<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
MBIA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
- --------------------------------------------------------------------------------
MBIA INC. DAVID H. ELLIOTT
113 King Street Chairman
Armonk, NY 10504
914 273 4545
[MBIA Logo]
March 29, 1999
Dear Shareholder:
On May 13, 1999, MBIA Inc. will hold its annual meeting of
shareholders and I am pleased to invite you on behalf of the Board of
Directors to join us so we can report to you on the activities of the
Company during 1998 and discuss the outlook for 1999. The meeting will
be held in our headquarters at 113 King Street, Armonk, New York, at
10:00 a.m.
This year you are being asked to act on the following: (a) the
election of directors; and (b) the selection of independent auditors
for 1999. These proposals are described in the attached proxy
statement which you are encouraged to read fully.
Whether or not you plan to attend the meeting, it is important
that your shares be represented. Regardless of the number of shares
you own, please date, complete, sign and return the enclosed proxy
promptly.
We appreciate your continued support.
Sincerely,
[/s/ David H. Elliott]
David H. Elliott
Chairman
<PAGE> 3
MBIA INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of MBIA Inc.:
The annual meeting of the shareholders of MBIA Inc. will be held at the
Company's headquarters, 113 King Street, Armonk, New York 10504, on Thursday,
May 13, 1999 at 10:00 a.m., New York time, for the following purposes:
PROPOSAL 1: To elect 12 directors of the Company for terms expiring
at the 2000 Annual Meeting;
PROPOSAL 2: To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP, certified public accountants, as independent
auditors for the Company for the year 1999;
and to transact such other business as may properly come before the meeting or
any adjournment thereof.
Shareholders of record at the close of business on March 25, 1999 will be
entitled to vote at the meeting, whether in person or by proxy. Please sign,
date, complete, and return the enclosed proxy card as soon as possible in the
envelope provided. Shareholders who attend the meeting may revoke their proxies
and vote in person, if they wish to do so.
By order of the Board of Directors,
/s/ Louis G. Lenzi
Louis G. Lenzi
Secretary
113 King Street
Armonk, New York 10504
March 29, 1999
<PAGE> 4
MBIA INC.
PROXY STATEMENT
Your proxy in the form enclosed is solicited by the Board of Directors of
MBIA Inc. (the "Company"). Your proxy may be revoked by you at any time prior to
its use. The shares represented by the proxies received will be voted at the
meeting, or any adjournment thereof, in accordance with such specifications as
are made therein or, if no such specifications are made, in accordance with the
recommendations of the Board of Directors.
The record date for the determination of shareholders entitled to vote at
the meeting is March 25, 1999. On the record date, there were outstanding
99,748,541 shares of the Company's Common Stock ("Common Stock"), constituting
all of the outstanding voting securities of the Company. Each share is entitled
to one vote. Abstentions and broker non-votes are counted for purposes of
determining the number of shares represented at the meeting but are deemed not
to have voted on any proposal. Directors are elected by a plurality of the votes
cast. The vote required for ratification of the independent auditors is a
majority of shares voting.
The mailing address of the executive offices of the Company is 113 King
Street, Armonk, New York 10504. This Proxy Statement and the accompanying Notice
of Annual Meeting of Shareholders and proxy card are being mailed, on or about
March 29, 1999, to shareholders of record on the record date.
PROPOSAL 1:
ELECTION OF DIRECTORS
All of the Company's directors are elected at each annual meeting of
shareholders. At the 1999 Annual Meeting, the shareholders will elect 12
directors to serve for a term expiring at the 2000 Annual Meeting.
The names of the nominees being presented for consideration by the
shareholders, their ages, the years they have been directors of the Company,
their principal occupations over the past five years, their current positions
with the Company and certain other directorships held by them are set forth
below. The shares represented by all proxies received will be voted for these
nominees, except to the extent authority to do so is withheld as provided for in
the enclosed proxy card. If any such nominee should be unable or unwilling to
serve (an event not now anticipated), all proxies received will be voted for the
person, if any, as shall be designated by the Board of Directors to replace such
nominee. The Board has set a policy that no person who has attained the age of
70 years or older shall be nominated to be a director. The Board has granted Mr.
Lebenthal a two-year waiver of this policy.
Joseph W. Brown, Jr........... Mr. Brown joined the Company as Chief Executive
Officer on January 7, 1999 and it is expected
that he will become Chairman of the Company in
May. Prior to that he was Chairman of the Board
of Talegen Holdings, Inc. (insurance), from
1992 through 1998. Prior to joining Talegen,
Mr. Brown had been with Fireman's Fund
Insurance Companies for 17 years during which
he held positions from actuary to Chief
Executive Officer. He is a Fellow of the
Property Casualty Actuarial Society and a
Member of the American Academy of Actuaries and
the Society of Chartered Property & Casualty
Underwriters. Mr. Brown has served as a
director of the Company since 1990 and
previously served as a director from December
of 1986 through May of 1989. Age 50.
