Exhibit 10.3


 


[As Approved by the Board of Directors on May 21,
2008]


 


FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.


 


2004 Equity Participation Plan


 


As amended and restated
effective as of May 21, 2008


 

















 


FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.


 


2004 Equity Participation Plan


 


	
  SECTION

  	
   

  	
  CONTENTS

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  General Purpose of Plan; Definitions

  	
   

  	
  1

  
	
  Section 2.

  	
   

  	
  Administration

  	
   

  	
  5

  
	
  Section 3.

  	
   

  	
  FSA Stock Subject to Plan

  	
   

  	
  6

  
	
  Section 4.

  	
   

  	
  Eligibility

  	
   

  	
  7

  
	
  Section 5.

  	
   

  	
  Performance Shares

  	
   

  	
  7

  
	
  Section 6.

  	
   

  	
  Dexia Restricted Stock

  	
   

  	
  12

  
	
  Section 7.

  	
   

  	
  Performance Share Units

  	
   

  	
  15

  
	
  Section 8.

  	
   

  	
  Transfer, Leave of Absence, etc.

  	
   

  	
  16

  
	
  Section 9.

  	
   

  	
  Amendments and Termination

  	
   

  	
  16

  
	
  Section 10.

  	
   

  	
  Compliance
  with Code Section 409A

  	
   

  	
  16

  
	
  Section 11.

  	
   

  	
  General Provisions

  	
   

  	
  16

  
	
  Section 12.

  	
   

  	
  Effective Date of Plan

  	
   

  	
  17

  
	
  Section 13.

  	
   

  	
  Term of Plan

  	
   

  	
  18

  



 

















 


[Approved by Board of Directors and effective—05/21/08]


 


FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.


 


2004 Equity Participation Plan


 


Section 1.  General Purpose of Plan; Definitions.


 


The name of this
plan is the Financial Security Assurance Holdings Ltd. 2004 Equity
Participation Plan (the “Plan”). 
The purpose of the Plan is to enable the Company to retain and attract
executives and employees who will contribute to the Company’s success by their
ability, ingenuity and industry, and to enable such executives and employees to
participate in the long-term growth of the Company and Dexia by obtaining a
proprietary interest in the Company or Dexia or the cash equivalent thereof.  The Plan was originally adopted on November 18,
2004 and was amended and restated effective September 9, 2005, January 1,
2005 and February 14, 2008.  The
Plan is hereby amended and restated, as set forth in this Plan document,
effective May 21, 2008 to amend the definitions of “Book Value” and “Operating
Earnings” and make certain conforming changes.


 


The Plan shall be
unfunded.  All obligations of the Company
under the Plan shall be paid from the general assets of the Company.


 


For purposes of
the Plan, the following terms shall be defined as set forth below:


 


a.                                       “Act”
means the Securities Exchange Act of 1934, as amended.


 


b.                                     “Adjusted
Book Value” means, as of a particular date, the Book Value on such date,
subject to the following adjustments, each of which shall have been derived
from the Company’s IFRS financial statements for the period ended on such date
(or, if not derivable from such financial statements, shall be determined in
good faith by the Company), but reduced by the amount of the federal income tax
applicable thereto:


 


(i)                                    add
to the Book Value the sum of (A) the unearned premiums net of prepaid
reinsurance premiums at such date, (B) the estimated present value of
future installment premiums, net of reinsurance, at such date, (C) the
estimated present value of ceding commissions to be received related to
reinsured future installment premiums at such date, and (D) the estimated
present value of future net interest margin at such date; and


 


(ii)                                 subtract
from such total the sum of (A) the deferred acquisition costs at such date
and (B) the estimated present value of premium taxes to be paid related to
future installment premiums.


 


c.                                       “Adjusted
Book Value per share” means, as of a particular date, Adjusted Book Value
on such date divided by the number of shares of FSA Stock outstanding
(excluding treasury shares other than those owned to hedge obligations under
the Company’s Deferred Compensation Plan(s) or Supplemental Executive
Retirement Plan(s)) on such date.


 


d.                                      “Board”
means the Board of Directors of the Company.


 


e.                                      “Book Value” means, as of a particular
date, the Company’s total shareholders’ equity on such date, as derived from
the Company’s IFRS financial statements for the period ended on such date.


