RETIREMENT AND CONSULTING AGREEMENT
RETIREMENT AND CONSULTING AGREEMENT, dated as of January 7, 1999, by and
between MBIA INC., a Connecticut corporation (the "Company"), and Xxxxx X.
Xxxxxxx ("Executive").
WHEREAS, Executive is currently serving as the Chairman of the Board of
Directors ("Chairman") and Chief Executive Officer of the Company;
WHEREAS, Executive has expressed his intention to retire from employment
with the Company;
WHEREAS, Executive has provided loyal and valuable service to the Company
and the Company recognizes Executive's significant contribution to the Company
and its shareholders;
WHEREAS, the Company believes that it is in its best interest to retain
access to the services of Executive; and
WHEREAS, Executive is willing to continue to provide services to the
Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of their mutual promises, the Company and
Executive agree as follows:
1. Resignation; Continuing Board Membership. Effective as of the date
hereof, Executive hereby resigns as Chief Executive Officer of the Company.
Executive shall remain as Chairman of the Board of Directors and an employee of
the Company ("Chairman") until the annual meeting of shareholders in 1999 (the
"Chairman Service Period"), and, effective at such time, he hereby resigns (i)
as Chairman, (ii) from employment with the Company and each of its subsidiaries
and affiliates and (iii) from each other officer or executive position held with
the Company and each directorship or officer or executive position held with
each of the Company's subsidiaries or affiliates. Subject to his continued
election by shareholders, Executive shall serve in the capacity as Chairman of
the Executive Committee, and as a member of the Board until the end of the
Consulting Period (as defined in Section 2 below) without compensation in
addition to that set forth herein.
2. Consulting Services. During the period beginning on the first day
following the Chairman Service Period and continuing until the second
anniversary thereof (the "Consulting Period"), Executive shall provide to the
Company consulting services commensurate with his status and experience with
respect to such matters as shall be reasonably requested from time to time
including, without limitation, such assistance as the Board shall request in
writing with respect to the transition of authority to his successor as Chief
Executive Officer. Executive shall not, solely by virtue of the consulting
services provided hereunder, be considered to be an officer or employee of the
Company during the Consulting Period, and shall not have the power or authority
to contract in the name of or bind the Company, except as may be expressly
stated in a written delegation of such authority from the Board.
3. Compensation. Except to the extent expressly otherwise provided herein,
during the Chairman Service Period, Executive shall continue to be compensated
on the same terms and conditions as in effect immediately prior to the date
hereof. During the Consulting Period, the Company shall pay Executive an annual
fee equal to the annual rate of base salary payable to Executive as of January
1, 1999. Such fees shall be paid to Executive at the same time or times and in
the same number of installments as base salary is payable to the Company's
senior officers. In addition to the fees described in the immediately preceding
sentence, Executive shall be entitled to receive a bonus payment in respect of
each of calendar years 1999 and 2000, in an amount to be determined by the
Compensation and Organization Committee of the Board, but which shall in no
event be less with respect to either year than the total bonus earned by
Executive in respect of calendar year 1998 (as determined prior to any stock
discount factor). Any such bonus amount shall be paid to Executive at the same
time and subject to the same conditions upon which annual bonuses are payable to
the senior officers of the Company, except the entire bonus amount shall be paid
to Executive in cash with no portion payable or issuable in stock. The Company
shall also reimburse Executive for such reasonable travel, lodging and other
appropriate expenses incurred by Executive in the course or on account of
rendering any services during either the Chairman Service Period or the
Consulting Period upon submission of itemized reports consistent with good
business practices. Nothing in this Agreement shall be construed to preclude
Executive from receiving, in addition to the amounts payable hereunder, any
other fees or compensation to which he may be entitled as a non-employee member
of the Board.
4. Employee Programs. (a) Benefits Generally. Effective as of the end of
the Chairman Service Period, Executive's employment with the Company shall
voluntarily terminate. Except as otherwise expressly provided below, Executive's
continued participation in, or rights to receive compensation or other benefits
under, any of the Company's employee benefit plans, programs or arrangements
(including those
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plans, programs or arrangements available solely for the benefit of senior
executive officers) shall be governed by the terms and conditions of the
applicable plan, program or arrangement. Notwithstanding the immediately
preceding sentence, during the Consulting Period, Executive shall be eligible to
participate in the Company's medical and dental plans on the same terms and
conditions as though Executive had continued to be an employee of the Company
throughout such period. In the event that the Company cannot provide such
medical and dental coverage under the terms and conditions of any such plan, the
Company shall provide substantially the same coverage from another source,
including by providing such benefits on a self-insured basis. Following the end
of the Consulting Period, Executive shall receive the same medical and dental
coverage as is available under the Company's generally applicable retiree
medical and dental benefit programs.
