/or Cayman Islands Branches
By: /s/ John S. McGill By: /s/Alan Frost
Title: Director Title: Vice President
<PAGE> 5
Timothy J. Stambaugh Bank One, NA tel 212.373.1124
Senior Vice President Insurance Division fax 212.373.1499
153 West 51st Street
New York, NY 10019
Bank One
August 9, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch, as
Administrative Agent; Bank One, NA (formerly known as The First National Bank of
Chicago), as Syndication Agent, and Fleet National Bank, as Documentation Agent
(the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meaning. It is also understood that Mr. Sevely is an officer of
both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $28,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Bank One, NA (formerly known as The First National Bank of Chicago)
By:/s/ Timothy J. Stambaugh
Title: Senior Vice President
<PAGE> 6
Bank of Montreal
Corporate Banking
115 South LaSalle Street, 12th Floor
Chicago, Illinois 60603
(312)750-4300
August 9, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 9l4-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-9366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $16,667,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Bank of Montreal
/s/ Karen Modi
Karen Modi
Director
<PAGE> 7
Jan-Gee W. McCollam
Managing Director
Financial Institutions
Mail Stop: CT EH 40225C
777 Main Street
Hartford, CT 06115
860.986.4535 tel
860.986.7264 fax
jan-gee_w_mccollam@fleet.com
FLEET
Corporate and
Investment Banking
August 21, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8377)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $28,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Fleet National Bank
By: /s/ Jan-Gee W. McCollam
Jan-Gee W. McCollam
Title: Managing Director
<PAGE> 8
CHASE
The Chase Manhattan Bank
270 Park Avenue, 20th Floor
New York, NY 10017
August 14, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28th, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch,
as Administrative Agent; The First National Bank of Chicago, as Syndication
Agent, and Fleet National Bank, as Documentation Agent (the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meaning. It
is also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $16,700,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
The Chase Manhattan Bank
By: /s/ MaryBeth Mueller
Vice President
<PAGE> 9
FORTIS
Solid partners, flexible solutions
August 10, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $17,000,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Sincerely,
Fortis (USA) Finance LLC
By: /s/ E. Matthews By: /s/ Robert Fakhoury
Title: VP Title: Treasurer
<PAGE> 10
Bank of America
Bank of America
PO Box 831000
Dallas, TX 75383-1000
Tel 888-279-3247
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
Tel: 914-765-3327
Fax: 914-755-3410
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
Tel: 212-469-9665
Fax: 212-469-8366
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $13,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Bank of America, N.A.
/s/ Joan D'Amico
Joan D'Amico
Managing Director
<PAGE> 11
Banco
Santander Central Hispano
August 15, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $8,333,333 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
BANCO SANTANDER CENTRAL HISPANO, S.A., New York Branch.
By: /s/ John Hennessy By: /s/ Meeta Anand
Title: Manager Asset Backed Finance Title: Assistant Vice President
<PAGE> 12
COMMERZBANK 2 World Financial Center
AKTIENGESELSCHAFT NEW YORK, NY 10281-050
NEW YORK BRANCH Telephone (212) 266-7200
August 10, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of US$8,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Very truly yours,
COMMERZBANK AG
New York Branch
/s/ Thomas Ausfahl /s/ James F. Ahern
Thomas Ausfahl James F. Ahern
Vice President Senior Vice President
<PAGE> 13
National Australia Bank
<TABLE>
<CAPTION>
<S> <C> <C> <C>
National Australia 34th Floor Telex 3728852 NATAUS Telephone (212) 916-9800
Bank Limited 200 Park Avenue SWIM NATAUS33 Facsimile (212) 983-1969
A.C.N. 004044937 New York, N.Y. 10166 (212) 983-1960
</TABLE>
August 11, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $200,000,000
(subsequently increased to $217,000,000) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its 364-day commitment of $8,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
National Australia Bank Limited
By: /s/ Craig Manning
Title: Vice President
<PAGE> 14
NORD/LB
NORDDEUTSCHE LANDESBANK
GIROZENTRALE
NEW YORK/CAYMAN ISLANDS
August 10, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
Re: MBIA/Notice of Extension of final maturity date
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for 200,000,000
(subsequently increased to $217,000,000) among MBIA Insurance Corporation,
Various Lending Institutions, Deutsche Bank AG, New York Branch, as
Administrative Agent, The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent ("Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender
of the Credit Agreement, the undersigned Lender hereby notifies you that it
has elected to Recommit its 364-day commitment of $8,300,000 effective the Final
Maturity Date August 25, 2000, such that the extended Final Maturity Date shall
be August 24, 2001.
Sincerely,
Norddeutsche Landesbank Girozentrale
New York and/or Cayman Islands Branch
/s/ Stephanie Finnen /s/ Josef Haas
Stephanie Finnen Josef Haas
Vice President Vice President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>6
<FILENAME>y46810ex10-15.txt
<DESCRIPTION>CREDIT AGREEMENT (5 YEAR AGREEMENT)
<TEXT>
<PAGE> 1
Exhibit 10.15
Deutsche Bank
To: All Lenders party to the MBIA Credit Agreements dated August 28, 1998
From: Deutsche Bank
MBIA0
Date: August 29, 2000
Re: Extension of MBIA's $650 Million Corporate Credit Facilities
We are pleased to report that the Credit Facilities totaling $650 million for
MBIA have been extended successfully. On behalf of MBIA, Deutsche Bank as the
Administrative Agent thanks you for your enthusiastic support for the
transaction.
The following provides a listing of all banks' commitments to the respective
facilities:
Lender Multi-year 364-day Title
Commitment Commitment
(US$ millions) (US$ millions)
Deutsche Bank AG, New $76.5 $38.5 Administrative Agent
York Branch
Banc One, NA $56.7 $28.3 Syndication Agent
Fleet National Bank $56.7 $28.3 Documentation Agent
Banca Monte Dei Paschi D $50.0 $25.0 Lender
Siena Spa
Bank of Montreal $33.3 $16.7 Lender
Chase Manhattan Bank $33.3 $16.7 Lender
Fortis (USA) Finance LLC $33.0 $17.0 Lender
Bank of America National $26.7 $13.3 Lender
Trust & Savings Associat
Banco Santander S.A., Ne $16.7 $8.3 Lender
York Branch
Commerzbank AG, New York $16.7 $8.3 Lender
Branch
National Australia Bank $16.7 $8.3 Lender
Limited, New York Branch
Norddeutsche Landesbank $16.7 $8.3 Lender
Girozentrale, New York
and/or
Cayman Islands Branches
Total $433.0 $217.0
<PAGE> 2
The 364-Day Facility will be extended as of August 25, 2000 with a final
maturity of August 24, 2001 and the Four-Year Facility will be extended as of
August 28, 2000 with a final maturity of August 28, 2004. Extension fees will be
paid on August 30, 2000.
Should you have any questions, please don't hesitate to call John McGill,
Deutsche Bank at (212) 469-8666.
<PAGE> 3
Monte Dei Paschi Di Siena
August 11, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10501
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch as
Administrative Agent; The First National Bank of Chicago as Syndication Agent,
and Fleet National Bank as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $50,000,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Banca Monte dei Paschi di Siena S.p.A
By: /s/ Gurilio Nomilcchi
Senior Vice President & General Manager
By: /s/ Brian T. Landy
Vice President
<PAGE> 4
Deutsche Bank
Deutsche Bank AG New York
31 West 52nd Street
August 29, 2000 New York NY 10019
Tel 212-469-8000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Director
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch as
Administrative Agent; The First National Bank of Chicago as Syndication Agent,
and Fleet National Bank as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $76,500,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Deutsche Bank AG, New York and/or Cayman Islands Branches
By: /s/ John S. McGill By: /s/ Alan Frouk
Title: Director Title: Vice President
<PAGE> 5
Timothy J. Stambaugh Bank One, NA tel 212.373.1124
Senior Vice President Insurance Division fax 212.373.1499
153 West 51st Street
New York, NY 10019
Bank One
August 9, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York Branch, as
Administrative Agent; Bank One, NA (formerly known as The First National Bank of
Chicago), as Syndication Agent, and Fleet National Bank, as Documentation Agent
(the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meaning. It is also understood that Mr. Sevely is an officer of
both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $56,950,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Bank One, NA (formerly known as The First National Bank of Chicago)
By:/s/ Timothy J. Stambaugh
Title: Senior Vice President
<PAGE> 6
Bank of Montreal
Corporate Banking
15 South LaSalle Street, 12th Floor
Chicago, Illinois 60603
(312) 750-4300
August 9, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 9l4-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-9366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $33,333,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Bank at Montreal
/s/ Karen Modi
Karen Modi
Director
<PAGE> 7
Jan-Gee W. McCollam
Managing Director
Financial Institutions
Mail Stop: CT EH 40225C
777 Main Street
Hartford, CT 06115
FLEET 860 986-4535 tel
Corporate and 860 986-7264 fax
Investment Banking jan-gee_w_mccollam@fleet.com
August 21, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8377)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $56,700,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Fleet National Bank
By: /s/ Jan-Gee W. McCollam
Jan-Gee W. McCollam
Title: Managing Director
<PAGE> 8
CHASE
The Chase Manhattan Bank
270 Park Avenue, 20th Floor
New York, NY 10017
August 14,2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-469-8666)
(Fax 212-469-8366)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28th, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch,
as Administrative Agent; The First National Bank of Chicago, as Syndication
Agent, and Fleet National Bank, as Documentation Agent (the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meaning. It
is also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $33,300,000 such that the extended Final
Maturity Date shall be August 28, 2004.
