STOCK OPTION AGREEMENT
AGREEMENT made and entered into as of this 7th day of January, 1999 between
MBIA Inc., a Connecticut corporation (the "Company"), and Xxxxxx X. Xxxxx, Xx.
(the "Optionee").
WITNESSETH:
WHEREAS, the Company has established the MBIA Inc. 1987 Stock Option Plan,
as amended (the "Plan") providing for the granting of options to purchase shares
("Stock Options") of Common Stock par value $1 per share, of the Company
("Shares") to key employees of the Company and certain wholly-owned subsidiaries
of the Company; and
WHEREAS, the Company has employed the Optionee pursuant to an offer letter
dated January 7, 1999 ("Offer Letter"), under which the Optionee has agreed to
become Chief Executive Officer of the Company on the terms and conditions set
forth therein;
WHEREAS, the Company is hiring the Optionee as a key employee of the
Company and has determined it to be in the interest of the Company and its
shareholders for the Optionee to be granted a stock option (the "Option") under
the Plan as an inducement for him to agree to serve the Company and as an
incentive for continuing effort during such service; and
WHEREAS, the Compensation and Organization Committee (the "Committee") of
the Board of Directors of the Company has determined to grant to the Optionee
this Option, subject to the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Optionee (together, the "Parties") do hereby
agree as follows:
1. Grant. Pursuant to the terms and provisions of the Plan, and the action
of the Committee, the Company hereby grants to the Optionee the right and option
to purchase, on the terms and conditions hereinafter set forth, Eight Hundred
Thousand (800,000) Shares.
2. Option Price. The purchase price of each of the Shares subject to the
Option (the "Option Price") is $67.875 per share, which is the Market Price (as
defined in Section 20) of a Share on January 6, 1999.
3. Term of Option Subject to the terms and provisions of the Plan and this
Stock Option Agreement (the "Agreement"), this Option may be exercised during
the periods set forth in Sections 4 and 5 below but no later than 11:59 p.m. on
January 7, 2009 (the
"Option Period"). The Optionee's rights during the Option Period shall be
subject to limitations as hereinafter provided and shall be subject to sooner
termination as provided in Section 5.
4. Exercisability.
(a) General Rule. Subject to the additional conditions set forth in Section
4(b) below, 100% of the Shares subject to the Option may be exercised, in whole
or in part, and from time to time, on or after the earlier to occur of (i)
January 7, 2008 or (ii) the later to occur of (1) January 7, 2002 and (2) the
last day of a period of ten consecutive Trading Days on which a Share has traded
at least $90 at any point during each such Trading Day, subject to exercise at
an earlier date in the event of certain terminations of the Optionee's
employment, as provided in Section 5. Upon the Option's becoming exercisable
under this Agreement, it shall, except as expressly provided herein, be treated
as fully vested and nonforfeitable in all respects.
(b) Share Ownership Requirements. Notwithstanding anything else in this
Agreement to the contrary, none of this Option shall become exercisable with
respect to any Shares and shall be forfeited unless the Optionee shall
"beneficially own" (within the meaning of both Rule 13d-3 and Rule 16a-1 as
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and as currently in effect)
not later than February 8, 1999 Two Hundred Thousand (200,000) Shares and shall
continuously own at least that number of Shares until the earliest to occur of
(i) a Change of Control, (ii) the termination of the Optionee's employment for
any of the reasons described in Section 5(a), (b), (c) or (d) and (iii) January
7, 2004. On and after January 7, 2004 and prior to the occurrence of a Change of
Control or the termination of the Optionee's employment for any of the reasons
described in Section 5(a), (b), (c) or (d), this Option shall cease to be
exercisable as to any Shares as to which the Option has not previously been
exercised (and the Option shall be forfeited with respect to such number of
Shares) on the first date, if any, as of which the Optionee ceases to
"beneficially owe' (as defined in the previous sentence) at least the number of
Shares determined pursuant to the following schedule:
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Date Number of Shares Required to be Owned
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On and after January 7, 2004 and
prior to July 7, 2005 150,000 Shares
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On or after July 7, 2005 and
prior to January 7, 2007 100,000 Shares
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On or after January 7, 2007 50,000 Shares
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Upon and after the occurrence of a Change of Control or the termination of
the Optionee's employment for any of the reasons described in Section 5(a), (b),
(c) or (d), there shall be no requirement under this Agreement or other-wise
that the Optionee continue to hold any Shares or any securities of the Company
or any successor in interest to the Company.