<PAGE> 5
David C. Clapp................ Mr. Clapp is currently a limited partner of The
Goldman Sachs Group, L.P. From 1990 until late
1994, he was Partner-in-charge of the Municipal
Bond Department at Goldman Sachs & Co.
(investment bank). Mr. Clapp is a member of the
Boards of the Hazelden Foundation and The Kent
School. He is past Chairman of the Municipal
Securities Rulemaking Board, President of the
Board of Trustees of the Museum of the City of
New York and Chair of the New York Arthritis
Foundation. Mr. Clapp has served as director of
the Company since 1994. Age 61.
Gary C. Dunton................ Mr. Dunton, who joined the Company in early
1998, is President of both the Public Finance
and Investment Management and Financial
Services Divisions of the Company. Prior to
that he was President of the Family and
Business Insurance Group, USF&G Insurance with
whom he had been associated since 1992. Mr.
Dunton was on the Company's board from 1996
until early in 1998. Mr. Dunton currently
serves as a member of the Board of Trustees for
the American Institute for Chartered Property
Casualty Underwriters and the Insurance
Institute of America. Age 43.
David H. Elliott.............. Mr. Elliott is the Chairman of the Company and
from 1991 until January of this year had been
its Chief Executive Officer. It is expected
that Mr. Elliott will step down as Chairman in
May. From 1986 to 1991, he served as the
President and Chief Operating Officer of the
Company and MBIA Insurance Corporation ("MBIA
Corp."). He has been a director of the Company
since 1988. He also was the Chairman of the
Municipal Bond Insurance Association (the
"Association"), MBIA Corp.'s predecessor, from
1976 to 1980 and from 1982 to 1986. Mr. Elliott
is a member of the board of Orion Capital
Corporation. Age 57.
Claire L. Gaudiani............ Dr. Gaudiani has been President of Connecticut
College since 1988. Dr. Gaudiani also serves as
a director of Southern New England Telephone
Company, Public Radio International and the
Citizen's Bank-Connecticut. She has been a
director of the Company since being elected at
the 1992 Annual Meeting. Age 54.
William H. Gray, III.......... Mr. Gray is President and Chief Executive
Officer of the United Negro College Fund, Inc.
Mr. Gray has served as Special Advisor to the
President on Haiti, Majority Whip and Budget
Chairman for the U.S. House of Representatives,
a faculty member at several colleges, and has
been pastor of the 5,000 member Bright Hope
Baptist Church in Philadelphia for 25 years. He
serves as a director of The Chase Manhattan
Corporation, The Prudential Insurance Company
of America, Warner-Lambert Company, CBS
Corporation, Union Pacific Corporation,
Rockwell International Corp. and Electronic
Data Systems Incorporated. Mr. Gray has been a
director of the Company since 1992. Age 57.
2
<PAGE> 6
Freda S. Johnson.............. Ms. Johnson is President of Government Finance
Associates, Inc. (municipal finance advisory
company), a firm which she has been associated
with since late 1990. From early 1990 until
December 1990, she was an independent public
finance advisor. She served as Executive Vice
President and Executive Director of the Public
Finance Department of Moody's Investors
Service, Inc. from 1979 to 1990. Ms. Johnson is
a member of the National Association of State
Auditors, Comptrollers and Treasurers' National
Advisory Board on State and Local Government
Secondary Market Disclosure and a member of the
corporate advisory board of Queens College. She
is also a past director of the National
Association of Independent Public Finance
Advisors and was a member of the Municipal
Securities Rulemaking Board's MSIL Committee on
Dissemination of Disclosure Information. Ms.
Johnson has served on the Company's Board of
Directors since 1990. Age 51.
Daniel P. Kearney............. Mr. Kearney, currently a financial consultant,
retired as Executive Vice President of Aetna
Inc. (insurance company) in February, 1998.
Prior to joining Aetna in 1991, he served as
President and Chief Executive Officer of the
Resolution Trust Corporation Oversight Board
from 1989 to 1991. From 1988 to 1989, Mr.
Kearney was a principal at Aldrich, Eastman &
Waltch, Inc., a pension fund advisor. Mr.
Kearney was a managing director at Salomon
Brothers Inc. (investment bank) in charge of
the mortgage finance and real estate finance
departments from 1977 to 1988. Mr. Kearney has
served on the Company's Board of Directors
since being elected at the 1992 Annual Meeting.
Age 59.
James A. Lebenthal............ Mr. Lebenthal has been Chairman of Lebenthal &
Co., Inc., a broker-dealer of municipal bonds,
since 1978. From 1986 to 1988, and from
April -- June 1995, Mr. Lebenthal was also
President of Lebenthal & Co., Inc. He is Vice
Chairman of the Rebuild America Coalition. Mr.
