Exhibit h.21
First Amendment to
Financial Guaranty Agreement
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EXECUTION COPY
FIRST AMENDMENT TO FINANCIAL GUARANTY AGREEMENT
FIRST AMENDMENT, dated as of December 17, 1999 (the "Amendment"), to
the Financial Guaranty Agreement, dated as of August 6, 1999 (the "Agreement"),
among MBIA INSURANCE CORPORATION (the "Insurer"), AELTUS INVESTMENT MANAGEMENT,
INC. ("Aeltus") and AETNA SERIES FUND, INC. (the "Fund").
W I T N E S S E T H:
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WHEREAS, Aeltus and the Fund have requested, and, upon this Amendment
becoming effective, the Insurer has agreed, that certain provisions of the
Agreement be amended in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. All capitalized terms defined in the
Agreement and used herein shall have the meanings given to them therein.
2. Amendments to Section 1.1 of the Agreement. Section 1.1 of
the Agreement is hereby amended by (a) deleting therefrom the definitions of the
following defined terms in their respective entireties and substituting in lieu
thereof the following definitions:
"'Asset Reallocation' shall mean, with respect to any PPF, (i)
the sale of Index Equities or Index Futures held by such PPF and the
reinvestment of all or a portion of the proceeds therefrom in Fixed
Income Securities or (ii) the sale of Fixed Income Securities held by
such PPF and the reinvestment of all or a portion of the proceeds
therefrom in Index Equities or Index Futures.
'Market Value' shall mean on any date of determination:
(i) with respect to any Index Equity held by a PPF,
the product of (A) the price per share of such Index Equity at
the close of trading on such date, as published in Reuters
America or in a Substitute Valuation Source, times the number
of shares of such Index Equity held by such PPF;
(ii) with respect to any Corporate Bond held by a
PPF, the market value thereof at the close of trading on such
date obtained from the Merrill Lynch Pricing Product or a
Substitute Valuation Source plus the aggregate amount of
accrued and unpaid interest thereon as of such date;
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(iii) with respect to Cash Equivalents held by a PPF
having a maturity date 60 days or less from such date, the
value of such security determined in accordance with the
"amortized cost" method of valuation which method values an
instrument at its cost and assumes a constant amortization of
premium or discount;
(iv) with respect to Cash Equivalents held by a PPF
having a maturity date more than 60 days from such date, the
market value thereof at the close of trading on such date
obtained from the Thompson Financial Securities Management
Service or a Substitute Valuation Source plus the aggregate
amount of accrued and unpaid interest thereon as of such date;
(v) with respect to any Index Future held by a PPF,
the product of (A) 500 (or such other index dollar multiplier
designated by the Chicago Mercantile Exchange as being in
effect on such date) times (B) the price of such Index Future
at the close of trading on such date, as published in Reuters
America or a Substitute Valuation Source, times (C) the number
of such Index Futures held by such PPF;
(vi) with respect to the U.S. Treasury Futures held
by a PPF, the aggregate Cash Margin with respect to such U.S.
Treasury Futures;
(vii) with respect to any U.S. Treasury Zero or U.S.
Agency Zero held by a PPF, the market value thereof at the
close of trading on such date obtained from the Merrill Lynch
Pricing Product or a Substitute Valuation Source; and
(viii) with respect to any U.S. Treasury Note or U.S.
Agency Note held by a PPF, the market value thereof at the
close of trading on such date obtained from the Merrill Lynch
Pricing Product or a Substitute Valuation Source plus the
aggregate amount of accrued and unpaid interest thereon as of
such date;
provided, however, that if on any date of determination the price or
value of any investment held by a PPF is not determinable as set forth
above, the Market Value thereof shall be determined on such date in
such manner as is determined in good faith by, or under the authority
of, the Board of Directors of the Fund.
'Modified Duration' shall mean, with respect to any Corporate
Bond, U.S. Treasury Note, U.S. Treasury Zero, U.S. Agency Note, U.S.