The Chase Manhattan Bank
By: /s/ MaryBeth Mueller
Vice President
<PAGE> 9
FORTIS
Solid partners. flexible solutions
August 10, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $33,000,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Sincerely,
Fortis (USA) Finance LLC
By: /s/ E. Matthews By: /s/ Robert Fakhoury
Title: VP Title: Treasurer
<PAGE> 10
Bank of America
August 11, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
Tel: 914-765-3327
Fax: 914-755-3410
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
Now York, NY 10019
Tel: 212-469-9665
Fax: 212-469-8366
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $26,700,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Bank of America, N.A.
/s/ Joan D'Amico
Joan D'Amico
Managing Director
<PAGE> 11
Banco
Santander Central Hispano
August 15, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $16,686,667 such that the extended Final
Maturity Date shall be August 28, 2004.
BANCO SANLANDER CENTRAL HISPANO, S.A., New York Branch.
By: /s/ John Hennessy By: /s/ Meeta Anand
Title: Manager Asset Backed Finance Title: Assistant Vice President
<PAGE> 12
COMMERZBANK 2 World Financial Center
AKTIENGESELSCHAFT NEW YORK, NY 10281-050
NEW YORK BRANCH Telephone (212) 266-7200
August 10, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $16,700,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Very truly yours,
COMMERZBANK AG
New York Branch
/s/ Thomas Ausfahl /s/ James F. Ahern
Thomas Ausfahl James F. Ahern
Vice President Senior Vice President
<PAGE> 13
National Australia Bank
<TABLE>
<CAPTION>
<S> <C> <C> <C>
National Australia 34th Floor Telex 3728852 NATAUS Telephone (212) 916-9800
Bank Limited 200 Park Avenue SWIM NATAUS33 Facsimile (212) 983-1969
A.C.N. 004044937 New York, N.Y. 10166 (212) 983-1960
</TABLE>
August 11, 2000
Mr. Joseph Sevely
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York, NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: NOTICE OF EXTENSION OF FINAL MATURITY DATE
Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for $400,000,000
(subsequently increased to $433,000,000 ) among MBIA Inc., MBIA Insurance
Corporation, Various Lending Institutions, Deutsche Bank AG, New York, Branch as
Administrative Agent; The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent (the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $16,700,000 such that the extended Final
Maturity Date shall be August 28, 2004.
National Australia Bank Limited
By: /s/ Craig Manning
Title: Vice President
<PAGE> 14
NORD/LB
NORDDEUTSCHE LANDESBANK
GIROZENTRALE
NEW YORK/CAYMAN ISLANDS
Mr. Joseph Sevely August 10, 2000
Treasurer
MBIA Inc.
113 King Street
Armonk, NY 10504
(Tel 914-765-3327)
(Fax 914-765-3410)
Mr. John S. McGill
Vice President
Deutsche Bank AG New York
31 West 52nd Street
New York NY 10019
(Tel 212-459-0666)
(Fax 212-469-8365)
RE: MBIA/Notice of Extension of final maturity date
Ladies and Gentlemen:
Reference is made to the August 28, 1998 Credit Agreement for 200,000,000
(subsequently increased to $433,000,000 ) among MBIA Insurance Corporation,
Various Lending Institutions, Deutsche Bank AG, New York Branch, as
Administrative Agent, The First National Bank of Chicago, as Syndication Agent,
and Fleet National Bank, as Documentation Agent ("Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meaning. It is
also understood that Mr. Sevely is an officer of both Parent and Corp.
Pursuant to Section 1.15 Recommitment: Replacement of Non-Continuing Lender of
the Credit Agreement, the undersigned Lender hereby notifies you that it has
elected to Recommit its commitment of $56,950,000 such that the extended Final
Maturity Date shall be August 28, 2004.
Sincerely,
Norddeutsche Landesbank Girozentrale
New York and/or Cayman Islands Branch
/s/ Stephanie Finnen /s/ Josef Haas
Stephanie Finnen Josef Haas
Vice President Vice President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>7
<FILENAME>y46810ex10-19.txt
<DESCRIPTION>ISDA MASTER AGREEMENT DATED MAY 2, 2000
<TEXT>
<PAGE> 1
EXHIBIT 10.19
(Multicurrency-Cross Border)
ISDA(R)
International Swap Dealers Association. Inc.
MASTER AGREEMENT
dated as of May 2, 2000
DEUTSCHE BANK AG and MBIA, INC.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the
Schedule will have the meanings therein specified for the purpose of
this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between
the provisions of the Schedule and the other provisions of this Master
Agreement, the Schedule will prevail. In the event of any inconsistency
between the provisions of any Confirmation and this Master Agreement
(including the Schedule), such Confirmation will prevail for the
purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in
reliance on the fact that this Master Agreement and all Confirmations
form a single agreement between the parties (collectively referred to
as this "Agreement"), and the parties would not otherwise enter into
any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery
specified in each Confirmation to be made by it, subject to
the other provisions of this Agreement.
(ii) Payments under this Agreement will be made on
the due date for value on that date in the place of the
account specified in the relevant Confirmation or otherwise
pursuant to this Agreement, in freely transferable funds and
in the manner customary for payments in the required currency.
Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation
unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.
(iii) Each obligation of each party under Section
2(a)(i) is subject to (1) the condition precedent that no
Event of Default or Potential Event of Default with respect to
the other party has occurred and is continuing, (2) the
condition precedent that no Early Termination Date in respect
of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent
specified in this Agreement.
Copyright(C)1992 by International Swap Dealers Association. Inc.
<PAGE> 2
(b) Change of Account. Either party may change its account for
receiving a payment or delivery by giving notice to the other party at
least five Local Business Days prior to the scheduled date for the
payment or delivery to which such change applies unless such other
party gives timely notice of a reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be
payable:
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other. then, on such date, each party's obligation
to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise
have been payable by the other party, replaced by an obligation upon
the party by whom the larger aggregate amount would have been payable
to pay to the other party the excess of the larger aggregate amount
over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable out We same
date in the same currency in respect of such Transactions, regardless
of whether such amounts are payable in respect of the same Transaction.
The election may be made in the Schedule or a Confirmation by
specifying that subparagraph (ii) above will not apply to the
Transactions identified as being subject to the election, together with
the starting date (in which case subparagraph (ii) above will not, or
will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions
and will apply separately to each pairing of Offices through which the
parties make and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will
be made without any deduction or withholding for or on account
of any Tax unless such deduction or withholding is required by
any applicable law, as modified by the practice of any
relevant governmental revenue authority, then in effect. If a
party is so required to deduct or withhold, then that party
("X") will:
(1) promptly notify the other party ("Y") of
such requirement;
(2) pay to the relevant authorities the full
amount required to be deducted or withheld (including
the full amount required to be deducted or withheld
from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is
required or receiving notice that such amount has
been assessed against Y;
(3) promptly forward to Y an official
receipt (or a certified copy), or other documentation
reasonably acceptable to Y, evidencing such payment
to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay
to Y, in addition to the payment to which Y is
otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the
net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had
no such deduction or withholding been required.
However, X will not be required to pay any additional
amount to Y to the extent that it would not be
required to be paid but for:
(A) the failure by Y to comply with
or perform any agreement contained in
Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation
made by Y pursuant to Section 3(f) to be
accurate and true unless such failure would
not have occurred but for (I) any action
taken by a taxing authority, or brought in a
court of competent jurisdiction, on or after
the date on which a Transaction is entered
into (regardless of whether such action is
taken or brought with respect to a party to
this Agreement) or (II) a Change in Tax Law.
2 ISDA(R)1992
<PAGE> 3
(ii) Liability. If:
(1) X is required by any applicable law, as
modified by the practice of any relevant governmental
revenue authority, to make any deduction or
withholding in respect of which X would not be
required to pay an additional amount to Y under
Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is
assessed directly against X,
then, except to the extent Y has satisfied or then satisfies
the liability resulting from such Tax, Y will promptly pay to
X the amount of such liability (including any related
liability for interest, but including any related liability
for penalties only if Y has failed to comply with or perform
any agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence
or effective designation of an Early Termination Date in respect of the
relevant Transaction, a party that defaults in the performance of any
payment obligation will, to the extent permitted by law and subject to
Section 6(c), be required to pay interest (before as well as after
judgment) on the overdue amount to the other party on demand in the
same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the
date of actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed. If, prior to the occurrence or effective designation of
an Early Termination Date in respect of the relevant Transaction, a
party defaults in the performance of any obligation required to be
settled by delivery, it will compensate the other party on demand if
and to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:
(a) Basic Representations.
(i) Status. It is duly organised and validly existing
under the laws of the jurisdiction of its organisation or
incorporation and, if relevant under such laws, in good
standing;
(ii) Powers. It has the power to execute this
Agreement and any other documentation relating to this
Agreement to which it is a party, to deliver this Agreement
and any other documentation relating to this Agreement that it
is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and
has taken all necessary action to authorise such execution,
delivery and performance;
(iii) No Violation or Conflict. Such execution,
delivery and performance do not violate or conflict with any
law applicable to it, any provision of its constitutional
documents, any order or judgment of any court or other agency
of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of
its assets;
(iv) Consents. All governmental and other consents
that are required to have been obtained by it with respect to
this Agreement or any Credit Support Document to which it is a
party have been obtained and are in full force and effect and
all conditions of any such consents have been complied with;
and
(v) Obligations Binding. Its obligations under this
Agreement and any Credit Support Document to which it is a
party constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms (subject
to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable
principles of general application (regardless of whether
enforcement is sought in a proceeding in equity or at law)).
3 ISDA(R)1992
<PAGE> 4
(b) Absence of Certain Events. No Event of Default or
Potential Event of Default or, to its knowledge, Termination Event with
respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or performing
its obligations under this Agreement or any Credit Support Document to
which it is a party.
