EXHIBIT 10.02
NOTE SUBSCRIPTION AGREEMENT
Up to $150,000,000 Aggregate Principal Amount
of Variable Rate Subordinated Notes
Due 15 Years from Original Issuance Date
MBIA, INC.
December 27, 2001
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Swiss Re Financial Products Corporation, a Delaware corporation ("SRFPC"),
and XXXXX, a Delaware corporation ("XXXXX"), and together with SRFPC, the
"Providers"), and Swiss Re Capital Markets Corporation, a Delaware corporation,
as agent for the Providers ("SRCMC"), hereby confirm their agreement with MBIA,
Inc., a Connecticut corporation (the "Company"), with respect to the future
issue and sale by the Company, and the commitments for purchase by the
Providers, subject to the terms and conditions set forth herein, of up to
$150,000,000 aggregate principal amount of Variable Rate Subordinated Notes Due
15 Years from Original Issuance Date (the "Notes") of the Company. Capitalized
terms used herein shall have the meanings attributed thereto in Section 1
hereof.
The Providers understand that on any day during the Commitment Period on
which Incurred Losses exceed the Trigger Point (each such date, a "Trigger
Date") but in no event more frequently than once every 30 days, subject to the
terms and conditions stated herein, the Company shall have the right to require
the Providers to purchase Notes in an aggregate principal amount equal to the
amount by which Incurred Losses on such Trigger Date exceed the Trigger Point as
of such Trigger Date, minus the aggregate principal amount of Notes sold to the
Providers prior to such Trigger Date, but in no event exceeding the amount of
the Available Commitment in effect at such time. No Provider shall be obligated
to purchase more than its Pro Rata Share of the Notes. Incurred Losses shall be
determined in respect of certain financial guaranty insurance policies issued by
any of MBIA Insurance Corporation ("MBIA Corp."), MBIA Assurance, S.A., Capital
Markets Assurance Corporation, MBIA Insurance Corp. of Illinois and any other
financial guaranty company wholly owned by, or consolidated on the balance sheet
of, MBIA Corp. or the Company (collectively, the "Insurers"), as described in
greater detail herein.
The Providers understand that the Company may agree to issue, from time to
time, additional commitments for the purchase of Notes in excess of $150,000,000
aggregate principal amount to one or more subsequent providers (each, a
"Subsequent Provider"), although SRFPC
and XXXXX shall have no obligation to purchase such additional commitments. The
Company acknowledges and agrees that the Providers may also request that all or
a portion of the Commitments evidenced by this Agreement be assigned to
Subsequent Providers; provided, however, that in no event shall the aggregate
Commitments of SRFPC be less than $50,000,000.
1. Definitions. Except as otherwise defined herein and except where
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the context otherwise requires, the following terms shall have the following
meanings:
"AAA" has the meaning given to such term in Section 14.
"Affiliate" shall mean any management employee or director of the
Company or any Subsidiary, or holder of five percent (5%) or more of any
class of capital stock of the Company, or any member of their respective
immediate families or any corporation or other entity directly or
indirectly controlled by one or more of such management employees,
directors or 5% stockholders or members of their immediate families.
"Agreement" means this Note Subscription Agreement.
"Available Commitment" means, as of any date of determination during
the Commitment Period, the amount of the Commitments, minus (i) the face
amount of Notes sold to the Providers or with respect to which a Note
Issuance Request has been given to the Providers and not rescinded before
such date (it being understood that if for any reason one or more
Providers defaults on its Commitments to purchase Notes on any Closing
Date, such defaulting Provider's Pro Rata Share of the Available
Commitment shall be increased by the aggregate principal amount of Notes
such Provider failed to purchase), and (ii) any reduction of the
Commitments by the Company as set forth in Section 2(c), plus the amount
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of any Notes redeemed pursuant to Sections 2(g) or 3(c).
"Average Investment Rating" means the weighted average of the issue
credit ratings of the investments held in the investment portfolio by MBIA
Corp. (measured by the then-current fair market value of such
investments), as determined by S&P or Moody's (or if neither of S&P or
Xxxxx'x is then providing such service, another NRSRO then providing such
service), where (i) a debt rating of AAA or Aaa equals 1.0, AA or Aa
equals 2.0, A or A equals 3.0, BBB or Baa equals 4.0 and any rating below
BBB or Baa equals 7.0, respectively; (ii) a short term issue credit rating
of A-1+ and P-1 equals 2.0, A-1 and P-1 equals 2.5, and A-2 and P-2 equals
4; (iii) a debt rating by the NAIC of NAIC 1 equals 2, NAIC 2 equals 4 and
NAIC 3 equals 7, but only if any such NAIC-rated debt has not otherwise
been rated by S&P or Moody's; (iv) any unrated money market mutual fund
equals 3, and (v) any investment not rated as set forth in the foregoing
clauses (i) through (iv) equals 10. In the event that S&P or Moody's do
not have equivalent ratings within the investment class described in the
foregoing clause (i), the lower of the two ratings shall apply, and in the
event that only one NRSRO issues ratings within such investment class,
such single rating shall apply.
"Business Day" means any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law,
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regulation or executive order to close in The City of New York, New York
and that is also a London Banking Day.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"Case Basis Reserves" means the specific, identified loss reserves
established by an Insurer to cover estimated losses on policies for which
such Insurer has determined that it is likely to incur losses.
"Change in Control" means, with respect to any Person, the
acquisition by any other Person, or any two or more other Persons acting
in concert, of beneficial ownership (within the meaning of Rule 13d-3
under the 1934 Act), directly or indirectly, of securities of such Person
(or other securities convertible into such securities) representing 30% or
more of the combined voting power of all securities of such Person
entitled to vote in the election of directors, other than securities
having such power only by reason of the happening of a contingency.
"Claims Paying Ratio" means (i) the aggregate outstanding net debt
service insured by the Reference Portfolio Insurers divided by (ii) the
sum of (A) the aggregate statutory capital (including contingency
reserves, if any) of the Reference Portfolio Insurers, (B) the aggregate
unearned premium reserve (calculated on an after tax basis) of the
Reference Portfolio Insurers, (C) the aggregate statutory loss and loss
adjustment expense reserves of the Reference Portfolio Insurers, (D) the
aggregate present value of future installment premiums (calculated on an
after tax basis on the same basis as the Company calculates adjusted book
value for external reporting purposes) of the Reference Portfolio
Insurers, and (E) the aggregate face amount of soft capital facilities
(including, without limitation, "stop loss" reinsurance facilities, bank
facilities, letters of credit, the Commitments under this Agreement or
similar facilities) available to the Company or any such Reference
Portfolio Insurer which would make available to Company or any such
Reference Portfolio Insurer funds to cover losses under any policies
issued by any Reference Portfolio Insurer.
"Closing Date" means each date scheduled for the delivery of, and
payment for, Notes underlying the Commitments, pursuant to a Note Issuance
Request properly delivered to the Providers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" has the meaning ascribed to such term in Section
5(a)(13).
"Commitments" means the obligation of the Providers to purchase an
aggregate principal amount of Notes from time to time during the
Commitment Period not to
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exceed the amount set forth on Schedule A, provided that the obligation
of each Provider shall not exceed its Pro Rata Share of the Commitments.
"Commitment Fee" means any commitment fee payable by the Company to
a Provider pursuant to a Note Commitment Fee Agreement.
"Commitment Period" means the period from and including the
Effective Date to, but excluding, the Commitment Termination Date.
"Commitment Termination Date" means the earliest to occur of (i)
purchase by the Providers of an aggregate principal amount of Notes equal
to the Commitments, (ii) the tenth anniversary of the date of this
Agreement, and (iii) such other termination of the Commitments as provided
herein.
"Company" means MBIA, Inc., a Connecticut corporation.
"Covenant Default" has the meaning ascribed to such term in Section
7(c).
"Covenant Default Rate" has the meaning ascribed to such term in
Section 7(c).
"Debt to Capital Ratio" with respect to any Person means, as of the
end of any fiscal quarter, the ratio, determined on a consolidated basis
on such date, of (i) the aggregate outstanding Indebtedness of such Person
on such date, to (ii) the aggregate outstanding Indebtedness of such
Person on such date, plus Shareholders' Equity, plus, the accumulated
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amount, if any, by which Incurred Losses exceed earned premium plus
investment income, as reported by the Reference Portfolio Insurers in
their respective statutory financial statements, from the Effective Date
to the end of such fiscal quarter.
"Default Fee" has the meaning ascribed to such term in Section 7(c).
"Default Rate" has the meaning ascribed to such term in Section
7(c).
"Effective Date" means December 27, 2001.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is or was maintained or contributed to by
the Company, any of its Subsidiaries or any of their respective ERISA
Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within
the meaning of Section 414(b) of the Code of which that Person is a
member; (ii) any trade or business (whether or not incorporated) which is
a member of a group of trades or businesses under common control within
the meaning of Section 414(c) of the Code of which that Person is a
member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Code of which that Person, any
corporation described in
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clause (i) above or any trade or business described in clause (ii) above
is a member. Any former ERISA Affiliate of the Company or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of the
Company or such Subsidiary within the meaning of this definition with
respect to the period such entity was an ERISA Affiliate of the Company or
such Subsidiary and with respect to liabilities arising after such period
for which the Company or such Subsidiary could be liable under the Code or
ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect
to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to
meet the minimum funding standard of Section 412 of the Code with respect
to any Pension Plan (whether or not waived in accordance with Section
412(d) of the Code) or the failure to make by its due date a required
installment under Section 412(m) of the Code with respect to any Pension
Plan or the failure to make any required contribution to a Multiemployer
Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the withdrawal by the Company, any of its Subsidiaries or any of
their respective ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan
resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition which might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on the
Company, any of its Subsidiaries or any of their respective ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of
the application of Section 4212(c) of ERISA; (vii) the withdrawal of the
Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is
any potential liability therefor, or the receipt by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of
an act or omission which could give rise to the imposition on the Company,
any of its Subsidiaries or any of their respective ERISA Affiliates of
material fines, penalties, taxes or related charges under Section 4975 of
the Code or under Section 502(i) of ERISA in respect of any Employee
Benefit Plan; (ix) the assertion of a material claim (other than routine
claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against the Company, any of
its Subsidiaries or any of their respective ERISA Affiliates in connection
with any Employee Benefit Plan; (x) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code) to qualify under Section 401(a) of the Code, or the failure of any
trust forming part of any Pension Plan to qualify for exemption from
taxation under Section 501(a) of the Code; or (xi) the imposition of a
Lien pursuant to Section 401(a)(29) or 412(n) of the Code or pursuant to
ERISA with respect to any Pension Plan.
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"Event of Default" has the meaning ascribed to such term in Section
10.
"Event of Suspension" has the meaning ascribed to such term in
Section 9.
"Exercise Date" means any date on which the Company sends a Note
Issuance Request to the Providers to purchase Notes.
"GAAP" means generally accepted accounting principles in the United
States, applied consistently.
"Incurred Losses" means, as of any Exercise Date, the aggregate
amount during the period commencing on the Effective Date to and including
such Exercise Date of (i) claims on the Reference Portfolio paid by any of
the Reference Portfolio Insurers, net of any Reinsurance with respect to
any such claims, plus (ii) the change since the Effective Date in the
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aggregate amount of Case Basis Reserves net of expected recoveries in
effect with respect to the Reference Portfolio on such Exercise Date
established by any of the Reference Portfolio Insurers in accordance with
statutory accounting standards, net of any Reinsurance, plus (iii) loss
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adjustment expense on the Reference Portfolio, minus (iv) recoveries by a
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Reference Portfolio Insurer of any portion of amounts paid under the
foregoing clauses (i) and (iii).
"Indebtedness" of any Person as of any date shall mean (i) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services or which is evidenced by a note,
bond, debenture or similar instrument, (ii) all Capital Lease Obligations
of such Person, and (iii) all liabilities secured by any lien on any
property owned by such Person, even though such Person has not assumed or
otherwise become liable for the payment thereof; provided, however, that
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such term shall not include municipal investment agreements, municipal
repurchase agreements or securities loaned or sold under agreements to
repurchase.
"Insurers" has the meaning ascribed to such term in the second
introductory paragraph.
"Licenses" has the meaning ascribed to such term in Section 5(a)(4).
"LIBOR" has the meaning ascribed to such term in Exhibit 2(a)-1.
"London Banking Day" means a day on which commercial banks are open
for business (including dealings in United States dollars) in London.
"Loss Adjustment Amount" has the meaning ascribed to such term in
Section 2(g).
"Material Adverse Effect" means (i) a material adverse change in, or
a material adverse effect upon, the business, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a
whole, which results, or with the giving of notice or lapse of time would
result, in a material impairment of the ability of the Company to perform
under this Agreement or any related transaction documents, or (ii) a
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material adverse effect upon the legality, validity, binding effect or
enforceability against the Company of this Agreement or any related
transaction documents.
"MBIA Corp." has the meaning ascribed to such term in the second
introductory paragraph.
"Moody's" means Xxxxx'x Investors Service, Inc. or any successor
thereto.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NAIC" means the ratings office of the National Association of
Insurance Commissioners.
"Net Insured Face Amount" means, with respect to any insured
obligation, the notional par amount of such insured obligation, minus the
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amount of such insured obligation subject to Reinsurance. As used herein,
"Net Insured Face Amount" includes all notional amounts of insured credit
derivatives but excludes all other insured derivatives.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Note Commitment Fee Agreements" means any agreement between the
Company and any Provider with respect to the payment of Commitment Fees.
"Note Issuance Request" has the meaning ascribed to such term in
Section 2(a).
"Notes" shall have the meaning as defined in the first introductory
paragraph.
"NRSRO" means a nationally recognized statistical rating
organization.
"Original Issuance Date" means, with respect to any issuance of
Notes, the date when any such Notes are issued and sold in accordance with
this Agreement.
"Parties" has the meaning given to such term in Section 14.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Code or Section
302 of ERISA.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land
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trusts, business trusts or other organizations, whether or not legal
entities, and governments (whether federal, state or local, domestic or
foreign, and including political subdivisions thereof) and agencies or
other administrative or regulatory bodies thereof.
"Portfolio Certificate" has the meaning ascribed to such term in
Section 7(a)(6).
"Pro Rata Share", with respect to each Provider, means the
percentage set forth opposite such Provider on Schedule A.
"Providers" has the meaning as defined in the first introductory
paragraph.
"Ratings Non-Compliance Period" means the period commencing on the
date that the Company's senior unsecured debt ratings by S&P or Moody's
are reduced to A+/A1 or lower, respectively, or the date that any
Reference Portfolio Insurer's insurance financial strength ratings by S&P
or Moody's are reduced to AA+/Aa1 or lower, respectively, and ending on
the date that the ratings of the Company and the Reference Portfolio
Insurers increase to AA-/Aa3 or higher and AAA/Aaa, respectively.
"Redemption Amount" has the meaning ascribed to such term in Section
2(g).
"Redemption Date" has the meaning ascribed to such term in Section
2(g).
"Reference Portfolio" means all financial guaranty insurance
policies issued by any of the Reference Portfolio Insurers or reinsurance
assumed by any of such Reference Portfolio Insurers. Notwithstanding the
foregoing, "Reference Portfolio" shall not include insurance or
reinsurance of unsecured obligations of Southern California Edison Company
and Pacific Gas and Electric Company, until such time, if any, as any such
unsecured obligation is upgraded to a rating of Baa3/BBB- or better by
Moody's and S&P, respectively, and such obligation maintains such ratings
for a period of 6 months.
"Reference Portfolio Insurer" means all Insurers other than those
Insurers which the Company has advised the Providers in writing are
"excluded Insurers" for purposes of determining the Reference Portfolio,
provided that MBIA Corp. remains at all times a Reference Portfolio
Insurer.
"Reinsurance" means any reinsurance agreement or arrangement under
which a third party reinsures any individual or related group of policies
on a quota share or non-proportional basis, but excluding any reinsurance
of the type customarily referred to as "stop loss."
"Senior Indebtedness" means Indebtedness of the Company outstanding
as of the Effective Date, or thereafter created, for all liabilities
senior to or pari passu with money borrowed from banks, insurance
companies and other financial institutions, unless the instrument creating
or evidencing such Indebtedness provides that such Indebtedness is not
senior to the Notes.
"Shareholders' Equity" of any Person at any date means such number
as calculated in accordance with GAAP as of such date.
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"S&P" means Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc. or any successor thereto.
"SRCMC" has the meaning as defined in the first introductory
paragraph.