Lebenthal has been a director of the Company
since August of 1988. Age 70.
Pierre-Henri Richard.......... Mr. Richard has been Chairman and Chief
Executive Officer of the European banking group
DEXIA (banking and municipal finance) since
1996. He has been Chairman and Chief Executive
Officer of Credit Local de France since 1993,
having acted as Chairman of the executive board
of Credit Local de France from 1987 to 1993.
From 1983 to 1993, he was Deputy Directeur
General of the Caisse des Depots et
Consignations, in charge of municipal finance.
He serves as a director of the European
Investment Bank, Air France, Le Monde and the
Institut de l'Entreprise. Mr. Richard has been
a director of the Company since January of
1990. Age 58.
3
<PAGE> 7
John A. Rolls................. Mr. Rolls has been President and Chief
Executive Officer of Thermion Systems
International since 1996. From 1992 until 1996,
he was President and Chief Executive Officer of
Deutsche Bank North America. Prior to joining
Deutsche Bank in 1992, he served as Executive
Vice President and Chief Financial Officer of
United Technologies from 1986 to 1992. He is a
director of Bowater, Inc. and Arguss Holdings,
Inc. and a trustee of the Center for Technology
Commercialization -- NASA Northeast Region
Technology Transfer Center. Mr. Rolls joined
the Company's Board in 1995. Age 57.
Richard L. Weill.............. Mr. Weill is Vice Chairman of the Company and
President of MBIA Corp. From 1991 to 1994, he
served as Executive Vice President of the
Company and MBIA Corp., having served as
General Counsel and Secretary to both companies
from 1989 to 1991. Mr. Weill was formerly a
partner with the law firm of Kutak Rock, with
which he was associated from 1969 to 1989. He
joined the Company's Board in 1995 and also is
a director of MBIA Corp. Age 56.
4
<PAGE> 8
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended December 31, 1998, the Board of Directors of the
Company (the "Board") met five times. At year end, there were six Committees of
the Board, whose activities are discussed below.
The Executive Committee, which at year end consisted of Messrs. Brown,
Elliott (chairman), Kearney and Lebenthal, met once during 1998. The Executive
Committee is authorized, subject to limitations set forth in the By-Laws of the
Company, to exercise powers of the Board during intervals between Board
meetings.
The Finance Committee, which at year end consisted of Messrs. Brown, Clapp,
Rolls (chairman) and Weill, met twice during 1998. This Committee approves the
general investment policies and objectives of the Company and monitors
investment activities and portfolio holdings, including review of investment
performance and asset allocation.
The Risk Oversight Committee, which at year end consisted of Mr. Clapp, Ms.
Johnson, Messrs. Kearney (chairman) and Lebenthal, met twice during 1998. This
Committee monitors the underwriting process in order to assure general
compliance with underwriting guidelines and reviews significant changes in
general underwriting policy and guidelines which are proposed by management. It
also reviews proposals to develop new product lines which are outside the scope
of existing businesses.
The Compensation and Organization Committee, which at year end consisted of
Messrs. Brown (chairman), Clapp, Ms. Gaudiani and Mr. Kearney, met twice during
1998. This Committee reviews and approves overall policy with respect to
compensation matters. The Committee annually reviews the performance of the
Chairman, recommends to the Board the compensation to be paid to the Chairman
and approves the compensation to be paid to the officers reporting to the
Chairman. The Committee also reviews significant organizational changes and
executive succession planning. As of January 7, 1999, Mr. Brown resigned from
the Committee and Mr. Clapp assumed the position of chairman.
The Audit Committee, which at year end consisted of Mr. Gray, Ms. Johnson
(chairperson), Messrs. Lebenthal and Rolls, met three times during 1998. Its
functions include reviewing the Company's annual financial statements, meeting
with the Company's internal auditor concerning the adequacy of internal controls
and review of the surveillance of insured issues, and meeting with the Company's
independent certified public accountants and with financial and legal personnel
of the Company. It is also a function of the Committee to recommend to the Board
the appointment of the Company's independent auditors.
The Committee on Directors, which at year-end consisted of Mr. Elliott, Ms.
Gaudiani and Mr. Gray (chairman), met twice during 1998. This Committee makes
recommendations to the Board on Director nominees and on the size and
composition of the Board. It also recommends guidelines and criteria for the
selection of nominees.
The annual fee paid for the services of a director who is not an executive
officer of the Company was $26,000 in 1998 and the fee paid for attendance at
Board or Committee meetings was $2,000, with the non-employee chairman of a
committee receiving an additional $1,000. There is also an annual award of stock
units equivalent to $10,000 made to each non-employee Director as additional
compensation. Additionally, in late 1998, the Compensation and Organization
Committee approved an increase in the annual fee to $30,000 and an increase in
the annual award of stock units to $30,000. Directors who are also executive
officers of the Company receive no additional compensation for their services as
Directors. The Company has a Deferred Compensation and Stock Ownership Plan for
Non-Employee Directors. Pursuant to this plan, all non-employee Directors are
eligible to elect to defer all or a portion of their fees and to receive payment
of either their current fees or their deferred fees in cash or in shares of
Common Stock of the Company. As of year-end, eight of the non-employee Directors
elected to participate in this plan. All Directors attended at least 75% of the
meetings of the
5
<PAGE> 9
Board and of its Committees on which they served, except for John A. Rolls who
was recuperating from an injury during the first half of 1998.