(c) Change of Control. Notwithstanding anything herein to the contrary,
including, without limitation, Sections 4(a), 4(b) and 5, this Option shall upon
any Change of Control (as defined in Section 20) immediately become fully
exercisable; provided that, if the Change of Control occurs prior to January 7,
2000 and unless the Compensation & Organization Committee of the Board of
Directors otherwise determines, only fifty percent (50%) of the Shares subject
to this Option grant (i.e., 400,000 shares) will become exercisable upon the
occurrence of a Change of Control. If in any transaction constituting a Change
of Control, shareholders may exchange or sell their Shares for cash, securities
or other property, this Option shall become exercisable to the extent provided
in the immediately preceding sentence immediately prior to the occurrence of
such Change of Control (but only after all material conditions to the
consummation of such transaction have been satisfied) and the Optionee shall be
afforded the opportunity to exercise this Option, in whole or in part, prior to
such occurrence so that he may receive in respect of his Option Shares the same
consideration received by such other shareholders.
5. Termination of Employment.
(a) Death. In the event that the Optionee dies while employed by the
Company, this Option shall immediately become fully exercisable and the estate
or other legal representative of the Optionee, or his successors and assigns as
permitted under this Agreement, as the case may be, shall be entitled, during
the period ending on the earlier of (i) the third anniversary of the Optionee's
death and (ii) January 7, 2009, to exercise this Option with respect to all of
the Shares then subject to this Option. To the extent any portion of this Option
is not exercised on or before such earlier date, such unexercised portion of
this Option shall expire. Notwithstanding any other provision of this Section 5,
in the event the Optionee dies subsequent to the termination of his employment
with the Company, but at a time at which all or a portion of this Option is
exercisable pursuant to the provisions of this Section 5, the estate or other
legal representative of the Optionee, or his successors and assigns as permitted
under this Agreement, as the case may be, shall be entitled to exercise the
portion of this Option that is exercisable at the date of the Optionee's death
for the period otherwise specified in this Section 5 or, if longer, until the
earlier of the first anniversary of the Optionee's death or January 7, 2009.
(b) Disability. In the that event the Optionee's employment with the
Company is terminated by either Party due to Disability (as defined in Section
20), this Option shall immediately become fully exercisable and the Optionee
shall be entitled, during the period ending on the earlier of (i) the third
anniversary of the date of Ms termination of
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employment due to Disability and (ii) January 7, 2009, to exercise this Option
with respect to all of the Shares then subject to this Option. To the extent any
portion of this Option is not exercised on or before such earlier date, such
unexercised portion of this Option shall expire.
(c) Retirement. In the event that the Optionee's employment with the
Company is terminated by his Retirement, the Optionee shall be entitled, during
the period ending on the earlier of (i) the third anniversary of the date of his
termination of employment due to Retirement and (ii) January 7, 2009, to
exercise the Option with respect to the sum of (1) that number of Shares with
respect to which the Optionee could have exercised the Option on the date of his
Retirement, determined in accordance with Section 4 above, and (2) his Pro-Rata
Percentage of any Shares as to which this Option is not exercisable at the date
of his Retirement. To the extent any portion of this Option is not exercised on
or before such earlier date, such unexercised portion of this Option shall
expire. For this purpose, "Retirement" shall mean termination of the Optionee's
employment, other than a termination by the Company for Cause or a termination
to which Section 5(a), 5(b) or 5(d) applies after having completed at least five
years of service as an employee of the Company and having attained age 55; and
"Pro Rata Percentage" shall mean the percentage determined by dividing (i) the
number of whole and partial months of the Optionee's employment from January 7,
1999 to the date of his Retirement by (ii) 108.