"Structuring Fee" means the structuring fee payable by the Company
to SRCMC pursuant to the Structuring Fee Agreement.
"Structuring Fee Agreement" means the agreement of even date
herewith between the Company and SRCMC, setting forth the Structuring Fee
payable by the Company to SRCMC.
"Subsequent Provider" has the meaning as defined in the third
introductory paragraph.
"Subsidiary" means any corporation or other entity with a GAAP net
worth in excess of $10 million of which at least a majority of the
securities or other ownership interest having ordinary voting power
(absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company or any of its other Subsidiaries.
"Tangible Net Worth" means, as at any date for any Person, the sum
of the following with respect to such Person and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP):
(i) Shareholders' Equity; minus
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(ii) the net present value of any liabilities due to the PBGC
or to any Employee Benefit Plan under Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA (to the extent not
otherwise deducted in the calculation of Shareholders' Equity);
minus
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(iii) the book value of all intangible assets.
"Termination Date" means December 27, 2011.
"Trigger Date" has the meaning ascribed to such term in the second
introductory paragraph.
"Trigger Point" means, as of any date with respect to the Reference
Portfolio, the sum of (i) 0.10% of the aggregate Net Insured Face Amount
of the domestic public finance general obligation portfolio, plus (ii)
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0.30% of aggregate Net Insured Face Amount of the domestic public finance
non-general obligation portfolio, plus (iii) 0.30% of the aggregate Net
----
Insured Face Amount of the portion of the international structured finance
and domestic structured finance portfolios which are rated triple A
(explicitly or via a "shadow" rating) by all (and in no event less than
one) NRSROs which rate such obligations, plus (iv) 0.50% of the aggregate
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Net Insured Face Amount of the portion of the domestic structured finance
portfolio which is not rated triple A by all (and in no
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event less than one) NRSROs, plus (v) 0.70% of the aggregate Net Insured
----
Face Amount of the domestic health care and domestic investor-owned
utility portfolios, plus (vi) 0.80% of the aggregate Net Insured Face
----
Amount of the Reference Portfolio not included in (i) through (v) above,
in each case determined as of the close of business on December 31 of the
preceding calendar year.
"US$" or "$" means United States Dollars. To the extent any losses,
liabilities or other amounts described or referred to in this Agreement
are stated or denominated in currencies other than United States Dollars,
such losses, liabilities or amounts shall be stated, for purposes of this
Agreement, in their respective United States Dollar equivalents as shown
in the Company's financial statements.
2. Subscription. (a) General. Subject to the terms and conditions
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contained herein, including, without limitation, Section 2(g) below, each
Provider hereby irrevocably subscribes for and agrees to purchase Notes in an
aggregate principal amount not to exceed its Pro Rata Share of the Commitments.
Upon the occurrence of any Trigger Date occurring during the Commitment Period,
the Company may request in writing (a "Note Issuance Request") that each
Provider purchase its Pro Rata Share of the Notes in an aggregate principal
amount which shall equal the amount by which Incurred Losses on such Trigger
Date exceed the Trigger Point as of such Trigger Date, minus the aggregate
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principal amount of Notes issued and sold to the Providers prior to such Trigger
Date; provided that the principal amount of the Notes issued at any time during
the Commitment Period shall not exceed the Available Commitment then in effect.
The Company shall make each Note Issuance Request in the manner set forth in
Section 3 of this Agreement. The Notes shall be issued in the form of, and upon
the terms set forth in, the form of Note attached hereto as Exhibit 2(a)-1. Each
Note issued pursuant to this Agreement shall have a maturity of 15 years from
the Original Issuance Date applicable to such Note and shall bear interest at a
rate of LIBOR plus the applicable Margin, as such terms are defined in Exhibit
2(a)-1.
(b) Limitations. Each Note Issuance Request by the Company during the
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Commitment Period shall be in aggregate increments of $5,000,000 or integral
multiples of $1,000,000 in excess thereof (or in the event that the Available
Commitment at such time is less than such amounts, the amount of the Available
Commitment). The Company shall not make more than one Note Issuance Request
during any 30 calendar day period.
(c) Reduction of Commitments. The Commitments may be permanently reduced
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(i) at the option of the Company, upon 10 Business Days' written notice to the
Providers, in a minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess thereof (or in the event that the Available Commitment at
such time is less than such amounts, the amount of the Available Commitment).
The Commitments of any Provider shall terminate on the earliest to occur of (i)
upon the occurrence of an Event of Default referred to in Sections 10(e) and
10(f), (ii) at the option of such Provider, upon the occurrence of any other
Event of Default, and (iii) on the Termination Date. In the case of clause (ii)
above, such termination shall take effect upon the date of written notice from
such Provider to the Company. The Available Commitment shall be permanently
reduced on each Original Issuance Date in an amount equal to the purchase price
of the Notes purchased on such date (subject to increase in accordance with the
provisions of Section 2(g)).
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(d) Payment of Structuring Fee. On the effective date of any commitments
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to purchase Notes, SRCMC shall be deemed to have earned, and the Company shall
pay to SRCMC, the Structuring Fee. The Structuring Fee shall be incurred by the
Company only once, on the applicable effective date.
(e) Payment of Fees. On the Effective Date, and on each anniversary
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thereafter during the Commitment Period, each Provider shall be deemed to have
earned, and the Company shall pay to such Provider, its Pro Rata Share of the
Commitment Fee, as set forth in the Note Commitment Fee Agreements.
(f) Ranking. The Notes will be subordinated in right of payment to all
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Senior Indebtedness. The subordination of the Notes to Senior Indebtedness shall
not affect the obligation of the Company to make, or prevent the Company from
making, other than as provided in the Notes, payments at any time of principal
of, premium, if any, or interest on the Notes.
(g) Provider's Redemption Option. Following any Exercise Date, in the
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event that there shall be a reduction (the "Loss Adjustment Amount") in the
Incurred Losses as set forth in the Note Issuance Request applicable to such
Exercise Date (as a result of the reduction of Case Basis Reserves, recoveries
or other adjustments, whether determined upon review by the Company or by a
Provider pursuant to Section 3(c) below), each Provider shall have the right to
require the Company to redeem a principal amount of Notes equal to its Pro Rata
Share of the Loss Adjustment Amount (the "Redemption Amount"). Such redemption
shall be made on the form of notice attached to such Note and shall occur on the
date (the "Redemption Date") stated therein, which shall be not less than 5
Business Days after the date of such notice. The Company shall redeem such
portion of Notes in cash at a purchase price equal to 100% of the Redemption
Amount plus accrued and unpaid interest on the Redemption Amount to, but
excluding, the Redemption Date. If on any Redemption Date the Company does not
have sufficient funds to pay the Redemption Amount to any Provider, the Notes
underlying such payment obligation shall continue to accrue interest at the
applicable rate plus the Default Rate provided by Section 7(c) of this
Agreement, until such time as the Redemption Amount is paid in full. In such
event, the Company's obligation to redeem the Notes shall be deferred until the
first Business Day on which the Company shall have sufficient funds, at which
time the Company shall pay the Redemption Amount immediately to the Providers.
3. Method of Exercise and Redemption. (a) Funding of Commitments will
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generally be scheduled to occur on a specified date, as mutually agreed upon by
the Company and the Providers, within 5 to 10 Business Days after the Providers
receive a Note Issuance Request (as defined below). In no event, however, shall
a Closing Date occur more than 20 Business Days after receipt of a Note Issuance
Request unless all parties otherwise agree.
(b) In the event that the Company desires to make a Note Issuance Request
in connection with any Trigger Date occurring during the Commitment Period, the
Company shall deliver such Note Issuance Request (in the form attached hereto as
Exhibit 3) to the Providers, in accordance with the notice provisions of Section
13. Each Note Issuance Request shall specify (i) the aggregate purchase price
for the Notes to be issued, (ii) the amount of the Incurred Losses and the
Trigger Point as of the Exercise Date and (iii) the proposed Closing Date, which
shall not
11
be less than 5 Business Days or more than 20 Business Days after the date of
receipt of the Note Issuance Request.
(c) Within 20 Business Days after any Closing Date, the Providers shall
be permitted reasonable access to loss records of the Company and its applicable
Subsidiaries relating to the Incurred Losses referred to in the applicable Note
Issuance Request (including, without limitation, policy files, claim files, and
loss and loss reserve files, or information and personnel, during normal
business hours of the Company and its applicable Subsidiaries). If any Provider
determines that any information or calculations contained in, or delivered with,
the Note Issuance Request, or any of the representations and warranties made, or
documents delivered, on the Closing Date in respect of such Note Issuance
Request, were materially inaccurate or misleading, and such defect, if known,
would have prevented the Closing Date from occurring, such Provider shall have
the right, subject to the dispute resolution provisions contained in Section 14
hereof, to require the Company to redeem any such Notes pursuant to Section
2(g).
(d) The Providers shall make available, on the applicable Closing Date
(or the next following Business Day if such Closing Date is not a Business Day),
by wire transfer of immediately available funds, in U.S. dollars, the aggregate
purchase price specified in the Note Issuance Request (less any fees deducted as
provided in the next sentence), against the delivery by the Company of the
Notes. On any Closing Date, the purchase price payable to the Company with
respect to the Notes to be issued on such date shall be reduced by the aggregate
amount of any Structuring Fee, Commitment Fees, Default Fees or any other
charges, fees or other costs hereunder which remain unpaid as of such Closing
Date.
4. Closings. Delivery of and payment for the Notes which are required to
--------
be delivered on any applicable Closing Date shall be made at the offices of the
Providers set forth in Section 13 (or such other place as may be determined by
agreement among the Company, the Providers and SRCMC), at 10:00 a.m., New York
time, on such Closing Date. Delivery of such Notes shall be made against payment
of the purchase price to the order of the Company in immediately available funds
by transfer to an account designated by the Company or by such other means as
shall be acceptable to the Company, the Providers and SRCMC. Payment for the
Notes shall be subject to delivery on the Closing Date of a certificate (in the
form of Exhibit 4 attached hereto) signed by the Chief Financial Officer,
Treasurer or Controller of the Company, certifying compliance with the
conditions set forth in Section 12(b).
5. Representations and Warranties of the Company and its Subsidiaries.
------------------------------------------------------------------
(a) The Company, on its behalf and on behalf of each of its Subsidiaries,
represents and warrants to the Providers and SRCMC as of the date hereof that:
(1) Existence and Qualification. The Company has been duly
---------------------------
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Connecticut with full corporate power
and authority to enter into and perform its obligations under this
Agreement and to own its properties and conduct its business as
currently being conducted. The Company is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except
12
where the failure to so qualify or be in good standing would not have
a Material Adverse Effect.
(2) Existence and Qualification of Reference Portfolio Insurers.
-----------------------------------------------------------
Each Reference Portfolio Insurer has been duly organized and is
validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and
authority to own, lease and operate its properties and conduct its
business as currently being conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have
a Material Adverse Effect; all of the issued and outstanding shares of
capital stock or other equity interests, as applicable, of each
Reference Portfolio Insurer have been duly authorized and are validly
issued, fully paid and non-assessable and, except for qualifying
shares, are owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and none of the outstanding shares of
capital stock of any Reference Portfolio Insurer was issued in
violation of preemptive or other similar rights of any securityholder
of such Reference Portfolio Insurer.
(3) No Material Changes. Since the date of filing of the
-------------------
Company's Annual Report on Form 10-K for the year ended December 31,
2000, except as otherwise stated therein or in any subsequently filed
Quarterly Report on Form 10-Q, or as disclosed in any subsequently
filed Current Report on Form 8-K filed prior to the date hereof, there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, operations, business affairs or
business prospects of the Company and its Subsidiaries, considered as
one enterprise, whether or not arising in the ordinary course of
business.
(4) Regulatory Matters. The Insurers have all requisite licenses,
------------------
permits and authority that are necessary for the conduct of their
respective insurance businesses, except where the failure to obtain
such licenses, permits or authorities would not have a Material
Adverse Effect (collectively, "Licenses"), such Licenses are in full
force and effect, and no proceeding is pending or, to the Company's
knowledge, threatened to suspend, revoke or limit any such License.
(5) Binding Obligations. The acceptance of the subscription
-------------------
hereof by the Company, as evidenced by its signature on the signature
page of this Agreement, and the execution, delivery and performance of
this Agreement will have been duly authorized by all necessary action
on behalf of the Company, and this Agreement, by virtue of such
acceptance, will, upon approval hereof by the Company's Board of
Directors, be a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or
other laws related to or affecting the enforcement of creditors'
rights generally or by equitable principles.
13
(6) Options or Rights with Respect to Insurers. There are (i) no
------------------------------------------
outstanding subscriptions, warrants, options, calls or commitments of
any character relating to or entitling any Person to purchase or
otherwise acquire any stock of any Insurer and (ii) no obligations or
securities convertible into or exchangeable for shares of any stock of
any Insurer or any commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any such
obligations or securities.
(7) Absence of Litigation. There are no legal or governmental
---------------------
proceedings pending to which the Company or any Insurer is a party or
of which any property of the Company or any Insurer is the subject,
and which, if determined adversely to the Company or any Insurer could
reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect; and to the best of the Company's knowledge,
no such proceedings are threatened nor has the Company been informed
that it or an Insurer is the subject of an investigation by
governmental authorities. There are no outstanding orders, judgments,
injunctions or decrees of any governmental authority against the
Company or any Insurer.
(8) No Violation or Conflict. Neither the Company nor any Insurer
------------------------
has any knowledge that it is, or with the giving of notice or passage
of time or both, would be, in breach or violation of any of the terms
or provisions of or in default under (i) any statute, rule or
regulation applicable to the Company or any Subsidiary, (ii) any
indenture, contract, lease, mortgage, deed of trust, note or other
agreement or instrument for over $25,000,000 to which the Company or
any Subsidiary is a party or by which it may be bound, (iii) its
certificate of incorporation, by-laws or other organizational
documents, and (iv) any order, decree or judgment of any court or
governmental agency or body having jurisdiction over the Company or
any Subsidiary except, with respect to breaches, violations or
defaults contemplated by clauses (i), (ii), (iii) or (iv), for such
breaches, violations or defaults that could not, individually or in
the aggregate, be reasonably expected to result in a Material Adverse
Effect. The performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not, with
the giving of notice or passage of time or both, result in a breach or
violation of any of the terms or provisions of or constitute a default
under or accelerate obligations under (w) any material statute, rule
or regulation applicable to the Company or any Subsidiary, (x) any
indenture, contract, mortgage, lease, deed of trust, note or other
agreement or instrument for over $25,000,000 to which the Company or
any Subsidiary is a party or by which it is bound, (y) the Company's
or any Subsidiary's certificate of incorporation or by-laws or (z) any
order, decree or judgment of any court or governmental agency or body
having jurisdiction over the Company or any Subsidiary or any of their
properties; provided, however, that no breach of the foregoing
representation and warranty shall be deemed to have occurred if such
breach arises from a failure by the Company to satisfy a debt leverage
test as a consequence of the issuance of the Notes.
14
(9) Compliance with 1940 Act. The Company is not an "investment
------------------------
company" or an entity "controlled" by an "investment company" as such
terms are defined in the 0000 Xxx.
(10) Compliance with 1933 Act. It is not necessary in connection
------------------------
with the offering of the Commitments or the underlying Notes, to
register the Commitments or such Notes under the 1933 Act or to
qualify and indenture under the Trust Indenture Act of 1939, as
amended. No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the
valid authorization, issuance, sale and delivery of the Commitments or
the underlying Notes, except such as may be required under the Blue
Sky laws or other securities or insurance securities laws of the
various states, which the Company represents have been complied with,
and any other requirements applicable to subscribers for Commitments,
as to which the Company makes no representation.
(11) No General Solicitation. None of the Company or any
-----------------------
Affiliate or any Person acting on its behalf (other than SRCMC, as to
which no representation is made) has (A) engaged, in connection with
the offering of subscriptions for the Commitments, in any form of
general solicitation or general advertising (as those terms are used
within the meaning of Regulation D under the 1933 Act), or (B)
solicited offers for, or offered or sold, subscriptions for the
Commitments and the underlying Notes by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the 0000 Xxx) or in any manner involving a public
offering within the meaning of Section 5 of the 1933 Act.
(12) Employee Benefit Plans.
----------------------
(i) The Company and each of its Subsidiaries are in
compliance with all applicable provisions and requirements of
ERISA, the Code and the regulations and published interpretations
thereunder with respect to each of their Employee Benefit Plans,
and have performed all their obligations under each of their
Employee Benefit Plans, except where the failure to comply or
perform would not have a Material Adverse Effect. Each Employee
Benefit Plan maintained by the Company and its Subsidiaries which
is intended to qualify under Section 401(a) of the Code is so
qualified.
