EXECUTION COPY
EXHIBIT 10.59
PUT OPTION
AGREEMENT
between
MBIA INSURANCE
CORPORATION
and
NORTH CASTLE CUSTODIAL TRUST
VII
Dated May 14, 2003
Preamble
This Put Option Agreement, dated as
of May 14, 2003 (this “ Agreement ”), is by and
between MBIA Insurance Corporation, a New York domestic stock
insurance corporation (“ MBIA Insurance ”), and
North Castle Custodial Trust VII (the “ Custodial
Trust ”), a Delaware statutory trust.
Recitals
WHEREAS, MBIA Insurance is
authorized to issue 500.01 shares of non-cumulative, redeemable,
perpetual preferred stock, par value $1,000 per share, designated
as “ Series G Perpetual Preferred Shares ,”
which shares have not been and will not be registered with the
Securities and Exchange Commission under the Securities Act of
1933, as amended (the “ Preferred Stock ”);
and
WHEREAS, MBIA Insurance and the
Custodial Trust desire to enter into a binding agreement pursuant
to which MBIA Insurance will have the right to sell, at its option,
the Preferred Stock to the Custodial Trust, and the Custodial Trust
will have an obligation to purchase the Preferred Stock upon MBIA
Insurance’s exercise of its option and upon the other terms
and conditions agreed upon by the parties.
NOW, THEREFORE, the parties hereto
agree as follows:
|
1.
|
Definitions;
Interpretation
|
|
1.1
|
The words
“ herein ,” “ hereof ” and
“ hereunder ” and other words of similar import
refer to this Agreement as a whole and not to any particular
section, clause or other subdivision, and references to “
Sections ” refer to Sections of this Agreement except
as otherwise expressly provided.
|
“ Agreement ” has
the meaning set forth above in the Preamble.
“ Auction Date ”
has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Auction Rate ”
has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Broker-Dealer ”
has the meaning set forth in the Declaration.
“ Business Day ”
has the meaning set forth in the Declaration.
“ CPS Securities
” has the meaning set forth in the Declaration.
“ Custodial Trust
” has the meaning set forth above in the Preamble.
-2-
“ Declaration ”
means the Amended and Restated Declaration of Trust governing the
Custodial Trust, dated as of the date hereof, as the same may be
amended or restated from time to time.
“ Delayed Auction
” has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Delayed Auction Date
” has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Delayed Auction
Period ” has the meaning set forth in the General Terms
of the CPS Securities attached to the Declaration as Appendix
A.
“ Delayed Auction Rate
” has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Delayed Put Option
Premium ” has the meaning set forth in Section
5.1.
“ Delayed Put Option
Premium Certificate ” has the meaning set forth in
Section 5.2.
“ Distribution Payment
Date ” has the meaning set forth in the General Terms of
the CPS Securities attached to the Declaration as Appendix
A.
“ Distribution Period
” has the meaning set forth in the General Terms of the CPS
Securities attached to the Declaration as Appendix A.
“ Dividend ” has
the meaning set forth in the Restated Charter.
“ Eligible Assets
” has the meaning set forth in the Declaration.
“ Expense Reimbursement
Agreement ” has the meaning set forth in Section
3.1.
“ Federal Funds Effective
Rate ” has the meaning set forth in the
Declaration.
“Fixed Rate Distribution
Event” has the
meaning set forth in the Restated Charter.
“ Fixed Rate Election
” means an election by MBIA Insurance to pay Dividends on the
Preferred Stock at the rate described in clause (iii) of the
definition of “Dividend Rate” set forth in the Restated
Charter.
“ Holder ” has
the meaning set forth in the Declaration.
“ Liquidation
Preference ” has the meaning set forth in the Restated
Charter.
“ Maximum Rate ”
has the meaning set forth in the Restated Charter.
“ MBIA Insurance
” has the meaning set forth above in the Preamble.
-3-
“ Overnight Rate of
Return ” means the rate earned on the interest and on the
principal of the Eligible Assets during the period from each
Auction Date until the related Distribution Payment Date and during
any Delayed Auction Period, which shall be equal to the Federal
Funds Effective Rate then in effect.
“ Preferred Stock
” has the meaning set forth above in the Recitals.
“ Preferred Stock Payment
Date ” has the meaning set forth in Section
3.2(a).
“ Preferred Stock Purchase
Price ” has the meaning set forth in Section
4.1.
“ Put Notice ”
means a written notice substantially in the form attached hereto as
Annex A .
“ Put Option Premium
” has the meaning set forth in Section 5.1.
“ Put Option Premium
Certificate ” has the meaning set forth in Section
5.2.
“ Redemption Price
” has the meaning set forth in the Restated
Charter.
“ Redemption Proceeds
” has the meaning set forth in Section 3.3(d).
“ Restated Charter
” means the Restated Charter of MBIA Insurance, a copy of
which is attached hereto as Annex C .