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Organization Committee, at
year-end, were Joseph W. Brown, Jr. (chairman), David C. Clapp, Claire L.
Gaudiani and Daniel P. Kearney. Upon his appointment as CEO of the Company, Mr.
Brown resigned from the Committee on January 7, 1999. There are no members of
the Company's Compensation and Organization Committee who are current or former
employees of the Company.
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
ON EXECUTIVE COMPENSATION
TO: The MBIA Inc. Board of Directors
As part of its Charter, the MBIA Inc. Compensation and Organization
Committee (the "Committee") has, among its duties, the responsibility to
recommend to the Board the compensation, including bonus and the awarding of
stock options and other long-term incentives, to be paid to the Chairman and
Chief Executive Officer, and to review and approve the recommendations of the
Chairman and Chief Executive Officer as to the compensation, including bonuses
and the awarding of stock options and other long-term incentives, to be paid to
the executive officers reporting to the Chairman and Chief Executive Officer.
The Committee is composed entirely of independent outside directors who are
neither current nor former employees of the Company.
ELEMENTS OF COMPENSATION
The Company's compensation philosophy is to pay all employees, including
executive officers, for actual performance, based on level of responsibility, in
a manner which motivates such employees to perform at the highest possible level
and assures that the Company attracts and retains highly qualified employees in
its competitive marketplace. The Company achieves these objectives by using a
combination of both fixed (i.e., salary) and variable (i.e., annual bonus and,
when applicable, stock options and other long-term incentives) compensation. In
addition, the Committee reviews the compensation of the Company's executive
officers, comparing it to a group of the Company's primary competitors in the
financial guaranty industry.
ANNUAL COMPENSATION
Executive officer salaries are based on the job content of each position,
the market relative to comparable positions, the individual's relevant
experience and the actual performance of each executive. Salary changes are
based on changes in responsibilities, the individual's performance and
competitive market conditions. For purposes of comparability of salaries and
salary changes, the Committee considers the median figures for the Company's
primary competitors in the financial guaranty industry (note: none of MBIA's
competitors are included in any of the indices in the stock performance graph).
Individual bonuses reflect Company performance and the individual's personal
contribution to the achievement of the Company's goals and the contribution of
the operating units for which such individual is responsible. Bonus ranges are
established for each job position as a function of base salary, e.g., typically
the bonus range for the Chairman and Chief Executive Officer is 0%-200% of base
salary. The size of the Company bonus pool is approved at year-end by this
Committee based on its determination of the Company's absolute and relative
performance. The performance factors considered are return on equity, earnings
per share, adjusted book value per share, the relative performance of peer group
companies and the achievement of the Company's business plan goals. In 1998,
each of these performance goals were substantially met or exceeded and
individual bonuses were made from a pool that the Committee approved which
aggregated $36.0 million. In addition, the
6
<PAGE> 10
Committee continued its practice of awarding executive officers with restricted
shares of the Company's Common Stock in lieu of a portion of their bonus.
Executive officer salary changes and bonuses are based on the Company's
performance in certain areas, including return on equity, earnings per share,
adjusted book value per share, performance relative to the Company's peer group,
success in reaching the business plan and strategic goals set for each division,
expense management and employee development and the individual officer's
personal contribution to the achievement of these goals. The weight and effect
of any of these factors on the compensation of each executive officer varies
depending on the individual responsibility of such officer.
The Chairman and Chief Executive Officer's salary and bonus are a function
of how the Company performed in the following areas: return on equity; earnings
per share; adjusted book value per share; relative performance to peer group
companies (the "Financial Goals"); and achievement of the Company's business
plan goals. For the Chairman and Chief Executive Officer, the Committee gave 50%
weight to the Financial Goals and 50% weight to the Company's business plan
goals. The Company achieved a 13.4% return on equity (excluding certain one time
charges) while earnings per share were up 17% over the previous year and the
adjusted book value per share was $53.28, an increase of 11% over 1997. The
Company's business plan goals were substantially met, including maintaining
capital adequacy, increasing the Company's international presence, beginning
cross-marketing of the Company's products and services and increasing the
effective use of information technology. In addition, the Chairman and Chief
Executive Officer oversaw the successful mergers of CapMAC Holdings Inc. and
1838 Investment Advisors, Inc. with the Company during 1998. Based on this
performance, the Committee awarded the Chairman and Chief Executive Officer a
bonus of $750,000 in cash, and a restricted stock award equivalent to $666,697,
compared to a 1997 bonus of $450,000 in cash, and a restricted stock award
equivalent to $600,025 and increased his salary to $700,000, effective January
1, 1999.
