Exhibit 10.06

Amended and Restated Reinsurance Agreement

          This Amended and Restated Reinsurance Agreement (this “Agreement”)
dated as of the 1st day of January, 2002, between MBIA Assurance S.A., a
corporation existing under the laws of the Republic of France (hereinafter
referred to as the “Ceding Company”) and MBIA Insurance Corporation, a New York
stock insurance company (hereinafter referred to as the “Reinsurer”).

W I T N E S S E T H:

          WHEREAS, the Ceding Company is a French corporation; and

          WHEREAS, the Ceding Company writes financial guaranty insurance as
permitted under French law;

          WHEREAS, the Ceding Company and the Reinsurer are Parties to a
Reinsurance Agreement dated the 1st day of January, 1993 (the “Agreement”)
whereby the Reinsurer  provides reinsurance on an aggregate excess of loss basis
for financial guaranty insurance as defined in Section 6901 of the New York
Insurance Law written by the Ceding Company; and

          WHEREAS the Ceding Company has represented that there have been no
paid losses for calendar years 1993 through 2001 which would be covered under
the Agreement and that there have been no incurred losses during that period;
and

          WHEREAS, the parties desire to amend and restate the Agreement to make
it applicable on an incurred loss basis and to increase the limit of coverage
thereunder.

          NOW, THEREFORE, in consideration of the mutual covenants and
understandings contained herein and upon the terms and conditions set forth
below, the parties hereto agree that the Agreement as heretofore amended is
amended and restated to read as follows:

Article  1

Cover:

          1.1.     The Reinsurer agrees to reimburse the Ceding Company, on an
excess of loss basis for amounts of losses incurred in each calendar year period
this Agreement is in effect for the net retained insurance liability of the
Ceding Company under the Ceding Company’s policies in force at 12:01 A.M. on
January 1, 2002 and under new policies becoming effective at and after said time
and date including extra contractual obligations relating thereto (but
excluding, however, liability arising from punitive damages assessed as a result
of bad faith, fraud or negligence).

Article  2

Covered Business:

          2.1.     Covered Business shall mean all of the Ceding Company’s gross
liability on financial guarantee business written by the Ceding Company as
defined in Section 6901 of the New York Insurance Law.  The Ceding Company’s net
retention is the remaining portion of the Ceding Company’s gross liability on
each policy reinsured hereunder after deducting all cessions to facultative
and/or other reinsurances and/or risk assumptions which inure to the benefit of
Ceding Company.  The term “policy” or “policies” shall mean the Ceding Company’s
policies and endorsements providing coverage of financial guarantee exposures.

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Article  3

Limits of Cover:

          3.1.     The Reinsurer shall reimburse the Ceding Company for the
amount of the Ceding Company’s losses, including loss adjustment expenses,
incurred in each calendar year which amount is in the aggregate excess of an
amount equal to the greater of: (1) $500,000; or (2) 40% of the Ceding Company’s
net earned premium income for that same calendar year.  However, the liability
of the Reinsurer shall not exceed, in any one calendar year, the Ceding
Company’s net retention (as defined above) with respect to the principal
outstanding plus interest insured under the Ceding Company’s largest policy in
effect as of 11:59 p.m. on December 31 of the prior year.

Article  4

Definitions:

          4.1.     As used in this Agreement:

 

          (a)     Ceded Reserves” shall mean, as of any date, the aggregate of
the unearned premium reserve and the loss reserve, if any, required to be
carried by the Ceding Company for the liabilities ceded hereunder in accordance
with statutory accounting practices, before giving effect to any reserve credit
for the cession made hereby.

 

 

 

          (b)     “Contingency Reserve” shall mean contingency reserve as
defined in Section 6903(a) of the New York Insurance Law.

Article  5

Period:

          5.1.     This Agreement shall be effective as of 12:01 A. M., Eastern
Standard Time in the United States, on January 1, 2002 (the “Effective Time”). 
This Agreement may be terminated by Agreement of either of the parties hereto
upon three (3) months prior written notice to the other party specifying the
proposed termination date; provided however, that this Agreement will not
terminate earlier than three (3) months after the date of receipt of the
termination notice described above by the nonterminating party and provided
further that this Agreement will remain in full force and effect with respect to
all policies relating to Covered Business in effect at the date of Termination
until the expiration or cancellation of each such Policy.