(b) Stock Options. Notwithstanding anything else to the contrary contained
in this Agreement or any agreement issued under the 1987 Stock Option Plan (the
"1987 Plan"), to the extent that Executive holds any options granted pursuant to
the terms of the 1987 Plan that are not exercisable as of the date hereof, each
such option shall become exercisable at the same time and subject to the same
conditions as though Executive had continued in the employ of the Company during
the period over which any such option otherwise would have become exercisable;
provided that, all of Executive's options shall become fully exercisable without
any further action on the part of Executive or the Company on the last day of a
period of ten consecutive days on which a Share has traded at at least $90 at
any point during each such day (an "Acceleration Event"). Any options currently
held by Executive may, to the extent currently exercisable or to the extent they
become exercisable hereafter in accordance with the immediately preceding
sentence, be exercised until the earlier of December 31, 2005 (or, if a Change
of Control (as defined in the 1987 Plan) occurs during the Consulting Period,
until the fifth anniversary of the end of the Consulting Period) or the
expiration of the option; provided that, if an Acceleration Event occurs (and
regardless of whether it has the effect of accelerating the exercisability of
any of Executive's options), none of Executive's options may be exercised after
the second anniversary of the Acceleration Event. To the extent any option is
not exercised within the times set forth above, any such unexercised options
shall be forfeited. Except as otherwise expressly provided in this Section 4(b),
all of the terms and conditions of the 1987 Plan and the grants made thereunder
to Executive (including, without limitation, the expiration date of such
options) shall continue to be applicable. Executive will not be eligible for any
new option grants after December 31, 1998.
(c) Restricted Shares. Except as otherwise provided herein, any restricted
shares awarded to Executive shall become vested at the same time and subject to
the same conditions as though Executive had continued in the employ of the
Company
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during the period over which any such restricted shares would otherwise have
become vested. At the end of the Consulting Period, any restricted shares that
have not previously become vested shall be fully and immediately vested without
any further action by any person. Except as otherwise expressly provided in this
Section 4(c), all of the terms and conditions of the such restricted stock
grants made to Executive shall continue to be applicable. Executive will not be
eligible for any new restricted stock grants after December 31, 1998.
(d) Book Value Awards. The long-term incentive award based on adjusted book
value (an "ABV Award") made to Executive in 1997 shall be payable in accordance
with its terms as at the same time and subject to the same conditions as though
Executive had continued in the employ of the Company during the period over
which award would otherwise have been earned. The ABV Award made to Executive in
1998 shall be payable on a pro-rated basis as soon as practicable after the end
of the Consulting Period based on the Company's adjusted book value as
determined by the Company in good faith based on performance through April 30,
200 1. Except as otherwise expressly provided in this Section 4(d), all of the
terms and conditions of the such ABV Awards made to Executive shall continue to
be applicable. Executive will not be eligible for any new ABV Awards after
December 31, 1998.
5. Confidential Information. Without the prior written consent of the
Board, and except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose to any third person any trade secrets, customer lists,
product development, marketing plans, sales plans, management organization,
operating policies and manuals, business plans, financial records, any
information related to any of the foregoing or other financial, commercial,
business or technical information related to the Company or any of its
subsidiaries unless such information has been previously disclosed to the public
by the Company or has become public knowledge other than by Executive's breach
of this Agreement.
6. Indemnity. The Company shall indemnify Executive for any claim arising
out of or in connection with Executive's service as a member of the Board, as an
officer or employee of the Company, as an officer or director of any of the
Company's subsidiaries or as a consultant pursuant to the terms of this
Agreement in the same manner and to the same extent as the Company or such
subsidiary, as the case may be, indemnifies its then current directors, officers
or employees, as the case may be.
7. Death of Executive. If Executive dies prior to the end of the Consulting
Period, the Company shall pay to Executive's legal representatives or benefici-
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aries designated by the Executive in writing, as a death benefit (which shall be
in addition to any life insurance or other death benefits otherwise available to
Executive), such amounts or such benefits as would have been paid or provided by
the Company to Executive under this Agreement (including the payouts described
above with respect to ABV Awards) had Executive continued to provide such
services for the term of this Agreement. Notwithstanding the foregoing, with
respect to (i) any stock options outstanding at the date of Executive's death
the provisions of the 1987 Stock Option Plan and any agreement thereunder shall
determine the rights of Executive and his beneficiaries thereunder and (ii) any
shares of restricted stock outstanding at the date of Executive's death, all
such shares shall vest immediately upon Executive's death.
8. Noncompetition. Executive agrees that, during the Chairman Service
Period and the Consulting Period, without the prior written consent of the
Company and/or its affiliates, (a) Executive will not be an owner, director,
employee, officer, consultant, broker, financier, or serve in any capacity
whatsoever in or for an entity that competes with the Company and (b) Executive
shall not either directly or indirectly direct business away from the Company.
9. Nonsolicitation. Executive agrees that, during the Chairman Service
Period and the Consulting Period, Executive will not hire or seek to hire
(whether on his own behalf or on behalf of some other person or entity) any
person who is at that time an employee of the Company and/or its affiliates.
Executive will not, directly or indirectly, induce or encourage any employee of
the Company and/or its affiliates to leave the Company and/or its affiliates'
employ.
