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Exhibit 10.30
ESOP LOAN AGREEMENT
THIS ESOP LOAN AGREEMENT (this "Agreement") is dated as of June 30,
1999, by and between MBIA Inc., a Connecticut corporation (the "Company"), and
the CapMAC Employee Stock Ownership Plan Trust (the "Trust"), established
pursuant to the CapMAC Employee Stock Ownership Plan (the "ESOP") by a trust
agreement dated as of June 25, 1992 (the "Trust Agreement") by and between
CapMAC Holdings Inc. (to which the Company is a successor), as settlor, and HSBC
Bank USA, as trustee ("the Trustee").
W I T N E S S E T H:
WHEREAS, the Trustee is the trustee of the Trust, established pursuant
to the ESOP;
WHEREAS, the Trustee was a party to an ESOP loan agreement by and
between CapMAC Holdings Inc. ("CapMAC"), the Trust and the ESOP;
WHEREAS, as of February 17, 1998, CapMAC merged into the Company, with
shares of the Company being exchanged for shares of CapMAC;
WHEREAS, as of July 1, 1999, the ESOP will be merged into the MBIA Inc.
Employees Profit Sharing Plan and 401(k) Salary Deferral Plan (the "MBIA Plan"),
converting the latter into an employee stock ownership plan, as defined by
Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), with its employer matching contributions;
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WHEREAS, the ESOP and the Trust Agreement contemplate a refinancing of
the outstanding balance of the original CapMAC loan agreement, par value $0.01
per share, of the Company ("Common Stock");
WHEREAS, as consideration for such refinancing, the Company will lend
Eight Hundred, Sixty-Seven Thousand, Four Hundred Fifty-Five Dollars and
Seventy-Five Cents ($867,455.75) in addition to the amount of the refinancing,
and will sell 13,397 additional shares to the ESOP at the closing price of the
stock on 6/29/99 (the "Additional Shares").
WHEREAS, under the terms of the ESOP and the Trust Agreement, the
Trustee has full power and authority to act for and on behalf of the Trust and
may, in its sole discretion, cause the Trust to refinance the purchase of Common
Stock on terms in the best interests of the ESOP's participants and
beneficiaries;
WHEREAS, the Company has agreed to lend the sum of Five Million, Three
Hundred Sixty-Four Thousand, Nine Hundred Five Dollars and Seventy-Five Cents
($5,364,905.75) (the "ESOP Loan") to the Trust for the purpose of refinancing
the original CapMAC ESOP loan and the purchase of the Additional Shares of the
Common Stock (the "Shares"), and the Trustee, acting for and on behalf of the
Trust, has determined that such actions are in the best interests of the
participants of the ESOP;
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WHEREAS, the ESOP Loan is intended to be an "exempt loan" as described
in Section 4975(d)(3) of the Code and as defined in Section 54.4975-7(b)(l)(iii)
of the Treasury Regulations (the "Regulations");
NOW THEREFORE, in consideration of the premises and mutual covenants
made herein, it is agreed as follows:
1. Agreement to Lend and Borrow Funds. On June 30, 1999 (the "Closing
Date"), the Company will refinance the existing CapMAC ESOP loan to the Trust
and lend sufficient additional funds to the Trust to purchase the Additional
Shares in the aggregate principal amount of Five Million, Three Hundred
Sixty-Four Thousand, Nine Hundred Five Dollars and Seventy-Five Cents
($5,364,905.75)
2. The Note. The ESOP Loan shall be evidenced by a promissory note
executed and delivered by the Trust to the Company on the Closing Date in the
form attached hereto as Exhibit A (the "Note"). The Trust shall, pursuant to the
attached Exhibit B, make scheduled principal payments. The Trust shall also pay
interest on the aggregate unpaid principal amount of the ESOP Loan on the first
day of each quarter, beginning on the first day of the second full quarter
following the Closing Date. The Trust may at its option at any time upon one (1)
day's written notice, prepay without penalty the ESOP Loan in any amount and
also may prepay without penalty the ESOP Loan to the extent that shares which
are not allocated to the accounts of participants in the ESOP are sold pursuant
to the ESOP; provided, however, that no repayment or prepayment of the ESOP Loan
shall be required or permitted if it would cause the Company to incur an
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excise tax under Section 4972 of the Code or it would adversely affect (a) the
qualification of the ESOP or the Trust under the Code or the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA"), or (b) the
status of the ESOP Loan as an "exempt loan" as such term is described in Section
4975(d)(3) of the Code. Any such prepayments shall be applied to remaining
installments of principal of the ESOP Loan in the normal order of their stated
maturity.