(c) Absence of Litigation. There is not pending or, to its
knowledge, threatened against it or any of its Affiliates any action.
suit or proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely
to affect the legality, validity or enforceability against it of this
Agreement or any Credit Support Document to which it is a party or its
ability to perform its obligations under this Agreement or such Credit
Support Document.
(d) Accuracy of Specified Information. All applicable
information that is furnished in writing by or on behalf of it to the
other party and is identified for the purpose of this Section 3(d) in
the Schedule is, as of the date of the information, true, accurate and
complete in every material respect.
(e) Payer Tax Representation. Each representation specified in
the Schedule as being made by it for the purpose of this Section 3(e)
is accurate and true.
(f) Payee Tax Representations. Each representation specified
in the Schedule as being made by it for the purpose of this Section
3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:
(a) Furnish Specified Information. It will deliver to the
other party or, in certain cases under subparagraph (iii) below, to
such government or taxing authority as the other party reasonably
directs:
(i) any forms, documents or certificates relating to
taxation specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or
any Confirmation; and
(iii) upon reasonable demand by such other party, any
form or document that may be required or reasonably requested
in writing in order to allow such other party or its Credit
Support Provider to make a payment under this Agreement or any
applicable Credit Support Document without any deduction or
withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the
completion, execution or submission of such form or document
would not materially prejudice the legal or commercial
position of the party in receipt of such demand), with any
such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed
and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation
or, if none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable
efforts to maintain in full force and effect all consents of any
governmental or other authority that are required to be obtained by it
with respect to this Agreement or any Credit Support Document to which
it is a party and will use all reasonable efforts to obtain any that
may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects
with all applicable laws and orders to which it may be subject if
failure so to comply would materially impair its ability to perform its
obligations under this Agreement or any Credit Support Document to
which it is a party.
(d) Tax Agreement. It will give notice of any failure of a
representation made by it under Section 3(f) to be accurate and true
promptly upon learning of such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay
any Stamp Tax levied or imposed upon it or in respect of its execution
or performance of this Agreement by a jurisdiction in which it is
incorporated,
4 ISDA(R)1994
<PAGE> 5
organised, managed and controlled, or considered to have it's seat, or
in which a branch or office through which it is acting for the purpose
of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon
the other party or in respect of the other party's execution or
performance of this Agreement by any such Stamp Tax Jurisdiction which
is not also a Stamp Tax Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect
to a party or, if applicable, any Credit Support Provider of such party
or any Specified Entity of such party of any of the following events
constitutes an event of default (an "Event of Default") with respect to
such party:
(i) Failure to Pay or Deliver. Failure by the party
to make, when due, any payment under this Agreement or
delivery under Section 2(a)(i) or 2(e) required to be made by
it if such failure is not remedied on or before the third
Local Business Day after notice of such failure is given to
the party:
(ii) Breach of Agreement. Failure by the party to
comply with or perform any agreement or obligation (other than
an obligation to make any payment under this Agreement or
delivery under Section 2(a)(i) or 2(e) or to give notice. of a
Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed
by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit
Support Provider of such party to comply with or
perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit
Support Document if such failure is continuing after
any applicable grace period has elapsed;
(2) the expiration or termination of such
Credit Support Document or the failing or ceasing of
such Credit Support Document to be in full force and
effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior
to the satisfaction of all obligations of such party
under each Transaction to which such Credit Support
Document relates without the written consent of the
other party; or
(3) the party or such Credit Support
Provider disaffirms, disclaims, repudiates or
rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than
a representation under Section 3(e) or (f)) made or repeated
or deemed to have been made or repeated by the party or any
Credit Support Provider of such party in this Agreement or any
Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or
deemed to have been made or repeated.
(v) Default under Specified Transaction. The party,
any Credit Support Provider of such party or any applicable
Specified Entity of such party (1) defaults under a Specified
Transaction and, after giving effect to any applicable notice
requirement or grace period, there occurs a liquidation of an
acceleration of obligations under, or an early termination of,
the Specified Transaction, (2) defaults, after giving effect
to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment,
delivery or exchange date of or any payment on early
termination of, a Specified Transaction (or such default
continues for at least three Local Business Days if there is
no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects in whole or in
part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified
in the Schedule as applying to the party, the occurrence or
existence of (1) a default, event of default or other similar
condition or event (however
5 ISDA(R)1992
<PAGE> 6
described) in respect of such party, any Credit Support
Provider of such party or any applicable Specified Entity of
such party under one or more agreements or instruments
relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not
less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness
becoming, or becoming capable at such time of being declared,
due and payable under such agreements or instruments, before
it would otherwise have been due and payable or (2) a default
by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more
payments on the due date thereof in an aggregate amount of not
less than the applicable Threshold Amount under such
agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support
Provider of such party or any applicable Specified Entity of
such party:
(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes
insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its
debts as they become due; (3) makes a general
assignment, arrangement or composition with or for
the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment
of insolvency or bankruptcy or any other relief under
any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition
instituted or presented against it such proceeding or
petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation
or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the
institution or presentation thereof, (5) has a
resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or
becomes subject to the appointment of an
administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar
official for it or for all or substantially all its
assets; (7) has a secured party take possession of
all or substantially all its assets or has a
distress, execution, attachment, sequestration or
other legal process levied, enforced or sued on or
against all or substantially all its assets and such
secured party maintains possession, or any such
process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to
it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any
Credit Support Provider of such party consolidates or
amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer,
(1) the resulting, surviving or transferee
entity fails to assume all the obligations of such
party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it
or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to
the other party to this Agreement; or
(2) the benefits of any Credit Support
Document fail to extend (without the consent of the
other party) to the performance by such resulting,
surviving or transferee entity of its obligations
under this Agreement.
(b) Termination Events. The occurrence at any time with
respect to a party or, if applicable, any Credit Support Provider of
such party or any Specified Entity of such party of any event specified
below constitutes an Illegality if the event is specified in (i) below,
a Tax Event if the event is specified in (ii) below or a Tax Event Upon
Merger if the event is specified in (iii) below, and, if specified to
be applicable, a Credit Event
6 ISDA(R)1992
<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an
Additional Termination Event if the event is specified pursuant to (v)
below:
(i) Illegality. Due to the adoption of, or any change
in, any applicable law after the date on which a Transaction
is entered into, or due to the promulgation of, or any change
in, the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):
(1) to perform any absolute or contingent
obligation to make a payment or delivery or to
receive a payment or delivery in respect of such
Transaction or to comply with any other material
provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support
Provider of such party to perform, any contingent or
other obligation which the party (or such Credit
Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected
Party) will, or there is a substantial likelihood that it
will, on the next succeeding Scheduled Payment Date (1) be
required to pay to the other party an additional amount in
respect of an Indemnifiable Tax under Section 2(d)(i)(4)
(except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount is
required to be deducted or withheld for or on account of a Tax
(except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by
reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened
Party") on the next succeeding Scheduled Payment Date will
either (1) be required to pay an additional amount in respect
of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or
(2) receive a payment from which an amount has been deducted
or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an
additional amount (other than by reason of Section
2(d)(i)(4)(A) or (B)), in either case as a result of a party
consolidating or amalgamating with, or merging with or into,
or transferring all or substantially all its assets to,
another entity (which will be the Affected Party) where such
action does not constitute an event described in Section
5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon
Merger" is specified in the Schedule as applying to the party,
such party ("X"), any Credit Support Provider of X or any
applicable Specified Entity of X consolidates or amalgamates
with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such
action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting,
surviving or transferee entity is materially weaker than that
of X, such Credit Support Provider or such Specified Entity,
as the case may be, immediately prior to such action (and, in
such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) Additional Termination Event. If "Additional
Termination Event" is specified in the Schedule or any
Confirmation as applying, the occurrence of such event (and,
in such event, the Affected Party or Affected Parties shall be
as specified for such Additional Termination Event in the
Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or
circumstance which would otherwise constitute or give rise to an Event
of Default also constitutes an Illegality, it will be treated as an
Illegality and will not constitute an Event of Default.
7 ISDA(R)1992
<PAGE> 8
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any
time an Event of Default with respect to a party (the "Defaulting
Party") has occurred and is then continuing, the other party (the
"Non-defaulting Party") may, by not more than 20 days notice to the
Defaulting Party specifying the relevant Event of Default, designate a
day not earlier than the day such notice is effective as an Early
Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as
applying to a party, then an Early Termination Date in respect of all
outstanding Transactions will occur immediately upon the occurrence
with respect to such party of an Event of Default specified in Section
5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8),
and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon
the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an
Affected Party will, promptly upon becoming aware of it,
notify the other party, specifying the nature of that
Termination Event and each Affected Transaction and will also
give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either
an, Illegality under Section 5(b)(i)(1) or a Tax Event occurs
and there is only one Affected Party, or if a Tax Event Upon
Merger occurs and the Burdened Party is the Affected Party,
the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to
transfer within 20 days after it gives notice under Section
6(b)(i) all its rights and obligations under this Agreement in
respect of the Affected Transactions to another of its Offices
or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under
Section 5(b)(i)(l) or a Tax Event occurs and there are two
Affected Parties, each party will use all reasonable efforts
to reach agreement within 30 days after notice thereof is
given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:
(1) a transfer under Section 6(b)(ii) or an
agreement under Section 6(b)(iii), as the case may
be, has not been effected with respect to all
Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2),
a Credit Event Upon Merger or an Additional
Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then
8 ISDA(R)1992
<PAGE> 9
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date
is given under Section 6(a) or (b), the Early Termination Date
will occur on the date so designated, whether or not the
relevant Event of Default or Termination Event is then
continuing.
