<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-15003
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 7, 1996)
LOGO
1,000,000 SHARES
MBIA INC.
COMMON STOCK
------------------
The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "MBI." On July 14, 1997, the last reported sale price of the
Common Stock on the NYSE was $115 1/2.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price Underwriting Proceeds
to Discounts and to
Public Commissions(1) Company(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share....................... $114.00 $4.00 $110.00
- ------------------------------------------------------------------------------------------
Total(3)........................ $114,000,000 $4,000,000 $110,000,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated to be
$156,250.
(3) The Company has granted the Underwriters an option, exercisable for 30
days, to purchase up to an additional 150,000 shares of Common Stock on
the same terms and conditions as set forth above to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$131,100,000, $4,600,000, $126,500,000, respectively. See "Underwriting."
------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters, subject to prior sale, withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made at the offices of Lehman Brothers Inc., New York, New York on or
about July 18, 1997.
------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
------------------
July 15, 1997
<PAGE>
No action has been taken or will be taken in any jurisdiction by the Company
or any Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Common Stock and the distribution of this Prospectus.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING
THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER
OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER RULED
UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
S-2
<PAGE>
THE COMPANY
MBIA Inc. (the "Company") insures municipal bonds, asset-backed securities
and other non-municipal bonds through its wholly-owned subsidiary, MBIA
Insurance Corporation ("MBIA Corp."). MBIA Corp.'s primary business is
enhancing the efficiency of public finance by guaranteeing the timely payment
of principal and interest on municipal bonds sold in the new issue market,
traded in the secondary market and held in unit investment trusts and mutual
funds. MBIA Corp. is the market leader with over 40% market share of the
insured new issue municipal business. MBIA Corp. also provides financial
guarantees for structured finance transactions (principally mortgage-backed
and asset-backed securities), investor-owned utility debt and obligations of
high-quality financial institutions. For the three months ended March 31,
1997, MBIA Corp. insured $8.5 billion par value of new issue and secondary
market municipal bonds and $5.2 billion par value of domestic structured
finance business. As of March 31, 1997, the total net par amount of
outstanding bonds insured by MBIA Corp. was $240.8 billion and the aggregate
net insurance in force was $422.4 billion.
Financial guarantee insurance provides an unconditional and irrevocable
guarantee of the payment of the principal of and interest on insured
obligations when due. MBIA Corp. primarily insures obligations sold in the new
issue and secondary markets, including those held in unit investment trusts
and by mutual funds. It also provides surety bonds for debt service reserve
funds. The principal economic value of financial guarantee insurance to the
entity offering the obligations is the saving in interest costs resulting from
the difference in the market yield between an insured obligation and the same
obligation on an uninsured basis. In addition, for complex financings and for
obligations of issuers that are not well known by investors, insured
obligations receive greater market acceptance than uninsured obligations. All
obligations insured by MBIA Corp. are rated AAA by both Standard & Poor's
Ratings Group, a division of The McGraw-Hill Companies, Inc. and Fitch
Investors Service, L.P. and Aaa by Moody's Investors Service, Inc., the
highest ratings assigned by these rating agencies.
The Company's insurance subsidiaries derive their income from insurance
premiums earned over the life of the insured obligations and from investment
income earned on assets representing capital, retained earnings, and deferred
premium revenues. As of March 31, 1997, the Company's deferred premium
revenues were $1,794 million, its shareholders' equity was $2,471 million, and
its total investments were $7,451 million and $7,504 million at book value and
market value, respectively. As of March 31, 1997, MBIA Corp.'s investment
portfolio was $4,222 million and $4,295 million at book value and market
value, respectively, and was primarily comprised of high quality fixed income
securities with intermediate maturities.
In 1990, the Company formed a French company, MBIA Assurance S.A. ("MBIA
Assurance"), to assist in writing financial guarantee insurance in the
countries of the European Community. MBIA Assurance, which is a subsidiary of
MBIA Corp., writes policies insuring public infrastructure financings, asset-
backed transactions and certain obligations of financial institutions. As of
March 31, 1997, MBIA Corp. and MBIA Assurance had collectively insured 170
international transactions. In September 1995, MBIA Corp. entered into a joint
venture agreement with AMBAC Indemnity Corporation for the purpose of jointly
marketing financial guarantee insurance within the European Community.
Over the last seven years, the Company has undertaken the development of
investment management services which capitalize on its capabilities,
reputation and marketplace relationships. The Company is delivering these
services through a group of subsidiary companies. For the three months ended
March 31, 1997, in the aggregate, these investment management ventures
contributed $8.8 million to revenues.
The financial guarantee industry is subject to the direct and indirect
effects of governmental regulation, including changes in tax laws affecting
the municipal and asset-backed debt markets. No assurance can be given that
future legislative or regulatory changes might not adversely affect the
results of operations and financial condition of the Company.
S-3
<PAGE>
Concurrent Offering
Concurrently with this offering of the shares of Common Stock, the Company
is offering $100,000,000 aggregate principal amount of its senior unsecured
debentures due 2027 (the "Debentures"). The Debentures and the Common Stock
are being offered separately and not as units and the prices at which the
Debentures and the Common Stock are being offered were determined
independently. Neither this offering of shares of Common Stock nor the
offering of the Debentures is conditioned on completion of the other offering.
The principal executive offices of the Company are located at 113 King
Street, Armonk, New York 10504. The telephone number is (914) 273-4545.
S-4
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of the Company at
March 31, 1997, and such capitalization as adjusted (i) to give effect to the
issuance and sale of the 1,000,000 newly-issued shares of Common Stock offered
hereby (assuming no exercise of the Underwriters' overallotment option) and
(ii) to give effect to the issuance and sale of the 1,000,000 shares of Common
Stock offered hereby and the concurrent issuance and sale of $100,000,000
aggregate principal amount of Debentures (in each case without giving effect
to the payment of expenses).
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------
ACTUAL AS ADJUSTED(1) AS ADJUSTED(2)
---------- -------------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt....................... $ 374,037 $ 374,037 $ 474,037
Shareholders' equity:
Preferred Stock, par value $1.00
per share; authorized shares--
10,000,000; issued and outstanding
shares--none...................... -- -- --
Common Stock, par value $1.00 per
share; authorized shares--
200,000,000; issued shares--
43,334,086; as adjusted--
44,334,086........................ 43,334 44,334 44,334
Additional paid-in capital......... 806,055 915,055 915,055
Retained earnings.................. 1,593,466 1,593,466 1,593,466
Cumulative translation adjustment.. (5,900) (5,900) (5,900)
Unrealized appreciation of
investments, net of taxes of
$18,926........................... 34,741 34,741 34,741
Unearned compensation--restricted
stock............................. (949) (949) (949)
---------- ---------- ----------
Total shareholders' equity....... 2,470,747 2,580,747 2,580,747
---------- ---------- ----------
Total capitalization........... $2,844,784 $2,954,784 $3,054,784
========== ========== ==========
</TABLE>
- --------
(1) Adjusted to give effect to the issuance and sale of the Common Stock.
(2) Adjusted to give effect to the concurrent issuance and sale of the Common
Stock and the Debentures.