3. Interest On the ESOP Loan. The Trust shall pay interest on the
aggregate unpaid principal amount of the ESOP Loan outstanding from time to time
during each calendar quarter until payment in full of such amount at an interest
rate per annum equal to the rate that the most creditworthy international banks
dealing in the London interbank eurodollar market charge each other for large
eurodollar loans with a term of three months as quoted on the money rate screen
by Bloomberg L.P. at the close of business on the second business day preceding
the commencement of such calendar quarter plus 1.75%; provided, however, that in
no event shall the interest rate exceed 7.52% per annum for any calendar
quarter.
4. Source of Funds. The Note and any interest thereon (a) shall be
payable from contributions (other than contributions of employer securities)
made to the Trust in accordance with the ESOP to enable the Trust to pay its
obligations under the Note, from earnings attributable to such contributions and
from dividends on the Shares purchased with the proceeds of the ESOP Loan, and
(b) may be payable from the proceeds of any sale of the Shares not then
allocated to participants' accounts that are sold as permitted by
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this Agreement to the extent and in the manner that such payments are permitted
by law, provided, however, that such sale would not constitute a prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. No
contributions, earnings, dividends and proceeds may be applied in payment of the
Note or any interest thereon if such application would cause the Company to
incur an excise tax under Section 4972 of the Code or would adversely affect (a)
the qualification of the ESOP or the Trust under the Code or ERISA or (b) the
status of the ESOP Loan as an "exempt loan" as such term is described in section
4975(d)(3) of the Code.
5. Purpose of the ESOP Loan. The proceeds of the ESOP Loan shall be
used by the Trust only to refinance the existing ESOP Loan and to purchase the
Additional Shares and should the Trustee determine that the Trust is unable to
purchase the Additional Shares or is prohibited from purchasing the Additional
Shares or should any purchase of the Additional Shares be rescinded, then the
trust shall return the proceeds of the ESOP Loan to the Company pursuant to
Section 12 hereof, but only to the extent of the total purchase price of the
Additional Shares.
6. Covenant of the Company. The Company will cause contributions to be
made to the Trust at such times and in such amounts sufficient to enable the
Trust to meet all obligations under the ESOP Loan provided, however, that the
Company shall have no obligation to cause any contributions to be made that
could reasonably be expected (i) to have an adverse effect on the qualification
of the ESOP or the tax-exempt status of the
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Trust under the Code or ERISA, or (ii) not to be deductible under Section 404
of the Code.
7. Representations of the Trustee, The Trustee represents and warrants
to the Company that:
(a) This Agreement and the Note have been duly executed and
delivered by the Trustee;
(b) This Agreement and the Note are in all respects valid,
legally binding upon the Trust and enforceable against the Trust in
accordance with their respective terms, except to the extent that the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally, ERISA or general principles of equity. The
execution, delivery and performance of this Agreement, the Note, and
all other documents or instruments executed or delivered by the Trustee
for and on behalf of the Trust in connection with the ESOP Loan are
within the Trustee's and the Trust's powers and have been duly
authorized by all necessary action;
(c) The Trustee has determined that the ESOP's investment in
the Additional Shares is prudent, in the best interests of the
participants in the Plan, and in accordance with its fiduciary
obligations under ERISA and the Code;
(d) The Trustee is a commercial bank validly existing and in
good standing under the laws of the State of New York; and
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(e) The Trustee has all requisite corporate power and
authority to execute, deliver and perform this Agreement.