10. Miscellaneous. This Agreement may only be amended by a written
instrument signed by the Company and Executive. This Agreement shall constitute
the entire agreement between the Company and Executive with respect to the
subject matter hereof. The obligations of the Company to Executive and the
covenants of Executive in favor of the Company shall survive the termination of
Executive's employment.
All cash payments to be made under this Agreement shall be made net of all
applicable income and employment taxes required to be withheld from such
payments. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. Any notices to be given and any payments to be made hereunder shall
be delivered in hand or sent by registered mail, return receipt requested, to
the respective party at the Company's headquarters or the address noted for
Executive on the Company's books and records or to such other address as either
such party shall direct by written notice given in accordance with this Section
10.
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11. Governing Law. This Agreement shall be governed by the laws of the
State of New York, without reference to the principles of conflicts of law.
IN WITNESS, WHEREOF, the parties have executed this Agreement effective as
of the day first written above.
MBIA INC.
By:/s/ Xxxxx X. Xxxxx
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Title: S.V.P. Management Services
Witness:
---------------------------------
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
Witness:
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SUMMARY RETIREMENT AND CONSULTING AGREEMENT
FOR XXXXX X. XXXXXXX
o Xx. Xxxxxxx will resign as Chief Executive Officer and step down as
Chairman following the annual meeting of shareholders in 1999.
o Thereafter, in addition to his duties as Chairman of the Executive
Committee of the Board, Xx. Xxxxxxx will provide consulting services to the
Board for a period of two years, commencing May 1999, on matters suitable
for his attention.
o For his consulting services, he will receive base salary on a payroll cycle
basis for the 24 month consulting period at the annual rate effective on
May 1, 1999.
o A performance bonus will be paid at year end in year 1999 and 2000 in the
form of 100% cash at an amount subject to the Compensation and Organization
Committee's discretion but no less than the total bonus (cash plus stock)
earned in 1998 prior to any stock discount treatment.
o These consulting fees will be in addition to the compensation to which Xx.
Xxxxxxx is otherwise entitled for his service on the Board.
o Restricted shares issued in 1996 will become fully vested and payable on
December 31, 1999, in accordance with the grants three year natural vesting
schedule. Restricted shares issued in 1997 and 1998 will become fully
vested and payable upon the completion of the consulting period, prior to
the grants' four year vesting schedule.
o The adjusted book value per share (ABV) long-term incentive awarded in 1997
will be paid out in the usual course of business in early 2001. The
adjusted book value per share (ABV) long-term incentive awarded in 1998
will be prorated and paid out as cash in May 2001, based on the adjusted
book value on April 30, 2001.
o All stock options granted to Xx. Xxxxxxx, including the 1998 grant, will
continue to vest in accordance with the five year vesting schedule provided
under the stock option plan. All outstanding stock options must be
exercised by December 31, 2005, which is 24 months after the date that the
1998 grant becomes fully vested. Options that naturally expire at the end
of the ten year option term will not be extended. All outstanding stock
options will be forfeited after December 31, 2005.
o All outstanding options will immediately vest if during a period of ten
consecutive trading days, a share has traded at least $90.00 at any point
during each such trading day. Upon such an event, all outstanding options
must be exercised within 24 months from the last day of the ten consecutive
trading days. All outstanding stock options will be forfeited after the 24
month period.
o There will be no new restricted stock, stock option or ABV grants to Xx.
Xxxxxxx after December 31, 1998.
o The terms and conditions of the Company's benefit programs, based upon his
voluntary termination status will govern participation in such benefit
plans. Notwithstanding the preceding sentence, during the consulting
period, Xx. Xxxxxxx shall be eligible to participate in the Company's
medical and dental plans on the same terms and conditions as though he had
continued to be an employee of the Company throughout the period. A summary
of MBIA benefit programs and participation opportunity during and after
consulting period follows:
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Benefit Program Consulting Period (May 1999-May 2001) Post-Consulting
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Medical & Dental Participation as an employee under current Participate in plans
cost sharing arrangements as a retiree under MBIA
retiree program
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Group Life Participation will cease under group plan, No benefit under
may convert group policy to individual group plan
policy
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Split Dollar Life MBIA premium contributions will continue (Same as Consulting Period)
until you reach age 65 (policy becomes
paid-up), at which time company contributions will
cease and company premiums paid (YTD) to policy
are returned to MBIA. You may then surrender
or retain your policy.
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Group Long- term Participation will cease as of May 1999 No benefit
Disability
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Executive Long-term Participation will cease as of May 1999 No benefit
Disability
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Health Care New contributions will cease; 90 days to No benefit
Reimbursement Account submit reimbursements
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401(k) and Accounts may be kept under MBIA (Same as Consulting Period)
Pension Plans program but no employee or company
contribution permitted (only interest
income on investments and transfer of
assets among funds)
1998 Pension The pension contribution for 1998 will be No further pension
Contribution credited to you in 1999 when the annual contributions
contribution is made company-wide.
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MBIA INC.
/s/ Xxxxx X. Xxxxxxx
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XXXXX X. XXXXXXX
Witness:
/s/ [ILLEGIBLE]
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02/10/99