S-5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND STATISTICAL DATA
The selected consolidated financial data in the table below for each of the
five years in the period ended December 31, 1996 have been derived from
audited consolidated financial statements of the Company previously filed with
the Commission. The selected consolidated financial data at March 31, 1996 and
1997 and for the three months ended March 31, 1996 and 1997 are unaudited but
in the opinion of management include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation. The following
information should be read in conjunction with the consolidated financial
statements and related notes of the Company included, or incorporated by
reference, in the Company's periodic reports filed under the Exchange Act that
are incorporated by reference herein. See "Incorporation of Certain Documents
by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Insurance:
Gross premiums
written.............. $ 368.7 $ 479.3 $ 360.8 $ 348.5 $ 460.7 $ 120.6 $ 92.1
Net premiums written.. 336.1 431.8 311.6 303.4 405.8 105.9 86.1
Premiums earned....... 162.9 231.3 218.3 215.1 251.7 60.4 71.4
Net investment income. 150.5 178.9 193.9 219.9 247.6 59.1 66.5
Net realized gains
(losses)............. 9.8 9.7 10.3 11.3 11.7 2.7 4.4
Investment management
services:
Income................ 2.3 4.7 16.2 19.9 26.7 6.1 7.2
Net realized gains
(losses)............. -- 0.1 (0.7) (6.1) 2.6 1.0 1.6
Income before income
taxes................. 244.3 324.0 329.4 345.0 408.1 98.6 115.1
Net income............. 188.7 259.0 260.2 271.4 322.2 77.6 90.9
PER SHARE DATA:
Earnings............... $ 4.62 $ 6.10 $ 6.18 $ 6.43 $ 7.43 $ 1.81 $ 2.08
Dividends:
Declared.............. 0.76 0.94 1.14 1.31 1.45 0.345 0.38
Paid.................. 0.72 0.89 1.09 1.275 1.415 0.345 0.38
Book value............. 33.00 38.18 40.96 53.19 57.28 52.31 57.02
BALANCE SHEET DATA:
Investments............ $ 2,528.7 $ 3,544.3 $ 4,866.8 $ 6,607.3 $ 7,633.9 $ 6,743.2 $ 7,504.3
Total assets........... 3,049.2 4,106.3 5,456.4 7,267.5 8,562.0 7,405.4 8,496.8
Deferred premium
revenue............... 1,196.2 1,402.8 1,512.2 1,616.3 1,785.9 1,666.9 1,794.1
Loss and loss
adjustment expense
reserves.............. 25.5 33.7 40.1 42.5 59.3 46.4 62.3
Long-term debt......... 298.6 298.7 298.8 373.9 374.0 373.9 374.0
Shareholders' equity... 1,382.1 1,596.4 1,704.7 2,234.3 2,479.7 2,242.0 2,470.7
SELECTED FINANCIAL
RATIOS:
GAAP Basis(1)(3):
Loss ratio............ 3.4% 3.4% 3.7% 4.9% 6.1% 5.3% 4.8%
Expense ratio......... 32.0% 27.4% 28.8% 29.3% 28.3% 27.3% 26.5%
Combined ratio........ 35.4% 30.8% 32.5% 34.2% 34.4% 32.6% 31.3%
SAP Basis(2)(3):
Loss ratio............ 2.4% (3.5%) 9.8% 0.4% 2.0% 1.3% (1.0%)
Expense ratio......... 18.3% 17.6% 22.9% 20.6% 17.6% 14.9% 23.3%
Combined ratio........ 20.7% 14.1% 32.7% 21.0% 19.6% 16.2% 22.3%
OTHER FINANCIAL DATA--
NET INSURANCE IN FORCE:
Net par amount
outstanding........... $112,483.0 $141,386.8 $164,317.9 $188,635.9 $233,244.1 $197,676.5 $240,750.5
Net debt service
outstanding........... 223,056.1 266,784.3 304,501.6 344,037.2 411,106.1 357,339.3 422,446.2
</TABLE>
- -------
(1) The GAAP loss ratio is the provision for losses and loss adjustment
expenses divided by net premiums earned, and the GAAP expense ratio is
underwriting expenses (adjusted for deferred policy acquisition costs) and
operating expenses (excluding interest expense) divided by net premiums
earned, in each case calculated in accordance with generally accepted
accounting principles. The combined ratio is the total of the loss and
expense ratios (see Note 2 to the Consolidated Financial Statements of
MBIA Inc. and Subsidiaries included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (the "1996 Form 10-K") which is
incorporated herein by reference).
(2) The SAP loss ratio is the provision for losses and loss adjustment
expenses divided by net premiums earned, and the SAP expense ratio is
underwriting expenses divided by net premiums written, in each case
calculated in accordance with statutory accounting practices. The combined
ratio is the total of the loss and expense ratios.
(3) For a discussion of the principal differences between GAAP and SAP
accounting, see Note 3 to the Consolidated Financial Statements of MBIA
Inc. and Subsidiaries included in the 1996 Form 10-K.
S-6
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the sale of the shares of Common Stock, net
of underwriting discounts and expenses, are estimated to be approximately
$109,843,750. Proceeds from the sale of the shares of Common Stock will be
used to provide additional capital for the future needs of the Company and
MBIA Corp. and for general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "MBI." The table
below sets forth the dividends paid per share and the high and low closing
sales prices for the Common Stock on the NYSE during the periods indicated.
The last reported sale price of the Common Stock on the NYSE on July 14, 1997
was $115 1/2.
<TABLE>
<CAPTION>
DIVIDENDS
PAID PER
HIGH LOW SHARE
----- ---- ---------
<S> <C> <C> <C>
1995:
1st Quarter...................................... $ 64 1/8 $55 3/4 $ .31
2nd Quarter...................................... 68 7/8 60 1/4 .31
3rd Quarter...................................... 71 3/4 65 1/4 .31
4th Quarter...................................... 77 3/8 69 5/8 .34 1/2
1996:
1st Quarter...................................... $ 79 3/8 $70 5/8 $.34 1/2
2nd Quarter...................................... 80 7/8 71 .34 1/2
3rd Quarter...................................... 86 1/2 73 1/4 .34 1/2
4th Quarter...................................... 104 1/8 86 1/8 .38
1997:
1st Quarter...................................... $100 3/4 $92 7/8 $ .38
2nd Quarter...................................... 120 1/2 91 3/4 .38
3rd Quarter (through July 14, 1997).............. 119 115 1/2 --
</TABLE>
In May 1987, following the Company's commencement of operations, the Board
of Directors of the Company established the policy of declaring quarterly
dividends on the Common Stock and the Company has paid consecutive quarterly
dividends since then. The amount of dividends payable on Common Stock is
reviewed periodically by the Board of Directors in light of the Company's
earnings, financial condition and capital requirements. It is the policy of
the Board of Directors that the Company retain a portion of its earnings to
support the reasonable growth of the business.
The Company's ability to pay dividends depends on the ability of MBIA Corp.
to declare and distribute dividends to the Company. MBIA Corp.'s ability to
declare dividends is subject to restrictions contained in the New York
Insurance Law. See "Business--Regulation" in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, which is incorporated herein
by reference. The Company expects that such restrictions will not affect the
ability of MBIA Corp. to declare dividends sufficient to support the Company's
dividend policy.
S-7
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of certain United States Federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person other than (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any State or (iii)
an estate or trust whose income is includable in gross income for United
States Federal income tax purposes regardless of its source (referred to
hereafter as a "non-U.S. holder").
The discussion is based on provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Furthermore, this discussion does not consider specific facts and
circumstances that may be relevant to a particular holder's tax position.
Prospective purchasers are urged to consult a tax adviser with respect to the
United States Federal income and estate tax consequences of owning and
disposing of Common Stock, as well as any tax consequences under the laws of
any other taxing jurisdiction.
INCOME TAX
DIVIDENDS. Generally, dividends paid to a non-U.S. holder of Common Stock
will be subject to U.S. Federal income tax. Except in the case of dividends
that are effectively connected with the holder's conduct of a trade or
business within the United States, this tax is imposed and withheld at the
rate of 30% of the amount of the dividend, unless reduced by an applicable
income tax treaty. Currently, dividends paid to an address in a foreign
country are presumed to be paid to a resident of such country in determining
the applicability of a treaty for such purposes. However, the Internal Revenue
Service has issued proposed regulations which, if adopted, would require a
non-U.S. holder to provide certain certifications under penalties of perjury
in order to obtain treaty benefits.