(ii) Upon the occurrence or effective designation of
an Early Termination Date, no further payments or deliveries
under Section 2(a)(i) or 2(e) in respect of the Terminated
Transactions will be required to be made, but without
prejudice to the other provisions of this Agreement. The
amount, if any payable in respect of an Early Termination Date
shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably
practicable following the occurrence of an Early Termination
Date, each party will make the calculations on its part, if
any, contemplated by Section 6(e) and will provide to the
other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2)
giving details of the relevant account to which any amount
payable to it is to be paid. In the absence of written
confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due
in respect of any Early Termination Date under Section 6(e)
will be payable on the day that notice of the amount payable
is effective (in the case of an Early Termination Date which
is designated or occurs as a result of an Event of Default)
and on the day which is two Local Business Days after the day
on which notice of the amount payable is effective (in the
case of an Early Termination Date which is designated as a
result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law)
interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is
paid, at the Applicable Rate. Such interest will be calculated
on the basis of daily compounding and the actual number of
days elapsed.
(e) Payments on Early Termination. If an Early Termination
Date occurs, the following provisions shall apply based on the parties'
election in the Schedule of a payment measure, either "Market
Quotation" or "Loss", and a payment method, either the "First Method"
or the "Second Method". If the parties fail to designate a payment
measure or payment method in the Schedule, it will be deemed that
"Market Quotation" or the "Second Method", as the case may be, shall
apply. The amount, if any, payable in respect of an Early Termination
Date and determined pursuant to this Section will be subject to any
Set-off.
(i) Events of Default. If the Early Termination Date
results from an Event of Default:
(1) First Method and Market Quotation. If
the First Method and Market Quotation apply, the
Defaulting Party will pay to the Non-defaulting Party
the excess, if a positive number, of (A) the sum of
the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent
of the Unpaid Amounts owing to the Non-defaulting
Party over (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First
Method and Loss apply, the Defaulting Party will pay
to the Non-defaulting Party, if a positive number,
the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Marker Quotation. If
the Second Method and Market Quotation apply, an
amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the
9 ISDA(R)1992
<PAGE> 10
Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent
of the Unpaid Amounts owing to the Non-defaulting
Party less (B) the Termination Currency Equivalent of
the Unpaid Amounts owing to the Defaulting Party. If
that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it
is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the
Defaulting Party.
(4) Second Method and Loss. If the Second
Method and Loss apply, an amount will be payable
equal to the Non-defaulting Party's Loss in respect
of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination
Date results from a Termination Event:
(1) One Affected Party. If there is one
Affected Party, the amount payable will be determined
in accordance with Section 6(c)(i)(3), if Market
Quotation applies, or Section 6(e)(i)(4), if Loss
applies, except that, in either case, references to
the Defaulting Party and to the Non-defaulting Party
will be deemed to be references to the Affected Party
and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all
the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two
Affected Parties:
(A) if Market Quotation applies,
each party will determine a Settlement
Amount in respect of the Terminated
Transactions, and an amount will be payable
equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of
the party with the higher Settlement Amount
("X") and the Settlement Amount of the party
with the lower Settlement Amount ("Y") and
(b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the
Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party
will determine its Loss in respect of this
Agreement (or, if fewer than all the
Transactions are being terminated, in
respect of all Terminated Transactions) and
an amount will be payable equal to one-half
of the difference between the Loss of the
party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will
pay it to X; if it is a negative number, X will pay
the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances
where an Early Termination Date occurs because "Automatic
Early Termination" applies in respect of a party, the amount
determined under this Section 6(e) will be subject to such
adjustments as are appropriate and permitted by law to.
reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party)
during the period from the relevant Early Termination Date to
the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market
Quotation applies an amount recoverable under this Section
6(e) is a reasonable pre-estimate of loss and not a penalty.
Such amount is payable for the loss of bargain and the loss of
protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such
losses.
10 ISDA(R)1992
<PAGE> 11
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:
(a) a party may make such a transfer of this Agreement
pursuant to a consolidation or amalgamation with, or merger with or
into, or transfer of all or substantially all its assets to, another
entity (but without prejudice to any other right or remedy under this
Agreement); and
(b) a party may make such a transfer of all or any part of its
interest in any amount payable to it from a Defaulting Party under
Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under
this Agreement will be made in the relevant currency specified in this
Agreement for that payment (the "Contractual Currency"). To the extent
permitted by applicable law, any obligation to make payments under this
Agreement in the Contractual Currency will not be discharged or
satisfied by any tender in any currency other than the Contractual
Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable
manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual
Currency of all amounts payable in respect of this Agreement. If for
any reason the amount in the Contractual Currency so received falls
short of the amount in the Contractual Currency payable in respect of
this Agreement, the party required to make the payment will, to the
extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate
for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency
payable in respect of this Agreement, the party receiving the payment
will refund promptly the amount of such excess.
(b) Judgments. To the extent permitted by applicable law, if
any judgment or order expressed in a currency other than the
Contractual Currency is rendered (i) for the payment of any amount
owing in respect of this Agreement, (ii) for the payment of any amount
relating to any early termination in respect of this Agreement or (iii)
in respect of a judgement or order of another court for the payment of
any amount described in (i) or (ii) above, the party seeking recovery,
after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums
paid in such other currency and will refund promptly to the other party
any excess of the Contractual Currency received by such party as a
consequence of sums paid in such other currency if such shortfall or
such excess arises or results from any variation between the rate of
exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually
received by such party. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection
with the purchase of or conversion into Contractual Currency.
(c) Separate Indemnities. To the extent permitted by
applicable law, these indemnities constitute separate and independent
obligations from the other obligations in this Agreement, will be
enforceable as separate and independent causes of action, will apply
notwithstanding any indulgence granted by the party to which any
payment is owed and will not be affected by judgment being obtained or
claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it
will be sufficient for a party to demonstrate that it would have
suffered a loss bad an actual exchange or purchase been made.
11 ISDA(R)1992
<PAGE> 12
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communication and prior writings with
respect thereto.
(b) Amendments. No amendment, modification or waiver in
respect of this Agreement will be effective unless in writing
(including a writing evidenced by a facsimile transmission) and
executed by each of the parties or confirmed by an exchange of telexes
or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections
2(a)(iii) and 6(c)(ii), the obligations of the parties under this
Agreement will survive the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement,
the rights, powers, remedies and privileges provided in this Agreement
are cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification
and waiver in respect of it) may be executed and delivered in
counterparts (including by facsimile transmission), each of
which will be deemed an original.
(ii) The parties intend that they are legally bound
by the terms of each Transaction from the moment they agree to
those terms (whether orally or otherwise). A Confirmation
shall be entered into as soon as practicable and may be
executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging
system, which in each case will be sufficient for all purposes
to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective
means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any
right, power or privilege in respect of this Agreement will not be
presumed to operate as a waiver, and a single or partial exercise of
any right, power or privilege will not be presumed to preclude any
subsequent or further exercise, of that right, power or privilege or
the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for
convenience of reference only and are not to affect the construction of
or to be taken into consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying,
each party that enters into a Transaction through an Office other than
its head or home office represents to the other party that,
notwithstanding the place of booking office or jurisdiction of
incorporation or organisation of such party, the obligations of such
party are the same as if it had entered into the Transaction through
its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered
into.
(b) Neither party may change the Office through which it makes
and receives payments or deliveries for the purpose of a Transaction
without the prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the
Schedule, such Multibranch Party may make and receive payments or
deliveries under any Transaction through any Office listed in the
Schedule, and the Office through which it makes and receives payments
or deliveries with respect to a Transaction will be specified in the
relevant Confirmation
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12 ISDA(R)1992
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in
respect of this Agreement may be given in any manner set forth below
(except that a notice or other communication under Section 5 or 6 may
not be given by facsimile transmission or electronic messaging system)
to the address or number or in accordance with the electronic messaging
system details provided (see the Schedule) and will be deemed effective
as indicated:
(i) if in writing and delivered in person or by
courier, on the date it is delivered;
(ii) if sent by telex, on the date the recipient's
answerback is received;
(iii) if sent by facsimile transmission, on the date
that transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a
transmission report generated by the sender's facsimile
machine);
(iv) if sent by certified or registered mail
(airmail, if overseas) or the equivalent (return receipt
requested), on the date that mail is delivered or its delivery
is attempted; or
(v) if sent by electronic messaging system, on the
date that electronic message is received,
unless the date of that delivery (or attempted delivery) or that
receipt, as applicable, is not a Local Business Day or that
communication is delivered (or attempted) or received, as applicable,
after the close of business on a Local Business Day, in which case that
communication shall be deemed given and effective on the first
following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the
other change the address, telex or facsimile number or electronic
messaging system details at which notices or other communications are
to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and
construed in accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or
proceedings relating to this Agreement ("Proceedings"), each party
irrevocably:
(i) submits to the jurisdiction of the English
courts, if this Agreement is expressed to be governed by
English law, or to the non-exclusive jurisdiction of the
courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the
State of New York; and
(ii) waives any objection which it may have at
anytime to the laying of venue of any Proceedings brought in
any such court, waives any claim that such Proceedings have
been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction (outside, if this Agreement is
expressed to be governed by English law, the Contracting States, as
defined in Section 10) of the Civil Jurisdiction and Judgments Act 1982
or any modification, extension or re-enactment thereof for the time
being in force) nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other
jurisdiction.
(c) Service of Process. Each party irrevocably appoints the
Process Agent (if any) specified opposite its name in the Schedule to
receive, for it and on its behalf, service of process in any
Proceedings. If for any
13 ISDA(R)1992
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party
will promptly notify the other party and within 30 days appoint a
substitute process agent acceptable to the other Party. The parties
irrevocably consent to service of process given in the manner provided
for notices in Section 12. Nothing in this Agreement will affect the
right of either party to serve process in any other manner permitted by
law.