Article  6

Premium:

          6.1.     There are two premiums payable to the Reinsurer under this
Agreement.  An annual premium equal to the lesser of40% of net written premium,
or  $1,000,000 shall be paid to Reinsurer in four equal quarterly installments
in arrears, i.e., at April 1, July 1, October 1 and December 31, for each
calendar year this Agreement remains in effect.  As soon as practicable after
each 12 month period that this Agreement is in effect, the Ceding Company shall
furnish to the Reinsurer a statement of the net earned premium income of the
Ceding Company for the same period, and an additional reinsurance premium shall
be payable at a rate of 0.5% of net earned premium income.  There shall be no
annual minimum premium for this Agreement.

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Reinsurance Accounts:

          6.2.     Within 20 days following the end of each quarter, the Ceding
Company will render or cause to be rendered a net account to the Reinsurer for
the quarter showing the Ceding Company’s interest in the following:

 

          (a)     net written premium accounted for during the calendar quarter
(being the gross written premium less cancellations).

 

 

 

          (b)     any loss or loss expense paid during the calendar quarter on
losses occurring during the term of this Agreement.

 

 

 

          (c)     subrogations, salvage or other recoveries made during the
calendar quarter on losses occurring during the term of the Agreement.

          6.3.     Within 15 days after receipt of the account, the Reinsurer
shall send confirmation of the account or relevant objections to the Ceding
Company.

          6.4.     Within 30 days following the end of each calendar quarter,
the Ceding Company shall furnish a report as to Ceded Reserves, together with
any other information which the Reinsurer may require for its accounting records
and which may be reasonably available to the Ceding Company.

          6.5.     Within 45 days following the end of each calendar year, the
Ceding Company shall furnish to the Reinsurer for the calendar year a summary
account split up per underwriting year together with any other information which
the Reinsurer may require for its accounting records and which may be reasonably
available to the Ceding Company.

          6.6.     A contingent commission shall be payable to the Ceding
Company in respect of this Agreement.  The contingent commission shall be equal
to 34% of the difference between net premium earned and incurred losses for each
calendar year under this Agreement.

          6.7.     All settlements of account under this Agreement between the
Ceding Company and the Reinsurer shall be made in cash or its equivalent in U.S.
dollars computed at exchange rates in effect at the end of the accounting
period, or if for a loss payable by the Reinsurer pursuant to section 9.3 of
this Agreement, the exchange rate in effect at the date of the notice shall
apply.

Article  7

Security:

          7.1.     When a governing body of any jurisdiction in which the Ceding
Company legally operates or to which it submits requires as a condition to
credit for the reinsurance provided by this Agreement that the Reinsurer deliver
securities legally pledged for the benefit of the Ceding Company or deposit
funds legally pledged for the benefit of the Ceding Company, the Reinsurer shall
deliver such securities or deposit such funds in the form and amount necessary
to permit the Ceding Company to avoid on any statutory financial statement filed
by the Ceding Company the penalty to surplus which would result from the loss of
credit for the reinsurance.

          7.2.     Notwithstanding any other provisions of this Agreement, it is
agreed that any securities pledged to the Ceding Company pursuant to section 7.1
of this Article 7 shall be securities which are of a type and quality acceptable
to the governing body of any jurisdiction in which the Ceding Company operates
which has required the pledge of securities in Section 7.1 and be drawn upon and
utilized by the Ceding Company or its successors in interest only for one or
more of the following purposes:

 

          (a)     to reimburse the Ceding Company for losses and loss expenses
paid by the Ceding Company under this Agreement;

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          (b)     to fund an account with the Ceding Company in an amount at
least equal to the deduction allowed for the reinsurance provided by this
Agreement, from the Ceding Company’s liabilities for policies ceded under this
Agreement, such amount to include, if applicable, but not be limited to, amounts
for Contingency Reserves, loss reserves for paid, reported and incurred but not
reported (“IBNR”) losses, loss expense reserves and unearned premium reserves;
or

 

 

 

          (c)     to pay any other amounts the Ceding Company claims are due
under this Agreement or under applicable law.

          All of the foregoing should be applied without diminution because of
insolvency on the part of the Ceding Company or Reinsurer.

          7.3.     If the Reinsurer elects to provide a Letter of Credit under
section 7.1 of this Article, the Reinsurer shall cause the Letter of Credit to
be issued, in place and effective no later than the “as of date” of the first
quarterly filing prepared by the Ceding Company for the appropriate regulatory
authority after the effective date of this Agreement.

Article  8

Service of Covered Business:

          8.1.     The Ceding Company shall service the Covered Business with
respect to collection and payment of premium, notice, service of process and
investigation, settlement, defense and payment of claims on all Covered
Business.