Except as may be otherwise provided in an applicable income tax treaty,
dividends which are effectively connected with the non-U.S. holder's conduct
of a trade or business within the United States are subject to tax at ordinary
Federal income tax rates, which tax is not collected by withholding (except as
described below under "Backup Withholding and Information Reporting"). All or
part of any effectively connected dividends received by a foreign corporation
may also, under certain circumstances, be subject to an additional "branch
profits" tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Non-U.S. holders of Common Stock must comply
with certain certification and disclosure requirements to claim an exception
from withholding under the rules described in this paragraph.
A non-U.S. holder that is eligible for a reduced rate of U.S. withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the United States
Internal Revenue Service.
DISPOSITION OF COMMON STOCK. Generally, non-U.S. holders will not be subject
to United States Federal income tax (or withholding thereof) in respect of
gain recognized on a disposition of Common Stock unless (i) the gain is
effectively connected with the non-U.S. holder's conduct of a trade or
business within the United States (in which case the "branch profits" tax
described above may also apply if the holder is a foreign corporation), (ii)
in the case of a non-U.S. holder who is a non-resident alien individual and
holds the Common Stock as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year of the sale and certain
other conditions are met; or (iii) the Company is or has been a "United States
real property holding corporation" for Federal income tax purposes and the
non-U.S. holder has held directly or constructively more than 5% of the
outstanding Common Stock within the five-year period ending on the date of the
disposition. The Company currently is not and does not anticipate becoming a
"U.S. real property holding corporation."
S-8
<PAGE>
ESTATE TAX
If an individual non-U.S. holder owns, or is treated as owning, Common Stock
at the time of his or her death, such stock would be subject to U.S. Federal
estate tax imposed on the estates of nonresident aliens, in the absence of a
contrary provision contained in any applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
DIVIDENDS. Generally, dividends paid on Common Stock to a non-U.S. holder at
an address outside the United States will be exempt from backup withholding
tax and information reporting requirements related thereto. However, the
Company must report annually to the Internal Revenue Service and to each non-
U.S. holder the amount of dividends and other payments distributed to such
non-U.S. holder and any tax withheld with respect to such holder, regardless
of whether withholding is required.
BROKER SALES. Payments of proceeds from the sale of Common Stock by a non-
U.S. holder made to or through a foreign office of a broker generally will not
be subject to information reporting or backup withholding. However, sales
through certain foreign offices, including the foreign offices of a U.S.
broker, are subject to information reporting unless the holder certifies its
non-U.S. status under penalties of perjury or otherwise establishes its
entitlement to an exemption. Payments of proceeds from the sale of Common
Stock by a non-U.S. holder to or through a U.S. office of a broker are
currently subject to both information reporting and backup withholding at a
rate of 31% unless the holder certifies its status as a non-U.S. holder under
penalties of perjury or otherwise establishes an exemption.
A non-U.S. holder may obtain a refund of any excess amounts withheld under
the backup withholding rules by filing the appropriate claim for refund with
the IRS.
S-9
<PAGE>
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the
underwriting agreement dated July 14, 1997 (the "Underwriting Agreement"),
Lehman Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation and
Smith Barney Inc. (the "Underwriters"), have severally agreed to purchase from
the Company, and the Company has agreed to sell to each Underwriter, the
aggregate number of shares of Common Stock set forth opposite the name of each
such Underwriter below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Lehman Brothers Inc............................................ 333,400
Donaldson, Lufkin & Jenrette Securities Corporation............ 333,300
Smith Barney Inc. ............................................. 333,300
---------
Total........................................................ 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock are subject to certain conditions, and
that if any of the shares of Common Stock offered hereby are purchased by the
Underwriters pursuant to the Underwriting Agreement, all of the shares of
Common Stock agreed to be purchased by the Underwriters pursuant to the
Underwriting Agreement must be so purchased.
The Company has been advised that the Underwriters propose to offer the
shares of Common Stock offered hereby directly to the public initially at the
public offering price set forth on the cover page of this Prospectus
Supplement, and to certain selected dealers (who may include the Underwriters)
at such initial public offering price less a selling concession not in excess
of $2.40 per share. The selected dealers may reallow a concession not in
excess of $.10 per share to certain brokers and dealers. After the initial
offering of the Common Stock, the public offering price, the concession to
selected dealers and the reallowance may be changed by the Underwriters.
The Company has granted the Underwriters an option to purchase up to an
additional 150,000 shares of Common Stock, at the initial public offering
price less the aggregate underwriting discounts and commissions shown on the
cover page of this Prospectus Supplement, solely to cover overallotments, if
any. The option may be exercised at any time up to 30 days after the date of
this Prospectus Supplement. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment.
The Company has agreed not to offer, sell or otherwise dispose of any shares
of Common Stock for a period of 90 days following the date of this Prospectus
Supplement, without the prior consent of Lehman Brothers Inc.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
In connection with the offering, the rules of the Securities and Exchange
Commission permit the Representatives to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions may consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of
the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering (i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement), the
Representatives may reduce that short position by purchasing Common Stock in
the open market. The Representatives also may elect to reduce any short
position by exercising all or part of the over-allotment option described
herein.
S-10
<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Lehman Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation
and Smith Barney Inc., and certain of their affiliates, have from time to time
provided investment banking, financial advisory and other services to the
Company and its affiliates in the ordinary course of business.
LEGAL OPINIONS
The validity of the Shares offered hereby will be passed upon for the
Company by Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022,
and for the Underwriters by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), 425 Lexington Avenue, New York, New York
10017. Such counsel will rely, as to matters of Connecticut law, upon the
opinion of Day, Berry & Howard, City Place, Hartford, Connecticut 06103,
Connecticut counsel for the Company.
EXPERTS
The consolidated financial statements and the related consolidated financial
statement schedules of the Company appearing or incorporated by reference in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
have been audited by Coopers & Lybrand L.L.P., independent accountants, as set
forth in their reports thereon dated February 3, 1997 incorporated by
reference or included therein and incorporated herein by reference. Such
consolidated financial statements and financial statement schedules are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
S-11
<PAGE>
PROSPECTUS
US $250,000,000
MBIA INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
----------------
MBIA Inc. (the "Company") may offer from time to time its (a) unsecured debt
securities, in one or more series, which may be either senior debt securities
(the "Senior Debt Securities") or subordinated debt securities (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"); (b) shares of its preferred stock, par value $1.00 per
share (the "Preferred Stock"); and (c) shares of its common stock, par value
$1.00 per share (the "Common Stock"). The Debt Securities, Preferred Stock and
Common Stock (collectively, the "Securities") may be offered either together
or separately and will be offered in amounts, at prices and on terms to be
determined at the time any such Securities are to be offered. The Securities
will have an aggregate initial offering price of up to $250,000,000 or the
equivalent thereof in U.S. dollars if any Securities are denominated in a
foreign currency or in currency units.
Specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement (the "Prospectus Supplement"), which will describe, without
limitation and where applicable the following: (a) in the case of Debt
Securities, the specific designation, aggregate principal amount,
denominations, maturity, premium, if any, interest rate (which may be fixed or
variable) or method of calculation of interest and premium, if any, place or
places where principal, premium, if any, and interest will be payable, any
terms of redemption, any sinking fund provisions, terms for any conversion or
exchange into other Securities, initial public offering or purchase price,
methods of distribution and other special terms, (b) in the case of Preferred
Stock, the specific designation, stated value and liquidation preference per
share and the number of shares offered, dividend rate (which may be fixed or
variable) or method of calculating dividends, place or places where dividends
will be payable, any terms of redemption, any sinking fund provisions, terms
for any conversion or exchange into other Securities, initial public offering
or purchase price, methods of distribution and other special terms, and (c) in
the case of Common Stock, the number of shares offered, initial public
offering or purchase price, methods of distribution and other special terms.