(d) Waiver of Immunities. Each party irrevocably waives, to
the fullest extent permitted by applicable law, with respect to itself
and its revenues and assets (irrespective of their use or intended
use), all immunity on the grounds of sovereignty or other similar
grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by
way of injunction, order for specific performance or for recovery of
property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it
or its revenues or assets might otherwise be entitled in any
Proceedings in the courts of any jurisdiction and irrevocably agrees,
to the extent permitted by applicable law, that it will not claim any
such immunity it, any Proceedings.
14. Definitions
As used in this Agreement:
"Additional Termination Event" has, the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality Tax Event or Tax Event Upon Merger, all Transactions
affected by the occurrence of such Termination Event and (b) with respect to any
other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:
(a) in respect of obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Defaulting Party, the
Default Rate;
(b) in respect of an obligation to pay an amount under Section
6(e) of either party from and after the date (determined in accordance
with Section 6(d)(ii)) on which that amount is payable, the Default
Rate;
(c) in respect of all other obligations payable or deliverable
(or which would have been but for Section 2(a)(iii)) by a
Non-defaulting Party, the Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment. promulgation, execution or ratification
of or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14 ISDA(R)1992
<PAGE> 15
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction.
or being or having been organised, present or engaged in a trade or business in
such jurisdiction or having had a permanent establishment or fixed place of
business in such jurisdiction, but excluding a connection arising solely from
such recipient or related person having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement or a Credit
Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2) in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section II. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15 ISDA(R)1992
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transactions or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised. managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:
(a) the Termination Currency Equivalent of the Market
Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market
Quotation is determined; and
(b) such party's Loss (whether positive or negative and
without reference to any Unpaid Amounts) for each Terminated
Transaction or group of Terminated Transactions for which a Market
Quotation cannot be determined or would not (in the reasonable belief
of the party making the determination) produce a commercially
reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
16 ISDA(R)1992
<PAGE> 17
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction " means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange, transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b)these transactions and
(c) any other transaction identified as a Specified Transaction in this
Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section, 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17 ISDA(R)1992
<PAGE> 18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
DEUTSCHE BANK AG MBIA, INC.
(Name of Party) (Name of Party)
By: /s/ A. Levenson By: /s/ Joseph . Sevely
Name: A. Levenson Name: Joseph Sevely
Title: Title: Treasurer
Date: Date: May 3, 2000
By: /s/ D. Nestler
Name: D. Nestler
Title:
18 ISDA(R)1992
<PAGE> 19
SCHEDULE
to the
ISDA Master Agreement
dated as of May 2, 2000
between
Deutsche Bank AG ("Party A"))
and
MBIA, Inc. ("Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means:
(i) in relation to Party A: Not Applicable
(ii) in relation to Party B: Not Applicable
(b) "Specified Transaction" shall have the meaning specified in Section
14 of this Agreement save that Section 14 shall be hereby amended by adding the
text "commodity transaction, credit derivative transaction, repurchase or
reverse repurchase transaction, securities lending transaction" after the words
"foreign exchange transaction" in the sixth line thereof.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to
both parties subject to amendment by adding at the end thereof the following
words:
"and in either case, the other party determines in good faith that it has
reasonable grounds to conclude that the performance by the Defaulting Party of
its financial obligations hereunder is endangered."
With regard to Party A, "Threshold Amount" means 2% of its shareholders' equity
(i.e., the sum of capital and disclosed reserves as reported in the most
recently published annual audited consolidated financial statements of Deutsche
Bank AG).
With regard to Party B or any Credit Support Provider, "Threshold Amount" means
2% of its shareholders' equity (as calculated in accordance with generally
accepted accounting principles applicable to it).
(d) The "Credit Event Upon Merger" provision of Section 5(b)(iv) will
apply to both Party A and Party B.
19
<PAGE> 20
(e) The "Automatic Early Termination" provision of Section 6(a) will
not apply to Party A and will not apply to Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e) of
this Agreement:
(i)Loss will apply. (ii)The Second Method will apply.
"Termination Currency" means United States Dollars.
(h) "Additional Termination Event" will not apply to either party.
Part 2. Tax Representations.
(a) Payer Tax Representations. For the purposes of Section 3(e) of this
Agreement, Party A and Party B will each make the following representations to
the other:
It is not required by any applicable law, as modified by the practice of any
relevant governmental revenue authority, of any Relevant Jurisdiction to make
any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(10 or 6(e) of this Agreement) to
be made by it to the other party under this Agreement. In making this
representation, each party may rely on:
(i)the accuracy of any representations made by the other party
pursuant to Section 3(f) of this Agreement;
(ii)the satisfaction of the agreement of the other party
contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and
(iii)the satisfaction of the agreement of the other party
contained in Section 4(d) of this Agreement,
provided that it shall not be a breach of this representation where reliance is
placed on clause (ii) and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) Payee Tax Representations. For the purpose of Section 3(f) of this
Agreement, Party A and Party B each represent to the other that, in respect of
each Transaction which it enters into through an Office or discretionary agent
in the United States of America ("U.S."),
20
<PAGE> 21
each payment received or to be received by it under that Transaction will be
effectively connected with its conduct of a trade or business in the U.S.
Part 3. Documents to be delivered.
(a) For the purpose of Section 4(a)(i), the documents to be delivered
are:
<TABLE>
<CAPTION>
Party required to Form/Document/ Date by which to be Section
deliver document Certificate delivered 3(d) Representation
<S> <C> <C> <C>
Party A An executed United (i) Upon execution of Not Applicable
States Internal this Agreement, (ii)
Revenue Service Form promptly upon
W-8ECI (or any reasonable demand by
successor thereto) and Party B and (iii)
an executed United promptly upon
States Internal learning that any such
Revenue Service Form form previously
W-8BEN (or any provided by Party A
successor thereto). has become obsolete
or incorrect.
Party B An executed United (i) Upon execution of Not Applicable
States Internal this Agreement, (ii)
Revenue Service Form promptly upon
W-8ECI (or any reasonable demand by
successor thereto), Party A and (iii)
Form W-8BEN (or promptly upon
any successor thereto), learning that any such
or W-9 (or any form previously
successor thereto), as provided by Party B
applicable. has become obsolete
or incorrect.
</TABLE>
(b) For the purposes of Section 4(a)(11), the other documents to be
delivered are as follows:
21
<PAGE> 22
<TABLE>
<CAPTION>
Party required to Form/Document/ Date by which to be Section 3(d)
deliver document Certificate delivered representation:
<S> <C> <C> <C>
Party A and Evidence of the Upon or prior to the Applicable
Party B authority, incumbency execution and delivery
and specimen of this Agreement and,
signature of each with respect to any
person executing this Confirmation upon
Agreement or any request by the other
Confirmation, Credit party.
Support Document or
other document
entered into in
connection with this
Agreement on its
behalf or on behalf of
a Credit Support
Provider or otherwise,
as the case may be.
Party A and A copy of the most Promptly after request Applicable
Party B recent annual report by the other party.
containing consolidated
financial statements of
each party or its Credit
Support Provider, if
any, and such other public
information respecting
the condition or operations,
financial or otherwise of such
party or its Credit Support
Provider, if any, as the other
party may reasonably request from
time to time.
Party A and Party B A duly executed and As of execution of this Applicable
delivered copy of the Agreement
Credit Support
Document.
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
Party A and Party B Legal opinions in As of execution of this Applicable
form and substance Agreement
satisfactory to the
other party.
</TABLE>
Part 4. Miscellaneous.
(a) Address for Notices. For the purpose of Section 12(a) of this Agreement, the
addresses for notices and communications to Party A and Party B shall be as
follows:
TO PARTY A:
(i)
Deutsche Bank AG, Head Office
Taunusanlage 12
60262 Frankfurt
GERMANY
Attention: Legal Department
Telex No: 411836 or 416731 or 41233
Answerback: DBF-D
(ii) All notices to Party A (other than those provided for in
paragraph (i) above) shall be sent directly to the office through which
Party A is acting for the relevant Transaction, using the address and
contact particulars specified in the Confirmation for the purposes of
confirming that Transaction. If no such particulars are so specified,
such notices shall be sent to the address of the relevant office set
out below:
23
<PAGE> 24
<TABLE>
<CAPTION>
Where Party A is acting through its Where Party A is acting through its
Frankfurt Head Office: London Branch:
<S> <C>
Deutsche Bank AG, Head Office Deutsche Bank AG, London Branch
Taunusanlage 12 6, Bishopsgate
60262 Frankfurt London EC2N 4DA
GERMANY UNITED KINGDOM
Attention: Trading & Sales/Evidenz Attn: OTC Derivatives
Tel: (49)(69) 910 33339 Tel: (44)(171) 545 8000
Fax No: (49) (69) 910-38406 Fax: (44)(171) 545 4455
Telex No: 41730-701 Telex: 94015555
Answerback: 41730-702 FMD Answerback: DBLN G
Where Party A is acting through its New York Branch:
Deutsche Bank AG, New York Branch
31 W. 52nd Street
New York, New York 10019
USA
Attn: Swap Group
Tel: (1)(212) 469-4338
Fax: (1)(212) 469-4654
Telex: 429166
Answerback: DEUTNYK
TO PARTY B:
MBIA, Inc.
113 King St.
Armonk, NY 10504
Attention: Treasurer
Fax No: (914) 765-3375
</TABLE>
and for purposes of notices under Sections 5 or 6 of the Agreement (other than
notices under Section 5(a)(i)), a copy to:
MBIA, Inc.