(ii) No ERISA Event has occurred or is reasonably expected
to occur, except where such occurrence would not have a Material
Adverse Effect.
(13) 1934 Act Compliance. The Company's most recent Annual Report
-------------------
filed on Form 10-K and its Quarterly Reports filed on Form 10-Q and
any Current Reports filed on Form 8-K filed after the date of such
Form 10-K, at the time they were filed with the U.S. Securities and
Exchange Commission (the
15
"Commission") and as of the Effective Date, complied and comply in all
material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission under the 1934 Act and, at the
Effective Date, do not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) The Company, on its behalf and on behalf of each of its Subsidiaries,
shall be deemed to have represented to each Provider as of each Closing Date
that:
(1) Existence and Qualification. The Company has been duly
---------------------------
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Connecticut with full corporate power
and authority to enter into and perform its obligations under this
Agreement including, without limitation, the issuance and sale of the
Notes, and to own its properties and conduct its business as currently
being conducted. The Company is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have
a Material Adverse Effect.
(2) Existence and Qualification of Reference Portfolio Insurers.
-----------------------------------------------------------
Each Reference Portfolio Insurer has been duly organized and is
validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and
authority to own, lease and operate its properties and conduct its
business as currently being conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have
a Material Adverse Effect; all of the issued and outstanding shares of
capital stock or other equity interests, as applicable, of each
Reference Portfolio Insurer have been duly authorized and are validly
issued, fully paid and non-assessable and, except for qualifying
shares, are owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and none of the outstanding shares of
capital stock of any Reference Portfolio Insurer was issued in
violation of preemptive or other similar rights of any securityholder
of such Reference Portfolio Insurer.
(3) Binding Obligations. The acceptance of the subscription
-------------------
hereof by the Company as evidenced by its signature on the signature
page of this Agreement, the execution, delivery and performance of
this Agreement and the issuance of the Notes, will have been duly
authorized by all necessary action on behalf of the Company, and this
Agreement, by virtue of such acceptance, and the Notes will be a
legal, valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws related
to or affecting the enforcement of creditors' rights generally or by
equitable principles.
16
(4) Options or Rights with Respect to Insurers. There are (i) no
------------------------------------------
outstanding subscriptions, warrants, options, calls or commitments of
any character relating to or entitling any Person to purchase or
otherwise acquire any stock of any Insurer and (ii) no obligations or
securities convertible into or exchangeable for shares of any stock of
any Insurer or any commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any such
obligations or securities.
(5) Compliance with 1940 Act. The Company is not an "investment
------------------------
company" or an entity "controlled" by an "investment company" as such
terms are defined in the 0000 Xxx.
(6) Compliance with 1933 Act. Assuming the Notes are issued and
------------------------
sold in the manner provided for herein, it is not necessary in
connection with the issuance and sale of the Notes underlying the
Commitments, to register such underlying Notes under the 1933 Act or
to qualify an indenture under the Trust Indenture Act of 1939, as
amended. No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the
valid authorization, issuance, sale and delivery of such underlying
Notes, except such as may be required under the Blue Sky laws or other
securities or insurance securities laws of the various states, which
the Company represents have been complied with, and any other
requirements applicable to purchasers of Notes, as to which the
Company makes no representation.
(7) No General Solicitation. None of the Company or any Affiliate
-----------------------
or any Person acting on its behalf (other than SRCMC, as to which no
representation is made) has (A) engaged, in connection with the
offering of the underlying Notes, in any form of general solicitation
or general advertising (as those terms are used within the meaning of
Regulation D under the 1933 Act), or (B) solicited offers for, or
offered or sold, the underlying Notes by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the 0000 Xxx) or in any manner involving a public
offering within the meaning of Section 5 of the 1933 Act.
(8) Employee Benefit Plans.
----------------------
(i) The Company and each of its Subsidiaries are in
compliance with all applicable provisions and requirements of
ERISA, the Code and the regulations and published interpretations
thereunder with respect to each of their Employee Benefit Plans,
and have performed all their obligations under each of their
Employee Benefit Plans, except where the failure to comply or
perform would not have a Material Adverse Effect. Each Employee
Benefit Plan maintained by the Company and its Subsidiaries which
is intended to qualify under Section 401(a) of the Code is so
qualified.
17
(ii) No ERISA Event has occurred or is reasonably expected
to occur, except where such occurrence would not have a Material
Adverse Effect.
6. Representations and Warranties of Providers. Each Provider, severally
-------------------------------------------
and not jointly, represents and warrants to the Company as of the date hereof,
and as of each Closing Date (excluding the first clause in the first sentence in
Section 6(b)), as follows:
(a) Existence and Qualifications of Provider. The Provider is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and the Provider has the full
corporate power and authority to execute and deliver this Agreement, and to
perform its obligations under, and consummate the transactions contemplated by,
this Agreement, including, without limitation, the purchase of the Notes
pursuant to the making of a Note Issuance Request by the Company as described in
this Agreement.
(b) No Violation or Conflict. The execution and delivery of this Agreement
------------------------
by the Provider, and the performance of the Provider under this Agreement, do
not violate or conflict with any applicable law, any provision of the Provider's
organizational documents or any order or judgment of any court or other
government agency applicable to the Provider, or any contractual restriction
binding upon or affecting the Provider.
(c) Consents. All governmental and other consents that are required to
--------
have been obtained by the Provider with respect to the execution and delivery of
this Agreement have been obtained by the Provider and are in full force and
effect and all conditions of any such consents have been complied with.
(d) Investment Representation. The Provider understands that the
-------------------------
Commitments and the issuance of the underlying Notes upon the making by the
Company of a Note Issuance Request under this Agreement have not been and will
not be registered under the 1933 Act and the underlying Notes will be issued in
reliance upon exemptions form the registration requirements of the 1933 Act. The
Provider represents that (a) it is executing its Commitment and acquiring any
underlying Notes solely for its own account, for investment purposes only, and
not with a view to distribution, fractionalization or resale thereof, except as
otherwise permitted under this Agreement, (b) it will not sell or otherwise
dispose of its Commitment or any underlying Notes except in compliance with the
registration requirements or exemption provisions of applicable securities laws
including the 1933 Act, (c) it has not relied on the Company for any explanation
of the application of the various U.S. state and federal securities laws with
regard to the execution of its Commitment or the acquisition of the underlying
Notes, (d) it has access to complete information regarding the business and
finances of the Company, and has received, read and understood the contents of
the Company's SEC filings, (e) it has such knowledge and experience in business
and financial matters that it has been able to fully understand and completely
evaluate the risks and merits of acquiring its Commitment and holding any
underlying Notes, (f) it is able to bear the economic risk and limitation in
liquidity of its Commitment and of an investment in the Notes, (g) it has
reviewed all documents furnished to it in connection with the investment in the
Commitments and the underlying Notes contemplated hereby, (h) it is an
"accredited investor" as such term is defined in Regulation D,
18
as amended, under the 1933 Act, (i) it is not a broker-dealer subject to
Regulation T of the United States Federal Reserve Board, (j) in making its
decision to acquire the Commitments and the underlying Notes, it has relied upon
independent investigations made by it and, to the extent believed by it to be
appropriate, its representatives, in addition to the representations and
warranties and agreements of the Company contained herein, and (k) it and its
representatives have been given the opportunity to examine all documents and to
ask questions of, and to receive answers from, the Company and its
representatives concerning the terms and conditions of the purchase of the
Commitments and the underlying Notes and to obtain any additional information
which it or its representatives deem necessary.
(e) Binding Obligations. The execution of this Agreement has been duly
-------------------
authorized by all necessary corporate action of the Provider, and this Agreement
(a) constitutes the legal, valid and binding obligation of the Provider, and (b)
is enforceable against the Provider in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application).
7. Covenants and Agreements of the Company. (a) The Company covenants and
---------------------------------------
agrees with the Providers for the duration of the Commitment Period and for so
long as any Notes remain outstanding that:
(1) Audited Financial Statements of the Company. The Company shall
-------------------------------------------
deliver to the Providers, within ten Business Days after the filing of
its Form 10-K with the Commission, income statements for such fiscal
year, balance sheets as of the end of such fiscal year and statements
of cash flows for such fiscal year, together with such notes thereto
as are appropriate, prepared in accordance with GAAP and setting forth
in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and certified by the independent public
accountants of the Company. The parties hereto agree that delivery of
the Company's Form 10-K will satisfy such information requirements, as
long as the information required under this paragraph is contained in
such Form 10-K. Notwithstanding the foregoing, in the event that the
Company is no longer a publicly held company, the Company shall
deliver the information required under this paragraph within 90 days
of the end of such fiscal year.
(2) Audited Financial Statements of MBIA Corp. The Company shall cause
-----------------------------------------
MBIA Corp. to deliver to the Providers, within ten Business Days after
the filing of any statutory financial statements, income statements
for such fiscal year, balance sheets as of the end of such fiscal year
and statements of cash flows for such fiscal year, together with such
notes thereto as are appropriate, prepared in accordance with
applicable statutory accounting principles consistently applied
(except as noted in the audit comments thereto) and setting forth in
each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and certified by the independent public
accountants of MBIA Corp. The parties hereto agree that the delivery
of MBIA Corp's statutory financial statements will satisfy such
information requirements, as long as the information required under
this paragraph is contained therein. Notwithstanding the foregoing,
the Company
19
shall deliver the information required under this paragraph no later
than 70 days after the end of such year.
(3) Unaudited Financial Statements of the Company. The Company shall
---------------------------------------------
deliver to the Providers, within ten Business Days after the filing of
a Form 10-Q by the Company with the Commission, unaudited income
statements for such quarter and the current fiscal year to date and
unaudited balance sheets as of the end of such quarter, along with
statements of profits and losses and cash flows for such quarter and
the current fiscal year to date, prepared in accordance with GAAP
(except for the omission of financial statement footnotes and subject
to recurring year-end adjustments), certified by the Chief Financial
Officer, Treasurer, or Controller of the Company. The parties hereto
agree that the delivery of the Company's Form 10-Q will satisfy such
information requirements, as long as the information required under
this paragraph is contained in such Form 10-Q.
(4) Unaudited Financial Statements of MBIA Corp. The Company shall
-------------------------------------------
cause MBIA Corp. to deliver to the Providers, within ten Business Days
after the filing of any statutory financial statements, unaudited
income statements for such quarter and the current fiscal year to date
and unaudited balance sheets as of the end of such quarter, along with
statements of profits and losses and cash flows for such quarter and
the current fiscal year to date, prepared in accordance with
applicable statutory accounting principles consistently applied
(except as noted in the audit comments thereto), certified by the
Chief Financial Officer, Treasurer, or Controller of MBIA Corp. The
parties hereto agree that the delivery of MBIA Corp.'s statutory
financial statements will satisfy such information requirements, as
long as the information required under this paragraph is contained
therein.
(5) Other Informational Filings. The Company shall deliver to the
---------------------------
Providers, within ten Business Days after the filing of any Form 8-K
(or any successor form) of the Company with the Commission, copies of
such Form 8-K or successor form.
(6) Certification; Officer's Certificates. The quarterly and annual
-------------------------------------
reports described in Sections 7(a)(1) through 7(a)(4) shall be
certified by the Chief Financial Officer, Treasurer, or Controller of
the Company or MBIA Corp., as the case may be. Such certified
financial information shall be submitted with a certificate of the
Chief Financial Officer, Treasurer, or Controller of the Company (the
"Portfolio Certificate") setting forth (i) (A) annually, the insured
obligations comprising the Reference Portfolio, and (B) quarterly, any
insured obligations added to the Reference Portfolio since the annual
certification described in foregoing clause (A) most recently
delivered to the Providers, and (ii) calculating in reasonable detail
as of the date of the most recent financial statements described in
Sections 7(a)(1) through 7(a)(4), (A) annually, the Trigger Point, (B)
quarterly, to the extent published or otherwise provided by the
Company, "Quarterly Operating Supplemental Statements" (as currently
reflected on the Company's world wide web page), (C) quarterly, so
long as the Commitments are outstanding, cumulative Incurred Losses,
including Case Basis Reserves during
20
the Commitment Period (to the extent not otherwise required to be
delivered hereunder), (D) quarterly, evidence of occurrence, amount of
Case Basis Reserves (to the extent not otherwise required to be
delivered hereunder), and (E) quarterly, a certification that no
default of the nature contemplated in Section 7(a)(7) below or Event
of Default has occurred, or if any such event has occurred, the nature
and extent of such default or Event of Default.
(7) Notice of Default. The Company shall deliver to the Providers
-----------------
notice of an event of default or similar event as defined in any
mortgage, indenture, instrument or agreement under which there may be
issued, or by which there may be secured or evidenced, any
Indebtedness of the Company or any of its Subsidiaries in an aggregate
principal amount in excess of $25,000,000, whether such Indebtedness
now exists or shall hereafter be created, promptly, but in any event
within 3 Business Days after the Company's first knowledge of the
occurrence thereof.
(8) Compliance with ERISA. The Company shall, and shall cause all of
---------------------
its Subsidiaries to, comply with all applicable laws, regulations and
similar requirements of governmental authorities relating to ERISA,
the Code and the PBGC, except where the necessity of such compliance
is being contested in good faith through appropriate proceedings
diligently pursued, or where failure to comply with any such laws
would not, alone or in the aggregate, have a Material Adverse Effect.
Any breach of this covenant shall be deemed to have been cured upon
the delivery by the Company to the Providers of correspondence or
other evidence from the Department of Labor, PBGC, Internal Revenue
Service or other governmental authority having jurisdiction over such
matter, establishing that any fines have been paid or such matter has
otherwise been fully resolved.
(9) Notice of ERISA Event. The Company shall deliver to the Providers
---------------------
notice of an ERISA Event promptly, but in any event within 10 Business
Days of the Company's first knowledge of the occurrence of such ERISA
Event.
(10) Books, Records and Inspections. The Company shall, and shall
------------------------------
cause each of its Subsidiaries to, permit any authorized
representatives designated by SRCMC or the Providers to visit the
offices of the Company or of any of its Subsidiaries, to inspect, copy
and take extracts from its and their financial and accounting records,
and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants (provided that
Company may, if it so chooses, be present at or participate in any
such discussion), all upon reasonable notice and at such reasonable
times during normal business hours and as often as may reasonably be
requested.
(11) GAAP and Statutory Records. The Company shall maintain systems of
--------------------------
accounting established and administered in accordance with sound
business practices and sufficient in all respects to permit
preparation of financial statements in conformity with GAAP. The
Insurers shall maintain systems of accounting established and
administered in accordance with sound business practices and
sufficient in all respects to permit preparation of statutory
financial
21
statements prepared in accordance with applicable statutory accounting
principles consistently applied. Any breach of this covenant shall be
deemed to have been cured upon the delivery by the Company to the
Providers of a letter from the Company's independent auditors stating
that the Company's or the relevant Insurer's accounting systems
satisfy the requirements of this Section 7(a)(11).
(12) Insurance. The Company shall, and shall cause each of its
---------
Subsidiaries to, maintain or cause to be maintained, with financially
sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and
casualty insurance with respect to liabilities, losses or damage in
respect of the assets, properties and businesses of the Company and
its Subsidiaries as may customarily be carried or maintained under
similar circumstances by corporations of established reputation
engaged in similar businesses, in each case in such amounts (giving
effect to self-insurance), with such deductibles, covering such risks
and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry, except where the
failure to so maintain such insurance would not result in a Material
Adverse Effect.
(13) Corporate Franchises. The Company and each Insurer will at all
--------------------
times preserve and keep in full force and effect its existence as a
corporation, limited partnership or limited liability company, as the
case may be, and all rights and franchises material to its business,
including its qualification to do business in each state where it is
required by law to so qualify.
(14) Payment of Obligations. The Company and each of the Reference
----------------------
Portfolio Insurers shall perform, observe, comply and fulfill all of
their respective payment obligations contained in any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which it is a party or by which it or any of its
properties is bound or to which it or any of its properties is
subject, except where the failure to so perform, observe, comply and
fulfill would not have a Material Adverse Effect.
(15) Rating. The Company shall use its best efforts to obtain and
------
maintain a rating on the Notes from the Securities Valuation Office of
the National Association of Insurance Commissioners.
(16) Further Assurances. The Company and its Subsidiaries shall, from
------------------
time to time, execute and deliver such documents, agreements and
reports, and perform such acts as SRCMC or the Providers at any time
may reasonably request to carry out the purposes and otherwise
implement the terms and provisions provided for in this Agreement.