The Prospectus Supplement will also contain information, as applicable,
about certain United States Federal income tax considerations relating to the
Offered Securities.
The Securities may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers or agents involved in the sale of Securities in respect
of which this Prospectus is being delivered and any applicable fee, commission
or discount arrangements with them will be set forth in the Prospectus
Supplement.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER RULED
UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 7, 1996
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS
SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT,
UNDERWRITER OR DEALER. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES TO WHICH THEY RELATE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports and proxy
and information statements and other information concerning the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the following regional offices of the Commission: Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661, 14th Floor, and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
at prescribed rates, or may be viewed by visiting the Commission's web site at
http://www.sec.gov. Reports, proxy statements and other information concerning
the Company may also be inspected at the offices of the New York Stock
Exchange, Inc. at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act") with respect to the securities offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. In addition, certain documents filed by the Company with
the Commission have been incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference." Statements contained herein
concerning the provisions of any document do not purport to be complete, and
in each instance are qualified in all respects by reference to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1995.
(2) The Company's Quarterly Report on Form 10-Q for each of the first two
calendar quarters of 1996.
(3) The description of the Common Stock of the Company contained in the
Company's Registration Statement on Form 8-A filed with the Commission on
June 15, 1987, as amended by the Form 8-A filed with the Commission on
December 31, 1991 and by the Form 8-A filed with the Commission on October
27, 1994.
(4) The Company's Current Report on Form 8-K filed with the Commission on
January 24, 1996.
Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the foregoing documents). Any such request
should be directed to: Louis G. Lenzi, Esq., MBIA Inc., 113 King Street,
Armonk, New York 10504 (telephone: (914) 273-4545).
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THE COMPANY
MBIA Inc. (the "Company") insures municipal bonds, asset-backed securities
and other non-municipal bonds through its wholly owned subsidiary, MBIA
Insurance Corporation ("MBIA Corp."). MBIA Corp.'s primary business is
enhancing the efficiency of public finance by guaranteeing the timely payment
of principal and interest on municipal bonds sold in the new issue market,
traded in the secondary market and held in unit investment trusts and mutual
funds. MBIA Corp. also provides financial guarantees for structured finance
transactions (principally mortgage-backed and asset-backed securities),
investor-owned utility debt and obligations of high-quality financial
institutions. For the six months ended June 30, 1996, MBIA Corp. insured $20.4
billion par value of domestic new issue and secondary market municipal bonds
and $8.4 billion par value of domestic structured finance business. As of June
30, 1996, the total net par amount of outstanding bonds insured by MBIA Corp.
was $210.6 billion and the aggregate net insurance in force was $377.6
billion.
Financial guarantee insurance provides an unconditional and irrevocable
guarantee of the payment of the principal of and interest on insured
obligations when due. MBIA Corp. primarily insures obligations sold in the new
issue and secondary markets, including those held in unit investment trusts
and by mutual funds. It also provides surety bonds for debt service reserve
funds. The principal economic value of financial guarantee insurance to the
entity offering the obligations is the saving in interest costs resulting from
the difference in the market yield between an insured obligation and the same
obligation on an uninsured basis. In addition, for complex financings and for
obligations of issuers that are not well known by investors, insured
obligations receive greater market acceptance than uninsured obligations. All
obligations insured by MBIA Corp. are rated AAA by both Standard & Poor's
Ratings Group, a division of The McGraw-Hill Companies, Inc. and Fitch
Investors Service, L.P. and Aaa by Moody's Investors Service, Inc., the
highest ratings assigned by these rating agencies.
The Company's insurance subsidiaries derive their income from insurance
premiums earned over the life of the insured obligations and from investment
income earned on assets representing capital, retained earnings, and deferred
premium revenues. As of June 30, 1996, the Company's deferred premium revenues
were $1,729 million, its shareholders' equity was $2,269 million, and its
total investments were $7,096 million and $7,177 million at book value and
market value, respectively. As of June 30, 1996, MBIA Corp.'s investment
portfolio was $3,969 million and $4,047 million at book value and market
value, respectively, and was primarily comprised of high-quality fixed-income
securities with intermediate maturities.
Since 1990, a French company, MBIA Assurance S.A. ("MBIA Assurance"), has
written financial guarantee insurance in the countries of the European
Community. MBIA Assurance, which is a subsidiary of MBIA Corp., writes
policies insuring public infrastructure financings, asset-backed transactions
and certain obligations of financial institutions.
Over the last six years, the Company has undertaken the development of
investment management services which capitalize on its capabilities,
reputation and marketplace relationships. The Company is delivering these
services through a group of subsidiary companies. For the six months ended
June 30, 1996, in the aggregate, these investment management ventures
contributed $14 million to revenues.
The financial guarantee industry is subject to the direct and indirect
effects of governmental regulation, including changes in tax laws affecting
the municipal and asset-backed debt markets. No assurance can be given that
future legislative or regulatory changes might not adversely affect the
results of operations and financial condition of the Company.
The principal executive offices of the Company are located at 113 King
Street, Armonk, New York 10504. The telephone number is (914) 273-4545.
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USE OF PROCEEDS
Unless otherwise stated in the applicable Prospectus Supplement, the net
proceeds to the Company from the sale of the Securities will be used to
provide additional capital for the future needs of the Company and MBIA Corp.
and for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated. Earnings represent consolidated
earnings before income taxes and fixed charges. Fixed charges consist of
interest and that portion of rental expense deemed representative of the
interest factor for such rental expense. The Company had no capitalized
interest for the periods presented.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ ---------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)........ 11.2 12.9 13.0 13.1 13.1 13.0 13.2
</TABLE>
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(1) Fixed charges do not include the amount of fixed charges associated with
obligations insured by MBIA Corp.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities offered hereby are to be issued in one or more
series under the Senior Indenture, dated as of August 1, 1990, as supplemented
from time to time (as so supplemented, the "Senior Indenture"), between the
Company and The First National Bank of Chicago, as trustee (the "Senior
Indenture Trustee"). The Subordinated Debt Securities offered hereby are to be
issued in one or more series under a Subordinated Indenture, as supplemented
from time to time (as so supplemented, the "Subordinated Indenture" and,
together with the Senior Indenture, the "Indentures"), between the Company and
a trustee to be named in the applicable Prospectus Supplement (the
"Subordinated Indenture Trustee" and, together with the Senior Indenture
Trustee, the "Trustees"). Copies of the Senior Indenture and the form of the
Subordinated Indenture have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
The statements herein relating to the Debt Securities and the following
summaries of certain provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures (as they may be amended or
supplemented from time to time) and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). Whenever particular sections or defined
terms of the Indentures (as they may be amended or supplemented from time to
time) are referred to herein or in a Prospectus Supplement, such sections or
defined terms are incorporated herein or therein by reference.
GENERAL
The Debt Securities will be direct and unsecured obligations of the Company.
The Senior Debt Securities will rank equally and ratably with all other
unsecured and unsubordinated obligations of the Company. The Subordinated Debt
Securities will be subordinate and junior in right of payment to the extent
and in the manner set forth in the Subordinated Indenture to all Senior Debt
(as defined below) of the Company. See "--Subordination under the Subordinated
Indenture". As a non-operating holding company, most of the assets of the
Company are owned by the Company's subsidiaries, and the Company relies
primarily on dividends from such subsidiaries to meet its obligations for
payment of principal and interest on its outstanding debt obligations.
Accordingly, the Debt Securities will be effectively subordinated to all
existing and future liabilities of the Company's subsidiaries. In addition,
the payment of dividends by the Company's insurance company subsidiary, MBIA
Insurance Corporation, is limited under the applicable insurance laws and
regulations of the State of New York. The Indentures do not limit the
aggregate amount of Debt Securities that may be issued thereunder. Except as
otherwise provided in the applicable Prospectus Supplement, the Indentures, as
they apply to any series of
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Debt Securities, do not limit the incurrence or issuance of other secured or
unsecured debt of the Company, whether under either of the Indentures or any
other indenture that the Company may enter into in the future or otherwise.