(d) Termination Without Cause. In the event that the Optionee's employment
is terminated (i) by the Company for any reason other than due to death or
Disability or for Cause (as each such term is defined in Section 20) or (ii) by
the Optionee through a Constructive Termination Without Cause (as defined in
Section 20), this Option shall immediately become fully exercisable and the
Optionee shall be entitled, during the period ending on the earlier of (x) the
fifth anniversary of the date of his termination of employment and (y) January
7, 2009, to exercise this Option with respect to all of the Shares then subject
to this Option. To the extent any portion of this Option is not exercised on or
before such earlier date, such unexercised portion of this Option shall expire.
(e) Voluntary Termination. In the event that the Optionee terminates his
employment with the Company voluntarily and none of Sections 5(a) through 5(d)
apply, then the Optionee shall be entitled during the period ending on the
earlier of (i) the first anniversary of his termination of employment and (H)
January 7, 2009, to exercise the Option with respect to the number of Shares as
to which the Option was exercisable by the Optionee at the date of such
termination of employment. To the extent any portion of this Option is not
exercised on or before such earlier date, such unexercised portion of this
Option shall expire.
(f) Termination following a Change of Control. Notwithstanding the
preceding provisions of this Section 5, if the Optionee's employment terminates
following or as a result of a Change of Control and this Option continues in
effect after such a Change of
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Control, the Optionee shall be entitled to exercise the Option until January 7,
2009 with respect to the number of Shares as to which the Option was exercisable
by the Optionee at the date of such termination of employment and, if the Change
of Control occurs prior to January 7, 2000, such additional number of Shares, if
any, as to which the Option becomes exercisable by reason of the provisions of
Section 5(a), 5(b), 5(c) or 5(d).
(g) Other Termination. In the event the Optionee's employment with the
Company is terminated for any reason other than those described in subsection
(a), (b), (c), (d), (e) and (f) above, then the Optionee shall be entitled
during the period ending on the earlier of (i) the three month anniversary of
his termination of employment and (ii) January 7, 2009, to exercise the Option
with respect to the number of Shares as to which the Option was exercisable by
the Optionee at the date of such termination of employment. To the extent any
portion of this Option is not exercised on or before such earlier date, such
unexercised portion of this Option shall expire.
(h) Committee Discretion. Without limiting the generality of the foregoing,
the Committee shall have the authority in its discretion to provide terms and
conditions with respect to the exercisability of the Option before or after
termination of employment that are more favorable to the Optionee than those set
forth in Section 4 or Section 5.
6. No Rights of Shareholder or Continued Employment. The Optionee shall
not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, either at law or in equity. Neither the grant of this Option nor the
exercise of such Option shall be construed as granting to the Optionee any right
of continued employment, and the right of the Company to terminate the
Optionee's employment at any time at will (whether by dismissal, discharge or
otherwise) is specifically reserved.
7. Exercise of Option.
(a) Method of Exercise. In order to exercise this Option, in whole or in
part, the Optionee (or any other person entitled to exercise this Option in
accordance with the terms hereof) shall submit to the Company an instrument in
writing (which shall be substantially in the form of Exhibit A hereto or in
another form which shall contain the data required by such form) specifying the
whole number of Shares in respect of which the Option is being exercised and
accompanied by payment in full (or an arrangement for payment in full in
accordance with Section 7(b)) of the aggregate Option Price for the Shares in
respect of which the Option is being exercised. The number of Shares for which
the Option has thus been exercised shall then promptly be issued by the Company
(the "Option Shares") and a certificate promptly delivered to the Optionee (or
such other person as shall be exercising this Option); provided, however, that
the Company shall not be obligated to issue any Option Shares hereunder if the
issuance of such Option Shares would violate any provisions of any applicable
law or regulation of any governmental authority.