(b) Grace Periods. In the event that the Company defaults in the
-------------
performance of the affirmative covenants described in Sections 7(a)(6)(ii)(E)
and 7(a)(7), the Company shall be entitled to a grace period of 5 Business Days
after the occurrence of such event. In the event that the Company defaults in
the performance of any other affirmative covenants described in
22
Section 7(a), the Company shall be entitled to a grace period of 30 Business
Days after the occurrence of such event.
(c) In the event that the Company fails to observe or perform any
covenant, condition or agreement to be observed under the affirmative covenants
in Section 7(a) in any material respect and such failure to observe or perform
such affirmative covenant continues uncured for a period beyond the applicable
grace period described in Section (7)(b) (a "Covenant Default"), the Company
shall pay to each Provider ((x) without notice from the Providers, in the case
of Covenant Defaults relating to Sections 7(a)(7) through 7(a)(9) and 7(a)(11)
through 7(a)(16), and (y) upon request of the Providers (such notice to be given
in accordance with Section 13), in the case of Covenant Defaults relating to
Sections 7(a)(1) through 7(a)(6) and 7(a)(10)), such Provider's Pro Rata Share
of a fee (a "Default Fee") calculated from the initial date of the event causing
the Covenant Default (the "Covenant Default Date") to the date such Covenant
Default is cured, by multiplying the Available Commitment at such time by the
applicable rate (a "Default Rate") multiplied by the number of days the Covenant
Default is continuing during the applicability of such Default Rate divided by
365. The Default Rate upon the occurrence of a Covenant Default shall be 1% per
annum. The Company shall pay the Default Fee to the Providers at the end of each
calendar month (with respect to such month or any part thereof) following the
Default Date and any remaining unpaid Default Fees upon the date such Covenant
Default has been cured. Notwithstanding the foregoing, in the event that the
Company has provided the quarterly information certificate required by Section
7(a)(6) to the Providers within the specified time period, and the Providers
determine that such certificate or any required enclosures are incomplete, the
Providers shall give notice thereof, describing in reasonable detail to the
Company any deficiencies therein. In such event, the applicable Default Fee
shall accrue from the date of the Providers' notice, rather than the Covenant
Default Date, and shall be payable upon the Company's failure to provide such
requested information in full within 15 Business Days after the date of the
Providers' notice.
8. Commitment Fee Covenants. (a) The Company, on its behalf and on behalf
------------------------
of its Subsidiaries, covenants and agrees with the Providers that:
(1) Investment Covenant. At all times during the Commitment Period,
-------------------
the Company and its Subsidiaries, taken as a whole, shall maintain an
Average Investment Rating of 2.25 or less. In calculating the Average
Investment Rating, the Company may exclude (i) up to 5% of the
aggregate fair market value, as determined in good faith by the
Treasurer or the Chief Financial Officer of the Company, of the
investments of the Company and its Subsidiaries, taken as a whole, and
(ii) any investments determined in good faith by the Treasurer or the
Chief Financial Officer of the Company to constitute "investment
agreement portfolio assets".
(2) Debt Covenant. At all times during the Commitment Period, the
-------------
Company shall not permit its Debt to Capital Ratio, as determined at
the end of any fiscal quarter, to be greater than 27.6%.
23
(3) Claims Paying Covenant. At all times during the Commitment Period,
----------------------
the Reference Portfolio Insurers shall maintain a Claims Paying Ratio
of less than or equal to 100.
(b) If during any Ratings Non-Compliance Period occurring during the
Commitment Period, the Company and its Subsidiaries, taken as a whole, fail to
meet any of the commitment fee covenants described in Section 8(a), then the
Commitment Fees shall be increased by 0.25% per annum, accruing from the first
day of such Ratings Non-Compliance Period until the earlier to occur of (i) the
date such failure to meet the commitment fee covenants is cured and (ii) such
Rating Non-Compliance Period ends. The Company shall pay the increased
Commitment Fees to the Providers at the end of each calendar month (with respect
to such month or any part thereof) and any remaining unpaid increased Commitment
Fees upon the earlier to occur of (i) the date such failure to meet the
commitment fee covenants is cured and (ii) the Ratings Non-Compliance Period
ends.
9. Event of Suspension. Upon (a) a default in payment beyond any
-------------------
applicable grace period with respect to (i) the Notes (including a default in
payment of any Redemption Amount), or (ii) any Indebtedness (other than the
Notes) of the Company or any of its Subsidiaries in excess of $25,000,000, or
(b) the failure of the Company or MBIA Corp. to deliver to the Providers the
quarterly and annual reports required under Sections 7(a) of this Agreement
after receiving written notice from the Providers and after the lapse of any
applicable grace period in respect thereof (each, an "Event of Suspension"), the
Company's right to make a Note Issuance Request and the Providers' obligation to
purchase Notes shall be suspended until such time, if any, as such Event of
Suspension is cured or waived in its entirety by such Provider. Upon the cure or
waiver in full of the Event of Suspension, the Company's right to make a Note
Issuance Request and the Providers' obligation to purchase Notes shall be
reinstated and exist as if no such Event of Suspension had occurred.
Notwithstanding the foregoing, upon the occurrence of an Event of Suspension,
the Default Fee shall continue to accrue and be payable to the Providers as set
forth in Section 7(c).
10. Events of Default. Any of following conditions or events shall
-----------------
constitute an event of default (each, an "Event of Default") under this
Agreement:
(a) Breach of Representations and Warranties. Any representation or
----------------------------------------
warranty contained in Section 5(a) shall not be true, complete and correct in
any material respect on the date as of which made;
(b) Failure to Pay Fees. Failure by Company to pay the Structuring Fee,
-------------------
Commitment Fees (including such amount payable under Section 8(b)) or Default
Fees after the later of (i) 5 Business Days after receipt of notice by
registered U.S. mail, return receipt requested, properly given pursuant to
Section 13, or (ii) 45 days after their due date;
(c) Payment Default. Default in payment beyond any applicable grace period
---------------
with respect to any Indebtedness of the Company or any of its Subsidiaries in
excess of $25,000,000, whether such Indebtedness now exists or shall hereafter
be created, which results in the obligation becoming due and payable prior to
the date on which it would otherwise have become
24
due and payable or upon the basis of which the obligation is declared by the
holders thereof to be due and payable prior to the date on which it would
otherwise have become due and payable;
(d) Non-Monetary Default. An event of default or like or similar event,
--------------------
other than failure to pay as described in clause (c) above, as defined in any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any Indebtedness of the Company or any of its
Subsidiaries that is outstanding in an aggregate principal amount in excess of
$25,000,000, whether such Indebtedness now exists or shall hereafter be created,
shall happen and such Indebtedness shall upon such ground become or be declared
due and payable prior to the date on which it would otherwise have become due
and payable, and such acceleration shall not have been rescinded or annulled, or
such Indebtedness shall not have been discharged;
(e) Insolvency or Voluntary Bankruptcy. (i) The Company or any one or
----------------------------------
more of the Reference Portfolio Insurers shall have an order for relief entered
with respect to it or commence a voluntary case under federal bankruptcy law or
under any other applicable bankruptcy, insolvency or similar state or federal
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or the Company or any one or more of the
Reference Portfolio Insurers shall make any assignment for the benefit of
creditors, or (ii) the Company or any one or more of the Reference Portfolio
Insurers shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due, or (iii) the Board of
Directors of the Company or any one or more of the Reference Portfolio Insurers
(or any committee thereof) shall adopt any resolution or otherwise authorize any
action to approve any of the actions referred to in clause (i) or (ii) above or
in Section 10(f) below;
(f) Involuntary Bankruptcy. The entry by a court having jurisdiction in
----------------------
the premises of (i) a decree or order for relief in respect of the Company or
any one or more of the Reference Portfolio Insurers in an involuntary case or
proceeding under federal bankruptcy law or any other applicable federal or state
law, or (ii) a decree or order adjudging the Company or any one or more of the
Reference Portfolio Insurers bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any one or more of the Reference Portfolio
Insurers under federal bankruptcy or any other applicable federal or state law,
or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any one or more of the Reference
Portfolio Insurers or of any substantial part of the property of any of them, or
ordering the winding up or liquidation of any of their affairs or (iii) there
shall be commenced against the Company or any one or more of the Reference
Portfolio Insurers any case, proceeding or other action seeking issuance of a
warrant, attachment, execution, discharge or similar process against all or any
substantial part of its assets that results in the entry of an order for any
such relief that shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof;
(g) Failure to Maintain Tangible Net Worth. The Company shall fail to
--------------------------------------
maintain a consolidated Tangible Net Worth in excess of $300,000,000;
25
(h) Consolidation, Merger, Sale of Assets. The Company or any of its
-------------------------------------
Subsidiaries shall wind up, liquidate or dissolve its or their affairs,
experience a Change in Control, enter into any transaction of merger or
consolidation, or sell, convey, transfer or otherwise dispose of all or
substantially all of its or any of their assets to any Person, or agree to do
any of the foregoing at a future time during which this Agreement is in effect
or any Notes are outstanding, which results in a default or Event of Default
under this Agreement or results in a Ratings Non-Compliance Period which
commences during the 180 days following such event. Notwithstanding the
foregoing, the following shall not constitute an Event of Default under this
clause (h):
(1) sales or dispositions of assets by the Company or any of its
Subsidiaries in the ordinary course of business;
(2) sales or dispositions of assets by the Company or any of its
Subsidiaries which singly or in the aggregate, in the case of
insurance assets, have a GAAP book value on the date of disposition
that constitute less than 15% of the sum of the Company's consolidated
Shareholders' Equity, or in the case of non-insurance assets, in
unlimited amounts at their fair market value, where fair market value
has been determined by a nationally recognized investment banking or
appraisal firm and set forth in a fairness opinion of such firm
addressed to the Providers;
(3) the merger or consolidation of the Company or any of its
Subsidiaries with or into, or liquidation into, any other of its
Subsidiaries or the Company, as the case may be, so long as such
Subsidiary (in the case of a merger or consolidation not involving the
Company) or the Company is the surviving Person; and
(4) the delivery by the Company to the Providers, prior to the
proposed action, of a written confirmation from S&P or Xxxxx'x
confirming that the consummation of such proposed action would not
result in a downgrade or withdrawal of the rating assigned to the
Company by such NRSRO.
(It is understood and agreed that upon any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing clauses (1)
through (4), the successor Person formed by such transfer shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor Person had been named
as the Company herein.)
11. Conditions to the Company's Obligations. The obligations of the
---------------------------------------
Company hereunder shall be subject to, at and as of the Effective Date, the
satisfaction of the following conditions:
(a) The Company shall have received an executed counterpart of this
Agreement from each of the Providers.
(b) The Company shall have received from Sidley Xxxxxx Xxxxx & Xxxx LLP or
in-house counsel of any Provider an opinion (or, if any Provider is a non-U.S.
entity, an opinion of its in-house counsel or local counsel) dated the Effective
Date and addressed to the Company, S&P and Xxxxx'x, substantially to the effect
that this Agreement (i) constitutes the legal, valid and binding obligation of
the Providers, and (ii) is enforceable against the Providers in
26
accordance with its terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general application).
In rendering its opinion, Sidley Xxxxxx Xxxxx & Xxxx LLP (or such other counsel)
may rely upon the opinions of in-house counsel to the Providers as to the due
authorization, execution and delivery by such Provider of this Agreement.
12. Conditions to the Providers' Commitments. (a) The several commitments
----------------------------------------
of the Providers hereunder shall be subject to the satisfaction of the following
conditions (with the following conditions (1)-(4) to be satisfied at and as of
the Effective Date and conditions (5) and (6) to be satisfied as promptly
thereafter as possible):
(1) The Company shall have accepted the subscription contained herein
and the Providers shall have received an executed counterpart of this
Agreement.
(2) The Providers shall have received from the general counsel for
the Company, an opinion, dated the Effective Date, substantially in
the form of Exhibit 12(a)(2) hereto.
(3) The Providers shall have received a certificate in the form of
Exhibit 12(a)(3), dated the Effective Date, and certified by the Chief
Financial Officer, Treasurer or Controller of the Company to the
effect that:
(i) The Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or
before the Effective Date; and
(ii) The representations and warranties of the Company contained
in Section 5(a) herein are true, complete, and correct at and as
of the Effective Date.
(4) The Company shall have made all material filings required under
applicable state and/or federal securities laws in connection with the
transactions contemplated by this Agreement. The Company shall have
received all other authorizations, consents, approvals, licenses,
filings and registrations required in connection with the execution,
delivery, performance, validity and enforceability of this Agreement.
(5) The Providers shall have received a certificate (or equivalent
customary documentation, with respect to non-U.S. entities) of the
appropriate public official in the jurisdiction of organization of the
Company and the Reference Portfolio Insurers as to the due
organization and good standing of the Company and the Reference
Portfolio Insurers together with a certified copy (or equivalent
customary documentation, with respect to non-U.S. entities) of the
organizational documents of the Company and the Reference Portfolio
Insurers and shall have received certificates of appropriate public
officials of each other jurisdiction in which the Company and each
Reference Portfolio Insurer is required to qualify to do business as a
foreign organization as to the due qualification and good standing of
the Company and each Reference Portfolio Insurer.
27
(6) The Providers shall have received a copy, certified by the
Secretary of the Company, of the actions of the Board of Directors of
the Company, authorizing, ratifying and approving the Note
Subscription Agreement in the form as executed on December 27, 2001,
including the issuance of the Commitments and the underlying Notes.
(b) The several commitments of the Providers, at and as of each Closing
Date, shall be subject to the following conditions:
(1) The Providers shall have received from the general counsel for
the Company, an opinion, dated as of each Closing Date, substantially
in the form of Exhibit 12(b)(1) hereto.
(2) The Providers shall have received the Note Issuance Request from
the Company.
(3) The Providers shall have received a certificate in the form of
Exhibit 4, dated such Closing Date, certified by the Chief Financial
Officer, Treasurer or Controller of the Company to the effect that:
(i) The Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied under
this Section 12(b) on such Closing Date; and
(ii) The representations and warranties of the Company contained
in Section 5(b) hereof are true and correct at and as of such
Closing Date.
(4) At and as of such Closing Date, there shall not have occurred and
been continuing an Event of Default or Event of Suspension.
(5) The Company shall have made all material filings required under
applicable state and/or federal securities laws in connection with the
issuance of the Notes on such Closing Date.
(6) The Providers shall have received a certificate of the
appropriate public official in the jurisdiction of organization of the
Company and the Reference Portfolio Insurers as to the due
organization and good standing of the Company and the Reference
Portfolio Insurers, together with a certified copy of any amendments
to the organizational documents of the Company and the Reference
Portfolio Insurers filed after any previous delivery of such documents
to the Providers.
(7) No action, suit or other third-party proceeding by or before any
governmental authority shall have resulted in the issuance of an order
or other similar action enjoining the issuance of the Notes.
(8) The Providers shall have received their respective Notes.
28
13. Notices. Any notice or other communication required or
-------
permitted under this Agreement shall be in writing and shall be deemed to have
been given (a) on the date of delivery if delivered personally or by facsimile
transmission, receipt confirmed, (b) twenty-four (24) hours after sending it by
a nationally recognized overnight delivery service, or (c) five (5) Business
Days after mailing, if sent by certified, registered or express mail, postage
prepaid, if properly addressed or directed to such party at the appropriate
address or facsimile number set forth below (or at such other address or
facsimile number as such party may designate from time to time by notice duly
given in accordance with the terms of this Section 13):
If to the Company:
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
with a copy to:
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: General Counsel
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to Swiss Re Capital Markets Corporation:
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Treasurer
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Swiss Re Capital Markets Corporation
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
29
If to Swiss Re Financial Products Corporation:
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Treasurer
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Swiss Re Financial Products Corporation
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to XXXXX:
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
30
14. Dispute Resolution. Any disputes arising under or in
------------------
connection with this Agreement shall be resolved by a court of law having the
appropriate jurisdiction over the parties and subject matter, subject to Section
17(b) of this Agreement. Notwithstanding the foregoing, any disputes arising out
of Sections 2(g) and 3(c) in respect of the determination of the aggregate
principal amount of Notes issued on any Closing Date (i.e., the calculation of
Incurred Losses, Trigger Point, etc.) shall be resolved by binding arbitration,
to be held in New York, New York in accordance with the rules and procedures of
the American Arbitration Association (the "AAA"). The Company and each of the
Providers (individually, a "Party", and together, the "Parties") will each
select an arbitrator within 15 days after demand for arbitration is made by a
Party. If an additional arbitrator is deemed necessary and the arbitrators
selected by the Parties are unable to agree on an additional arbitrator within
that period, then any Party may request that the AAA select such additional
arbitrator. Each Party shall bear its own expenses incurred in connection with
arbitration, and the fees and expenses of the arbitrators shall be shared
equally by the Parties and advanced by them from time to time as required.