The Debt Securities will be issuable in one or more series pursuant to an
indenture supplemental to the Senior Indenture or the Subordinated Indenture,
as the case may be, or a resolution of the Company's Board of Directors or a
committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Debt Securities (to the extent such terms are
applicable to such Debt Securities): (1) the title of the Debt Securities; (2)
any limit upon the aggregate principal amount of the Debt Securities; (3) the
date or dates on which the principal of the Debt Securities is payable; (4)
the rate or rates, if any, at which the Debt Securities shall bear interest,
the interest payment dates on which any such interest shall be payable, the
right, if any, of the Company to defer or extend an interest payment date, or
the method by which any of the foregoing shall be determined; (5) the place or
places where, subject to the terms of the Indenture, the principal of and
premium, if any, and interest on the Debt Securities will be payable; (6) any
period or periods within or date or dates on which, the price or prices at
which and the terms and conditions upon which Debt Securities may be redeemed,
in whole or in part, at the option of the Company pursuant to any sinking fund
or otherwise; (7) the obligation, if any, of the Company to redeem, purchase
or repay the Debt Securities pursuant to any sinking fund, amortization or
analogous provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Debt Securities shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligation; (8) the denominations in which
any Debt Securities shall be issuable if other than denominations of $1,000
and any integral multiple thereof; (9) if other than in U.S. Dollars, the
currency or currencies (including currency unit or units) in which the
principal of (and premium, if any) and interest, if any, on the Debt
Securities shall be payable, or in which the Debt Securities shall be
denominated; (10) any additions, modifications or deletions, in the Events of
Default or covenants of the Company specified in the Indenture with respect to
the Debt Securities; (11) if other than the principal amount thereof, the
portion of the principal amount of Debt Securities that shall be payable upon
declaration of acceleration of the maturity thereof; (12) any index or indices
used to determine the amount of payments of principal of and premium, if any,
on the Debt Securities and the manner in which such amounts will be
determined; (13) the issuance of a temporary Global Security representing all
of the Debt Securities of such series and exchange of such temporary Global
Security for definitive Debt Securities of such series; (14) whether the Debt
Securities of the series shall be issued in whole or in part in the form of
one or more Global Securities and, in such case, the Depositary for such
Global Securities, and the circumstances under which any such Registered
Global Security may be registered for transfer or exchange, or authenticated
and delivered, in the name of a Person other than such Depositary or its
nominee, if other than as set forth in the Indentures; (15) the appointment of
any paying agent, transfer agent or registrars; (16) the terms and conditions
of any obligation or right of the Company to convert or exchange the
Subordinated Debt Securities into other Securities or at the option of a
Holder thereof; (17) the relative degree, if any, to which the Debt Securities
of any series shall be senior to or subordinated to other series of Debt
Securities in right of payment, whether such other series of Debt Securities
are outstanding or not; and (18) any other terms of the Debt Securities not
inconsistent with the provisions of the Indentures. (Section 2.3).
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. Certain federal income tax consequences and
special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, certain federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
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If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Debt Securities, special federal
income tax, accounting and other considerations applicable thereto will be
described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION, PAYMENT AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. Debt Securities of
any series will be exchangeable for other Debt Securities of the same issue
and series, of any authorized denominations, of a like aggregate principal
amount.
Debt Securities may be presented for exchange as provided above, and may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed), at
the office of the registrar or at the office of any transfer agent designated
by the Company for such purpose with respect to any series of Debt Securities
and referred to in an applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in
the Indenture. The Company will appoint the Trustees as registrars under the
Indentures. If the applicable Prospectus Supplement refers to any transfer
agents or paying agents (in addition to the registrar) initially designated by
the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or paying agent or
approve a change in the location through which any such transfer agent or
paying agent acts. The Company may at any time designate additional transfer
agents or paying agents with respect to any series of Debt Securities.
Neither the Company nor the Trustees shall be required to exchange or
register a transfer of (a) any Debt Securities of any series for a period of
15 days preceding the first mailing of notice of redemption for such series to
be redeemed, or (b) any Debt Securities selected, called or being called for
redemption except, in the case of any Debt Security to be redeemed in part,
the portion thereof not so to be redeemed.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Debt Securities will
be made at the office of the Trustee for such Debt Securities in the City of
New York or at the office of such paying agent or paying agents as the Company
may designate from time to time in an applicable Prospectus Supplement, except
that at the option of the Company payment of any interest may be made by check
mailed to the address of the person entitled thereto as such address shall
appear in the register. Unless otherwise indicated in an applicable Prospectus
Supplement, payment of any interest on Debt Securities will be made to the
person in whose name such Debt Security is registered at the close of business
on any record date for such interest, except in the case of defaulted
interest.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Debt Securities that will be deposited with, or on
behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued only
in fully registered form and in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Debt Security may not be transferred except as a
whole by the Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Debt Security, and the deposit of such Global
Debt Security with or on behalf of the Depositary, the Depositary for such
Global Debt Security or its nominee will credit on its book-entry
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registration and transfer system, the respective principal amounts of the
individual Debt Securities represented by such Global Debt Security to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Debt Securities or by the Company if such Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in
a Global Debt Security will be limited to Participants or persons that may
hold interests through Participants. Ownership of beneficial interests in such
Global Debt Security will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable Depositary or
its nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Debt Security.
So long as the Depositary for a Global Debt Security, or its nominee, is the
registered owner of such Global Debt Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Global Debt Security for all purposes
under the Indenture governing such Debt Securities. Except as provided below,
owners of beneficial interests in a Global Debt Security will not be entitled
to have any of the individual Debt Securities of the series represented by
such Global Debt Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Debt Securities of such
series in definitive form and will not be considered the owners or holders
thereof under the Indenture governing such Debt Securities.
Payments of principal of (and premium, if any) and interest on individual
Debt Securities represented by a Global Debt Security registered in the name
of a Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner of the Global Debt Security
representing such Debt Securities. None of the Company, the Trustee for such
Debt Securities, any paying agent, or the Securities registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interest of the Global Debt Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Debt Security representing any of such Debt
Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Debt Security for such Debt Securities as shown on the
records of such Depositary or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Debt
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name'.
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Debt Securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual
Debt Securities of such series in exchange for the Global Debt Security
representing such series of Debt Securities. In addition, the Company may at
any time and in its sole discretion, subject to any limitations described in
the Prospectus Supplement relating to such Debt Securities, determine not to
have any Debt Securities of such series represented by one or more Global Debt
Securities and, in such event, will issue individual Debt Securities of such
series in exchange for the Global Debt Security or Securities representing
such series of Debt Securities. Further, if the Company so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest
in a Global Debt Security representing Debt Securities of such series may, on
terms acceptable to the Company, the Trustee and the Depositary for such
Global Debt Security, receive individual Debt Securities of such series in
exchange for such beneficial interests, subject to any limitations described
in the Prospectus Supplement relating to such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Debt Security will be
entitled to
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physical delivery of individual Debt Securities of the series represented by
such Global Debt Security equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name. Individual
Debt Securities of such series so issued will be issued in denominations,
unless otherwise specified by the Company, of $1,000 and integral multiples
thereof.