Article  9

Claims and Loss Adjustment Expense and Salvage:

          9.1.     The Ceding Company agrees that it will investigate, settle or
defend all claims arising under policies with respect to which reinsurance is
afforded by this Agreement.

          9.2.     The Ceding Company shall be the sole judge of what shall
constitute a loss covered under the Ceding Company’s policies, of the Ceding
Company’s liability thereunder, and of the amount or amounts which it shall be
proper for Ceding Company to pay thereunder.  The Reinsurer shall be bound by
the judgment of the Ceding Company as to the liability and obligation of the
Ceding Company under its policies.

          9.3.     Any loss chargeable to the Reinsurer under this Agreement
shall be paid promptly by the Reinsurer to the Ceding Company within one hour of
receiving written or telephonic notice of any claim (any telephonic notice to be
subsequently confirmed in writing), pay the Reinsurer’s share of all losses and
loss expense excluding unallocated loss expense. 

          9.4.     The term “loss” shall mean the  losses incurred by the Ceding
Company after making deductions for all other reinsurances or insurances inuring
to the benefit of the Ceding Company under this Agreement, whether collectible
or not, and all salvages and all recoveries, and shall include all loss
adjustment expenses incurred by the Ceding Company in the settlement or defense
of claims (other than the office expenses of the Company and the salaries and
expenses of its employees).

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Article  10

Access to Records:

          10.1.     The Reinsurer shall, at all reasonable times during the term
of this Agreement and thereafter, have the right to inspect the books, records
and documents of the Ceding Company with respect to the Covered Business.

Article  11

Reserves:

          11.1.     The Reinsurer agrees to maintain proper unearned premium,
loss and loss expense reserves upon the liabilities ceded hereunder in
accordance with accounting practices prescribed or permitted by the Insurance
Department of the State of New York.

Article  12

Follow the Fortunes:

          12.1.     This Agreement shall be construed as an honorable
undertaking between the parties hereto and shall not be defeated by technical
legal construction, it being the intention of this Agreement that the fortunes
of the Reinsurer shall follow the fortunes of the Ceding Company.  Nothing
herein shall in any manner create any obligations or establish any rights
against the Reinsurer in favor of any third parties or any persons not parties
to this Agreement.

Article  13

Errors and Omissions:

          13.1.     Any inadvertent error, omission or delay in connection with
this Agreement shall not affect the liability which otherwise would have
attached to either party, provided such error, omission or delay is rectified as
soon as possible after discovery.

Article  14

Offset:

          14.1.     Each party hereto shall have, and may exercise at any time
and from time to time, the right to offset any balance or balances, whether on
account of premiums or on account of losses or otherwise, due from such party to
the other party hereto under this Agreement, and may offset the same against any
balance or balances due or to become due to the former from the latter under the
same.  The party asserting the right of offset shall have and may exercise such
right whether the balance or balances due or to become due to such party from
the other are on account of premiums or on account of losses or otherwise and
regardless of the capacity in which each party acted under the agreement or, if
more than one, the different agreements involved.  In the event of the
insolvency of a party hereto, offsets shall be allowed only in accordance with
the provisions of Section 7427 of the New York Insurance Law.

Article  15

Insolvency:

          15.1.     In the event of the insolvency of the Ceding Company or its
successor in interest, this reinsurance shall be payable directly to the Ceding
Company, or directly to its liquidator, receiver, conservator or statutory
successor, on the basis of the liability of the Ceding Company without
diminution because of the insolvency of the Ceding Company or because the
liquidator, receiver, conservator or statutory successor of the Ceding Company
has failed to pay all or a portion of any claim.  It is agreed, however, that
the liquidator, receiver, conservator or statutory successor of the Ceding
Company shall

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give written notice to the Reinsurer of the pendency of the claim against the
Ceding Company indicating the policy or bond reinsured which claim would involve
a possible liability on the part of the Reinsurer within a reasonable time after
such claim is filed in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose at its own expense, in the proceeding where
such claim is to be adjudicated any defense or defenses that it may deem
available to the Ceding Company or its liquidator, receiver, conservator or
statutory successor.  The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the court, against the Ceding Company as
part of the expense of conservation or liquidation to the extent of a pro rata
share of the benefit which may accrue to the Ceding Company solely as a result
of the defense undertaken by the Reinsurer.

          15.2.     The Reinsurance shall be payable by the Reinsurer to the
Ceding Company or to its liquidator, receiver, conservator or statutory
successor, except (a) where the policy specifically provided another payee of
such reinsurance in the event of the insolvency of the Ceding Company and (b)
where the Reinsurer with the consent of the direct insured or insureds has
assumed such policy obligations of the Ceding Company as direct obligations of
the Reinsurer to the payees under such policies and in substitution for the
obligations of the Ceding Company to such payees.