LONG-TERM INCENTIVES
The Company's Long-Term Incentive Plan (the "Plan") is designed to align
the interests of higher level employees with those of shareholders. The Plan
authorizes both the annual granting of stock options as well as the payment of
compensation in the form of cash or stock at the end of a multi-year cycle based
on the Company attaining certain performance goals. Awards under the Plan are
divided equally, with 50% of the award given in stock options and 50% of the
award to be paid in cash or shares of Company stock.
The payment of the cash/stock award, since 1996, is made upon the
achievement of a specified level of growth in adjusted book value per share
("ABV") of the Company's stock. The ABV portion of the Plan awarded in 1998 has
a base line growth of 12%. Under the 1998 award, a minimum growth of 8% is
necessary to receive any award and 18% growth would result in a maximum award of
200% of target level being granted.
The stock option grants provide the right to purchase shares of common
stock at the fair market value (closing price) of the stock on the date of the
grant. Each option vests over five years and has a ten-year term. Because the
grants are based on an annual formula, prior option grants are not taken into
account in determining the number of options granted in any year. In December
1998, based on the above formula, 525,430 options were awarded.
Target levels for the Plan are a percentage of total salary and bonus based
upon an individual's position. The awards under the Plan are typically granted
from the Vice-President position up to and including the Chairman and Chief
Executive Officer.
7
<PAGE> 11
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Based on currently prevailing authority, including proposed Treasury
regulations issued in December 1995, and in consultation with outside tax and
legal experts, the Committee has determined that it is unlikely that the Company
would pay any amounts in 1998 that would result in the loss of a federal income
tax deduction under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
Respectfully submitted,
MBIA Inc. Compensation and
Organization Committee
Joseph W. Brown, Jr., Chairman
David C. Clapp
Claire L. Gaudiani
Daniel P. Kearney
The Company has entered into a retirement agreement with Mr. Elliott
whereby Mr. Elliott has agreed to provide the Company with consulting services
for two years following his retirement. For such services, Mr. Elliott will be
paid each year an amount equal to his annual base salary as in effect on January
1, 1999. For each of 1999 and 2000, Mr. Elliott will also receive a cash
performance bonus to be determined by the Compensation and Organization
Committee, but which (subject to the applicable performance criteria being
satisfied) will not be less than the bonus payable to him in respect to his 1998
services. Such fees are in addition to any amounts otherwise payable to Mr.
Elliott for his continuing service as a member of the Board.
In addition, under his retirement agreement, the Company has agreed to
permit Mr. Elliott's existing equity and incentive compensation awards to
generally continue to vest or be deemed earned at the same time (and in respect
to the same number of shares or amounts) as they would have vested or become
payable or exercisable had he continued in the Company's employ. Additionally,
if the Company's stock trades at $90 per share for a period of at least ten
consecutive trading days, Mr. Elliott's outstanding stock options will
immediately become exercisable for a period of two years and lapse thereafter.
In consideration of these benefits, Mr. Elliott has agreed that, during the
period during which he is providing consulting services, he will not compete
with the Company, will not hire its employees, will not otherwise interfere with
the relationship between the Company and any of its employees and will not
direct business away from the Company.
In early 1999, the Company entered into key employee protection agreements
with certain of its executive officers, including Messrs. Weill, Caouette,
Dunton and Budnick. Under these agreements, the executive officers would be
entitled to severance benefits upon the occurrence of both a change in control
and an involuntary or constructive termination. These benefits include a
pro-rated annual bonus and adjusted book value award, severance equal to three
times the sum of base salary and average annual bonus, full exercisability of
stock options, full vesting of restricted stock and continued health, life and
pension benefits.