CERTAIN COVENANTS OF THE COMPANY
Limitations on Liens. Under the Senior Indenture, so long as Senior Debt
Securities are outstanding, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, issue, assume, incur or
guarantee any indebtedness for borrowed money which is secured by a Mortgage
of any nature on any of the present or future capital stock of any Restricted
Subsidiary unless the Senior Debt Securities then outstanding shall be secured
equally and ratably with, or prior to, such other secured debt so long as it
is outstanding. (Section 3.6)
Limitations on Disposition of Stock of Restricted Subsidiaries. Under the
Senior and Subordinated Indentures, so long as Debt Securities are
outstanding, the Company will not, and will not permit any Subsidiary to,
sell, transfer or otherwise dispose of any shares of capital stock of any
Restricted Subsidiary except for (i) a sale, transfer or other disposition of
any capital stock of any Restricted Subsidiary to a wholly owned Subsidiary of
the Company or such Subsidiary; (ii) a sale, transfer or other disposition of
the entire capital stock of any Restricted Subsidiary for at least fair value
(as determined by the Board of Directors of the Company acting in good faith);
or (iii) a sale, transfer or other disposition of the capital stock of any
Restricted Subsidiary for at least fair value (as determined by the Board of
Directors of the Company acting in good faith) if, after giving effect
thereto, the Company and its Subsidiaries would own more than 80% of the
issued and outstanding Voting Stock of such Restricted Subsidiary. (Section
3.7 of the Senior Indenture; Section 3.6 of the Subordinated Indenture)
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Under the Senior and Subordinated Indentures, so long as Debt Securities are
outstanding, the Company will not consolidate with or merge with or into any
other corporation or convey, transfer or lease its properties or assets as an
entirety or substantially as an entirety to any person, unless (i) the
successor or purchaser is a corporation organized and existing under the laws
of the United States of America, any State thereof or the District of
Columbia; (ii) such successor or purchaser shall expressly assume, by
supplemental indenture satisfactory in form to the related Trustee, the due
and punctual payment of the principal of, premium, if any, and interest on all
the Debt Securities and the performance and observance of every covenant and
condition of the Company under the related Indenture; and (iii) immediately
after giving effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing under the related Indenture.
(Section 9.1)
CERTAIN DEFINITIONS
The covenants and other provisions relating to the Debt Securities are to be
read in conjunction with the definitions contained in the Senior and
Subordinated Indentures, certain of which are substantially to the following
effect:
"Debt Securities" means all unsecured debt securities, notes or other
evidences of indebtedness issued in one or more series that the Company may
issue from time to time in accordance with the terms of the related
Indentures.
"Mortgage" means any mortgage, pledge, lien, security interest or other
encumbrance.
"Restricted Subsidiary" means MBIA Corp. and any successor to all or
substantially all of its business, provided that such successor is a
Subsidiary.
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"Subsidiary" means a corporation more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
"Voting Stock" means, with respect to any Subsidiary, stock of any class or
classes (or equivalent interests), if the holders of the stock of such class
or classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or persons
performing similar functions) of such corporation, even though the right so to
vote has been suspended by the happening of such a contingency.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default with
regard to any series of Debt Securities under each of the Indentures: (i)
default continued for 30 days in payment of any installment of interest on any
of the Debt Securities when due; (ii) default in payment of all or any part of
the principal of the Debt Securities when due and payable either at maturity,
upon any redemption, by declaration or otherwise; (iii) default continued for
60 days after notice of such default in performance of any covenant or
warranty of the Indenture by the Company in respect of the Debt Securities;
(iv) certain events of default with respect to indebtedness of the Company
(other than the Debt Securities or non-recourse obligations of the Company) in
an aggregate principal amount in excess of $10,000,000 which default shall
consist of the failure to make any payment at maturity or shall have resulted
in the acceleration of the maturity of such indebtedness; (v) certain events
of bankruptcy, insolvency, or reorganization of the Company or any Restricted
Subsidiary; or (vi) any other Event of Default provided in the supplemental
indenture or resolution of the Board of Directors under which such series of
Debt Securities is issued or in the form of Debt Security for such series.
(Section 5.1) The Company is required to file with the Trustee annually a
written statement as to the fulfillment of certain of its obligations under
the Indenture. (Section 3.5)
Each Indenture provides that the Trustee may withhold notice to the holders
of Debt Securities of any default (except in payment of principal of or
premium, if any, or interest on the Debt Securities) if the Trustee considers
it in the interest of the holders of the Debt Securities to do so. (Section
5.11)
Each Indenture provides that (a) if an Event of Default described in clause
(i) or (ii) above shall have occurred and be continuing with regard to the
Debt Securities of any series, either the Trustee or the holders of 25% in
aggregate principal amount of the Debt Securities of that series then
outstanding (each such series acting as a separate class) may declare the
principal (or, if Debt Securities of such series are original issue discount
Debt Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Debt Securities of such series and interest
accrued thereon, if any, to be due and payable immediately and (b) if an Event
of Default described in clause (iii), (iv) or (v) above shall have occurred
and be continuing, either the Trustee or the holders of 25% in aggregate
principal amount of all Debt Securities (or in the case of an Event of Default
described in clause (iii) above, all series affected by such Event of Default)
then outstanding (voting as a single class) may declare the principal (or, if
Debt Securities of such series are original issue discount Debt Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all Debt Securities (in the case of clause (iii) above, limited to
all series affected) then outstanding and interest accrued thereon, if any, to
be due and payable immediately. Upon certain conditions, such declaration by
the holders of Debt Securities of any series may be annulled and past defaults
which have been cured may be waived by (a) with respect to clauses (i) or (ii)
the holders of a majority in aggregate principal amount of Debt Securities of
such series (each such series voting as a separate class) then outstanding and
(b) with respect to clauses (iii), (iv) or (v) above, the holders of a
majority in aggregate principal amount of the Debt Securities of all series
(in the case of clause (iii) above, limited to all series affected by such
default) then outstanding (voting as a single class). (Section 5.1) Prior to a
declaration of acceleration of maturity of the Debt Securities of any series,
the holders of a majority in aggregate principal amount of the Debt Securities
of each series voting separately or all series voting as a single class,
depending on the nature of the Event of Default, may waive any Event of
Default, and its consequences, except a default in the payment of the
principal of or premium, if any, or interest on any of the
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<PAGE>
Debt Securities of such series or in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the
holder of each Debt Security of such series affected. (Section 5.10)
Subject to the provisions of each Indenture relating to the duties of the
Trustee, the Trustee shall be under no obligation to exercise any of its
rights or powers under the relative Indenture at the request, order or
direction of any of the holders of Debt Securities, unless such holders shall
have offered the Trustee reasonable indemnity. (Section 6.2) Subject to such
provision for indemnification, the holders of a majority in aggregate
principal amount of the Debt Securities shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee.
(Section 5.9)
DEFEASANCE AND COVENANT DEFEASANCE
Except as may otherwise be provided in the applicable Prospectus Supplement
with respect to the Debt Securities of any series, each Indenture provides
that, subject to certain conditions, the Company may elect either (i) to be
discharged from any and all obligations with respect to the Debt Securities
(except for the obligations to register the transfer or exchange of the Debt
Securities, to replace temporary or mutilated, defaced, destroyed, lost or
stolen Debt Securities, to maintain an office or agency for the payment of
principal and interest in respect of the Debt Securities, to appoint a paying
agent and, if the Company elects to act as the paying agent, to hold moneys
for such payment in trust) ("Defeasance") or (ii) to be released from its
obligations with respect to the Debt Securities under Sections 3.6 and 3.7 of
the Indenture (being the sections of the Indenture captioned "Limitations on
Liens" and "Limitations on Disposition of Stock of Restricted Subsidiaries"
see "Certain Covenants of the Company") ("Covenant Defeasance"), upon the
deposit with the Trustee (or another qualifying trustee) irrevocably in trust
for such purpose, of money and/or United States government obligations in an
amount which, in the opinion of a nationally recognized firm of independent
public accountants delivered to such trustee, would be sufficient to pay the
principal of and premium, if any, and interest on the Debt Securities on the
scheduled due dates therefor. (Sections 13.1 through 13.4)
Each Indenture provides that, to effect Defeasance or Covenant Defeasance,
the Company must deliver to the Trustee an opinion of counsel to the effect
that Defeasance or Covenant Defeasance, as the case may be, will not cause the
holders of the Debt Securities to recognize income, gain or loss for federal
income tax purposes. In addition, in the case of Defeasance, such opinion of
counsel must state that a private letter ruling or a revenue ruling to the
same effect has been issued by the United States Internal Revenue Service or
state that since the date of the Indenture there has been a change in the
applicable federal income tax law to the same effect. (Sections 13.3 and 13.4)
With respect to the Subordinated Indenture, in order to be discharged as
described above, no default in the payment of principal of (or premium, if
any) or interest on any Senior Debt shall have occurred and be continuing or
no Event of Default with respect to the Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt becoming or being
declared due and payable prior to the date it would have become due and
payable.