113 King St.
Armonk, NY 10504
Attention: General Counsel
Fax No: (914) 765-3919
24
<PAGE> 25
(b) Process Agent. For the purposes of Section 13(c) of this Agreement:
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this
Agreement.
(d) Multibranch Party. For purposes of Section 10(c) of this Agreement:
(i) Party A is a Multibranch Party and may act through the
following offices:
New York Branch, London Branch and Head Office, Frankfurt
(ii) Party B is not a Multibranch Party
(e) The Calculation Agent shall be Party A.
(f) Credit Support Document. Details of any Credit Support Document:
With respect to Party A and Party B: the Credit Support Annex attached
hereto and incorporated herein by reference.
(g) Credit Support Provider. Credit Support Provider means in relation
to Party A and Party B:
Not applicable
(h) Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York (without
reference to its choice of law doctrine).
(i) "Affiliate" will have the meaning specified in Section 14
of this Agreement.
Part 5. Other Provisions.
(a) Representations.
(i) Non-Reliance, Etc. Each party will be deemed to represent
to the other party on the date that it enters into a Transaction that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):
25
<PAGE> 26
(1) Non-Reliance. It is acting for its own account, and it has made its
own independent decisions to enter into that Transaction and as to whether that
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisers as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment advice or as a
recommendation to enter into that Transaction; it being understood that
information and explanations related to the terms and conditions of a
Transaction shall not be considered to be investment advice or a recommendation
to enter into that Transaction. No communication (written or oral) received from
the other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.
(2) Assessment and Understanding. It is capable of assessing the merits
of and understanding (on its own behalf or through independent professional
advice), and understands and accepts the terms and conditions and risks of that
Transaction. It is also capable of assuming, and assumes, the risks of that
Transaction.
(3) Status of Parties. The other party is not acting as a fiduciary for
or adviser to it in respect of that Transaction.
(ii) Commodity Exchange Act. Each party represents to the
other party on and as of the date hereof and on each date on which a
Transaction is entered into between them that:
(1) each Transaction is intended to be exempt from, or otherwise not
subject to regulation under, the Commodity Exchange Act;
(2) such party is an "eligible swap participant" within the meaning of
CFTC Regulation Section 35.1(b)(2); and
(3) such party is entering into each Transaction in connection with its
line of business and not for purposes of speculation.
(iii) Securities Act Representations. Each party represents to
the other party (which representations will be deemed to be repeated by
each party on each date on which a Transaction is entered into) that:
(1) it acknowledges that certain Transactions under the Agreement may
involve the purchase or sale of "securities" as defined under the U.S.
Securities Act of 1933, as amended (the "Securities Act") and understands that
any such purchase or sale of securities will not be registered under the
Securities Act and that any such securities may not be reoffered, resold,
26
<PAGE> 27
pledged or otherwise transferred except (1) pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act and (2) in accordance with
any applicable securities laws of any state of the United States.
(2) it is a "qualified institutional buyer" as defined in Rule 144A
under the Securities Act, or an "accredited investor" as defined under the
Securities Act; and
(3) unless otherwise expressly provided in a Confirmation for a
Transaction, any securities it is required to deliver under this Agreement and
any Transaction will ' not at the time of such delivery constitute "restricted
securities" or be subject to restrictions on transfer (including so-called
"control securities") under the Securities Act (as defined above) or otherwise.
This representation will be deemed repeated at the time of such delivery.
(b) Consent to Recording.
Each party (i) consents to the recording of the telephone conversations of
trading and marketing and/or other personnel of the parties and their Affiliates
in connection with this Agreement or any potential Transaction (ii) agrees to
obtain any necessary consent of and give notice of such recording to such
personnel of it and its Affiliates; and (iii) agrees that recordings may be
submitted in evidence in any Proceedings relating to this Agreement.
(c) Tax Provisions.
(i) The definition of Tax Event, Section 5 (b)(ii),
is hereby modified by adding the
following provision at the end thereof
"provided, however, that for purposes of clarification, the parties acknowledge
that the introduction or proposal of legislation shall not, in and of itself,
give rise to a presumption that a Tax Event has occurred."
(ii) The definition of term "Indemnifiable Tax" is
amended by adding the following provisions at the end thereof.
"Notwithstanding the foregoing, Indemnifiable Tax" also means any Tax imposed in
respect of a payment under this Agreement by reasons of a Change in Tax Law by a
government or taxing authority of a Relevant Jurisdiction of the party making
such payment, unless the other party is incorporated, organized, managed and
controlled or considered to have its
27
<PAGE> 28
seat in such jurisdiction, or is acting for purposes of this Agreement through a
branch or office located in such jurisdiction."
5. Set-off
Section 6 of this Agreement is amended by the addition of the following Sections
6(f) at the end thereof:
(f) Any amount (the "Early Termination Amount") payable to one
party (the "Payee") by the other party (the "Payer") under Section
6(e), in circumstances where there is a Defaulting Party or one
Affected Party in the case where a Termination Event under Section
5(b)(iv) has occurred, will, at the option of the party ("X") other
than the Defaulting Party or the Affected Party (and without prior
notice to the Defaulting Party or the Affected Party), be reduced by
being set-off against any amount(s) (the "Other Agreement Amount")
payable (whether at such time or in the future or upon the occurrence
of a contingency) by the Payee to the Payer (irrespective of the
currency, place of payment or booking office of the obligation) under
any other agreements) between the Payee and the Payer or instrument(s)
or undertaking(s) issued or executed by one party to, or in favor of,
the other party (and the Other Agreement Amount will be discharged
promptly and in all respects to the extent it is so set-off). X will
give notice to the other party of any set-off effected under this
Section 6(f). For the purpose of this provision, either the Early
Termination Amount or the Other Agreement Amount (or the relevant
portion of such amounts) may be converted by X into the currency in
which the other is denominated at the rate of exchange at which such
party would be able, acting in a reasonable manner and in good faith,
to purchase the relevant amount of such currency. If an obligation
under this provision is unascertained, X may in good faith estimate
such amount and effect a set-off hereunder in the amount of such
estimate, subject to the relevant party accounting to the other when
the amount of the obligation is ascertain. Nothing in this Section 6(f)
shall be effective to create a charge or other security interest. This
Section shall be without prejudice and in addition to any right of
set-off, combination of accounts, lien or other right to which any
party is at any time otherwise entitled (whether by operation of law,
contract or otherwise)."
(e) Escrow.
On any date on which both parties are required to make payments hereunder,
either party may at its option and in its sole discretion notify the other party
that payments on that
28
<PAGE> 29
date are to be made in escrow. In this case deposit of the payment due earlier
on that date shall be made by 2:00 p.m. (local time at the place for the earlier
payment if there is a time difference between the cities in which payments are
to be made) on that date with an escrow agent selected by the party giving the
notice and reasonably acceptable to the other party, accompanied by irrevocable
payment instructions (a) to release the deposited payment to the intended
recipient upon receipt by the escrow agent of the required deposit of the
corresponding payment from the other party on the same date accompanied by
irrevocable payment instructions to the same effect or (b) if the required
deposit of the corresponding payment is not made on that same date, to return
the payment deposited to the party that paid it into escrow at such party's
request. The party that elects to have payments made in escrow shall pay the
costs of the escrow arrangements and shall cause those arrangements to provide
that the intended recipient of the payment due to be deposited first shall be
entitled ' to interest on that deposited payment for each day in the period of
its deposit at the rate offered by the escrow agent for that day for overnight
deposits in the relevant currency in the office where it holds that deposited
payment (at 11:00 a.m. local time on that day) if that payment is not released
by 5:00 p.m. local time on the date it is deposited for any reason other than
the intended recipient's failure to make the escrow deposit it is required to
make hereunder in a timely fashion.
Additional Acknowledgments and Agreements of the Parties.
(i) Deutsche Bank Securities Inc. Each party
acknowledges and agrees that (i) Deutsche Bank Securities Inc.
or another designated Affiliate of Party A (the "Designated
Agent") will act as agent for Party A in connection with
certain Transactions when so specified in the Transaction
Confirmation; and (ii) the Designated Agent is acting solely
as agent and shall have no liability for the performance of
either party's obligations under this Agreement or any
Transaction, or for costs, expenses, damages or claims arising
out of the failure of either party to perform any such
obligation.
(ii) Bankruptcy Code. Without limiting the
applicability if any, of any other provision of the U.S.
Bankruptcy Code as amended (the "Bankruptcy Code") (including
without limitation Sections 362, 546, 556, and 560 thereof and
the applicable definitions in Section 101 thereof), the
parties acknowledge and agree that all Transactions entered
into hereunder will constitute "forward contracts" or "swap
agreements" as defined in Section 101 of the Bankruptcy Code
or "commodity contracts" as defined in Section 761 of the
Bankruptcy Code, that the rights of the parties under Section
6 of this Agreement will constitute contractual rights to
liquidate Transactions, that any margin or collateral provided
under any margin, collateral, security, pledge, or similar
agreement related hereto will constitute a "margin payment" as
defined in Section 101 of the Bankruptcy Code, and that the
parties are entities entitled to the rights under, and
protections afforded by, Sections 362, 546, 556, and 560 of
the Bankruptcy Code.
29
<PAGE> 30
(iii) Waiver of Right to Trial by Jury. Each of the
parties hereby irrevocably waives any and all right to a trial
by jury with respect to any legal proceeding arising out of or
relating to this Agreement or any Transaction.
(g) Confirmations for Foreign Exchange Transactions.