 

















 


For purposes hereof, Book Value shall be determined excluding the
after-tax effect of (i) accumulated other comprehensive income (the
total mark-to-market (“MTM”) on investment assets not subject to hedge
accounting and the credit risk component of the MTM on investment assets
subject to hedge accounting), (ii) the credit risk component of the MTM of
fair valued liabilities, (iii) the MTM of credit derivatives, (iv) the MTM of Committed Preferred Trust
Securities, and (v) the MTM of other than temporarily impaired
investments, but including the after-tax effect of any expected losses on
credit derivatives and investments.


 


f.                                         “Book
Value per share” means, as of a particular date, Book Value on such date
divided by the number of shares of FSA Stock outstanding (excluding treasury
shares other than those owned to hedge obligations under the Company’s Deferred
Compensation Plan(s) or Supplemental Executive Retirement Plan(s)) on such
date.


 


g.                                      “Cause”
means (i) conviction of, or plea
of nolo contendere (or similar plea) by, a Participant in a criminal proceeding
for commission of a misdemeanor or a felony that is materially injurious to the
Company; or (ii) willful misconduct by a Participant in carrying out his
or her duties with the Company which is directly and materially harmful to the
business or reputation of the Company.


 


h.                                      “Change
in Control” means (i) an event or series of events as a result of
which any “person” or “group” (as such terms are defined in Rule 13d-5
under the Act) is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Act) of shares of capital stock entitling the holder
thereof to cast more than 50% of the votes for the election of directors of the
Company; or (ii) the approval by the Company’s shareholders of the Company’s
consolidation with or merger into another unaffiliated corporation, or another
unaffiliated corporation’s merger into the Company, or the conveyance, transfer
or lease of all or substantially all of its assets to any unaffiliated person
or (iii) unless otherwise determined by the Board, the liquidation or
dissolution of the Company.


 


i.                                          “Code”
means the Internal Revenue Code of 1986, as amended.


 


j.                                          “Committee”
means the committee administering the Plan pursuant to Section 2.


 


k.                                       “Company”
means Financial Security Assurance Holdings Ltd. (and, unless required
otherwise by the context, its Subsidiaries), a corporation organized under the
laws of the State of New York (or any successor corporation).


 


l.                                          “Dexia”
means Dexia S.A., a limited liability company under Belgium law having its
registered office at Dexia Tower, Place Roger 111210, Brussels, Belgium,
registered with the Commercial Registry of Brussels under 604.748 (or any
successor thereto).


 


m.                                    “Dexia
Restricted Stock” means an award of shares of Dexia Stock that are subject
to the conditions under Section 6.


 


n.                                      “Dexia
Stock” means ordinary shares of Dexia.


 


o.                                      “Disability”
means permanent and total disability as determined under the Company’s
long-term disability program or as otherwise determined by the Committee.


 


p.                                      “Disinterested
Person” means a person meeting the requirements, if any, to be a member of
a compensation committee prescribed by Section 16 of the Act or any rule or
regulation thereunder.


 


2

















 


q.                                      “Division”
means any of the operating units or divisions of the Company designated as a
Division by the Committee.


 


r.                                        “Fair
Market Value” means, as of a particular date (i) in the case of FSA
Stock, if such shares are not then publicly traded, the greater of (A) the product of 0.85 and the Adjusted Book Value
per share of FSA Stock as of the last day of the calendar quarter ending prior
to the date of determination of Fair Market Value and (B) the average of (a) the
product of 1.15 and the Adjusted Book Value per share of FSA Stock as of the
last day of the calendar quarter ending prior to the date of determination of
Fair Market Value and (b) the product of 14 and Operating Earnings per
share of FSA Stock as of the last day of the calendar quarter ending prior to
the date of determination of Fair Market Value; and (ii) in the case of
FSA Stock or Dexia Stock, if such shares are then publicly traded, the
closing sales price per share of FSA Stock on the principal national securities
exchange on which FSA Stock is then traded or, in the case of Dexia Stock, the
Euronext Brussels stock exchange (or, if not then traded on the Euronext
Brussels stock exchange, the principal stock exchange on which Dexia Stock is
then traded), in either such case, on the last preceding date (including such
particular date) (or such other date as shall be specified herein) on which
there was a sale of such shares on such exchange and, in the case of Dexia
Stock, converted into U.S. dollars using the noon buying rate published by the
Federal Reserve Bank of New York for such date (or, if such rate is no longer
published, such other rate as the Committee shall approve), provided that if
FSA Stock is not traded on a national securities exchange but is traded in an
over-the-counter market, “Fair Market Value” means the average of the closing
bid and asked prices for such shares in such over-the-counter market for the
last preceding date (including such particular date) (or such other date as
shall be specified herein) on which there was a sale of such shares in such
market.