“ Stated Yield ”
means all amounts of interest (including accreted interest) and
other payments due and payable (upon maturity or otherwise) on the
principal amount of the Eligible Assets (excluding any repayment of
principal) held by the Custodial Trust during a Distribution
Period, plus the amount of interest to be earned based on the
Overnight Rate of Return, as calculated on or prior to 11:00 a.m.
on the Auction Date for each respective Distribution
Period.
“ Tax Matters Partner
” has the meaning set forth in the Declaration.
“ Trustee ” has
the meaning set forth in the Declaration.
In this Agreement, any reference to
a “ company ” shall be construed so as to
include any corporation, trust, partnership, limited liability
company or other legal entity, wheresoever incorporated or
established.
|
1.3
|
In this
Agreement, save where the contrary is indicated, any reference
to:
|
|
|
(a)
|
this Agreement
or any other agreement or document shall be construed as a
reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time
to time be, amended, varied, novated or supplemented in accordance
with its terms; and
|
|
|
(b)
|
a statute shall
be construed as a reference to such statute as the same may have
been, or may from time to time be, amended or
re-enacted.
|
-4-
|
1.4
|
In this
Agreement, any definition shall be equally applicable to both the
singular and plural forms of the defined terms.
|
|
2.1
|
In
consideration of the payment of the Put Option Premium, the
Custodial Trust hereby grants to MBIA Insurance the right to cause
the Custodial Trust to purchase the Preferred Stock on the terms
set forth in this Agreement.
|
|
2.2
|
The put option
created hereby shall remain in effect and be exercisable at any
time except:
|
|
|
(a)
|
during any
period when the Preferred Stock that has been put to the Custodial
Trust pursuant to this Agreement is held by the Custodial Trust;
or
|
|
|
(b)
|
after this
Agreement has been terminated pursuant to Section 2.3.
|
|
2.3
|
This Agreement
shall terminate upon the earliest to occur of:
|
|
|
(a)
|
MBIA Insurance
delivers a written notice to the Custodial Trust while the
Custodial Trust is holding Eligible Assets, stating that MBIA
Insurance is electing not to pay the Put Option Premium for the
next succeeding Distribution Period that follows the notice by at
least three (3) Business Days and indicating the Distribution
Payment Date on which the termination shall become effective
(delivery of such a termination notice by MBIA Insurance shall be
irrevocable);
|
|
|
(b)
|
MBIA Insurance
fails to pay the Put Option Premium or the Delayed Put Option
Premium, if any, for a Distribution Period on the related
Distribution Payment Date, and such failure has not been cured
within five (5) Business Days;
|
|
|
(c)
|
MBIA Insurance
makes a Fixed Rate Election;
|
|
|
(d)
|
MBIA Insurance
fails to pay Dividends on the Preferred Stock, or the fees and
expenses of the Custodial Trust pursuant to the Expense
Reimbursement Agreement, for a Distribution Period on the related
Distribution Payment Date;
|
|
|
(e)
|
MBIA Insurance
fails to pay the Redemption Price and such failure has not been
cured within five (5) Business Days; and
|
|
|
(f)
|
the aggregate
face amount of the Custodial Trust’s CPS Securities is less
than $20,000,000;
|
|
3.
|
Exercise of
Put Option; Redemption.
|
|
3.1
|
The Custodial
Trust agrees that it shall, upon exercise of the put option as
provided in Section 3.2, purchase the Preferred Stock from MBIA
Insurance for a purchase price equal to the Preferred Stock
Purchase Price, which Preferred Stock Purchase Price shall be
payable on the Preferred Stock Payment Date in accordance with
Section 4.
|
-5-
|
3.2 (a)
|
MBIA Insurance
may exercise the put option at any time by delivering (i) a Put
Notice to the Trustee, specifying a payment date (the “
Preferred Stock Payment Date ”), which shall be the
next succeeding Distribution Payment Date after the date on which
the Put Notice is delivered to the Trustee and (ii) the Expense
Reimbursement Agreement to the Custodial Trust in the form attached
hereto as Annex D (the “ Expense Reimbursement
Agreement ”), in either case not more than fifteen (15)
days but not less than ten (10) days prior to the next succeeding
Distribution Payment Date.
|
|
|
(b)
|
On the
Preferred Stock Payment Date, after payment of the Put Option
Premium by MBIA Insurance to the Custodial Trust and payment of the
distribution amount by the Custodial Trust to the Holders of the
CPS Securities, in each case for the immediately preceding
Distribution Period, MBIA Insurance shall issue and deliver to the
Custodial Trust, or its designee, Preferred Stock with an aggregate
Liquidation Preference equal to the proceeds attributable to
principal received upon the maturity of the Custodial Trust’s
Eligible Assets (and, if applicable, liquidation of defaulted
Eligible Assets), net of fees and expenses of the Custodial Trust
and after any principal is returned to Holders of the CPS
Securities pursuant to Section 6.01(g) of the Declaration and
Section 6(b) of the General Terms of the CPS Securities attached
thereto. The Preferred Stock shall be delivered free and clear of
any defect in title, together with all transfer and registration
documents (or all notices, instructions or other communications) as
are necessary to convey title to the Preferred Stock to the
Custodial Trust (or its nominee).