Except as may otherwise be agreed in writing by the Parties or as ordered by the
arbitrators upon substantial justification shown, the hearing for the dispute
will be held within 60 days of submission of the dispute to arbitration. The
arbitrators will render their final determination within 30 days following
conclusion of the hearing and any required post-hearing briefing or other
proceedings ordered by the arbitrators. The decision of the arbitrators will be
final and binding and not subject to judicial review.
15. Transfers of Obligations or Notes. No Provider shall sell,
---------------------------------
assign or otherwise transfer its rights or obligations under this Agreement
(including, without limitation, the Commitments) (i) except pursuant to an
exemption from the registration requirements of the 1933 Act, and (ii) to an
investor having a rating at the time of such sale, assignment or transfer less
than AAA/Aaa by S&P and Xxxxx'x, respectively, and which has not been previously
approved in writing by the Company. The Company acknowledges and agrees that the
Providers may transfer interests in issued and outstanding Notes without the
prior consent of the Company in whole or in part only to one or more affiliates
of the Providers (it being further understood that the Providers may not
transfer the Commitments to any of their affiliates). The Company agrees to
provide reasonable assistance to any Provider or SRCMC in connection with the
documentation of any permitted transfer of the Notes or Commitments.
16. Indemnification for Broker's Fees. The Company agrees to
---------------------------------
indemnify, defend and hold harmless SRCMC from any and all claims, costs and
expenses (including reasonable attorney's fees and disbursements) in respect of
the assertions of any broker, finder, agent or other person seeking compensation
for the subscription for the Commitments or the underlying Notes or for other
services rendered in connection with such transactions.
17. Miscellaneous.
-------------
(a) The representations, warranties and agreements of the
Providers and of the Company set forth herein are continuing in nature and shall
survive the acceptance of the subscription contained herein and the closings
with respect to the Notes.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. The parties hereby submit to
the exclusive jurisdiction of the federal
31
and state courts located in New York County with respect to any dispute arising
under this Agreement, the agreements and instruments entered into in connection
herewith or the transactions contemplated hereby or thereby. THE PARTIES HEREBY
WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY
PARTY HERETO AGAINST ANY OTHER PARTY HERETO IN RESPECT OF ANY MATTER ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR THE COMMITMENTS.
(c) The descriptive headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provision of this Agreement.
(d) This Agreement contains the entire agreement of the parties
with respect to the subject matter of this Agreement, and there are no
representations, covenants or other agreements except as stated or referred to
herein. This Agreement may be amended only by a writing executed by the party
against whom such amendment is sought to be enforced.
(e) This Agreement may be executed in one or more counterparts,
all of which shall constitute one and the same instrument.
(f) Except (i) as may be required by law (including the
requirements for any filings made by the Company under the 1933 Act or 1934 Act,
or pursuant to the order or ruling of any regulatory authority having
jurisdiction over the Company or the Insurers), or (ii) as may be required by
any rating agency in respect of its rating of the Company or any Insurer, the
Company, SRFPC and SRCMC hereby agree not to disclose that XXXXX is a party to
this Agreement or any of the agreements executed in connection herewith
(including the disclosure of XXXXX's name or the name, if any, of its
affiliates) or the nature or amount of its Commitments hereunder, except that
XXXXX may be referred to in press releases as "a leading reinsurance company"
and its ratings may be disclosed. In the event the disclosure of XXXXX's
identity pursuant to clauses (i) or (ii) of the foregoing sentence is required,
the Company, SRFPC and SRCMC agree to give advance notice to XXXXX of such
disclosure.
(g) This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns and legal
representatives, and any reference to a specific partyin this Agreement shall
include such party's permitted successors or assigns.
32
If the foregoing is in accordance of our agreement, please sign and
return a duplicate hereof, whereupon this Note Subscription Agreement and your
acceptance will represent a binding agreement between SRCMC, the Providers and
the Company.
SWISS RE FINANCIAL
PRODUCTS CORPORATION,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
SWISS RE CAPITAL MARKETS
CORPORATION, a Delaware corporation
By:
--------------------------------------
Name:
Title:
XXXXX,
a Delaware corporation
By:
--------------------------------------
Name:
Title:
ACCEPTED this 27/th/ day of December, 2001
By MBIA, INC., a Connecticut corporation
By:
-----------------------------------------
Name:
Title:
33
Schedule A
Commitments
Amount Percentage
------ ----------
Swiss Re Financial Products Corporation $100,000,000 66 2/3%
XXXXX $ 50,000,000 33 1/3%
EXHIBIT 2(a)-1
FORM OF NOTE
2A-1
EXHIBIT 3
[FORM OF NOTE ISSUANCE REQUEST]
NOTE ISSUANCE REQUEST
Reference is made to that certain Note Subscription Agreement dated
December 27, 2001, as amended, supplemented or otherwise modified to the date
hereof (as so amended, supplemented or otherwise modified, the "Agreement"), by
and among MBIA, Inc., a Connecticut corporation (the "Company"), Swiss Re
Capital Markets Corporation, and Swiss Re Financial Products Corporation and
XXXXX (the "Providers"). This is the Note Issuance Request referred to in the
Agreement. Capitalized terms used but not defined in this Note Issuance Request
shall have the meanings given to them in the Subscription Agreement.
The aggregate purchase price for the Notes to be issued at this time
under the Note Issuance Request is: $__________
The Closing Date with respect to such Notes will be: __________
The Trigger Date occurred on: __________
The aggregate purchase price with respect to such Notes has been
computed pursuant to the terms of the Subscription Agreement based on the
figures set forth below, which have been determined as of the Trigger Date.
A. Incurred Losses on
Reference Portfolio $__________
(i) Claims paid by Insurers (net of
Reinsurance): $_____________
(ii) Case Basis Reserves (net of Reinsurance): + $_____________
(iii) Loss adjustment expense: + $_____________ $_____________
(iv) Recoveries of amounts paid under (i) and
(iii) above: - $_____________
Total $==========
B. Trigger Point
Notional
(i) Domestic public amount: $_____________
finance general Amount subject
obligation portfolio to Reinsurance: - $_____________
$_____________ x0.10% $_____________
3A-1
Notional
(ii) Domestic public amount: $_____________
finance non-general Amount subject
obligation portfolio to Reinsurance: - $_____________
$_____________ x0.30% + $_____________
(iii) International Notional
structured finance amount:
and domestic $_____________
structured finance Amount subject
rated AAA to Reinsurance: - $_____________
$_____________ x0.30% + $_____________
Notional
(iv) Domestic structured amount:
finance portfolio not $_____________
rated AAA Amount subject
to Reinsurance: - $_____________
$_____________ x0.50% + $_____________
Notional
(v) Domestic health care amount:
and domestic $_____________
investor-owned Amount subject
utility portfolios to Reinsurance: - $_____________
$_____________ x0.70% + $_____________
Notional
(vi) Reference Portfolio amount:
minus (i) through (v) $_____________
above. Amount subject
to Reinsurance: - $_____________
$_____________ x0.80% + $_____________ - $_____________
C. Aggregate principal amount
of previously issued and sold
Notes: - $_____________
D. Aggregate purchase price: $
=============
The purchase price for the Notes shall be remitted in immediately
available funds to the account of the Company pursuant to the following wire
transfer instructions:
DATED:_____________________ MBIA, Inc.
By: __________________________
Title: __________________________
3A-2
EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
The undersigned officer of MBIA, Inc., a Connecticut corporation (the
"Company"), does hereby deliver this certificate on behalf of the Company
pursuant to Section 12(b)(3) of the Note Subscription Agreement dated December
27, 2001 (the "Agreement") between the Company, Swiss Re Financial Products
Corporation, Swiss Re Capital Markets Corporation and XXXXX, and hereby
certifies that:
(A) The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under Section
12(b) of the Agreement on the date hereof; and
(B) The representations and warranties of the Company contained in
Section 5(b) of the Agreement are true and correct at and as of
the date hereof.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
Dated: _____________, 20_____ MBIA, Inc.
___________________________________
Name:
Title: [Chief Financial Officer] [Treasurer]
[Controller]
4-1
EXHIBIT 12(a)(2)
OPINION OF COUNSEL
EFFECTIVE DATE
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Connecticut.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as currently being conducted
and to enter into and perform its obligations under the Note Subscription
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) Each Insurer has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to own, lease and operate its properties and
conduct its business as currently being conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
be in good standing would not have a Material Adverse Effect; all of the issued
and outstanding shares of capital stock or other equity interests, as
applicable, of each Insurer have been duly authorized and are validly issued,
fully paid and non-assessable and, except for qualifying shares, are owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; and none of the
outstanding shares of capital stock of any Insurer was issued in violation of
preemptive or other similar rights of any securityholder of such Insurer.
(v) Each Insurer has all requisite licenses, permits and authority
that are necessary for the conduct of its insurance business, except where the
failure to obtain such licenses, permits or authorities would not have a
Material Adverse Effect (collectively, "Licenses"), such Licenses are in full
force and effect, and no proceeding is pending or, to the best of my knowledge,
threatened to suspend, revoke or limit any such License.
(vi) There are (i) no outstanding subscriptions, warrants, options,
calls or commitments of any character relating to or entitling any Person to
purchase or otherwise acquire any stock of any Insurer and (ii) no obligations
or securities convertible into or exchangeable for shares of any stock of any
Insurer or any commitments of any character relating to or entitling any Person
to purchase or otherwise acquire any such obligations or securities.
(vii) The Note Subscription Agreement has been duly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the other parties thereto) constitutes a
legal, valid and binding agreement of the Company,
12A2-1
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(viii) Upon the subscription for the Commitments and the subsequent
issuance and delivery of the underlying Notes as provided in the Note
Subscription Agreement, it will not be necessary in connection with the
subscription for the Commitments or the issuance of the underlying Notes to
register such Commitments or Notes under the 1933 Act or to qualify an indenture
under the Trust Indenture Act of 1939, as amended. No authorization, approval or
consent of any court or governmental authority or agency is necessary in
connection with the valid issuance, sale and delivery of the Notes, except such
as may be required under the Blue Sky laws or other securities or insurance
securities laws of the various states, and any other requirements applicable to
purchasers of Notes.
(ix) To the best of my knowledge, there is no pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any Insurer is a party, or to which the property of the Company or any Insurer
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which may reasonably be expected to result, individually or
in the aggregate, in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the assets, properties or operations
thereof, taken as a whole, or the consummation of the transactions contemplated
in the Note Subscription Agreement or the performance by the Company of its
obligations thereunder.
(x) Neither the Company nor any Insurer is, or with the giving of
notice or passage of time or both, would be, in breach or violation of any of
the terms or provisions of or in default under (i) any statute, rule or
regulation applicable to the Company or any Insurer, (ii) any indenture,
contract, lease, mortgage, deed of trust, note or other agreement or instrument
for over $25,000,000 to which the Company or any Insurer is a party or by which
it may be bound, (iii) its certificate of incorporation, by-laws or other
organizational documents, and (iv) any order, decree or judgment of any court or
governmental agency or body having jurisdiction over the Company or any Insurer
except, with respect to breaches, violations or defaults contemplated by clauses
(i), (ii), (iii) or (iv), for such breaches, violations or defaults that could
not, individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect. The opinions stated in clauses (i), (ii) and (iv) are
stated to the best of my knowledge. The performance of the Note Subscription
Agreement by the Company and the consummation of the transactions therein
contemplated will not, with the giving of notice or passage of time or both,
result in a breach or violation of any of the terms or provisions of or
constitute a default under or accelerate obligations under (w) any material
statute, rule or regulation applicable to the Company or any Insurer, (x) any
indenture, contract, mortgage, lease, deed of trust, note or other agreement or
instrument for over $25,000,000 to which the Company or any Insurer is a party
or by which it is bound, (y) the Company's or any Insurer's certificate of
incorporation or by-laws or (z) any order, decree or judgment of any court or
governmental agency or body having jurisdiction over the Company or any Insurer
or any of their properties.
12A2-2
(xi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
12A2-3
EXHIBIT 12(a)(3)
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
The undersigned officer of MBIA, Inc., a Connecticut corporation (the
"Company"), does hereby deliver this certificate on behalf of the Company
pursuant to Section 12(a)(3) of the Note Subscription Agreement dated December
27, 2001 (the "Agreement") between the Company, Swiss Re Financial Products
Corporation, Swiss Re Capital Markets Corporation and XXXXX, and hereby
certifies that:
(A) The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or
before the date hereof; and
(B) The representations and warranties of the Company contained in
Section 5(a) of the Agreement are true, complete, and correct
at and as of the date hereof.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
Dated: December 27, 2001 MBIA, Inc.
____________________________________________
Name:
Title: [Chief Financial Officer] [Treasurer]
[Controller]
12A3
EXHIBIT 12(b)(1)
OPINION OF COUNSEL
CLOSING DATE
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Connecticut.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as currently being conducted
and to enter into and perform its obligations under the Notes.
(iii) The Notes, have been duly executed and delivered in the manner
contemplated in the Note Subscription Agreement and constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(iv) It is not necessary in connection with the issuance of the
Securities to register such Notes under the 1933 Act or to qualify an indenture
under the Trust Indenture Act of 1939, as amended. No authorization, approval or
consent of any court or governmental authority or agency is necessary in
connection with the valid issuance, sale and delivery of the Notes, except such
as may be required under the Blue Sky laws or other securities or insurance
securities laws of the various states, and any other requirements applicable to
purchasers of Notes.
(v) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(vi) No Event of Default under the Note Subscription Agreement has
occurred and is continuing.
12B
PREFERRED SHARES SUBSCRIPTION AGREEMENT
Up to 75,000 Shares
Series A Preferred Stock
Par Value $1.00 Per Share
MBIA, INC.
December 27, 2001
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Swiss Re Financial Products Corporation, a Delaware corporation
("SRFPC"), and XXXXX, a Delaware corporation ("XXXXX"), and together with SRFPC,
the "Providers"), and Swiss Re Capital Markets Corporation, a Delaware
corporation, as agent for the Providers ("SRCMC"), hereby confirm their
agreement with MBIA, Inc., a Connecticut corporation (the "Company"), with
respect to the future issue and sale by the Company, and the commitments for
purchase by the Providers, subject to the terms and conditions set forth herein,
of an aggregate of up to 75,000 shares of Series A Preferred Stock, par value
$1.00 per share (the "Preferred Shares"), having a liquidation preference (the
"Liquidation Preference") of $2,000 per share. Capitalized terms used herein
shall have the meanings attributed thereto in Section 1 hereof.
Pursuant to the terms and conditions of a Note Subscription Agreement
(the "Note Subscription Agreement") of even date herewith by and among the
Company, the Providers and SRCMC, the Company has the right to require the
Providers to purchase up to $150,000,000 aggregate principal amount of its
Variable Rate Subordinated Notes Due 15 Years from Original Issuance Date (the
"Notes"). The Providers understand that not less than 30 days but not more than
180 days after each issuance of Notes pursuant to the Note Subscription
Agreement, the Company shall be vested with the right to require each Provider
to acquire through the tender of outstanding Notes held by such Provider, or
otherwise, such number of Preferred Shares as may be determined by dividing the
aggregate principal amount of the Notes issued by 100% of the Liquidation
Preference of the Preferred Shares, subject to the terms and conditions more
fully described herein.
The Providers understand that the Company may agree to issue, from time
to time, additional commitments for the purchase of Preferred Shares in excess
of 75,000 shares to one or more subsequent providers (each, a "Subsequent
Provider"), although SRFPC and XXXXX shall have no obligation to purchase such
additional commitments. The Company acknowledges and agrees that the Providers
may also request that all or a portion of the Commitments evidenced by this
Agreement be assigned to Subsequent Providers; provided, however, that in no
event shall the aggregate Commitments of SRFPC be less than 25,000 shares.
1. Definitions. Except as otherwise defined herein and except
-----------
where the context otherwise requires, the following terms shall have the
following meanings:
"Affiliate" shall mean any management employee or director of
the Company or any Subsidiary, or holder of five percent (5%) or more
of any class of capital stock of the Company, or any member of their
respective immediate families or any corporation or other entity
directly or indirectly controlled by one or more of such management
employees, directors or 5% stockholders or members of their immediate
families.