8
<PAGE> 12
MBIA INC.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ----------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME & COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (A)($) OPTIONS(B)(#) (C)($)
- ------------------ ---- --------- -------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Elliott(d).......... 1998 $600,000 $750,000 $11,636 $666,697 100,000 $369,391
Chairman and Chief 1997 575,000 450,000 11,636 600,025 23,500 308,194
Executive Officer 1996 525,000 325,000 13,098 325,000 50,000 230,703
Richard L. Weill............. 1998 500,000 400,000 14,938 366,690 13,600 228,804
Vice Chairman 1997 360,000 275,000 9,583 366,639 14,270 183,460
1996 350,000 245,000 9,376 135,000 24,680 139,156
John B. Caouette............. 1998 450,000 400,000 4,715 333,349 13,310 219,215
President, Structured 1997 450,000 700,000 4,715 0 25,713 176,179
Finance Division 1996 400,000 550,000 4,476 0 53,296 150,159
Gary C. Dunton............... 1998 462,000 300,000 6,399 683,342(e) 66,000(f) 201,175
President, Public Finance & 1997 0 0 0 0 0 0
Investment Management and 1996 0 0 0 0 0 0
Financial Services Divisions
Neil G. Budnick.............. 1998 350,000 250,000 6,668 166,642 12,780 128,503
Chief Financial Officer 1997 250,000 240,000 2,616 100,004 9,040 92,534
and Treasurer 1996 197,500 165,000 1,644 60,000 13,880 66,783
</TABLE>
- ---------------
(a) Represents a portion of the annual bonus awarded to Messrs. Elliott, Weill,
Caouette, Dunton and Budnick paid in 10,458, 5,752, 5,229, 3,660 and 2,614
shares of restricted stock, respectively. The shares were valued at the
closing price on December 9, 1998 -- the date of the award. The aggregate
number (i) and value (ii) of the restricted stock holdings at year-end was
as follows: Elliott -- (i) 26,186 and (ii) $1,591,722; Weill -- (i) 14,114
and (ii) $868,329; Caouette -- (i) 5,229 and (ii) $333,349; Dunton -- (i)
10,637 and (ii) $683,342 and Budnick -- (i) 5,350 and (ii) $326,647.
Dividends are paid on the restricted stock at the same rate payable to all
common shareholders and thus are not reflected in the amounts reported.
(b) The 1996 options have been adjusted to reflect a two-for-one stock split,
effected in the form of 100% stock dividend payable on October 29, 1997 to
shareholders of record as of October 1, 1997.
(c) Consists of (i) contributions to the Company's money purchase pension plan
and 401(k) plan, and (ii) premiums paid on behalf of such employees under a
split-dollar life insurance policy. Such amounts in 1998 were as follows:
Elliott -- (i) $302,505 and (ii) $66,886; Weill -- (i) $190,004 and (ii)
$38,800; Caouette -- (i) $193,615 and (ii) $25,600; Dunton -- (i) $182,634
and (ii) $18,541 and Budnick -- (i) $114,996 and (ii) $13,507.
(d) Mr. Elliott retired as Chief Executive Officer effective January 7, 1999.
(e) Includes 6,977 shares of restricted stock (value of $450,017) which were
awarded to Mr. Dunton on January 9, 1998 when he joined the Company.
(f) Includes 50,000 options which were awarded to Mr. Dunton on January 9, 1998
when he joined the Company.
9
<PAGE> 13
MBIA INC.
II. OPTION GRANTS IN 1998
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE FAIR VALUE
UNDERLYING GRANTED TO PRICE OF OPTION
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION AWARD ON
NAME GRANTED(A)(#) 1998 ($/SH) DATE GRANT DATE(B)
- ---- -------------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
David H. Elliott................... 100,000 17% $63.7500 2008 $1,813,800
Richard L. Weill................... 13,600 2% $63.7500 2008 $ 246,677
John B. Caouette................... 13,310 2% $63.7500 2008 $ 241,417
Gary C. Dunton(c).................. 66,000 11% $64.3200 2008 $1,207,778
Neil G. Budnick.................... 12,780 2% $63.7500 2008 $ 231,804
</TABLE>
- ---------------
(a) The options were granted at an exercise price equal to the closing price of
the stock on the date
of the grant, have a ten-year term and vest as follows: year 1 -- 0%; year
2 -- 40%; year 3 -- 60%; year 4 -- 80%; year 5 -- 100% (subject to certain
acceleration provisions if there occurs a change in control of the Company
or upon the death, disability or retirement of the employee).
(b) The fair value is based upon the Black-Scholes option valuation model.
Black-Scholes is a mathematical model used to estimate the theoretical price
an individual would pay for a traded option. The actual value an executive
may realize will depend on the excess of the stock price over the exercise
price. There is no assurance the value realized will be at or near the value
estimated by Black-Scholes. This model used the grant date of December 9,
1998. The fair value of the options granted on that date is $18.138 per
option based on: (1) an exercise price of $63.75, (2) an option term of 5.86
years, (3) a future dividend yield of 1.254%, (4) a risk-free interest rate
of 4.63% and (5) an estimated stock price volatility of 0.2392.
(c) The option grants to Mr. Dunton include 50,000 options which were awarded on
January 9, 1998 when he joined the Company. The exercise price is $64.50 per
share; the value as estimated by Black-Scholes is $18.3514 per share; and
the fair value of these options on the grant date was $917,570.
MBIA INC.
III. AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998(#) DECEMBER 31, 1998(B)($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED(A)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Elliott...... 74,748 $3,713,204 232,004 178,804 $8,619,162 $1,567,493
Richard L. Weill...... 0 0 194,772 61,478 7,812,035 928,901
John B. Caouette...... 0 0 145,892 85,891 5,251,648 277,867
Gary C. Dunton........ 0 0 0 66,000 0 82,125
Neil G. Budnick....... 0 0 29,960 36,380 911,319 378,817
</TABLE>
- ---------------
(a) The "Value Realized" is equal to the fair market value on the date of
exercise, less the exercise price, times the number of shares acquired.