(i) With effect from the date hereof, any FX
Transaction or Currency Option (as defined in the 1998 FX and
Currency Option Definitions, as published by the International
Swaps and Derivatives Association, Inc., the Emerging Markets
Traders Association and The Foreign Exchange Committee (the
"FX Definitions")) which the parties may enter or may have
entered into prior to the date hereof, in respect of which the
Confirmation fails by its terms expressly to exclude the
application of this Agreement, shall (to the extent not
otherwise provided for in this Agreement) be deemed to
incorporate the terms of and shall be governed by and be
subject to this Agreement (in substitution for any existing
terms, if any, whether express or implied) and, for the
purposes hereof, shall be deemed to be a Transaction.
(ii) Where a Transaction is confirmed by means of
exchange of electronic messages on an electronic messaging
system or other document or other confirming evidence
exchanged between the parties confirming such Transaction such
messages, document or evidence will constitute a Confirmation
for the purposes of this Agreement even where not so specified
therein.
(iii) Reference is made to the FX Definitions with
respect to any FX Transaction or Currency Option. Unless
other-wise specified in a Confirmation relating to a FX
Transaction or a Currency Option, any terms used in that
Confirmation which are not otherwise defined herein and which
are contained in the FX Definitions shall have the meaning set
forth in those definitions. In the event of any inconsistency
between the provisions of this Agreement and the FX
Definitions, the provisions of this Agreement shall prevail.
(h) Premium Payments
If any Premium relating to a Currency Option is not received on the Premium
Payment Date, the Seller may elect: (1) to accept a late payment of such
Premium; (2) to give written notice of such non-payment and, if such payment
shall not be received within two (2) Local Business Days of such notice, treat
the related Currency Option as void; or (3) to give written notice of such
non-payment and, if such payment shall not be received within two (2) Local
Business Days of such notice, treat such non-payment as an Event of Default
under Section 5(a)(i). If the Seller elects to act under either clause (1) or
(2) of the preceding sentence, the Buyer shall pay all out-of-pocket costs and
actual damages incurred in connection with such unpaid or late Premium or void
Currency Option, including, without limitation, interest on such Premium in the
same currency as such
30
<PAGE> 31
Premium at the then prevailing market rate and any other costs or expenses
incurred by the Seller in covering its obligations (including, without
limitation, any hedge) with respect to such Currency Option.
DEUTSCHE BANK AG MBIA, INC.
By: /s/A. Levenson By:
----------------------- ----------------------------
Name: A. Levenson Name:
Title: Title:
Date: Date:
By: /s/D. Nestler By: /s/ Joseph Sevely
----------------------- ----------------------------
Name: D. Nestler Name: Joseph Sevely
Title: Title: Treasurer
Date: Date: May 3, 2000
31
<PAGE> 32
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term
"Obligations" as used in this Annex includes the following additional
obligations.
With respect to Party A and Party B: Inapplicable.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount and Credit Support
Amount.
(A) "Delivery Amount" has the meaning
specified in Paragraph 3(a).
(B) "Return Amount" has the meaning
specified in Paragraph 3(b).
(C) "Credit Support Amount" has the meaning
specified in Paragraph 3, except that, if an
Independent Amount or Independent Amounts are
specified for a party, the Credit Support Amount for
such party will never be less than the aggregate of
all Independent Amounts applicable to that party.
(ii) Eligible Collateral. The following items will
qualify as "Eligible Collateral" for the party specified:
<TABLE>
<CAPTION>
Party A Party B Valuation
Percentage
<S> <C> <C> <C>
(A) Cash [X] [X] 100%
(B) negotiable debt obligations issued by the U.S. [X] [X] 98%
Treasury Department having a remaining maturity of
less than one year
(C) negotiable debt obligations issued by the U.S. [X] [X] 95%
Treasury Department having a remaining maturity of
1-10 years
(D) negotiable debt obligations issued by the U.S. [X] [X] 90%
Treasury Department having a remaining maturity of
more than 10 years
(E)single-class mortgage participation certificates [X] [X] 90%
("FHLMC Certificates") in book-entry form backed by
single-family residential mortgage loans, the full and
timely payment of interest at the applicable certificate
rate and the ultimate collection of principal of which
are guaranteed by the Federal Home Loan Mortgage
Corporation (excluding Real Estate Mortgage
Investment Conduit ("REMIC") or other multi-class
Pass-through certificates, collateralized mortgage
obligations, pass-through certificates backed by
adjustable rate mortgages, securities paying interest or
principal only and similar derivative securities);
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C> <C> <C>
(F) single-class mortgage pass-through certificates [X] [X] 90%
("FNMA Certificates") in book-entry form backed by
single-family residential mortgage loans, the full and
timely payment of interest at the applicable certificate
rate and ultimate collection of principal of which are
guaranteed by the Federal National Mortgage
Association (excluding REMIC or other multi-class
pass-through certificates, pass-through certificates
backed by adjustable rate mortgages collateralized
mortgage obligations, securities paying interest or
principal only and similar derivative securities);
(G) single-class fully modified pass-through certificates [X] [X] 90%
("GNMA Certificates" in book-entry form backed by
single-family residential mortgage loans, the full and
timely payment of principal and interest of which is
guaranteed by the Government National Mortgage
Association (excluding REMIC or other multi-class
Pass-through certificates, collateralized mortgage
obligations, pass-through certificates backed by
adjustable rate mortgages, securities paying interest
or principal only and similar derivatives securities).
(H) Such other collateral as Party A and Party B may [X] [X] As may be agreed
</TABLE>
(iii) Other Eligible Support. The following items
will qualify as "Other Eligible Support" for the party
specified:
<TABLE>
<CAPTION>
Party A Party B
<S> <C> <C>
(A) Inapplicable [ ] [ ]
(B) Inapplicable [ ] [ ]
</TABLE>
33
<PAGE> 34
(iv) Thresholds.
(A) "Independent Amount" means with respect
to Party A: $ Inapplicable
"Independent Amount" means with respect to Party B: $ Inapplicable
(B) "Threshold" means, with respect to each
Party A and Party B, the amount set forth opposite
the lower of the ratings in the table set forth below
in effect on any Valuation Date for the
unsubordinated, unsecured, long-term debt of Party A
or of Party B, respectively;
provided however that if the unsubordinated, unsecured, long-term debt of Party
A or of Party B ceases to be rated by either Standard & Poor's Ratings Services,
a division of the McGraw-Hill Companies ("S&P") or Moody's Investors Service
("Moody's"), then the rating by whichever of S&P or Moody's that has continued
to rate the unsubordinated, unsecured, long-term debt of such entity shall be
used as the sole rating of such entity for purposes of this table; and
provided further that, if
(x) an Event of Default, Potential Event of Default,
Termination Event, Additional Termination Event or Specified
Condition has occurred and is continuing with respect to (i)
Party A or (ii) Party B or
(y) (i) Party A or (ii) of Party B has no
unsubordinated, unsecured, long-term debt rated by either
Standard & Poor's Corporation or Moody's,
then the Threshold of the applicable party shall be zero.
<TABLE>
<CAPTION>
Rating by S&P Rating by Moody's Threshold in Dollars
<S> <C> <C>
AAA to AA- Aaa to Aa3 $75,000,000.00
A+ Al $5,000,000.00
A&A- A2 & A3 $3,000,000
BBB+ or below Baa 1 $0
</TABLE>
(C) "Minimum Transfer Amount" means with
respect to Party A: $250,000; provided, however, that
the Minimum Transfer Amount for such party shall be
zero upon the occurrence and during the continuance
of an Event of Default, Potential Event of Default,
Termination Event, Additional Termination Event, or
Specified Condition with respect to such party.
"Minimum Transfer Amount" means with respect
to Party B: $250,000; provided, however, that the
Minimum Transfer Amount for such party shall be zero
upon the occurrence and during the continuance of an
Event of Default, Potential Event of Default,
Termination Event, Additional Termination Event, or
Specified Condition with respect to such party.
34
<PAGE> 35
(D) Rounding. The Delivery Amount and the
Return Amount will be rounded up and down to the
nearest integral multiple of $50,000.00,
respectively, or to zero, in the case of a return
amount lower than $50,000.00.
(c) Valuation and Timing.
(i) "Valuation Agent" means:, for purposes of
Paragraphs 3 and 5, the party making the demand under
Paragraph 3, and, for purposes of Paragraph 6(d), the Secured
Party receiving or deemed to receive the Distributions or the
Interest Amount, as applicable.
(ii) "Valuation Date" means: Any Local Business Day.
(iii) "Valuation Time" means:
[ ] the close of business in the city of the Valuation Agent on the Valuation
Date or date of calculation, as applicable;
[X] the close of business on the Local Business Day before the Valuation Date or
date of calculation, as applicable;
provided that the calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "Notification Time" means 1:00pm, New York time,
on a Local Business Day.
(v) "Exposure" has the meaning provided in Paragraph
12 except that the proviso in the definition of "Exposure" is
deleted and the following is substituted therefor: "provided,
that Market Quotation will be determined by the Valuation
Agent (i) in respect of any equity-based total return swap,
using the closing price or last sale price (as applicable) of
each stock, basket, or index (as applicable) on the relevant
determination date or (ii) in respect of any other Transaction
type (including, without limitation, equity-related option)
using its good faith estimate at mid-market of the amounts
that would be payable for Replacement Transactions (as that
term is defined in the definition of "Market Quotation").
(d) Conditions Precedent and Secured Party's Rights and Remedies. Each
Termination Event specified below with respect to a party will be a "Specified
Condition" for that party (the specified party being the Affected Party if a
Termination Event or Additional Termination Event occurs with respect to that
party):
<TABLE>
<CAPTION>
Party A Party B
<S> <C> <C>
Illegality [X] [X]
Tax Event [ ] [ ]
Tax Event Upon Merger [ ] [ ]
Credit Event Upon Merger [X] [X]
The Additional Termination Events
specified in Part I of the Schedule to
this Agreement or any event which,
with the giving of notice or the lapse of
time or both, would constitute an
Additional Termination Event.