8. Contingencies to Performance by the Company. This Agreement shall
become effective only upon satisfaction of the following conditions:
(a) The Company shall have received originals (which may be
executed in several counterparts), duly executed by the Trustee, of
this Agreement and the Note;
(b) Prior to the Closing Date, there shall have been no legal
action or administrative proceeding initiated or threatened which
affects this Agreement, the Note or consummation of any of the
transactions contemplated hereby or thereby;
(c) All legal matters incident to this Agreement, the Note and
the other documents and transactions contemplated hereby and thereby,
shall be reasonably satisfactory in form and substance to the Company
and its counsel;
9. Collateral. The Shares shall be and are hereby pledged by the Trust
as security for the Note (the "Collateral"). Each time there is a payment on
the ESOP Loan by the Trust, the Collateral shall be reduced by the number of
Shares that are to be allocated to the ESOP participants as a result of that
contribution, in accordance with the provisions of the ESOP.
10. Default/Remedies.
(a) The failure of the Trust to pay when due any payment of
principal or interest on the Note shall constitute an event of default
("Event of Default").
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(b) Notwithstanding any provision in the Trust Agreement, the
Note, or in any document referred to therein or entered into in
connection therewith, the obligations of the Trust under this Agreement
are without recourse to the Trust except as provided in this Agreement.
If an Event of Default shall occur and be continuing, the Company shall
have no rights to assets of the Trust other than contributions (other
than contributions of employer securities) that are made by the Company
to enable the Trust to meet its obligations hereunder and earnings
attributable to the investment of such contributions and the
Collateral; provided, however, that (i) the value of Trust assets
transferred in satisfaction of the ESOP Loan shall not exceed the
amount in default (without regard to any acceleration of the payment
schedule that occurs as a result of the default, and (ii) Trust assets
shall he transferred to the Company only to the extent of the failure
of the Trust to meet the payment schedule of the ESOP Loan.
11. Amendments of this Agreement. Each of the parties hereto agrees
that it will not, without the prior written consent of the other party hereto,
(i) cancel or terminate this Agreement or consent to or accept any cancellation
or termination hereof, or (ii) amend or otherwise modify this Agreement.
12. Construction and Purpose. All provisions hereof shall be construed
so as to maintain (i) the ESOP as a qualified leveraged employee stock ownership
plan under Section 401(a) and Section 4975(e)(7) of the Code, (ii) the Trust as
exempt from taxation under Section 501(a) of the Code and (iii) this ESOP Loan
as an exempt loan under
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Section 54.4975-7(b)(1)(iii) of the Regulations. The parties agree that the
purpose of the ESOP Loan is to enable the Trust to refinance the existing ESOP
Loan and to purchase the Additional Shares. The parties further agree that, to
the extent permitted by Section 54.4975-7(b) of the Regulations, should the
Trust be prohibited from purchasing the Additional Shares or should the purchase
of the Additional Shares by the Trust pursuant thereto be rescinded pursuant to
any government decree or court order, writ or judgment, then this Agreement will
be considered to be rescinded and the Trust shall promptly pay to the Company,
or its assigns, the proceeds of the ESOP Loan to the extent that such proceeds
are returned to the Trust pursuant to the rescission of the purchase of the
Additional Shares. In no event shall payments made with respect to the ESOP Loan
exceed an amount equal to the sum of contributions, dividends, proceeds and
earnings received during or prior to the due date of such payments, less such
payments in prior years.
13. Notices. It shall be a sufficient giving of any notice or other
communication hereunder if the party giving the same shall either deliver said
notice personally or shall mail a copy thereof by express mail or registered or
certified first class mail, postage prepaid, addressed as follows:
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(a) To the Trustee:
HSBC Bank USA
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
(b) To the Company:
MBIA Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxxxx
The date of giving any such notice, or other communication shall be the date on
which such envelope was either personally delivered or deposited. The post
office receipt showing the date of such deposit shall be prima facie evidence of
these facts. Either party may change the address to which notices are sent to it
in the manner herein provided for giving notice to the other party.