"Agreement" means this Preferred Shares Subscription
Agreement.
"Available Commitment" means, as of any date of determination
during the Commitment Period, the number of Preferred Shares
representing the Commitments, minus (i) the number of Preferred Shares
-----
sold to the Providers or with respect to which a Notice of Issuance has
been given to the Providers and not rescinded before such date (it
being understood that if for any reason one or more Providers defaults
on its Commitments to purchase Preferred Shares on any Issuance Date,
such defaulting Provider's Pro Rata Share of the Available Commitment
shall be increased by the aggregate number of Preferred Shares such
Provider failed to purchase), and (ii) any reduction of the Commitments
by the Company as set forth in Section 2(c).
"Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to
close in The City of New York, New York and that is also a London
Banking Day.
"Certificate of Amendment" means the Certification of
Amendment of the Company's Restated Certificate of Incorporation, in
the form attached as Exhibit 1, establishing pursuant to Section
33-666(d) of the Connecticut Business Corporation Act the designations,
preferences, and rights related to the Preferred Shares.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" has the meaning ascribed to such term in Section
5(n).
"Commitments" means the obligation of the Providers to
purchase an aggregate number of Preferred Shares from time to time
during the Commitment Period not to exceed the number set forth on
Schedule A, provided that the obligation of each Provider shall not
exceed its Pro Rata Share of the Commitments.
"Commitment Period" means the period from and including the
Effective Date to, but excluding, the Commitment Termination Date.
"Commitment Termination Date" means the earliest to occur of
(i) purchase by the Providers of an aggregate number of Preferred
Shares equal to the Commitments, (ii) 180 days after the tenth
anniversary of the date of this Agreement, and (iii) such other
termination of the Commitments as provided herein.
2
"Company" means MBIA, Inc., a Connecticut corporation.
"Effective Date" means December 27, 2001, or such other date
as may be agreed upon by and among the Company, the Providers and
SRCMC.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is or was maintained or
contributed to by the Company, any of its Subsidiaries or any of their
respective ERISA Affiliates.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations
within the meaning of Section 414(b) of the Code of which that Person
is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common
control within the meaning of Section 414(c) of the Code of which that
Person is a member; and (iii) any member of an affiliated service group
within the meaning of Section 414(m) or (o) of the Code of which that
Person, any corporation described in clause (i) above or any trade or
business described in clause (ii) above is a member. Any former ERISA
Affiliate of the Company or any of its Subsidiaries shall continue to
be considered an ERISA Affiliate of the Company or such Subsidiary
within the meaning of this definition with respect to the period such
entity was an ERISA Affiliate of the Company or such Subsidiary and
with respect to liabilities arising after such period for which the
Company or such Subsidiary could be liable under the Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder
with respect to any Pension Plan (excluding those for which the
provision for 30-day notice to the PBGC has been waived by regulation);
(ii) the failure to meet the minimum funding standard of Section 412 of
the Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Code) or the failure to make by
its due date a required installment under Section 412(m) of the Code
with respect to any Pension Plan or the failure to make any required
contribution to a Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of
ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal
by the Company, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in
liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan,
or the occurrence of any event or condition which might constitute
grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of
liability on the Company, any of its Subsidiaries or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA;
(vii) the withdrawal of the Company, any of its Subsidiaries or any of
their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of
3
ERISA) from any Multiemployer Plan if there is any potential liability
therefor, or the receipt by Company, any of its Subsidiaries or any of
their respective ERISA Affiliates of notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence
of an act or omission which could give rise to the imposition on the
Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of material fines, penalties, taxes or related charges
under Section 4975 of the Code or under Section 502(i) of ERISA in
respect of any Employee Benefit Plan; (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or
against the Company, any of its Subsidiaries or any of their respective
ERISA Affiliates in connection with any Employee Benefit
Plan; (x) receipt from the Internal Revenue Service of notice of the
failure of any Pension Plan (or any other Employee Benefit Plan
intended to be qualified under Section 401(a) of the Code) to qualify
under Section 401(a) of the Code, or the failure of any trust forming
part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Code; or (xi) the imposition of a Lien pursuant
to Section 401(a)(29) or 412(n) of the Code or pursuant to ERISA with
respect to any Pension Plan.
"Exercise Date" means any date on which the Company sends a
Notice of Issuance to the Providers to purchase Preferred Shares.
"GAAP" means generally accepted accounting principles in the
United States, applied consistently.
"Incurred Losses" has the meaning given in the Note
Subscription Agreement.
"Insurers" means any of MBIA Corp., MBIA Assurance, S.A.,
Capital Markets Assurance Corporation, MBIA Insurance Corp. of Illinois
and any other financial guaranty company wholly owned by, or
consolidated on the balance sheet of, MBIA Corp. or MBIA, Inc.
"Issuance Date" shall have the meaning ascribed to such term
in Section 3(b).
"Licenses" has the meaning ascribed to such term in Section
5(d).
"LIBOR" has the meaning ascribed to such term in Exhibit 1.
"Liquidation Preference" has the meaning ascribed to such term
in the first introductory paragraph.
"London Banking Day" means a day on which commercial banks are
open for business (including dealings in United States dollars) in
London.
"Material Adverse Effect" means (i) a material adverse change
in, or a material adverse effect upon, the business, condition
(financial or otherwise) or prospects of the Company and its
Subsidiaries, taken as a whole, which results, or with the giving of
notice or lapse of time would result, in a material impairment of the
ability of the
4
Company to perform under this Agreement or any related transaction
documents, or (ii) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Company of this
Agreement or any related transaction documents.
"MBIA Corp." means MBIA Insurance Corporation.
"Moody's" means Xxxxx'x Investors Service, Inc. or any
successor thereto.
"Multiemployer Plan" means any Employee Benefit Plan which is
a "multiemployer plan" as defined in Section 3(37) of ERISA.
"NAIC" means the ratings office of the National Association of
Insurance Commissioners.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Note Subscription Agreement" has the meaning ascribed to such
term in the second introductory paragraph.
"Notes" shall have the meaning as defined in the second
introductory paragraph.
"Notice of Issuance" means the notice attached hereto as
Exhibit 3(b).
"NRSRO" means a nationally recognized statistical rating
organization.
"Original Issuance Date" means, with respect to any issuance
of Notes, the date when any such Notes are issued and sold in
accordance with the Note Subscription Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Code or
Section 302 of ERISA.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability
companies, limited liability partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments (whether federal, state or local, domestic or
foreign, and including political subdivisions thereof) and agencies or
other administrative or regulatory bodies thereof.
"Preferred Shares" has the meaning given to such term in the
first introductory paragraph, to be issued pursuant to the Certificate
of Amendment attached hereto as Exhibit 1.
5
"Preferred Shares Commitment Fee" means any commitment fee
payable by the Company to a Provider pursuant to a Preferred Shares
Commitment Fee Agreement.
"Preferred Shares Commitment Fee Agreement" means any
agreement between the Company and the Providers with respect to the
payment of Preferred Shares Commitment Fees.
"Pro Rata Share", with respect to each Provider, means the
percentage set forth opposite such Provider on Schedule A.
"Providers" has the meaning as defined in the first
introductory paragraph.
"Reference Portfolio" means all financial guaranty insurance
policies issued by any of the Reference Portfolio Insurers or
reinsurance assumed by any of such Reference Portfolio Insurers.
Notwithstanding the foregoing, "Reference Portfolio" shall not include
insurance or reinsurance of unsecured obligations of Southern
California Edison Company and Pacific Gas and Electric Company, until
such time, if any, as any such unsecured obligation is upgraded to a
rating of Baa3/BBB- or better by Moody's and S&P, respectively, and
such obligation maintains such ratings for a period of 6 months.
"Reference Portfolio Insurer" means all Insurers other than
those Insurers which the Company has advised the Providers in writing
are "excluded Insurers" for purposes of determining the Reference
Portfolio, provided that MBIA Corp. remains at all times a Reference
Portfolio Insurer.
"Reinsurance" means any reinsurance agreement or arrangement
under which a third party reinsures any individual or related group of
policies on a quota share or non-proportional basis, but excluding any
reinsurance of the type customarily referred to as "stop loss."
"Shareholders' Equity" of any Person at any date means such
number as calculated in accordance with GAAP as of such date.
"S&P" means Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc. or any successor thereto.
"SRCMC" has the meaning as defined in the first introductory
paragraph.
"Structuring Fee Agreement" means the agreement of even date
herewith between the Company and SRCMC, setting forth the structuring
fee payable by the Company to SRCMC.
"Subsequent Provider" has the meaning as defined in the third
introductory paragraph.
"Subsidiary" means any corporation or other entity with a GAAP
net worth in excess of $10 million of which at least a majority of the
securities or other ownership interest having ordinary voting power
(absolutely or contingently) for the election of
6
directors or other persons performing similar functions are at the time
owned directly or indirectly by the Company or any of its other
Subsidiaries.
"Termination Date" means December 27, 2011.
"Trigger Date" has the meaning ascribed to such term in the Note
Subscription Agreement.
"Trigger Point" has the meaning ascribed to such term in the Note
Subscription Agreement.
"US$" or "$" means United States Dollars. To the extent any losses,
liabilities or other amounts described or referred to in this Agreement are
stated or denominated in currencies other than United States Dollars, such
losses, liabilities or amounts shall be stated, for purposes of this
Agreement, in their respective United States Dollar equivalents as shown in
the Company's financial statements.
2. Subscription. (a) General. Subject to the terms and conditions
------------ -------
contained herein, each Provider hereby irrevocably subscribes for and agrees to
purchase an aggregate number of Preferred Shares not to exceed its Pro Rata
Share of the Commitments. Such Preferred Shares shall be issued and sold
pursuant to Section 3 of this Agreement.
(b) Payment of Fees. On the Effective Date, and on each anniversary of the
---------------
Effective Date thereafter during the Commitment Period, each Provider shall be
deemed to have earned, and the Company shall pay to each Provider, the Preferred
Shares Commitment Fee, as set forth in the Preferred Share Commitment Fee
Agreement.
(c) Reduction of Commitments. The Commitments may be permanently reduced
------------------------
(i) at the option of the Company, upon 10 Business Days' written notice to the
Providers, in a minimum amount of 2,500 shares and integral multiples of 500
shares in excess thereof (or in the event that the Available Commitment at such
time is less than such amounts, the amount of the Available Commitment). The
Commitments of any Provider shall terminate on the earliest to occur of (i) upon
the occurrence of an Event of Default referred to in Sections 10(e) and 10(f) of
the Note Subscription Agreement, (ii) at the option of such Provider, upon the
occurrence of any other Event of Default under the Note Subscription Agreement,
and (iii) on the Termination Date. In the case of clause (ii) above, such
termination shall take effect upon the date of written notice from such Provider
to the Company. The Available Commitment shall be permanently reduced on each
Issuance Date in an amount equal to the number of Preferred Shares purchased on
such date.
(d) No Obligation of SRCMC to Purchase Preferred Shares. SRCMC shall not
---------------------------------------------------
have any obligation to purchase the Preferred Shares from the Company as
principal.
(e) No Redemption Upon Adjustment. The Providers' redemption rights
-----------------------------
pursuant to Section 2(g) of the Note Subscription Agreement (pursuant to which
the Providers may redeem such amount of Notes as were issued with respect to an
amount of Incurred Losses subsequently adjusted), shall not apply to any issued
and outstanding Preferred Shares. Notwithstanding the foregoing, had the Company
not required the Provider to acquire Preferred Shares and all or a
7
portion of the related Notes would have been eligible for redemption under
Section 2(g) of the Note Subscription Agreement, then the Company shall not
issue another Note Issuance Request pursuant to the Note Subscription Agreement
until such time as Incurred Losses on any subsequent Trigger Date exceed the sum
of (i) the Trigger Point and (ii) the aggregate Liquidation Preference of all or
such portion of such Preferred Shares. During the period when the Company is not
permitted to issue a Note Issuance Request pursuant to this Section 2(e), the
dividend rate on the Preferred Shares shall be increased by 2.0%.
3. Method of Exercise. (a) General. Not less than 30 days but not more
------------------ -------
than 180 days after any Original Issuance Date, the Company may require each
Provider to purchase such number of Preferred Shares, having a Liquidation
Preference of $2,000 per share, as is determined by dividing the aggregate
principal amount of such Provider's Notes to be issued on such Original Issuance
Date by the Liquidation Preference.
(b) Method of Issuance. To effect an issuance and sale of Preferred Shares,
------------------
the Company shall complete and manually sign a notice of issuance ("Notice of
Issuance") in the form attached hereto as Exhibit 3(b) and deliver the Notice of
Issuance to the Providers in accordance with the procedures set forth below. The
Notice of Issuance shall set forth a date, upon notice of no less than 15 but no
more than 30 days (the "Issuance Date") on which such Providers shall purchase
the Preferred Shares. The Company shall pay any transfer or similar tax, if
required.
(c) Payment. On the Issuance Date, each Provider shall have the option to
-------
purchase the Preferred Shares either (i) by delivering such amount of Notes,
duly endorsed, having an aggregate face amount equal to the Liquidation
Preference of the Preferred Shares to be issued, (ii) in cash (in which case (A)
such Provider's Notes shall remain outstanding, with all rights and benefits
contained herein unaffected by the Notice of Issuance, and (B) such Provider's
Available Commitment shall not be reduced by such number of Preferred Shares
issued), or (iii) in any combination of the methods of payment set forth in
clauses (i) or (ii). The payment election set forth in the preceding sentence
shall be in the sole and absolute discretion of the Provider.
(d) Fractional Shares. The Company shall not issue a fractional Preferred
-----------------
Share upon any such issuance. Instead, the Company shall remit cash to the
Provider in lieu of the fractional share, based on the Liquidation Preference,
rounding to the nearest whole cent with one half cent being rounded upwards.
(e) Validity. Any Preferred Shares issued pursuant to this Section shall be
--------
(i) validly issued, fully paid and nonassessable, (ii) free of any preemptive
rights, (iii) free and clear of any lien, encumbrance or other restriction, and
(iv) issued in compliance with the requirements of federal and state securities
laws.
4. Closings. Delivery of and payment for the Preferred Shares which are
--------
required to be delivered on any applicable Issuance Date shall be made at the
offices of the Providers set forth in Section 10 (or such other place as may be
determined by agreement among the Company, the Providers and SRCMC), at 10:00
a.m., New York time, on such Issuance Date. Delivery of such Preferred Shares
shall be made against payment of the purchase price to the
8
order of the Company by the tender of duly endorsed Notes, or if all or a
portion of the purchase price is paid in cash, in immediately available funds by
transfer to an account designated by the Company or by such other means as shall
be acceptable to the Company, the Providers and SRCMC. Payment for the Preferred
Shares shall be subject to delivery on the Issuance Date of a certificate (in
the form of Exhibit 4 attached hereto) signed by the Chief Financial Officer,
Treasurer or Controller of the Company, certifying compliance with the
conditions set forth in Section 9(b).
5. Representations and Warranties of the Company and its Subsidiaries. The
------------------------------------------------------------------
Company, on its behalf and on behalf of each of its Subsidiaries, represents and
warrants to the Providers and SRCMC as of the date hereof that:
(a) Existence and Qualification. The Company has been duly incorporated and
---------------------------
is validly existing as a corporation in good standing under the laws of the
State of Connecticut with full corporate power and authority to enter into and
perform its obligations under this Agreement and to own its properties and
conduct its business as currently being conducted. Upon the filing of the
Certificate of Amendment prior to the first Issuance Date, the Company will have
the authority to issue and deliver the Preferred Shares. The Company is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure to so qualify or be in good standing would not have a
Material Adverse Effect.
(b) Existence and Qualification of Reference Portfolio Insurers. Each
-----------------------------------------------------------
Reference Portfolio Insurer has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to own, lease and operate its properties and
conduct its business as currently being conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
be in good standing would not have a Material Adverse Effect; all of the issued
and outstanding shares of capital stock or other equity interests, as
applicable, of each Reference Portfolio Insurer have been duly authorized and
are validly issued, fully paid and non-assessable and, except for qualifying
shares, are owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and none of the outstanding shares of capital stock of any Reference
Portfolio Insurer was issued in violation of preemptive or other similar rights
of any securityholder of such Reference Portfolio Insurer.