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(b) Method of Payment. Payment of the aggregate Option Price for Option
Shares may be made (i) by delivery to the Company of cash or a check to the
order of the Company in an amount equal to the aggregate Option Price of such
Shares; (ii) by delivery to the Company of Shares then owned by the Optionee
having an aggregate Market Price on the date of delivery equal to the aggregate
Option Price of the Shares for which the Option is being exercised; (iii)
through reasonable cashless exercise procedures that are from time to time
established by the Company (which procedures the Company agrees to establish if
requested by the Optionee) and that afford the Optionee the opportunity to sell
immediately some or all of the Shares underlying the exercised portion of the
Option in order to generate sufficient cash to pay the aggregate Option Price of
such Shares or (iv) by any combination of (i), (ii) or (iii).
(c) Delivery of Shares in Payment of Option Price. Payment by delivery of
Shares may be effected by delivering one or more stock certificates or otherwise
by delivering Shares to the Company's reasonable satisfaction (including,
without limitation, through an "attestation" procedure that is reasonably
acceptable to the Company) in each case accompanied by such endorsements, stock
powers, signature guarantees or other documents or assurances as may reasonably
be required by the Company. If a certificate or certificates or other
documentation representing Shares in excess of the amount required are
delivered, a certificate (or other satisfactory evidence of ownership)
representing the excess number of Shares shall be returned by the Company. The
Company need not accept fractional Shares.
(d) Additional Company Obligations. The Company shall, upon and to the
extent of any written request from the Optionee, use its reasonable commercial
best efforts to assure that all Option Shares shall be, and shall remain, (i)
fully registered (at the Company's expense) for issuance under the Securities
Act of 1933, as amended; (ii) fully registered or qualified (at the Company's
request) under such state securities laws as the Optionee may reasonably
request, both for issuance and resale, (iii) listed on a national securities
exchange or eligible for sale on the NASDAQ National Market; and (iv) validly
issued, fully paid and nonassessable. The Company shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of this Agreement
and shall pay all original issue taxes with respect to the issuance of Option
Shares and all other fees and expenses incurred in connection therewith.
8. Excise Tax. In the event that any payment or benefit made or provided to
or for the benefit of the Optionee under this Agreement, or under any plan,
agreement, program or arrangement of the Company or any of its affiliates (a,
"Payment") is determined to be subject to any excise tax ("Excise Tax") imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any successor section to such Section), the Company shall pay to the Optionee at
or prior to the time any Excise Tax is payable with respect to such Payment
(through withholding or otherwise), an additional amount which, after the
imposition of all income, employment, excise and other taxes payable by the
Optionee thereon, is equal to the sum of (i) the Excise Tax on
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such Payment plus (ii) any penalty and interest assessments associated with such
Excise Tax. The determination of whether any Payment is subject to the Excise
Tax and, if so, the amount to be paid by the Company to the Optionee and the
time of payment pursuant to this Section 8 shall be made by an independent,
nationally recognized United States public accounting firm (the "Auditor")
jointly selected by the Parties and paid by the Company. If the Parties cannot
agree on the firm to serve as the Auditor, then the Parties shall each select
one nationally recognized United States accounting firm and those two firms
shall jointly select the accounting firm to serve as the Auditor, which firm
shall not have acted in any way on behalf of the Company during the two years
preceding its selection. The Parties shall cooperate with each other in
connection with any proceeding or claim relating to the existence or amount of
any liability for any Excise Tax. All expenses relating to any such proceeding
or claim (including any attorneys' fees and other expenses associated therewith)
shall be paid by the Company promptly upon demand by the Optionee, and any such
payment shall be subject to gross up in the event that the Optionee is subject
to any income tax, employment tax or Excise Tax on it. In the event that the
Optionee is entitled to a gross-up from the Company under the provisions of this
Agreement and any other agreement or arrangement with the Company, the payment,
if any, to be made in respect of any Excise Tax under this Section 8 shall not
be in addition to or duplicative of any such other payment.