MODIFICATION AND WAIVER
Each Indenture provides that the Company may enter into a supplemental
indenture or indentures for the purpose of adding to, changing or eliminating
any of the provisions of such Indenture or of any supplemental indentures or
of modifying the rights of the holders of Debt Securities issued thereunder if
approved in writing signed by the holders of not less than a majority in
aggregate principal amount of all outstanding Debt Securities affected thereby
voting as one class; provided that the consent of each holder of Debt
Securities affected thereby is required for any modification or alteration
which (i) extends the final maturity of any Debt Securities, or reduces the
principal amount thereof, or reduces the rate or extends the time of payment
of interest thereon, or reduces any amount payable on redemption thereof or
impairs or affects the right of any holder of Debt Securities to institute
suit for the payment thereof, (ii) reduces the percentage in aggregate
principal amount, the consent of
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<PAGE>
the holders of which is required for any such supplemental indenture or (iii)
modifies any provision with respect to the subordination of Debt Securities of
any series in a manner adverse to the holders thereof. (Section 8.2) The
holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of all series (including the Debt Securities)
voting as one class may waive compliance by the Company with certain covenants
contained in each Indenture. (Section 3.9)
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the Subordinated Indenture, the Company has covenanted and agreed that
any Subordinated Debt Securities issued thereunder will be subordinate and
junior in right of payment to all Senior Debt to the extent provided in the
Subordinated Indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of the Company, the
holders of the Senior Debt will first be entitled to receive payment in full
of principal of (and premium, if any) and interest, if any, on such Senior
Debt before the holders of Subordinated Debt Securities will be entitled to
receive or retain any payment in respect of the principal of (and premium, if
any) or interest, if any, on the Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders
of Subordinated Debt Securities will be entitled to receive any payment upon
the principal of (or premium, if any) or interest, if any, or the Subordinated
Debt Securities.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting
in the acceleration of the maturity thereof, or if any judicial proceeding
shall be pending with respect to any such default.
The Subordinated Indenture defines "Senior Debt" as the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Subordinated Indenture or thereafter incurred, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such obligations are not superior in right of payment to
the Subordinated Debt Securities or to other Debt which is pari passu with, or
subordinated to, the Subordinated Debt Securities; provided, however, that
Senior Debt shall not be deemed to include (i) any Debt of the Company which
when incurred and without respect to any election under Section 1111(b) of the
Bankruptcy code was without recourse to the Company, (ii) any Debt of the
Company to any of its subsidiaries, (iii) Debt to any employee of the Company,
(iv) any liability for taxes, (v) indebtedness or monetary obligations to
trade taxes and (vi) indebtedness or monetary obligations to trade creditors
or assumed by the Company or any of its subsidiaries in the ordinary course of
business in connection with the obtaining of materials or services. As used in
the proceeding sentence the term "Debt" means with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed; (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person; (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of such Person; and (vi) every obligation of the type
referred to in clauses (i) through (v) of another Person and all dividends of
another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable, directly or indirectly, as obligor or
otherwise.
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The Subordinated Indenture places no limitation on the amount of additional
Senior Debt that may be incurred by the Company. The Company may from time to
time incur additional indebtedness constituting Senior Debt.
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Subordinated
Debt Securities, may be changed prior to such issuance. Any such change would
be described in the Prospectus Supplement relating to such Subordinated Debt
Securities.
CONVERSION OR EXCHANGE
The Subordinated Debt Securities of any series may be convertible or
exchangeable into Common Stock or other Securities. The specific terms and
conditions on which Subordinated Debt Securities of any series may be so
converted or exchanged will be set forth in the applicable Prospectus
Supplement. Such terms may include the conversion or exchange price,
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Company, and provisions under which the number
of shares of Common Stock or other Securities to be received by the holders of
Subordinated Debt Securities would be calculated as of a time and in the
manner stated in the applicable Prospectus Supplement.
CONCERNING THE TRUSTEE
The Senior Indenture Trustee, The First National Bank of Chicago, performs
services for the Company in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
The following is a summary of the terms of the Company's Amended and
Restated Certificate of Incorporation.
The Company's authorized capital stock consists of 200,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock, par value $1.00 per
share. At the date of this Prospectus no shares of Preferred Stock are
presently outstanding. The Company does not presently have outstanding, and
the Amended and Restated Certificate of Incorporation does not authorize, any
other classes of capital stock. The issued and outstanding shares of Common
Stock are duly authorized, validly issued, fully paid and nonassessable.
COMMON STOCK
Holders of shares of Common Stock have no preemptive, redemption or
conversion rights. The holders of Common Stock are entitled to receive
dividends when and as declared by the Board of Directors out of funds legally
available therefor. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock may share ratably in the net assets of
the Company after payment in full to all creditors of the Company and
liquidating distributions to holders of Preferred Stock, if any. Each holder
of Common Stock is entitled to one vote per share on all matters submitted to
a vote of shareholders.
The Common Stock is traded on the New York Stock Exchange under the symbol
"MBI'. The transfer agent for the Common Stock is ChaseMellon Shareholder
Services, L.L.C.
The applicable Prospectus Supplement relating to an offering of Common Stock
will describe terms relevant thereto, including the number of shares offered,
the initial offering price, market price and dividend information.
PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby will be
set forth in the Prospectus Supplement relating thereto. The rights,
preferences, privileges and restrictions, including dividend rights, voting
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<PAGE>
rights, terms of redemption, retirement and sinking fund provisions and
liquidation preferences, if any, of the Preferred Stock of each series will be
fixed or designated pursuant to a certificate of designation adopted by the
Board of Directors or a duly authorized committee thereof. The terms, if any,
on which shares of any series of Preferred Stock are convertible or
exchangeable into Common Stock will also be set forth in the Prospectus
Supplement relating thereto. Such terms may include provisions for conversion
or exchange, either mandatory, at the option of the holder, or at the option
of the Company, in which case the number of shares of Common Stock to be
received by the holders of Preferred Stock would be calculated as of a time
and in the manner stated in the applicable Prospectus Supplement. The
description of the terms of a particular series of Preferred Stock that will
be set forth in the applicable Prospectus Supplement does not purport to be
complete and is qualified in its entirety by reference to the certificate of
designation relating to such series.
CERTAIN PROVISIONS OF RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
The Company's Amended and Restated Certificate of Incorporation requires the
approval of at least 80% of the outstanding shares of Common Stock for the
amendment of certain provisions which describe the factors the Board may
consider in evaluating proposed mergers, sales and other corporate
transactions. Further, as an insurance holding company, the Company is subject
to certain state insurance regulations that require prior approval of a change
of control. See "Business--Regulation" in the Company's 1995 Form 10-K. These
provisions and regulations may discourage attempts to obtain control of the
Company.
In the Amended and Restated Certificate of Incorporation the Company elects
not to be subject to the provisions of Sections 33-374a through 33-374c of the
Connecticut Stock Corporation Act. If the Company had not made such elections
these provisions would require the approval of the holders of at least 80% of
the voting power of the outstanding voting stock of the Company, and at least
66 2/3% of the voting power of the outstanding voting stock of the Company
other than voting stock held by certain holders of 10% or more of such voting
power or by certain affiliates of the Company, as a condition for mergers,
liquidations and other business transactions involving the Company and the
holders of 10% or more of such voting power or certain affiliates of the
Company unless certain minimum price and procedural requirements are met.