Agency Zero or U.S. Treasury Future on any Valuation Date, the quotient
of (a) the weighted average term to maturity of the cash flows
generated by such security (or, in the case of a U.S. Treasury Future,
by the Cheapest-to-Deliver Bond with respect to such U.S. Treasury
Future on such Valuation Date) divided by (b) the sum of (i) one plus
(ii) the quotient of (x) the yield to maturity of such security (or, in
the case of a U.S. Treasury Future, of the Cheapest-to-Deliver Bond
with respect to such U.S. Treasury Future) divided by (y) the number of
interest payments on such security per year (or, in the case of a U.S.
Treasury Future, on the Cheapest-to-Deliver Bond with respect to such
U.S. Treasury Future). For the purposes of this calculation, the number
of interest payments on any U.S. Treasury Zero is assumed to be two per
year.
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'Portfolio Duration' shall mean, with respect to more than one
type of Fixed Income Securities held by any PPF on any Valuation Date,
an amount equal to the average of the Modified Duration of each such
Fixed Income Security, weighted on the basis of the Market Values
thereof, calculated using the Lehman Brothers Analytics Model or a
Substitute Valuation Source, as of the close of business on such
Valuation Date.
'Total Net Assets' shall mean, with respect to any PPF, on any
Valuation Date, an amount equal to the excess of (a) the sum of:
(i) the aggregate Market Value of all Index
Equities held by such PPF on such Valuation
Date;
(ii) the aggregate Market Value of all Cash
Equivalents held by such PPF (less Cash
Associated with Futures and Cash Margin with
respect to such PPF) on such Valuation Date;
(iii) the aggregate Market Value of all U.S. Treasury
Zeroes and U.S. Agency Zeroes held by such PPF
on such Valuation Date;
(iv) the aggregate Market Value of all Corporate
Bonds held by such PPF on such Valuation Date;
(v) the Market Value of all U.S. Treasury Futures
held by such PPF;
(vi) the Market Value of all U.S. Treasury Notes and
U.S. Agency Notes held by such PPF;
(vii) the aggregate Market Value of all Index Futures
held by such PPF on such Valuation Date;
(viii)to the extent not included in the Market Value
of the Equity Portfolio, Fixed Income Portfolio
or the Cash Equivalents of such PPF, an amount
equal to the aggregate amount of interest and
dividend receivables and receivables for
securities sold payable to such PPF;
(ix) an amount equal to the aggregate amount payable
to such PPF on such Valuation Date on account
of a decrease in the margin requirements with
respect to the U.S. Treasury Futures held by
such PPF; and
(x) an amount equal to the aggregate amount payable
to such PPF by the Investment Adviser with
respect to such PPF pursuant to the Investment
Advisory Agreement with respect to such PPF on
account of expenses incurred by such PPF that
are subject to reimbursement by such Investment
Adviser;
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over (b) an amount equal to the aggregate amount of the liabilities
allocated to such PPF, including all amounts payable by such PPF in
respect of securities purchased,"; and
(b) adding the following new defined terms to Section 1.1 in
alphabetical order:
"'Fixed Income Security' shall mean any investment of a PPF
which is an Eligible PPF Investment defined in Section 3.1(b)(ii),
(iii) or (iv).
'U.S. Agency Notes' shall mean non-callable interest bearing
general obligations of any one of the following agencies of the Federal
Government of the United States of America: Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Federal Home Loan
Bank, Resolution Funding Corporation, Financing Corporation and
Tennessee Valley Authority; provided, however, that any such
obligations that are rated less than AAA by S&P or less than Aaa by
Moody's shall not be U.S. Agency Notes.
'U.S. Treasury Notes' shall mean non-callable interest bearing
general obligations of the United States Treasury backed by the full
faith and credit of the United States of America."
3. Amendment to Section 2.1. Section 2.1 is hereby amended by
deleting "$250,000,000" from the first sentence thereof and inserting
"$500,000,000" in lieu thereof.