9. Adjustments for Changes in Structure and Special Transactions. In the
event of any merger, consolidation, reorganization, recapitalization, spin-off,
split-up, combination, share exchange, liquidation, dissolution, stock split,
extraordinary cash dividend, stock dividend, distribution of stock or other
property in respect of the Shares or other securities of the Company, or other
change in corporate structure or capitalization affecting the Shares,
appropriate adjustment(s) will be made in the number and kind of equity
securities subject to this Option, the Market Price specified in Section
4(a)(i)(2), the number of Shares specified in Section 4(b) and/or in the Option
Price or other terms and conditions of this Option and/or appropriate provision
shall be made for supplemental payments of cash or other property, so as to
avoid dilution or enlargement of the rights of the Optionee and of the economic
opportunity and value represented by this Option. The Company will use its
reasonable commercial best efforts to obtain the agreement of any successor in
interest to provide the opportunity for the Optionee to receive options for its
common equity in substitution for this Option, but shall not have any obligation
to take any action that would be detrimental to the interests of the Company's
shareholders.
10. Deferral of Option Gains. The Optionee shall have the right, by
furnishing written notice to the Company at least six months prior to any
exercise of this Option, to elect to defer any gains realized upon such
exercise. Any such deferral, including the manner of exercise of this Option in
connection with such deferral, shall be made in such manner as may reasonably be
required by the Company, including such requirements as may apply in order to
defer such gains for Federal income tax purposes as the independent public
accountants for the Company reasonably advise are necessary in
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order that such gains not result in a charge against the earnings of the
Company. At the time the Optionee elects to defer such gains, such gains shall
be deferred into any nonqualified deferral plan of the Company that accepts such
deferrals on terms and conditions that satisfy the requirements of the preceding
sentence. If no such plan is available, the Optionee may make an irrevocable
written election to defer such gains into Share Units (with each Share Unit
representing a Share, including the right to be credited with any dividends or
other distributions that may be declared or made thereon during the period of
the deferral). Amounts deferred under this Section 10 shall be paid out under
the terms of the Optionee's election to defer.
11. Relationship of this Agreement to the Plan and to the Letter Agreement.
In the event of any inconsistency between the provisions of the Plan and the
provisions of this Agreement, the Plan shall be deemed amended insofar as is
necessary to conform the Plan to the provisions of this Agreement, and the
provisions of this Agreement shall control. In the event of any inconsistency
between the provisions of the Offer Letter and the provisions of this Agreement,
the provisions of this Agreement shall control.
12. Nonassignability of Option. This Option is personal and no rights
granted hereunder may be transferred, assigned, pledged, hypothecated in any way
(whether by operation of law or otherwise) nor shall any such rights be subject
to execution, attachment or similar process, except that this Option may be
transferred, in whole or in part, (i) by will or the laws of descent and
distribution; (ii) to any organization that is exempt from Federal income
taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") or any private foundation that is exempt for Federal income
taxation under Section 509 of the Code, provided that such organization or
foundation agrees to be bound by the terms of this Agreement and any reasonable
conditions that the Company may impose in order to assure compliance with its
obligations under the Federal securities laws; and (iii) to any Immediate Family
Member or to any trust, the sole beneficiaries of which are the Optionee and/or
his Immediate Family Members, or to any entity (including, without limitation,
any corporation, partnership or limited liability company) in which the
Optionee, his Immediate Family Members or trusts, solely for the benefits of
such persons hold all the beneficial interests, provided that such Immediate
Family Members and/or trusts and/or other entities (and upon distribution their
beneficiaries) are bound by the provisions of this Agreement. For purposes of
this Agreement, the term "Immediate Family Member" shall mean the Optionee's
parents and spouse and any of the lineal descendants of the Optionee, his spouse
or either of his parents (including, without limitation, descendants by
adoption). Any person or entity to whom this Option has been transferred in
whole or in part in part in accordance with this Section 12 shall to the extent
of the transfer, succeed to the rights of the Optionee under Sections 3, 4(a),
4(c), 5, 7, 8, 9, 17 and 18.