 


s.                                       “FSA
Stock” means the Common Stock, $.01 par value per share, of the Company.


 


t.                                         “Good
Reason” means the voluntary termination by a Participant of his or her
employment with the Company, after the occurrence of any one of the following events
without the Participant’s express written consent:  (i) a
diminution of any of the Participant’s significant duties or responsibilities; (ii) a
breach by the Company of its obligations hereunder; (iii) the Company
requiring the Participant to be based at an office that is greater than
twenty-five miles from the previous location of the Participant’s office; or (iv) a
material adverse change in the Participant’s total compensation.  Notwithstanding the foregoing, a Participant
shall not be deemed to have terminated his or her employment for Good Reason
unless the Participant provides 60 days’ prior written notice to the Company
stating in reasonable detail the basis upon which “Good Reason” is asserted,
such notice is given within 120 days of the later of the occurrence of the
event or the date the Participant knows or should have known of the event which
would otherwise constitute Good Reason and, if such failure or breach is
reasonably susceptible to cure, the Company does not effect a cure within such
60-day period.


 


u.                                      “Internal
Reorganization” means the direct or indirect acquisition of all or
substantially all of the outstanding FSA Stock by a newly organized holding
company established to own the Company and other companies engaged or to be
engaged in the financial guaranty insurance business, immediately following
which Dexia continues to own, directly or indirectly, shares of capital stock
of the Company entitling Dexia to, directly or indirectly, cast more than 90%
of the votes for the election of directors of the Company.


 


v.                                      “Operating Earnings” means, as of a
particular date, net income of the Company for the first four completed
calendar quarters ended on or prior to such date less the after-tax effect of (i) the credit risk component of the
mark-to-market (“MTM”) of fair valued liabilities, (ii) the MTM of credit
derivatives, (iii) the MTM of Committed Preferred Trust Securities, and
the MTM of other than temporarily impaired investments, but including the
after-tax effect of any expected losses on credit


 


3

















 


derivatives
and investments, as determined by the Company, consistent, as applicable, with
its determination of net income from time to time under IFRS.


 


w.                                    “Operating
Earnings per share” means, as of a particular date, Operating Earnings for
the first four completed calendar quarters ended on or prior to such date,
divided by the number of shares of FSA Stock outstanding (excluding treasury
shares other than those owned to hedge obligations under the Company’s Deferred
Compensation Plan(s) or Supplemental Executive Retirement Plan(s)) on such
date.


 


x.                                        “Participant”
means any employee of the Company selected for participation in the Plan by the
Committee (as a recipient of Performance Shares, Dexia Restricted Stock or
Performance Share Units).


 


y.                                      “Performance
Cycle” means a time period of at least 12 months, ending on December 31,
specified by the Committee at the time a grant of Performance Shares is made,
during which the performance of the Company, a Subsidiary or a Division will be
measured.


 


z.                                        “Performance
Objectives” means the objective goals set by the Committee with respect,
but not limited, to:  (i) growth in
Adjusted Book Value per share; (ii) growth in Book Value per share; (iii) earnings
per share of FSA Stock or Dexia Stock, (iv) pre-tax profits, (v) net
earnings or net worth, (vi) absolute and/or relative return on equity or
assets, or (vii) any combination of the foregoing.  Performance
Objectives may be in respect of the performance of the Company and its
Subsidiaries (which may be on a consolidated basis), a Subsidiary or a
Division.


 


aa.                                 “Performance
Shares” means Performance Shares granted to a Participant under Section 5.


 


bb.                               “Performance
Share Units” means Performance Share Units granted to a Participant under Section 7,
consisting of Performance Shares and Dexia Restricted Stock.


 


cc.                                 “Qualified
Change in Control” means a Change in Control that is also a change in the
ownership or effective control of the Company, or in the ownership of a
substantial portion of the Company’s assets, within the meaning of Section 409A(a)(2)(A)(v) of
the Code.


 


dd.                               “Qualified
Disability” means a Disability that is also a disability within the meaning
of Section 409A(a)(2)(C) of the Code. 
An individual is generally considered disabled within the meaning of Section 409A(a)(2)(C) of
the Code if individual (i) is unable to engage in any substantially
gainful activity by reason of a medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months, or (ii) is, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or to last for a continuous period of not less than
twelve months, receiving income replacement benefits for a period of not less
than three months under an accident and health plan covering employees of the
Company.  An individual will be deemed to
have a Qualified Disability if determined to be disabled in accordance with a
disability insurance program that applies a definition of disability that
complies with the requirements of Section 409A(a)(2)(C) of the Code
or if determined to be totally disabled by the Social Security Administration.