RIGHTS AGREEMENT
On December 12, 1991, the Company's Board of Directors declared a dividend
distribution of one Preferred Share Purchase Right (a "Right") for each share
of Common Stock. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a Junior Participating Cumulative Preferred
Share (the "Junior Preferred Stock") of the Company at a price of $160,
subject to certain adjustments to prevent dilution through stock dividends,
splits and combinations and distributions of warrants or other securities or
assets. The Junior Preferred Stock will rank senior to Common Stock, but could
rank junior to other classes of Preferred Stock that might be issued, as to
dividends and liquidating distributions, and will have 100 votes per share,
voting together with Common Stock. Initially, the Rights are attached to
shares of Common Stock and are not represented by separate certificates or
exercisable until the earlier to occur of (a) ten business days following the
public announcement by the Company (the "Shares Acquisition Date") that a
person or group of persons acquired (or obtained the right to acquire)
beneficial ownership of 10% or more of the outstanding Common Stock and (b)
ten business days (or, if determined by the Board of Directors, a later date)
following the announcement or commencement of a tender offer or exchange offer
which, if successful, would result in the bidder owning 10% or more of the
outstanding Common Stock. However, no person shall be deemed to have acquired
or obtained the right to acquire the beneficial ownership of 10% or more of
the outstanding shares of the Company's Common Stock, if the Board of
Directors determines that such acquisition is inadvertent, and such person
promptly divests itself of a sufficient number of shares to be below the 10%
ownership threshold. On such earlier date, Rights certificates would be issued
and mailed to holders of Common Stock. The Rights will expire on December 12,
2001, unless earlier redeemed or exchanged. shares to be below the 10%
ownership threshold. On such earlier date, Rights certificates would be issued
and mailed to holders of Common Stock. The Rights will expire on December 12,
2001, unless earlier redeemed or exchanged.
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<PAGE>
If an acquiring person or group acquires beneficial ownership of 10% or more
of the Common Stock (except pursuant to a tender or exchange offer for all of
the outstanding Common Stock determined by a majority of the Company's
independent directors to be fair and in the best interests of the Company and
its shareholders), then each Right (other than those held by the acquiror,
which will become void) will entitle its holder to purchase for $160 (or the
purchase price as then adjusted) that number of shares of Common Stock (or, in
certain circumstances, cash, a reduction in the purchase price, Common Stock,
other securities of the Company, other property or a combination thereof)
having a market value of $320 (or 200% of the adjusted purchase price). If,
after an acquiring person or group so acquires 10% or more of the Common Stock
in a merger or other business combination and (a) the Company shall not be the
surviving or continuing corporation, (b) the Company shall be the surviving or
continuing corporation and all or part of the Shares of Common Stock shall be
changed or exchanged, or (c) 50% or more of the Company's assets, cash flow or
earning power is sold, then proper provision shall be made so that each Right
(other than those held by the acquiror) will entitle its holder to purchase
that number of shares of common stock of the acquiring company which at the
time of such transaction would have a market value of 200% of the then-
effective purchase price.
The Company's Board of Directors may redeem all but not less than all of the
Rights at $0.01 per Right at any time prior to ten business days following the
Shares Acquisition Date. Additionally, at any time after a person or group
acquires 10% or more but less than 50% of the outstanding Common Stock, the
Company's Board of Directors may exchange the Rights (other than those held by
the acquiror, which will become void), in whole or in part, at an exchange
ratio of one share of Common Stock per Right (subject to adjustment). The
Board of Directors may also amend the Rights at any time prior to the Shares
Acquisition Date. The Company's Rights Plan is designed to make it more likely
that all of the Company's shareholders receive fair and equal treatment in the
event of any unsolicited attempt to acquire the Company and to guard against
the use of coercive tactics to gain control of the Company. However, the
existence of the Company's Rights Plan might discourage unsolicited merger
proposals and unfriendly tender offers and may therefore deprive shareholders
of an opportunity to sell their shares at a premium over prevailing market
prices.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors directly or
through agents or dealers. Any such underwriter, agent or dealer involved in
the offer and sale of the Securities will be named in an applicable Prospectus
Supplement.
Offers and sales of Securities hereunder may be effected at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as its agents to offer and sell the Securities upon the
terms and conditions set forth in any Prospectus Supplement. If Securities are
sold by means of an underwritten offering, the Company will execute an
underwriting agreement with an underwriter or underwriters at the time an
agreement for such sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, the respective
amounts underwritten and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be set forth in the applicable Prospectus Supplement which will be used
by the underwriters to make resales of the Securities in respect of which this
Prospectus is being delivered to the public. If any underwriter or
underwriters are utilized in the sale of the Securities, unless otherwise set
forth in the applicable Prospectus Supplement, the underwriting agreement will
provide that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a sale of
Securities will be obligated to purchase all such Securities if any are
purchased.
In connection with the sale of Securities, underwriters may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Securities for whom they may act as agent. Underwriters may sell Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the
15
<PAGE>
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers, will be set
forth in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters under the Securities Act, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities
may be deemed to be underwriting discounts and commissions under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with the Company to indemnification against and contribution toward
certain civil liabilities, including liabilities, under the Securities Act,
and to reimbursement by the Company for certain expenses.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to such
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company and
the sale thereof may be made by the Company directly to institutional
investors or others, who may be deemed to be underwriters within the meaning
of the Securities Act with respect to any resale thereof. The terms of any
such transaction will be set forth in the Prospectus Supplement relating
thereto.
The Securities may or may not be listed on a national securities exchange or
a foreign securities exchange. Certain series of the Securities will be a new
issue and will not have an established trading market. No assurances can be
given that there will be a market for any of the Securities.
Agents, underwriters and dealers may be customers of, engage in transactions
with or perform services for, the Company and its subsidiaries in the ordinary
course of business.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Securities being
offered hereby will be passed upon for the Company by Debevoise & Plimpton,
New York, New York, and for any underwriters or agents by counsel to be named
in the Prospectus Supplement. Such counsel may rely, as to matters of
Connecticut law, upon the opinion of Day, Berry & Howard, City Place,
Hartford, Connecticut 06103, Connecticut counsel for the Company.
EXPERTS
The consolidated financial statements and the related consolidated financial
statement schedules of the Company appearing or incorporated by reference in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995,
have been audited by Coopers & Lybrand L.L.P., independent accountants, as set
forth in their reports thereon dated January 22, 1996 incorporated by
reference or included therein and incorporated herein by reference. Such
consolidated financial statements and financial statement schedules are
incorporated herein by reference in reliance upon such reports given the
authority of such firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
The Company .............................................................. S-3
Capitalization............................................................ S-5
Selected Consolidated Financial and Statistical Data...................... S-6
Use of Proceeds........................................................... S-7
Price Range of Common Stock and Dividends................................. S-7
Certain United States Tax Consequences to Non-United States Holders of
Common Stock............................................................. S-8
Underwriting.............................................................. S-10
Legal Opinions............................................................ S-11
Experts................................................................... S-11
Prospectus
Available
Information..... 2
Incorporation of Certain
Documents by Reference........ 3
The
Company... 4
Use of
Proceeds.... 5
Ratio of Earnings to Fixed
Charges.................... 5
Description of Debt
Securities............. 5
Description of Capital
Stock................. 13
Plan of Distribution... 15
Legal Matters.......... 16
Experts................ 16
</TABLE>
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1,000,000 SHARES
LOGO
COMMON STOCK
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PROSPECTUS SUPPLEMENT
July 15, 1997
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LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SMITH BARNEY INC.
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