(b) These values are based on $65.5625 per share, the fair market value of the
shares underlying the options on December 31, 1998, less the exercise price,
times the number of options.
10
<PAGE> 14
MBIA INC.
IV. LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
PERIOD UNTIL
NAME PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
David H. Elliott.......................... Three years 0 $1,622,500 $3,245,000
Richard L. Weill.......................... Three years 0 661,000 1,322,000
John B. Caouette.......................... Three years 0 647,000 1,294,000
Gary C. Dunton............................ Three years 0 777,500 1,555,000
Neil G. Budnick........................... Three years 0 621,000 1,242,000
</TABLE>
- ---------------
(a) The awards were made in December of 1998, with the payout, if any, occurring
in early 2002. The target award is based on a projected 12% growth in the
adjusted book value per share of the Company's stock, subject to the
threshold and maximum levels.
[Total Return Graph]
<TABLE>
<CAPTION>
MBIA INC COMMON STOCK S&P 500 INDEX S&P FINANCIAL INDEX
--------------------- ------------- -------------------
<S> <C> <C> <C>
'1993' 100 100 100
'1994' 91 101 96
'1995' 124 139 148
'1996' 170 171 201
'1997' 228 228 297
'1998' 226 294 331
</TABLE>
11
<PAGE> 15
PROPOSAL 2:
SELECTION OF INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP currently serve as the Company's independent
auditors. They have served in that capacity since the Company's founding in
1986, and prior to that served as the independent auditors of the Company's
predecessor, the Municipal Bond Insurance Association, starting in 1974. During
1998, PricewaterhouseCoopers LLP examined the accounts of the Company and its
subsidiaries and also provided other services to the Company in connection with
Securities and Exchange Commission filings.
Upon recommendation of the Audit Committee, the Board has appointed
PricewaterhouseCoopers LLP as the independent auditors of the Company for 1999.
The shareholders are asked to approve this action of the Board.
It is anticipated that one or more representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting with an
opportunity to make a statement, if desired, and will be available to answer
appropriate questions from shareholders present.
OTHER MATTERS
The Board knows of no other business to be brought before the meeting other
than as set forth above. If any other business should properly come before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
card to vote such proxies in accordance with their best judgment of such
matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below contains certain information with respect to the only
beneficial owners known to the Company as of March 25, 1999 of more than 5% of
the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF
COMMON
NAME AND ADDRESS STOCK BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
- ------------------- ------------------ --------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc.(1)........................ 5,834,493 5.9%
767 Fifth Avenue
New York, NY 10153
</TABLE>
- ---------------
(1) Information as to the beneficial ownership of shares of Common Stock is
based on the February 5, 1999 Schedule 13G filed by Sanford C. Bernstein &
Co., Inc. with the SEC. Such filing indicates that Bernstein has sole voting
power with respect to 3,323,968 of these shares and sole dispositive power
with respect to 5,834,493.
12
<PAGE> 16
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 25, 1999, the beneficial
ownership of shares of Common Stock of each Director, each Executive Officer
named in the Summary Compensation Table above, and all Directors and Executive
Officers of the Company, as a group.
<TABLE>
<CAPTION>
SHARES TOTAL
SHARES ACQUIRABLE SHARES
BENEFICIALLY UPON EXERCISE BENEFICIALLY
NAME OWNED OF OPTIONS(2) OWNED(3)
- ---- ------------ ------------- ------------
<S> <C> <C> <C>
Directors
Joseph W. Brown, Jr.(4)..................... 208,864 -- 208,864
David C. Clapp(4)........................... 6,698 -- 6,698
David H. Elliott............................ 80,716(1) 240,004 320,720
Claire L. Gaudiani(4)....................... 4,773 -- 4,773
William H. Gray, III(4)..................... 2,478 -- 2,478
Freda S. Johnson(4)......................... 10,300 -- 10,300
Daniel P. Kearney(4)........................ 7,702 -- 7,702
James A. Lebenthal(4)....................... 9,903 -- 9,903
Pierre-Henri Richard(4)..................... 961 -- 961
John A. Rolls(4)............................ 5,964 -- 5,964
Richard L. Weill............................ 34,325(1) 200,772 235,097
Executive Officers
John B. Caouette............................ 40,850 145,892 186,742
Gary C. Dunton.............................. 23,885(1) -- 23,885
Neil G. Budnick............................. 10,796(1) 31,840 42,636
All of the above and other Executive
Officers as a group...................... 468,897(1) 639,645 1,108,542
</TABLE>
- ---------------
(1) This number includes shares held by the Executive Officers under the
Company's exempt 401(k) Plan and includes restricted shares awarded annually
to certain of the Executive Officers.