Article  16

Arbitration:

          16.1.     As a condition precedent to any right of action hereunder,
any dispute arising out of or related to this Agreement shall be submitted to
the decision of a board of arbitration composed of two arbitrators and an
umpire, meeting in Armonk, New York, unless otherwise agreed.

          16.2.     The members of the board of arbitration shall be active or
retired disinterested officials of insurance or reinsurance companies.  Each
party shall appoint its arbitrator, and the two arbitrators shall choose an
umpire before instituting the hearing.  If the respondent fails to appoint its
arbitrator within four weeks after being requested to do so by the claimant, the
latter shall also appoint the second arbitrator.  If the two arbitrators fail to
agree upon the appointment of an umpire within four weeks after their
nominations, the umpire shall be selected by the regional director of the
American Arbitration Association in New York, New York, of the regional
director’s delegate.

          16.3.     The claimant shall submit its initial brief within 20 days
from appointment of the umpire.  The respondent shall submit its brief within 20
days after receipt of the claimant’s brief and the claimant shall submit a reply
brief within 10 days after receipt of the respondent’s brief.  The board shall
make its decision with regard to the custom and usage of the insurance and
reinsurance business.  The board shall issue its decision in writing based upon
a hearing in which evidence may be introduced without following strict rules of
evidence but in which cross-examination and rebuttal shall be allowed.  The
board shall make its decision within 60 days following the termination of the
hearings unless the parties consent to an extension.  The majority decision of
the board shall be final and binding upon all parties to the proceeding. 
Judgment may be entered upon the award of the board in any court having
jurisdiction thereof.

          16.4.     Each party shall bear the expense of its own arbitrator and
shall jointly and equally bear with the other party the expense of the umpire. 
The remaining costs of the arbitration proceedings shall be allocated by the
board.  Unless prohibited by applicable law, an arbitral award hereunder and any
judgment thereon shall bear interest from the date the arbitral award was
rendered at the rate equal from time to time to the rate publicly announced by
Citibank, N.A., as its base rate plus 2%.

          16.5.     The parties consent to the jurisdiction of the Supreme Court
of the State of New York, County of New York, and of the United States District
Court for the Southern District of New York, for all purposes in connection with
such arbitration, including without limitation any application to compel
arbitration or to confirm an arbitration award.  The parties consent that any
process or notice of motion or other application to either of said courts, and
any paper in connection with arbitration, may be served by certified mail,
return receipt requested, or by personal service or in such other manner as may
be permissible under the rules of the applicable court or panel provided a
reasonable time for appearances is

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allowed.  Service upon the Ceding Company shall be directed to it, in care of
its General Counsel.  Service upon the Reinsurer shall be directed to the
Reinsurer in care of its President.

Article  17

Miscellaneous:

          17.1.     This Agreement shall be governed by the laws of the State of
New York.

          17.2.     The parties hereto agree to execute and deliver such further
instruments and do such further acts as may be necessary and proper to carry out
the purposes of this Agreement.

          17.3.     If any provision of this Agreement or the applicability
thereto to any person or circumstance is held invalid, the remainder of this
Agreement, including the remainder of the section in which such provision
appears, or the applicability of such provision to those persons or
circumstances, shall not be affected thereby.

          17.4.     This Agreement contains the entire understanding of the
parties with respect to the subject matter hereto. There are no restrictions,
promises, warranties, covenants or undertakings with respect to such subject
matter, other than those expressly set forth herein.  This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter. This Agreement is binding on and shall inure to the benefit of
the parties hereto, their successors and assigns; provided, however, that
neither party may voluntarily assign this Agreement without (i) the prior
written consent of the other and (ii) without obtaining confirmation from any
rating agency that assigns a rating to the Ceding Company at the time of any
proposed assignment (at the moment Standard & Poor’s Corporation, Moody’s
Investors Service Inc. and Fitch) that such assignment will not result in a
downgrade of the ratings assigned by such rating agency to the Ceding Company as
in effect immediately prior to such assignment; it also being understood and
agreed  the foregoing clause (ii) shall not apply to any assignment pursuant to
any order issued by or requirement of the French Insurance Commissioner.

At Paris, France

MBIA ASSURANCE S.A.

 

 

 

 

 

By:

 

 

 

 

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President

 

 

 

 

 

At Armonk, New York

MBIA INSURANCE CORPORATION

 

 

 

 

 

 

By:

 

 

 

 

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Managing Director

 

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