</TABLE>
(e) Substitution.
35
<PAGE> 36
(i) "Substitution Date" has the meaning specified in
Paragraph 4(d)(ii).
(ii) Consent. If specified here as applicable, then
the Pledgor must obtain the Secured Party's consent for any
substitution pursuant to Paragraph 4(d): Inapplicable
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York time,
on the Local Business Day following the date on which the
notice is given that gives rise to a dispute under Paragraph
5.
(ii) Value. For the purpose of Paragraphs 5(i)(C) and
5(ii), the Value of Posted Credit Support will be calculated
as follows: as set forth for other purposes in Paragraph 12.
(iii) Alternative. The provisions of Paragraph 5 will
apply, except to the following extent: (A) pending the
resolution of a dispute, Transfer of the undisputed Value of
Eligible Credit Support or Posted Credit Support involved in
the relevant demand will be due as provided in Paragraph 5 if
the demand is given by the Notification Time, but will be due
on the second Local Business Day after the demand if the
demand is given after the Notification Time; and (B) the
Disputing Party need not comply with the provisions of
Paragraph 5(11)(2) if the amount to be Transferred does not
exceed the Disputing Party's Minimum Transfer Amount.
(g) Holding and Using Posted Collateral.
(i) Eligibility to Hold Posted Collateral,
Custodians. Party A and its Custodian will be entitled to hold
Posted Collateral pursuant to Paragraph 6(b); provided that
the following conditions applicable to it are satisfied:
(A) Party A is not a Defaulting Party.
(B) Posted Collateral may be held only in
the following jurisdictions: New York.
Initially, the Custodian for Party A is: Deutsche Bank AG New York Branch.
Party B and its Custodian will be entitled to hold Posted Collateral pursuant to
Paragraph 6(b); provided that the following conditions applicable to it are
satisfied:
(A) Party B is not a Defaulting Party.
(B) Posted Collateral may be held only in
the following jurisdictions: New York.
(C) In the event that the Custodian holds
Posted Collateral, the long-term unsubordinated
unsecured debt of the Custodian is rated at least A
by Standard & Poors, a division of The McGraw-Hill
Companies, Inc. (or any successor thereto) and at
least A2 by Moody's Investors Service, Inc. (or any
successor thereto).
Initially, the Custodian for Party B is: as agreed upon from time to time.
(ii) Use of Posted Collateral. The provisions of
Paragraph 6(c) will not apply to Party A and Party B.
(h) Distributions and Interest Amount.
(i) Interest Rate. The "Interest Rate" will be with
respect to Eligible Collateral in the form of Cash, for any
day, the rate opposite the caption "Federal Funds (Effective)"
for such day as published for such
36
<PAGE> 37
day in Federal Reserve Publication H.15(519) or any successor
publication as published by the Board of Governors of the
Federal Reserve System.
(ii) Transfer of interest Amount. The Transfer of the
Interest Amount will be made on the first Local Business Day
of each calendar month and on any Local Business Day that
Posted Collateral in the form of Cash is Transferred to the
Pledgor pursuant to Paragraph 3(b).
(iii) Alternative to Interest Amount. The provisions
of Paragraph 6(d)(ii) will apply.
(i) Other Eligible Support and Other Posted Support.
(i) "Value" with respect to Other Eligible Support
and Other Posted Support means: Inapplicable
(ii) "Transfer" with respect to Other Eligible
Support and Other Posted Support means: Inapplicable
(j) Demands and Notices. All demands, specifications and
notices under this Annex will be made pursuant to the Notices Section
of this Agreement, unless otherwise specified here:
Party A: Deutsche Bank AG
31 West 52nd Street
New York, NY 10019
Attention: Global Margin Management
Party B: MBIA, Inc.
113 King St.
Armonk, NY 10504
Attention: Treasurer
Fax No: (914) 765-3375
(k) Addresses for Transfers
Party A: For Cash: DBAG NY, ABA: 026003780, Ref: A C# [to be provided]
For Eligible Collateral: Bank of NYC / DBNYC, ABA: 021000018,
Ref. GMM /[Client name]
Party B: To be provided.
(l) Other Provisions.
(i) Limit on Secured Party's Liability. The Secured
Party will not be liable for any losses or damages that the
Pledgor may suffer as a result of any failure by the Secured
Party to perform, or any delay by it in performing, any of its
obligations under this Annex if the failure or delay results
from circumstances beyond the reasonable control of the
Secured Party or its Custodian, such as interruption or loss
of computer or communication services, labor disturbance,
natural disaster or local or national emergency.
(ii) Further Assurances. If the Pledgor fails (a) to
execute and deliver to the Secured Party such financing
statements, assignments, or other documents or (b) to do such
other things relating to the Posted Collateral as the Secured
Party may reasonably request in order to protect and maintain
its security interest in the Posted Collateral and to protect,
preserve, and realize upon the Posted Collateral, then the
Secured Party is hereby authorized by the Pledgor (but not
required) to complete and execute such financing
37
<PAGE> 38
statements, assignments, and other documents as the Secured
Party deems appropriate for such purposes. The Pledgor hereby
appoints the Secured Party, during the term of this Agreement,
as the Pledgor's agent and attorney-in-fact to complete and
execute such financing statements, assignments and other
documents and to perform all other acts which the Secured
Party may deem appropriate to protect and maintain its
security interest in the Posted Collateral and to protect,
preserve, and realize upon the Posted Collateral. The
power-of-attorney granted herein to the Secured Party is
coupled with an interest and is irrevocable during the term of
this Agreement.
(iii) The following is added as a new paragraph 1
l(g):
(g) Pledgor shall deliver to the Secured Party an opinion of
counsel in form and substance, satisfactory to the Secured Party but
with customary exceptions and qualifications, to the effect that the
Transfer of the Posted Collateral effects a valid perfected security
interest, such opinion to be requested by the Secured Party in writing
within one week of the first Transfer of Posted Collateral by the
Pledgor and such opinion will be delivered in writing within thirty
(30) Local Business Days of such request. If counsel is unable to
render such an opinion, the parties agree that they will work in good
faith to amend the Agreement and the Credit Support Annex as required
in order to permit such an opinion to be rendered.
DEUTSCHE BANK AG MBIA, INC.
By: /s/A. Levenson By: /s/ Joseph Sevely
------------------------- ---------------------------
Name: A. Levenson Name: Joseph Sevely
Title: Title: Treasurer
By: /s/D. Nestler
------------------------
Name: D. Nestler
Title:
38
<PAGE> 39
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
MASTER AGREEMENT
dated as of May 2, 2000
between
DEUTSCHE BANK AG and MBIA, INC.
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to each party.
Accordingly, the parties agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise
defined herein or elsewhere in this Agreement have the meanings specified
pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to
Paragraphs of this Annex. In the event of any inconsistency between this Annex
and the other provisions of this Schedule, this Annex will prevail, and in the
event of any inconsistency between Paragraph 13 and the other provisions of this
Annex, Paragraph 13 will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the
"Secured Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
Copyright (C) 1994 by International Swaps and Derivatives Association, Inc.
<PAGE> 40
Paragraph 3. Credit Support Obligations
(a) Delivery Amount Subject to Paragraphs 4 and 5, upon a demand made
by the Secured Party on or promptly following a Valuation Date, if the Delivery
Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer
Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit
Support having a Value as of the date of Transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise
specified in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for
any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit
Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by
the Pledgor on or promptly following a Valuation Date, if the Return Amount for
that Valuation Date equals or exceeds the Secured Party's Minimum Transfer
Amount, then the Secured Party will Transfer to the Pledgor Posted Credit
Support specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"Return Amount" applicable to the Secured Party for any Valuation Date will
equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit
Support held by the Secured Party
exceeds
(ii) the Credit Support Amount.
"Credit Support Amount" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and
Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or
Specified Condition has occurred and is continuing with respect to the
other party; and
(ii) no Early Termination Date for which any unsatisfied
payment obligations exist has occurred or been designated as the result
of an Event of Default or Specified Condition with respect to the other
party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless
otherwise specified, if a demand for the Transfer of Eligible Credit Support or
Posted Credit Support is made by the Notification Time, then the relevant
Transfer will be made not later than the close of business on the next Local
Business Day; if a demand is made after the Notification Time, then the relevant
Transfer will be made not later than the close of business on the second Local
Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes
of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
2 ISDA(R) 1994
<PAGE> 41
(d) Substitutions.
(i) Unless otherwise specified in Paragraph 13, upon notice to
the Secured Party specifying the item of Posted Credit Support to be
exchanged, the Pledgor may, on any Local Business Day, Transfer to the
Secured Party substitute Eligible Credit Support (the "Substitute
Credit Support"); and
(ii) subject to Paragraph 4(a), the Secured Party wilt
Transfer to the Pledgor the items of Posted Credit Support specified by
the Pledgor in its notice not later than the Local Business Day
following the date on which the Secured Party receives the Substitute
Credit Support, unless otherwise specified in Paragraph 13 (the
"Substitution Date"); provided that the Secured Party will only be
obligated to Transfer Posted Credit Support with a Value as of the date
of Transfer of that Posted Credit Support equal to the Value as of that
date of the Substitute Credit Support.
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day'
following (X) the date that the demand is made under Paragraph 3 in the case of
(I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties
will consult with each other in an attempt to resolve the dispute and (4) if
they fail to resolve the dispute by the Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or
Return Amount, unless otherwise specified in Paragraph 13, the
Valuation Agent will recalculate the Exposure and the Value as of the
Recalculation Date by:
(A) utilizing any calculations of Exposure for the