|
|
|
(c)
|
For the
avoidance of doubt, (1) any cash received by the Custodial Trust as
interest or other payments earned on the principal amount of the
Eligible Assets (net of fees and expenses and excluding any
repayment of principal) and not previously distributed to the
Holders of CPS Securities shall be distributed to the Holders of
CPS Securities prior to payment by the Custodial Trust of the
Preferred Stock Purchase Price, and shall not be used to purchase
shares of Preferred Stock; and (2) the aggregate Liquidation
Preference of Preferred Stock purchased from MBIA Insurance shall
be reduced by the amount, if any, by which the aggregate face
amount of CPS Securities is reduced as a result of losses of
principal of or interest on Eligible Assets as required by Section
6.01(g) of the Declaration and Section 6(b) of the General Terms of
the CPS Securities attached thereto.
|
|
|
(d)
|
MBIA Insurance
shall have the right to redeem all or a portion of the Preferred
Stock on any Distribution Payment Date upon payment of the
Redemption Price for the shares to be redeemed (the “
Redemption Proceeds ”). Notwithstanding the foregoing,
MBIA Insurance shall redeem all of the Preferred Stock if after
giving effect to a partial redemption, the aggregate Liquidation
Preference of the Preferred Stock outstanding immediately after
such partial redemption would be less than $20,000,000. Payment of
the Redemption Price will be made on the first Distribution Payment
Date after MBIA Insurance properly elects to redeem the Preferred
Stock.
|
-6-
|
|
(e)
|
Notice of any
redemption of Preferred Stock shall be mailed to the holders of the
Preferred Stock not less than ten (10) days nor more than fifteen
(15) days prior to the date fixed for such redemption. At any time
before or after a notice of redemption has been given, MBIA
Insurance shall deposit the aggregate Redemption Price of the
Preferred Stock to be redeemed with any bank or trust company in
New York, New York, with directions to pay the holders of the
Preferred Stock being redeemed the Redemption Proceeds in exchange
for the Preferred Stock.
|
|
|
(f)
|
Upon a partial
redemption of Preferred Stock held by the Custodial Trust, the
Redemption Proceeds shall be allocated pro rata among the Holders
of CPS Securities.
|
|
|
(g)
|
Upon a complete
redemption of all Preferred Stock held by the Custodial Trust prior
to a Fixed Rate Distribution Event, the Custodial Trust shall apply
the Redemption Proceeds to the purchase of a portfolio of Eligible
Assets.
|
|
|
(h)
|
For the
avoidance of doubt, there is no limitation on the number of times
MBIA Insurance may put the Preferred Stock to the Custodial Trust
pursuant to and in accordance with the terms of this
Agreement.
|
|
|
(i)
|
MBIA Insurance
may not redeem the Preferred Stock from the holders thereof for a
period of two years following a Fixed Rate Distribution
Event.
|
|
4.1
|
On the
Preferred Stock Payment Date, after payment of the Put Option
Premium by MBIA Insurance to the Custodial Trust and payment of the
distribution amount by the Custodial Trust to the Holders of the
CPS Securities, in each case for the immediately preceding
Distribution Period, the Custodial Trust will deliver to MBIA
Insurance the proceeds attributable to principal received upon the
maturity of the Custodial Trust’s Eligible Assets (and, if
applicable, liquidation of defaulted Eligible Assets), net of fees
and expenses of the Custodial Trust and after any principal is
returned to Holders of CPS Securities pursuant to Section 6.01(g)
of the Declaration and Section 6(b) of the General Terms of the CPS
Securities attached thereto (the “ Preferred Stock
Purchase Price ”).
|
|
4.2
|
Payment by the
Custodial Trust of the Preferred Stock Purchase Price shall be made
on or prior to 3:00 p.m. on the Preferred Stock Payment Date and to
the account of MBIA Insurance specified in the Put
Notice.
|
|
4.3
|
Payment of the
Preferred Stock Purchase Price by the Custodial Trust shall be made
as provided in Section 4.1 and Section 4.2 without setoff, claim,
recoupment, deduction or counterclaim; provided ,
however , that if MBIA Insurance exercises its put option
under Section 3 hereof at any time that it has failed to pay all or
a portion of the Put Option Premium, and such failure has not been
cured on or before the Preferred Stock Payment Date, the Custodial
Trust shall be entitled to setoff against the Preferred Stock
Purchase Price of such unpaid portion of the Put Option
Premium.
|
-7-
|
5.1
|
In
consideration for the Custodial Trust’s agreement to purchase
the Preferred Stock in accordance with the terms of this Agreement,
MBIA Insurance will pay to the Custodial Trust, in US dollars, on
each Distribution Payment Date during which the put option remains
in effect and is exercisable as set forth in Section 2.2 hereof,
the “ Put Option Premium, ”
|