13. Restrictions on Transfer of Option Shares. Neither Option Shares
acquired on exercise of the Option, nor any interest in such Option Shares may
be sold, assigned,
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pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole or in part, except in compliance with the terms, conditions and
restrictions as set forth in the Certificate of Incorporation or By-Laws of the
Company, applicable federal and state securities laws or any other applicable
laws or regulations, and the terms and conditions hereof.
14. Withholding. The Optionee agrees to make appropriate arrangements with
the Company for satisfaction of any applicable tax withholding requirements
("tax obligations") arising out of this Agreement. Such tax obligations may be
satisfied in any of the manners provided in Section 7(b) for payment of the
purchase price of the Option Shares or, at the election of the Optionee, by
authorizing the Company to withhold up to the greatest number of whole Shares
that would otherwise would be delivered to the Optionee and that have an
aggregate Market Price on the date of exercise equal to the amount of taxes
required to be withheld.
15. Amendment or Waiver. No provision of this Agreement may be amended
unless such amendment is set forth in a writing signed by the Parties. No Waiver
by any person of any breach of any condition or provision contained in this
Agreement shall be deemed a waiver of any similar or dissimilar condition or
provision at the same or any prior or any subsequent time. To be effective, any
waiver must be in writing signed by the waiving person.
16. References and Headings. References herein to rights and obligations of
the Optionee shall apply, where appropriate, to the estate or other legal
representative of the Optionee or his successors and assigns as permitted under
this Agreement, as the case may be, without regard to whether specific reference
to such estate or other legal representative or his successors and assigns is
contained in a particular provision of this Agreement. The headings of Sections
contained in this Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision of this Agreement.
17. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given (i) when
delivered directly to the person concerned or (ii) three business days after
being sent by postage-prepaid certified or registered mail or by nationally
recognized overnight carrier, return receipt requested, duty addressed to the
person concerned at the location indicated below (or to such changed address as
such party may subsequently by similar process give notice of): If to the
Company, at the Company's headquarters and to the attention of the Office of the
Secretary. If to the Optionee, at the Company's headquarters and to the
attention of the Optionee. If to a transferee permitted under Section 12, to the
address (if any) supplied by the Optionee to the Company.
18. Resolution of Disputes. Any dispute or controversy arising out of or
relating to this Agreement, the Optionee's employment with the Company, or the
termination thereof, shall be resolved by binding confidential arbitration, to
be held in New York City
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before three arbitrators in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. Each of the Parties shall be entitled to
appoint one of the three arbitrators and the third arbitrator shall be appointed
by the arbitrators appointed by the Parties. Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof The
Company shall promptly pay all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by the Optionee (or his permitted
successors and assigns) in resolving any claim raised in such an arbitration,
other than any claim brought by the Optionee (or the Optionee's permitted
successors and assigns) that the arbitrator(s) determine to have been brought
(i) in bad faith or (ii) without any reasonable basis. In the event that there
is a dispute regarding the Optionee's rights under this Agreement, the Optionee
shall have the right at any time and from time to time to deliver to the Company
a written conditional exercise and sales notice with respect to all or any
portion of this Option, the effect of which shall be to establish the Optionee's
damages in the event that any proceeding is resolved in his favor assuming that
he would have exercised the Option to the extent provided in such notice on the
date of such notice and immediately sold the Option Shares related to such
deemed exercise on such date at the Market Price. In the event that any such
proceeding is resolved favorably to the Company and against the Optionee, any
such conditional exercise and sales notice shall be deemed void and without
effect, but the period during which the Option shall remain exercisable as
otherwise specified in Section 5 shall in no event expire earlier than the
earlier of (i) January 7, 2009 and (ii) 30 days after the arbitrator's decision
is rendered in writing in favor of the Company.