(c) No Material Changes. Since the date of filing of the Company's Annual
-------------------
Report on Form 10-K for the year ended December 31, 2000, except as otherwise
stated therein or in any subsequently filed Quarterly Report on Form 10-Q, or as
disclosed in any subsequently filed Current Report on Form 8-K filed prior to
the date hereof, there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, operations, business affairs or
business prospects of the Company and its Subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business.
(d) Regulatory Matters. The Insurers have all requisite licenses, permits
------------------
and authority that are necessary for the conduct of their respective insurance
businesses, except
9
where the failure to obtain such licenses, permits or authorities would not have
a Material Adverse Effect (collectively, "Licenses"), such Licenses are in full
force and effect, and no proceeding is pending or, to the Company's knowledge,
threatened to suspend, revoke or limit any such License.
(e) Binding Obligations. The acceptance of the subscription hereof by the
-------------------
Company as evidenced by its signature on the signature page of this Agreement,
the execution, delivery and performance of this Agreement and, on or prior to
the first issuance of Preferred Shares, the Certificate of Amendment, will have
been duly authorized by all necessary action on behalf of the Company, and this
Agreement, by virtue of such acceptance, will be the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other laws related to or affecting the enforcement of creditors' rights
generally or by equitable principles. On or prior to the first issuance of
Preferred Shares, the Certificate of Amendment will have been filed with the
Secretary of State of the State of Connecticut.
(f) Preferred Shares. On or prior to the initial Issuance Date, the
----------------
Preferred Shares shall have been duly authorized, validly issued, fully paid and
nonassessable, and no securityholder of the Company shall have any preemptive
rights with respect to any Preferred Shares. Upon issuance pursuant to this
Agreement, the Preferred Shares shall be free and clear of any lien, encumbrance
or other restriction, and upon delivery as provided in this Agreement, the
Provider will acquire good title to the Preferred Shares, free and clear of any
lien, encumbrance or other restriction, other than any such lien, encumbrance or
other restriction arising from the actions of such Provider. On the date of
filing of the Certificate of Amendment, the Company shall have reserved for
issuance an aggregate of 100,000 Preferred Shares for issuance on one or more
Issuance Dates pursuant to this Agreement. There are (i) no outstanding
subscriptions, warrants, options, calls or commitments of any character relating
to or entitling any Person to purchase or otherwise acquire Preferred Shares,
(ii) no obligations or securities convertible into or exchangeable for Preferred
Shares or any commitments of any character relating to or entitling any Person
to purchase or otherwise acquire any such obligations or securities and (iii) no
understandings or agreements with respect to the purchase or voting of any of
Preferred Shares.
(g) Absence of Litigation. There are no legal or governmental proceedings
---------------------
pending to which the Company or any Insurer is a party or of which any property
of the Company or any Insurer is the subject, and which, if determined adversely
to the Company or any Insurer could reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect; and to the best of the
Company's knowledge, no such proceedings are threatened nor has the Company been
informed that it or an Insurer is the subject of an investigation by
governmental authorities. There are no outstanding orders, judgments,
injunctions or decrees of any governmental authority against the Company or any
Insurer.
(h) No Violation or Conflict. Neither the Company nor any Insurer has any
------------------------
knowledge that it is, or with the giving of notice or passage of time or both,
would be, in breach or violation of any of the terms or provisions of or in
default under (i) any statute, rule or regulation applicable to the Company or
any Subsidiary, (ii) any indenture, contract, lease, mortgage, deed of trust,
note or other agreement or instrument for over $25,000,000 to which the
10
Company or any Subsidiary is a party or by which it may be bound, (iii) its
certificate of incorporation, by-laws or other organizational documents, and
(iv) any order, decree or judgment of any court or governmental agency or body
having jurisdiction over the Company or any Subsidiary except, with respect to
breaches, violations or defaults contemplated by clauses (i), (ii), (iii) or
(iv), for such breaches, violations or defaults that could not, individually or
in the aggregate, be reasonably expected to result in a Material Adverse Effect.
The performance of this Agreement by the Company and the consummation of the
transactions herein contemplated will not, with the giving of notice or passage
of time or both, result in a breach or violation of any of the terms or
provisions of or constitute a default under or accelerate obligations under (w)
any material statute, rule or regulation applicable to the Company or any
Subsidiary, (x) any indenture, contract, mortgage, lease, deed of trust, note or
other agreement or instrument for over $25,000,000 to which the Company or any
Subsidiary is a party or by which it is bound, (y) the Company's or any
Subsidiary's certificate of incorporation or by-laws or (z) any order, decree or
judgment of any court or governmental agency or body having jurisdiction over
the Company or any Subsidiary or any of their properties; provided, however,
that no breach of the foregoing representation and warranty shall be deemed to
have occurred if such breach arises from a failure by the Company to satisfy a
debt leverage test as a consequence of the issuance of the Notes.
(i) Options or Rights with Respect to Insurers. There are (i) no
------------------------------------------
outstanding subscriptions, warrants, options, calls or commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
any stock of any Insurer and (ii) no obligations or securities convertible into
or exchangeable for shares of any stock of any Insurer or any commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
any such obligations or securities.
(j) Compliance with 1940 Act. The Company is not an "investment company" or
------------------------
an entity "controlled" by an "investment company" as such terms are defined in
the 1940 Act.
(k) Compliance with 1933 Act. Assuming the Preferred Shares are issued and
------------------------
delivered as provided herein, it is not necessary in connection with the
offering of the Commitments or the issuance of the Preferred Shares to register
such Commitments or such Preferred Shares under the 1933 Act. No authorization,
approval or consent of any court or governmental authority or agency is
necessary in connection with the valid authorization, issuance, sale and
delivery of the Commitments or the Preferred Shares, except such as may be
required under the Blue Sky laws or other securities or insurance securities
laws of the various states, which the Company represents have been complied
with, and any other requirements applicable to subscribers for Commitments or to
purchasers of Preferred Shares, as to which the Company makes no representation.
(l) No General Solicitation. None of the Company or any Affiliate or any
-----------------------
Person acting on its behalf (other than SRCMC) has (A) engaged, in connection
with the offering of the Commitments or the Preferred Shares, in any form of
general solicitation or general advertising (as those terms are used within the
meaning of Regulation D under the 1933 Act), or (B) solicited offers for, or
offered or sold, such Preferred Shares by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the 0000 Xxx) or in any manner involving a public offering within the
meaning of Section 5 of the 1933 Act.
11
(m) Employee Benefit Plans.
----------------------
(1) The Company and each of its Subsidiaries are in compliance with
all applicable provisions and requirements of ERISA, the Code and the
regulations and published interpretations thereunder with respect to
each of their Employee Benefit Plans, and have performed all their
obligations under each of their Employee Benefit Plans, except where
the failure to comply or perform would not have a Material Adverse
Effect. Each Employee Benefit Plan maintained by the Company and its
Subsidiaries which is intended to qualify under Section 401(a) of the
Code is so qualified.
(2) No ERISA Event has occurred or is reasonably expected to occur,
except where such occurrence would not have a Material Adverse Effect.
(n) 1934 Act Compliance. The Company's most recent Annual Report filed on
-------------------
Form 10-K and its Quarterly Reports filed on Form 10-Q and any Current Reports
filed on Form 8-K filed after the date of such Form 10-K, at the time they were
filed with the U.S. Securities and Exchange Commission (the "Commission") and as
of the Effective Date, complied and comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
under the 1934 Act and, at the Effective Date, do not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
The representations and warranties set forth in Sections 5(a) (first
sentence), (e), (f) and (j) through (l) shall be deemed repeated by the Company
on each Issuance Date.
6. Representations and Warranties of Providers. Each Provider, severally
-------------------------------------------
and not jointly, represents and warrants to the Company as of the date hereof,
and as of each Issuance Date (excluding the first clause in the first sentence
in Section 6(b)), as follows:
(a) Existence and Qualifications of Provider. The Provider is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and the Provider has the full
corporate power and authority to execute and deliver this Agreement, and to
perform its obligations under, and consummate the transactions contemplated by,
this Agreement, including, without limitation, the purchase of the Preferred
Shares pursuant to the making of a Notice of Issuance by the Company as
described in this Agreement.
(b) No Violation or Conflict. The execution and delivery of this Agreement
------------------------
by the Provider, and the performance of the Provider under this Agreement, do
not violate or conflict with any applicable law, any provision of the Provider's
organizational documents or any order or judgment of any court or other
government agency applicable to the Provider, or any contractual restriction
binding upon or affecting the Provider.
(c) Consents. All governmental and other consents that are required to
--------
have been obtained by the Provider with respect to the execution and delivery of
this Agreement have been obtained by the Provider and are in full force and
effect and all conditions of any such consents have been complied with.
12
(d) Investment Representation. The Provider understands that the
-------------------------
Commitments and the issuance of the underlying Preferred Shares upon the making
by the Company of a Notice of Issuance under this Agreement have not been and
will not be registered under the 1933 Act and the underlying Preferred Shares
will be issued in reliance upon exemptions form the registration requirements of
the 1933 Act. The Provider represents that (a) it is executing its Commitment
and acquiring any Preferred Shares solely for its own account, for investment
purposes only, and not with a view to distribution, fractionalization or resale
thereof, except as otherwise permitted under this Agreement, (b) it will not
sell or otherwise dispose of its Commitment or any Preferred Shares except in
compliance with the registration requirements or exemption provisions of
applicable securities laws including the 1933 Act, (c) it has not relied on the
Company for any explanation of the application of the various U.S. state and
federal securities laws with regard to the execution of its Commitment or the
acquisition of the Preferred Shares, (d) it has access to complete information
regarding the business and finances of the Company, and has received, read and
understood the contents of the Company's SEC filings, (e) it has such knowledge
and experience in business and financial matters that it has been able to fully
understand and completely evaluate the risks and merits of acquiring its
Commitment and holding any Preferred Shares, (f) it is able to bear the economic
risk and limitation in liquidity of its Commitment and of an investment in the
Preferred Shares, (g) it has reviewed all documents furnished to it in
connection with the investment in the Commitments and the underlying Preferred
Shares contemplated hereby, (h) it is an "accredited investor" as such term is
defined in Regulation D, as amended, under the 1933 Act, (i) it is not a
broker-dealer subject to Regulation T of the United States Federal Reserve
Board, (j) in making its decision to acquire the Commitments and the underlying
Preferred Shares, it has relied upon independent investigations made by it and,
to the extent believed by it to be appropriate, its representatives, in addition
to the representations and warranties and agreements of the Company contained
herein, and (k) it and its representatives have been given the opportunity to
examine all documents and to ask questions of, and to receive answers from, the
Company and its representatives concerning the terms and conditions of the
purchase of the Commitments and the underlying Preferred Shares and to obtain
any addition information which it or its representatives deem necessary.
(e) Binding Obligations. The execution of this Agreement has been duly
-------------------
authorized by all necessary corporate action of the Provider, and this Agreement
(a) constitutes the legal, valid and binding obligation of the Provider, and (b)
is enforceable against the Provider in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application).
7. Covenants and Agreements of the Company. The Company covenants and
---------------------------------------
agrees with the Providers for the duration of the Commitment Period and for so
long as any Preferred Shares remain outstanding that:
(a) Audited Financial Statements of the Company. The Company shall deliver
-------------------------------------------
to the Providers, within ten Business Days after the filing of its Form 10-K
with the Commission, income statements for such fiscal year, balance sheets as
of the end of such fiscal year and statements of cash flows for such fiscal
year, together with such notes thereto as are appropriate, prepared in
accordance with GAAP and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
the independent
13
public accountants of the Company. The parties hereto agree that delivery of the
Company's Form 10-K will satisfy such information requirements, as long as the
information required under this paragraph is contained in such Form 10-K.
Notwithstanding the foregoing, in the event that the Company is no longer a
publicly held company, the Company shall deliver the information required under
this paragraph within 90 days of the end of such fiscal year.
(b) Audited Financial Statements of MBIA Corp. The Company shall cause MBIA
-----------------------------------------
Corp. to deliver to the Providers, within ten Business Days after the filing of
any statutory financial statements, income statements for such fiscal year,
balance sheets as of the end of such fiscal year and statements of cash flows
for such fiscal year, together with such notes thereto as are appropriate,
prepared in accordance with applicable statutory accounting principles
consistently applied (except as noted in the audit comments thereto) and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by the independent public accountants of
MBIA Corp. The parties hereto agree that the delivery of MBIA Corp's statutory
financial statements will satisfy such information requirements, as long as the
information required under this paragraph is contained therein. Notwithstanding
the foregoing, the Company shall deliver the information required under this
paragraph no later than 70 days after the end of such year.
(c) Unaudited Financial Statements of the Company. The Company shall
---------------------------------------------
deliver to the Providers, within ten Business Days after the filing of a Form
10-Q by the Company with the Commission, unaudited income statements for such
quarter and the current fiscal year to date and unaudited balance sheets as of
the end of such quarter, along with statements of profits and losses and cash
flows for such quarter and the current fiscal year to date, prepared in
accordance with GAAP (except for the omission of financial statement footnotes
and subject to recurring year-end adjustments), certified by the Chief Financial
Officer, Treasurer, or Controller of the Company. The parties hereto agree that
the delivery of the Company's Form 10-Q will satisfy such information
requirements, as long as the information required under this paragraph is
contained in such Form 10-Q.
(d) Unaudited Financial Statements of MBIA Corp. The Company shall cause
-------------------------------------------
MBIA Corp. to deliver to the Providers, within ten Business Days after the
filing of any statutory financial statements, unaudited income statements for
such quarter and the current fiscal year to date and unaudited balance sheets as
of the end of such quarter, along with statements of profits and losses and cash
flows for such quarter and the current fiscal year to date, prepared in
accordance with applicable statutory accounting principles consistently applied
(except as noted in the audit comments thereto), certified by the Chief
Financial Officer, Treasurer, or Controller of MBIA Corp. The parties hereto
agree that the delivery of MBIA Corp.'s statutory financial statements will
satisfy such information requirements, as long as the information required under
this paragraph is contained therein.
(e) Other Informational Filings. The Company shall deliver to the
---------------------------
Providers, within ten Business Days after the filing of any Form 8-K (or any
successor form) of the Company with the Commission, copies of such Form 8-K or
successor form.
14
(f) Certification; Officer's Certificates. The quarterly and annual
-------------------------------------
reports described in Sections 7(a)(1) through 7(a)(4) shall be certified by the
Chief Financial Officer, Treasurer, or Controller of the Company or MBIA Corp.,
as the case may be.
8. Conditions to the Company's Obligations. The obligations of the
---------------------------------------
Company hereunder shall be subject to, at and as of the Effective Date, the
satisfaction of the following conditions:
(a) The Company shall have received an executed counterpart of this
Agreement from each of the Providers.
(b) The Company shall have received from Sidley Xxxxxx Xxxxx & Xxxx LLP or
in-house counsel of any Provider an opinion (or, if any Provider is a non-U.S.
entity, an opinion of its in-house counsel or local counsel) dated the Effective
Date and addressed to the Company, S&P & Xxxxx'x, substantially to the effect
that this Agreement (i) constitutes the legal, valid and binding obligation of
the Providers, and (ii) is enforceable against the Providers in accordance with
its terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to equitable principles of general application). In rendering
its opinion, Sidley Xxxxxx Xxxxx & Xxxx LLP (or such other counsel) may rely
upon the opinions of in-house counsel to the Provider as to the due
authorization, execution and delivery by such Provider of this Agreement.
9. Conditions to the Providers' Commitments. (a) The several commitments
----------------------------------------
of the Providers hereunder shall be subject to the satisfaction of the following
conditions (with the following conditions (1)-(4) and (6) to be satisfied at and
as of the Effective Date and condition (5) to be satisfied as promptly
thereafter as possible):
(1) The Company shall have accepted the subscription contained herein
and the Providers shall have received an executed counterpart of this
Agreement.
(2) The Providers shall have received from the general counsel for the
Company, an opinion, dated the Effective Date, substantially in the
form of Exhibit (9)(a)(2) hereto.
(3) The Providers shall have received a certificate in the form of
Exhibit 12(a)(3), dated the Effective Date, and certified by the Chief
Financial Officer, Treasurer or Controller of the Company to the
effect that:
(i) The Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or before
the Effective Date; and
(ii) The representations and warranties of the Company contained
in Section 5 herein are true, complete, and correct at and as of the
Effective Date.
(4) The Company shall have made all material filings required under
applicable state and/or federal securities laws in connection with the
transactions contemplated by this Agreement. The Company shall have
received all other
15
authorizations, consents, approvals, licenses, filings and
registrations required in connection with the execution, delivery,
performance, validity and enforceability of this Agreement.