(2) This column indicates the number of shares that are presently exercisable or
will become exercisable on or before May 31, 1999 under the Company's stock
option program.
(3) The percentage of shares of Common Stock beneficially owned by all Directors
and Executive Officers as a group is 1.2% of the shares of Common Stock
outstanding.
(4) This number includes (a) Common Stock equivalent deferral units held under
the Company's Deferred Compensation and Stock Ownership Plan for
Non-Employee Directors and (b) Common Stock units awarded under the
restricted stock compensation plan. (See the discussion of these plans under
"The Board of Directors and its Committees").
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Company's stock by executive officers
and Directors of the Company are required to be reported to the Securities and
Exchange Commission pursuant to Section 16 of the Securities Exchange Act of
1934. To the Company's knowledge all such required filings were made on a timely
basis.
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMPIRE STATE MUNICIPAL EXEMPT TRUSTS, GUARANTEED SERIES
MBIA Corp. insures municipal bonds held by certain of the Guaranteed Series
of Empire State Municipal Exempt Trusts. One of the co-sponsors of the
Guaranteed Series of Empire State Municipal Exempt Trusts is Lebenthal & Co.,
Inc., the chairman of which is James A. Lebenthal, a director of the Company.
The Company believes the terms of the insurance policies and the premiums
charged are no less favorable to MBIA Corp. than the terms and premium levels
for other similar unit investment trusts.
EXECUTIVE LOANS
CapMAC Holdings, Inc., which the Company acquired in February of 1998, had
an executive loan program. Under that program, John B. Caouette, former CEO of
CapMAC Holdings, has a $500,000 loan outstanding, with a 5-year term and an
interest rate of 6.75%, which is the rate that CapMAC Holdings could have
invested its fund at April 24, 1996, the date the loan was made.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 2000 Annual Meeting of Shareholders must be
received at the principal executive offices of the Company, 113 King Street,
Armonk, New York 10504, no later than November 19, 1999, in order to be
considered for inclusion in the Company's Proxy Statement for such Meeting.
MISCELLANEOUS
The cost of preparing and mailing this notice and statement and the
enclosed form of proxy will be borne by the Company. In addition to solicitation
by mail, proxies may be solicited in person or by telephone or telegraph by
directors, officers and regular employees of the Company, without extra
compensation and at the Company's expense. The Company will also request bankers
and brokers to solicit proxies from their customers, where appropriate, and will
reimburse them for reasonable expenses. In addition, the Company has engaged
MacKenzie Partners, New York, New York to assist in soliciting proxies for a fee
of approximately $6,000 plus reasonable out-of-pocket expenses.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE ON REQUEST BY WRITING TO THE CORPORATE
MARKETING DEPARTMENT, MBIA INC., 113 KING STREET, ARMONK, NEW YORK 10504.
By order of the Board of Directors,
/s/ Louis G. Lenzi
Louis G. Lenzi
Secretary
14
<PAGE> 18
MBIA INC.
ANNUAL MEETING OF SHAREHOLDERS--THURSDAY, MAY 13, 1999
THE PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF MBIA INC.
The undersigned hereby appoints James A. Lebenthal and Freda S. Johnson and each
of them, the proxies and agents of the undersigned, each with power of
substitution, to vote all shares of Common Stock of MBIA INC. (the "Company"),
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held at MBIA INC., 113 King Street, Armonk, New York, on
Thursday, May 13,1999, at 10:00 A.M., New York time, and at any adjournment
thereof, with all the powers which the undersigned would possess if personally
present, hereby revoking any prior proxy to vote at such meeting and hereby
ratifying and confirming all that said proxies and agents or their substitutes
or any of them may lawfully do by virtue hereof, upon the following matters, as
described in the MBIA INC. Proxy Statement, receipt of which is hereby
acknowledged, and in their discretion, upon such other business as may properly
come before the meeting or any adjournment thereof.
Election of Directors, Nominees: Joseph W. Brown, Jr., David C. Clapp, Gary C.
Dunton, David H. Elliott, Claire L. Gaudiani, William H. Gray, Ill, Freda S.
Johnson, Daniel P. Kearney, James A. Lebenthal, Pierre H. Richard, John A. Rolls
and Richard L. Weill.
(Continued and to be signed on reverse side)
- FOLD AND DETACH HERE -
<PAGE> 19
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR ITEM 2.
Please mark your votes as indicated in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
FOR WITHHOLD
ALL AUTHORITY FOR
NOMINEES ALL NOMINEES
/ / / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
2. APPROVAL OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE DATE
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
- FOLD AND DETACH HERE -
MBIA INC.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 13, 1999
10:00 A.M.
Corporate Headquarters
MBIA INC.
113 King Street
Armonk, New York 10504