19. The Company's Representations. The Company represents and warrants that
(i) sufficient shares are available under the Plan for the grant of the Option
hereunder; (ii) it is fully authorized by action of the Board and of the
Committee (and of any other person or body whose action is required) to enter
into this Agreement and to perform its obligations hereunder; (iii) the grant of
this Option and this Agreement have been approved in accordance with Rule
16b-3(d)(1) promulgated under the 1934 Act; (iv) the execution, delivery and
performance of this Agreement by the Company does not violate any applicable
law, regulation, order, judgment or decree or any agreement, plan or corporate
governance document of the Company; and (v) upon the execution and delivery of
this Agreement by the Company and the Optionee, this Agreement shall be the
valid and binding obligation of the Company, enforceable in accordance with its
terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
20. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Change of Control" shall mean the occurrence of any of the following
events:
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(i) any "person", as such term is currently used is Section 13(d) or 14(d)
of the 1934 Act, other than the Company, its majority owned subsidiaries, or any
employee benefit plan of the Company or any of its majority-owned subsidiaries,
becomes a "beneficial owner" (as such term is currently used in Rule 13d-3, as
promulgated under the 0000 Xxx) of 25% or more of the Voting Power of the
Company;
(ii) a majority of the Board consists of individuals other than Incumbent
Directors, which term means the members of the Board who were serving on the
Board on the date hereof, provided that any individual who becomes a director
subsequent to that date whose election or nomination for election was supported
by two-thirds of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director for purposes of this subsection
20(a)(ii);
(iii) the Board adopts any plan of liquidation providing for the
distribution of all or substantially all of the Company's assets;
(iv) the stockholders of the Company approve a merger, consolidation, share
exchange, division, sale or other disposition of substantially all of the assets
of the Company (a "Corporate Event"), as a result of which the shareholders of
the Company immediately prior to such Corporate Event (the "Company
Shareholders") shall not hold, directly or indirectly, immediately following
such Corporate Event a majority of the Voting Power of (x) in the case of a
merger or consolidation, the surviving or resulting corporation, (y) in the case
of a share exchange, the acquiring corporation or (z) in the case of a division
or a sale or other disposition of substantially all of the Company's assets,
each surviving, resulting or acquiring corporation; provided that, such a
division or sale shall not be a Change of Control for purposes of this Agreement
to the extent that, following such Corporate Event, the Executive continues to
be employed by a surviving, resulting or acquiring entity with respect to which
the Company Shareholders hold, directly or indirectly, a majority of the Voting
Power immediately following such Corporate Event.
(b) "Cause" shall mean: (i) the Optionee is convicted of a felony involving
moral turpitude or (ii) the Optionee engages in conduct that constitutes willful
gross neglect or willful gross misconduct in carrying out his duties for the
Company, resulting, in either case, in material economic harm to the Company,
unless the Optionee believed in good faith that such conduct was in, or not
opposed to, the best interests of the Company. Notwithstanding the immediately
preceding sentence, Cause shall not exist for purposes of this Agreement unless
the following procedural requirements have been complied with. The Optionee
shall be given written notice by the Board of its intention to terminate his
employment for Cause, which notice shall state in detail the particular
circumstances that constitute the grounds on which the proposed termination for
Cause is based. The Optionee shall have the right to have a timely hearing
before the Board, and to present evidence to the Board in defense of such
proposed termination and to be represented and assisted by counsel at such
hearing. A determination that Cause exists may only be made
11
upon a vote of two-thirds of the members of the Board (excluding the Optionee)
after such hearing and only on the basis of the grounds set forth in the notice
initially sent to the Optionee regarding such action.
(c) "Constructive Termination Without Cause" shall mean a termination by
the Optionee of his employment with the Company on written notice given to the
Company within 60 days following the occurrence, without Es prior written
consent, of any of the following events:
(i) the failure to elect or reelect the Optionee as Chief Executive Officer
of the Company, as a member of the Board and, beginning on or after May 31,
1999, Chairman of the Board, or the removal of him from any such position other
than in connection with an actual termination of employment by the Company for
Cause in accordance with the provisions hereof;
(ii) any material diminution in his duties or responsibilities, any change
in the reporting structure so that the Optionee reports to someone other than
the Board or (prior to June 1, 1999) its Chairman, or the assignment to him of
duties that materially impair his ability to perform the duties normally
assigned to a chief executive officer (and, beginning as of May 31, 1999, a
chairman of the board) of a publicly traded company of the same size and nature
as the Company;
(iii) any material breach of this Agreement by the Company or any other
breach of this Agreement which is not cured by the Company within 10 business
days of receipt by the Company of written notice thereof setting forth in
reasonable detail the grounds on which such breach is alleged.