(5) The Providers shall have received a certificate (or equivalent
customary documentation, with respect to non-U.S. entities) of the
appropriate public official in the jurisdiction of organization of the
Company and the Reference Portfolio Insurers as to the due
organization and good standing of the Company and the Reference
Portfolio Insurers together with a certified copy (or equivalent
customary documentation, with respect to non-U.S. entities) of the
organizational documents of the Company and the Reference Portfolio
Insurers and shall have received certificates of appropriate public
officials of each other jurisdiction in which the Company and each
Reference Portfolio Insurer is required to qualify to do business as a
foreign organization as to the due qualification and good standing of
the Company and each Reference Portfolio Insurer.
(6) The Providers shall have received a copy, certified by the
Secretary of the Company, of the actions of the Board of Directors of
the Company authorizing, ratifying, and approving the Preferred Shares
Subscription Agreement in the form as executed on December 27, 2001,
including the issuance of the Commitments and the underlying Preferred
Shares.
(b) The several commitments of the Providers, at and as of each Issuance
Date, shall be subject to the following conditions:
(1) The Providers shall have received from the general counsel for the
Company, an opinion, dated as of each Issuance Date, substantially in
the form of Exhibit 9(b)(1) hereto.
(2) The Providers shall have received the Notice of Issuance from the
Company.
(3) The Providers shall have received a certificate, dated such
Issuance Date, certified by the Chief Financial Officer, Treasurer or
Controller of the Company to the effect that:
(i) The Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied under this
Section 9(b) on such Issuance Date; and
(ii) The representations and warranties of the Company required
to be made on such Issuance Date are true and correct at and as of
such Issuance Date.
(4) At and as of such Issuance Date, there shall not have occurred and
been continuing an Event of Default under the Note Subscription
Agreement or any Notes.
16
(5) The Company shall have made all material filings required under
applicable state and/or federal securities laws in connection with the
issuance of the Preferred Shares on such Issuance Date.
(6) No action, suit or other third-party proceeding by or before any
governmental authority shall have resulted in the issuance of an order
or other similar action enjoining the issuance of the Preferred
Shares.
(7) The Providers shall have received certificates representing their
Preferred Shares.
10. Notices. Any notice or other communication required or permitted under
-------
this Agreement shall be in writing and shall be deemed to have been given (a) on
the date of delivery if delivered personally or by facsimile transmission,
receipt confirmed, (b) twenty-four (24) hours after sending it by a nationally
recognized overnight delivery service, or (c) five (5) Business Days after
mailing, if sent by certified, registered or express mail, postage prepaid, if
properly addressed or directed to such party at the appropriate address or
facsimile number set forth below or at such other address or facsimile number as
such party may designate from time to time by notice duly given in accordance
with the terms of this Section 10:
If to the Company:
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
with a copy to:
MBIA, Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn: General Counsel
Telephone No.: 000-000-0000
Fax No.: 000-000-0000
If to Swiss Re Capital Markets Corporation:
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Treasurer
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
17
with a copy to:
Swiss Re Capital Markets Corporation
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Swiss Re Financial Products Corporation:
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: Treasurer
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Swiss Re Financial Products Corporation
00 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to XXXXX:
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
11. Dispute Resolution. Any disputes arising under or in connection with
------------------
this Agreement shall be resolved by a court of law having the appropriate
jurisdiction over the parties and subject matter, subject to Section 14(b) of
this Agreement.
12. Transfers of Obligations or Preferred Shares. No Provider shall sell,
--------------------------------------------
assign or otherwise transfer its rights or obligations under this Agreement
(including, without limitation, the Commitments) (i) except pursuant to an
exemption from the registration requirements of the 1933 Act, and (ii) to an
investor having a rating at the time of such sale, assignment or transfer less
than AAA/Aaa by S&P and Xxxxx'x, respectively, and which has not been previously
approved in writing by the Company. The Company acknowledges and agrees that the
Providers may transfer interests in issued and outstanding Preferred Shares
without the prior consent of the Company in whole or in part only to one or more
affiliates of the Providers (it being further understood that the Providers may
not transfer the Commitments to any of their affiliates). The
18
Company agrees to provide reasonable assistance to any Provider or SRCMC in
connection with the documentation of any permitted transfer of the Preferred
Shares or Commitments.
13. Indemnification for Broker's Fees. The Company agrees to indemnify,
---------------------------------
defend and hold harmless SRCMC from any and all claims, costs and expenses
(including reasonable attorney's fees and disbursements) in respect of the
assertions of any broker, finder, agent or other person seeking compensation for
the subscription for the Commitments or the underlying Preferred Shares or for
other services rendered in connection with such transactions.
14. Miscellaneous.
-------------
(a) The representations, warranties and agreements of the Providers and of
the Company set forth herein are continuing in nature and shall survive the
acceptance of the subscription contained herein and the issuances with respect
to the Preferred Shares.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The parties hereby submit to the exclusive
jurisdiction of the federal and state courts located in New York County with
respect to any dispute arising under this Agreement, the agreements and
instruments entered into in connection herewith or the transactions contemplated
hereby or thereby. THE PARTIES HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY
HERETO IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR THE COMMITMENTS.
(c) The descriptive headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provision of this Agreement.
(d) This Agreement contains the entire agreement of the parties with
respect to the subject matter of this Agreement, and there are no
representations, covenants or other agreements except as stated or referred to
herein. This Agreement may be amended only by a writing executed by the party
against whom such amendment is sought to be enforced.
(e) This Agreement may be executed in one or more counterparts, all of
which shall constitute one and the same instrument.
(f) Except (i) as may be required by law (including the requirements for
any filings made by the Company under the 1933 Act or 1934 Act, or pursuant to
the order or ruling of any regulatory authority having jurisdiction over the
Company or the Insurers), or (ii) as may be required by any rating agency in
respect of its rating of the Company or any Insurer, the Company, SRFPC and
SRCMC hereby agree not to disclose that XXXXX is a party to this Agreement or
any of the agreements executed in connection herewith (including the disclosure
of XXXXX's name or the name, if any, of its affiliates) or the nature or amount
of its Commitments hereunder, except that XXXXX may be referred to in press
releases as "a leading reinsurance company" and its ratings may be disclosed. In
the event the disclosure of XXXXX's identity pursuant to clauses (i) or (ii) of
the foregoing sentence is required, the Company, SRFPC and SRCMC agree to give
advance notice to XXXXX of such disclosure.
19
(g) This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns and legal representatives,
and any reference to a specific party in this Agreement shall include such
party's permitted successors or assigns.
20
If the foregoing is in accordance of our agreement, please sign and return
a duplicate hereof, whereupon this Preferred Shares Subscription Agreement and
your acceptance will represent a binding agreement between SRCMC, the Providers
and the Company.
SWISS RE FINANCIAL
PRODUCTS CORPORATION,
a Delaware corporation
By: __________________________________
Name:
Title:
SWISS RE CAPITAL MARKETS
CORPORATION, a Delaware corporation
By: __________________________________
Name:
Title:
XXXXX,
a Delaware corporation
By: __________________________________
Name:
Title:
ACCEPTED this 27/th/ day of December, 2001
By MBIA, INC., a Connecticut corporation
By: __________________________________
Name:
Title:
21
Schedule A
Commitments
Amount Percentage
------ ----------
Swiss Re Financial Products Corporation 50,000 shares 66 2/3%
XXXXX 25,000 shares 33 1/3%
A-1
EXHIBIT 1
Certificate of Amendment
1A-1
EXHIBIT 3(b)
[FORM OF NOTICE OF ISSUANCE]
NOTICE OF ISSUANCE
[Provider]
[Address]
Attention:
Dear Sir/Madam:
Reference is hereby made to the Preferred Shares Subscription Agreement
(the "Subscription Agreement") dated December 27, 2001 by and among MBIA, Inc.,
a Connecticut corporation (the "Company"), SRCMC and the Providers named
therein. This Notice represents the Company's request that you purchase shares
of the Company's Series A Preferred Stock, par value $1.00 per share (the
"Preferred Shares"), having a liquidation preference of $2,000 per share (the
"Liquidation Preference"). Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Subscription Agreement.
The aggregate principal amount of the Notes subject to this Notice of
Issuance is: $_________
The date of issuance with respect to such Preferred Shares will be:
____________, 20___
The number of Preferred Shares to be acquired by [Provider] in
connection with such issuance has been computed pursuant to the terms of the
Notes based on the figures set forth below:
Aggregate principal
amount of Notes: Liquidation Preference: Number of Preferred Shares:
$________________ / $2,000 = ________________
Cash payment for fractional shares: $______________.
3B-1
[In the event that you elect to pay cash for the Preferred Shares in lieu
of tendering the Notes as payment thereof, the purchase price for the Preferred
Shares shall be remitted in immediately available funds to the account of the
Company pursuant to the following wire transfer instructions:]
MBIA, INC.
By: _____________________________
Name:________________________
Title:_______________________
Dated: ____________, 20__
9A2-2
EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
The undersigned officer of MBIA, Inc., a Connecticut corporation (the
"Company"), does hereby deliver this certificate on behalf of the Company
pursuant to Section 9(b)(3) of the Preferred Shares Subscription Agreement dated
December 27, 2001 (the "Agreement") between the Company, Swiss Re Financial
Products Corporation, Swiss Re Capital Markets Corporation and XXXXX, and hereby
certifies that:
(A) The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under Section 9(b)
of the Agreement on the date hereof; and
(B) The representations and warranties of the Company required to be made
on the date hereof are true and correct at and as of the date hereof.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
Dated: _____________, 20_____ MBIA, Inc.
_____________________________________
Name:
Title: [Chief Financial Officer] [Treasurer]
[Controller]
3B-1
EXHIBIT 9(a)(2)
OPINION OF COUNSEL
EFFECTIVE DATE
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Connecticut.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as currently being conducted
and to enter into and perform its obligations under the Certificate of
Amendment.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) Each Insurer has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to own, lease and operate its properties and
conduct its business as currently being conducted and is duly qualified to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
be in good standing would not have a Material Adverse Effect; all of the issued
and outstanding shares of capital stock or other equity interests, as
applicable, of each Insurer have been duly authorized and are validly issued,
fully paid and non-assessable and, except for qualifying shares, are owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; and none of the
outstanding shares of capital stock of any Insurer was issued in violation of
preemptive or other similar rights of any securityholder of such Insurer.
(v) Each Insurer has all requisite licenses, permits and authority
that are necessary for the conduct of its insurance business, except where the
failure to obtain such licenses, permits or authorities would not have a
Material Adverse Effect (collectively, "Licenses"), such Licenses are in full
force and effect, and no proceeding is pending or, to the best of my knowledge,
threatened to suspend, revoke or limit any such License.
(vi) There are (i) no outstanding subscriptions, warrants, options,
calls or commitments of any character relating to or entitling any Person to
purchase or otherwise acquire any stock of any Insurer and (ii) no obligations
or securities convertible into or exchangeable for shares of any stock of any
Insurer or any commitments of any character relating to or entitling any Person
to purchase or otherwise acquire any such obligations or securities.
(vii) The Preferred Shares Subscription Agreement has been duly
authorized, executed and delivered by the Company and (assuming the due
authorization, execution and delivery
9A3-1
thereof by the other parties thereto) constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(viii) The Preferred Shares, when issued and delivered by the Company
pursuant to the Preferred Shares Subscription Agreement against payment of the
consideration set forth therein, will be validly issued and fully paid and
non-assessable; and no holder of the Preferred Shares is or will be subject to
personal liability by reason of being such a holder. There are (i) no
outstanding subscriptions, warrants, options, calls or commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
Preferred Shares, (ii) no obligations or securities convertible into or
exchangeable for Preferred Shares or any commitments of any character relating
to or entitling any Person to purchase or otherwise acquire any such obligations
or securities and (iii) no understandings or agreements with respect to the
purchase or voting of any of Preferred Shares.
(ix) The issuance of the Preferred Shares is not subject to
preemptive or other similar rights of any securityholder of the Company.
(x) Upon the subscription for the Commitments and subsequent
issuance and delivery of the underlying Preferred Shares as provided in the
Preferred Shares Subscription Agreement, it is not necessary in connection with
the subscription for the Commitments or the issuance of the underlying Preferred
Shares to register such Commitments or Preferred Shares under the 1933 Act. No
authorization, approval or consent of any court or governmental authority or
agency is necessary in connection with the valid issuance, sale and delivery of
the Preferred Shares, except such as may be required under the Blue Sky laws or
other securities or insurance securities laws of the various states, and any
other requirements applicable to purchasers of Preferred Shares.
(xi) To the best of my knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any Insurer is a party, or to which the property of the Company or any Insurer
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which may reasonably be expected to result, individually or
in the aggregate, in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the assets, properties or operations
thereof, taken as a whole, or the consummation of the transactions contemplated
in the Preferred Shares Subscription Agreement or the performance by the Company
of its obligations thereunder.
(xii) Neither the Company nor any Insurer is, or with the giving of
notice or passage of time or both, would be, in breach or violation of any of
the terms or provisions of or in default under (i) any statute, rule or
regulation applicable to the Company or any Insurer, (ii) any indenture,
contract, lease, mortgage, deed of trust, note or other agreement or instrument
for over $25,000,000 to which the Company or any Insurer is a party or by which
it may be bound, (iii) its certificate of incorporation, by-laws or other
organizational documents, and (iv) any
9A2-2
order, decree or judgment of any court or governmental agency or body having
jurisdiction over the Company or any Insurer except, with respect to breaches,
violations or defaults contemplated by clauses (i), (ii), (iii) or (iv), for
such breaches, violations or defaults that could not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect. The
opinions stated in clauses (i), (ii) and (iv) are stated to the best of my
knowledge. The performance of the Preferred Shares Subscription Agreement by the
Company and the consummation of the transactions therein contemplated will not,
with the giving of notice or passage of time or both, result in a breach or
violation of any of the terms or provisions of or constitute a default under or
accelerate obligations under (w) any material statute, rule or regulation
applicable to the Company or any Insurer, (x) any indenture, contract, mortgage,
lease, deed of trust, note or other agreement or instrument for over $25,000,000
to which the Company or any Insurer is a party or by which it is bound, (y) the
Company's or any Insurer's certificate of incorporation or by-laws or (z) any
order, decree or judgment of any court or governmental agency or body having
jurisdiction over the Company or any Insurer or any of their properties.
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act. 1.
9A2-3
EXHIBIT 9(a)(3)
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
The undersigned officer of MBIA, Inc., a Connecticut corporation (the
"Company"), does hereby deliver this certificate on behalf of the Company
pursuant to Section 9(a)(3) of the Preferred Shares Subscription Agreement dated
December 27, 2001 (the "Agreement") between the Company, Swiss Re Financial
Products Corporation, Swiss Re Capital Markets Corporation and XXXXX, and hereby
certifies that:
(A) The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or
before the date hereof; and
(B) The representations and warranties of the Company contained in
Section 5 of the Agreement are true, complete, and correct at
and as of the date hereof.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
Dated: December 27, 2001 MBIA, Inc.
------------------------------
Name:
Title: [Chief Financial Officer] [Treasurer]
[Controller]
9A3-1
EXHIBIT 9(b)(1)
OPINION OF COUNSEL
ISSUANCE DATE
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Connecticut.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to perform its obligations under the Certificate of
Amendment.
(iii) The Preferred Shares have been validly issued and delivered by
the Company pursuant to the Preferred Shares Subscription Agreement, are fully
paid and non-assessable, and no holder of the Preferred Shares is or will be
subject to personal liability by reason of being such a holder. There are (i) no
outstanding subscriptions, warrants, options, calls or commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
Preferred Shares, (ii) no obligations or securities convertible into or
exchangeable for Preferred Shares or any commitments of any character relating
to or entitling any Person to purchase or otherwise acquire any such obligations
or securities and (iii) no understandings or agreements with respect to the
purchase or voting of any of Preferred Shares.
(iv) The issuance of the Preferred Shares is not subject to
preemptive or other similar rights of any securityholder of the Company.
(v) It is not necessary in connection with the issuance of the
Preferred Shares to register such Preferred Shares under the 1933 Act. No
authorization, approval or consent of any court or governmental authority or
agency is necessary in connection with the valid issuance, sale and delivery of
the Preferred Shares, except such as may be required under the Blue Sky laws or
other securities or insurance securities laws of the various states, and any
other requirements applicable to purchasers of Preferred Shares.
(vi) No Event of Default under the Note Subscription Agreement or
under any Notes has occurred and is continuing.
9B-1