4. Amendments to Section 3.1. Paragraph (b) of Section 3.1 is
hereby amended by (a) deleting clause (ii) therefrom and inserting in lieu
thereof the following clause (ii):
"(ii) U.S. Treasury Notes, U.S. Treasury Zeroes, U.S. Agency
Notes or U.S. Agency Zeroes,"; and
(b) deleting clause (iii) therefrom and inserting in lieu
thereof the following clause (iii):
"(iii) Non-callable interest bearing debt obligations of a
corporation having a rating of at least AA- by S&P or Aa3 by Moody's;
provided that if both Moody's and S&P have issued a rating thereon,
such rating shall be no less than AA-/Aa3 ("Corporate Bonds")".
5. Amendments to Section 3.2. Section 3.2 is hereby amended by
(a) inserting the words ", U.S. Treasury Notes and U.S. Agency Notes" after the
words "Corporate Bonds" in paragraph (f) thereof; (b) deleting clause (g)
therefrom and inserting in lieu thereof the following paragraph (g):
"(g) U.S. Treasury Futures shall be acquired or sold by a PPF
only in order to shorten or lengthen the Portfolio Duration with
respect to the Corporate Bonds, U.S. Treasury Notes and U.S. Agency
Notes held by such PPF;";
(c) deleting clause (h) therefrom and inserting in lieu
thereof the following paragraph (h):
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"(h) on any Valuation Date, the Portfolio Duration with
respect to the Corporate Bonds, the U.S. Treasury Notes, the U.S.
Treasury Zeroes, the U.S. Agency Notes, the U.S. Agency Zeroes and U.S.
Treasury Futures held by such PPF shall not be greater than the
Theoretical Zero Modified Duration with respect to such PPF nor less
than the Theoretical Zero Modified Duration with respect to such PPF
minus 0.25;";
(d) deleting the parenthetical "(excluding U.S. Treasury
Futures)" from paragraph (k) thereof; (e) deleting the word "and" at
the end of paragraph (k) thereof; (f) deleting the period at the end of
paragraph (l) thereof and inserting a semi-colon in lieu thereof; and
(g) adding the following new paragraphs (m) and (n) thereto:
"(m) all U.S. Treasury Zeroes or U.S. Agency Zeroes held by
such PPF shall mature on, or within the 90 days preceding, the Maturity
Date with respect to such PPF; and
(n) all Corporate Bonds, U.S. Treasury Notes and U.S. Agency
Notes held by such PPF shall mature within the three years preceding or
the three years following the Maturity Date with respect to such PPF."
6. Amendments to Section 3.5. Section 3.5 is hereby amended by
(a) inserting the words "U.S. Treasury Notes, U.S. Agency Notes," after the
words "of all" in clause (iii) of paragraph (a) thereof; (b) inserting the words
", U.S. Treasury Notes, U.S. Agency Notes" after the words "U.S. Treasury
Zeroes, U.S. Agency Zeroes" in paragraph (a) thereof; and (c) inserting the
words ", U.S. Treasury Notes, U.S. Agency Notes" after the words "U.S. Treasury
Zeroes" in paragraph (d) thereof..
7. Conditions to Effectiveness. This Amendment shall become
effective on the date on which the Insurer, Aeltus and the Fund shall have
executed and delivered this Amendment.
8. No Other Amendments; Confirmation. Except as expressly
amended, modified and supplemented hereby, the provisions of the Agreement are
and shall remain in full force and effect.
9. Governing Law; Counterparts. (a) This Amendment and the
rights and obligations of the parties hereto shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
(b) This Amendment may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
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IN WITNESS WHEREOF, each of the undersigned have caused this Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
MBIA INSURANCE CORPORATION
/s/ Lisa A. Wilson
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By: Lisa A. Wilson
Title: Assistant Secretary
AELTUS INVESTMENT MANAGEMENT, INC.
/s/ Neil Kochen
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By: Neil Kochen
Title: Managing Director
AETNA SERIES FUND, INC.
/s/ Amy R. Doberman
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By: Amy R. Doberman
Title: Vice President
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