(d) "Disability" shall mean the Optionee's inability, due to physical or
mental incapacity, to substantially perform his duties and responsibilities as
Chief Executive Officer of the Company for a period of 180 consecutive days as
determined by an approved medical doctor. For this purpose, an approved medical
doctor shall mean a medical doctor selected by the Parties. If the Parties
cannot agree on a medical doctor, each Party shall select a medical doctor and
the two doctors shall select a third who shall be the approved medical doctor
for this purpose.
(e) "Market Price", when used with respect to the price of Shares on a
particular day, shall mean the closing price for which a Share is purchased that
day (or, if such day is not a Trading Day, on the most recent preceding Trading
Day on which such a purchase occurred) on the principal national securities
exchange or national market system on which Shares are then listed or eligible
for sale (or, if Shares are not listed or eligible for sale on any such exchange
or market system, the price as determined by agreement between the Parties or,
in the absence of such agreement, the price as determined in accordance with
Section 18).
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(f) "Person", when used in the definition of a Change of Control, shall
have the meaning ascribed to such term in Section 3(a)(9) of the 1934 Act, as
supplemented by Section 13(d)(3) of the 1934 Act; provided, however, that Person
shall not include (i) the Company or any subsidiary of the Company or (ii) any
employee benefit plan sponsored by the Company or any subsidiary of the Company.
(g) "Trading Day" shall mean a day on which the principal national
securities exchange or national market system on which Shares are then listed or
eligible for sale is open for buying and selling Shares (or, if Shares are not
listed or eligible for sale on any such exchange or market system, any day that
is not a Saturday, a Sunday, or a legal holiday in New York City).
(h) When used in the definition of a Change of Control, a specified
percentage of "Voting Power" of a company shall mean such number of the Voting
Securities as shall enable the holders thereof to cast such percentage of all
the votes which could be cast in an annual election of directors and "Voting
Securities" shall mean all securities of a company entitling the holders thereof
to vote in an annual election of directors.
21. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Connecticut without regard
to the principles of conflict of laws.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one document.
23. Survival. The provisions of Sections 8, 10, 17, 18 and 19 shall survive
the exercise or expiration of this Option.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
MBIA INC.
/s/ Xxxxx X. Xxxxxxx
---------------------------
OPTIONEE
/s/ [ILLEGIBLE]
---------------------------
13
EXHIBIT A
MBIA INC. 1987 STOCK OPTION PLAN
OPTION EXERCISE FORM
Name: ____________________________________________________
Address: _________________________________________________
__________________________________________________________
Social Security Number: _____________________
Office Telephone Number: ___________________
Pursuant to the terms of the MBIA Inc. 1987 Stock Option Plan and the Stock
Option Agreement entered into as of January 7, 1999, between MBIA, Inc. and
Xxxxxx X. Xxxxx, Xx. (the "Agreement"), I hereby exercise the Option granted
pursuant to the Agreement for the number of shares listed below:
1. Number of shares as to which the option is being exercised: ________
2. Per share exercise price: ________
3. Method of payment: _________________________________________________
4. If a cashless exercise, to be executed by:
( ) Xxxxx Xxxxxx Shearson - White Plains, NY
( ) Other
I understand that the amount by which the aggregate fair market value of
the shares that I am purchasing exceeds the aggregate exercise price is subject
to applicable income and employment tax withholding, I agree that the Company
shall calculate the amount required by law to be withheld. The amount required
to be withheld shall be satisfied as follows: ________________________________
Date: _____________________ Signed: ____________________________
DO NOT WRITE BELOW THIS LINE _________________________________________________
Date Received: _________________ Fair Market Value: _____________________
RETURN TO THE SECRETARY OF MBIA INC.