14. Miscellaneous.
(a) Amendments and Waivers. No amendment or waiver of any
provisions of this Agreement, nor consent to any departure by the Trust
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Company and the Trust, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given. No failure on the part of the
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Company to exercise any rights hereunder shall operate as a waiver
thereof, nor shall any single waiver of any right hereunder preclude
any other future exercise thereof.
(b) Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the
laws of the State of New York without regard to conflicts of laws rules
or principles.
(c) Assignment. This Agreement shall be binding upon and,
shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) Counterparts. This Agreement may he executed in two or
more counterparts, all of which taken together shall constitute one
instrument.
(e) Integration. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
MBIA Inc.
By: /s/ illegible
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Title: E.V.P. CAO
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MBIA INC. EMPLOYEES PROFIT
SHARING AND 401(k) SALARY
DEFERRAL TRUST
By: HSBC Bank USA, not in its individual
or corporate capacity but solely as
Trustee
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
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Title: Senior Vice President
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NON-RECOURSE PROMISSORY NOTE
$5,364,905.75 June 30, 1999
FOR VALUE RECEIVED, the undersigned CapMAC Employee Stock Ownership
Plan (the "Borrower") PROMISES TO PAY to the order of MBIA Inc. (the "Lender")
the principal sum of Five Million, Three Hundred Sixty-Four Thousand, Nine
Hundred Five Dollars and Seventy-Five Cents ($5,364,905.75), in accordance with
and pursuant to the terns of the loan agreement, dated June 30, 1999, by and
between the Lender, the Borrower, pursuant to the terms of the CapMAC Employee
Stock Ownership Plan (the "ESOP") and the CapMAC Employee Stock Ownership Trust
Agreement (the "Trust Agreement"), and HSBC Bank USA (the "Trustee")
(hereinafter the "Loan Agreement").
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until paid in full at such interest rates and at
such times as are specified in the Loan Agreement. The unpaid principal amount
of this obligation at any time shall be the total amounts advanced hereunder
less any amount of principal payments made hereon by the Borrower.
Both principal and interest are payable in lawful money of the United
States of America to the Lender at 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000 (or
other location specified by the Lender) in immediately available funds.
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This document is the Note referred to in, and is subject to the terms
of, the Loan Agreement. This Note is subject to prepayment as provided in the
Loan Agreement.
Presentment and demand for payment, notice of dishonor, protest and
notice of protest are hereby waived.
The obligations of the Borrower hereunder are without recourse to the
borrower, except as otherwise provided for in the Loan Agreement.
This Note (a) may not be amended orally, but only in writing; (b) shall
be governed in all respects by the laws of the State of New York without regard
to conflicts of laws rules or principles (except as the same may be preempted by
federal law); and (c) shall inure to the benefit of and shall be binding upon
the Borrower, the Lender and their respective successors and assigns.
CapMAC EMPLOYEE STOCK OWNERSHIP PLAN
By: HSBC Bank, USA
not in its individual or corporate
capacity but solely as Trustee
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
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Title: Senior Vice President
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MBIA agrees to make the following quarterly payments of principal on or
before the corresponding dates:
Date Principal Payment
---- -----------------
07/01/1999 $75,000
10/01/1999 $75,000
01/01/2000 $175,000
04/01/2000 $175,000
07/01/2000 $175,000
10/0l/2000 $175,000
01/01/2001 $175,000
04/01/2001 $175,000
07/01/2001 $175,000
10/01/2001 $175,000
01/01/2002 $175,000
04/01/2002 $175,000
07/01/2002 $175,000
10/01/2002 $175,000
01/01/2003 $175,000
04/01/2003 $175,000
07/01/2003 $175,000
10/01/2003 $175,000
01/01/2004 $175,000
04/01/2004 $175,000
07/01/2004 $175,000
10/01/2004 $175,000
01/01/2005 $175,000
04/01/2005 $175,000
07/01/2005 $175,000
10/01/2005 $175,000
01/01/2006 $175,000
04/01/2006 $175,000
07/01/2006 $175,000
10/01/2006 $489,905.75