 


ee.                                 “Retirement”
means early retirement (at or after age 55 with 5 Years of Service) or normal
retirement (after age 60 with 5 Years of Service) from active employment with
the Company, or as otherwise determined by the Committee.


 


4

















 


ff.                                    “ROE”
means, in respect of any Performance Cycle, the average of:


 


(i)                                    the
discount rate (expressed as an annual percentage rate) such that (a) the
Adjusted Book Value per share of FSA Stock on the last day of the Performance
Cycle and the dividends paid per share during such Performance Cycle, each
discounted at such discount rate to the first day of such Performance Cycle,
equals (b) the Adjusted Book Value per share of FSA Stock on the first day
of such Performance Cycle; and


 


(ii)                                 the
discount rate (expressed as an annual percentage rate) such that (a) the
Book Value per share of FSA Stock on the last day of the Performance Cycle and
the dividends paid per share during such Performance Cycle, each discounted at
such discount rate to the first day of such Performance Cycle, equals (b) the
Book Value per share of FSA Stock on the first day of such Performance Cycle.


 


gg.                               “Subsidiary”
means any corporation (other than the Company) that is a “subsidiary
corporation” with respect to the Company under Section 424(f) of the
Code.  In the event that after the date
hereof the Company becomes a “subsidiary corporation” of another company, the
provisions hereof applicable to Subsidiaries shall, unless otherwise determined
by the Committee, also be applicable to such other company if it is a “parent
corporation” with respect to the Company under Section 424(e) of the
Code.


 


hh.                               “Years
of Service” shall mean “Years of Service for Vesting” as defined under the
Financial Security Assurance Inc. Money Purchase Pension Plan, as amended from
time to time.


 


Section 2. 
Administration.


 


The Plan shall be
administered by a Committee of not less than two persons, who shall be members
of and appointed by the Board and serve at the pleasure of the Board, unless
otherwise determined by the Board, and who shall be Disinterested Persons so
long as the FSA Stock is registered pursuant to Section 12 of the
Act.  Unless otherwise determined by the
Board, the Human Resources Committee of the Board shall serve as the Committee.


 


The Committee
shall have the power and authority to grant to Participants, pursuant to the
terms of the Plan:  (a) Performance
Shares, (b) Dexia Restricted Stock and (c) Performance Share Units.


 


In particular, the
Committee shall have the authority:


 


(i)                                     to
select the officers and other key employees of the Company to whom Performance
Shares, Dexia Restricted Stock and/or Performance Share Units may from time to
time be granted hereunder;


 


(ii)                                  to
determine whether and to what extent Performance Shares, Dexia Restricted Stock
or Performance Share Units, or a combination of any of the foregoing, are to be
granted hereunder;


 


(iii)                               to
determine the number of shares of FSA Stock or Dexia Stock to be covered by
each such award granted hereunder;


 


(iv)                              to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any award granted hereunder (including, but not limited to, any vesting
requirements or


 


5

















 


other restrictions
or performance criteria relating to any Performance Shares, Dexia Restricted
Stock or Performance Share Units awarded hereunder and/or any shares of FSA
Stock or Dexia Stock relating thereto);


 


(v)                                 to
determine whether, and to what extent any one or more specified Performance
Objectives, relating to an award of Performance Shares under the Plan, have
been met by the Company over any one Performance Cycle; and


 


(vi)                              to
determine whether, to what extent and under what circumstances FSA Stock, Dexia
Stock and other amounts otherwise payable with respect to an award under the
Plan shall be deferred either automatically or at the election of the
Participant.


 


The Committee
shall have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall, from time to time,
deem advisable; to interpret provisions of the Plan and any award issued under
the Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan.  Without
limiting the generality of the foregoing, the Committee may (subject to such
considerations as may arise under Section 16 of the Act, or under other
corporate, securities and tax laws) take any steps it deems appropriate, that
are not materially substantive and are not inconsistent with the purposes and
intent of the Plan, to take into account the provisions of Section 162(m) of
the Code, and the Committee may take any steps it deems appropriate (including
amending the terms or imposing further conditions on any award issued under the
Plan), that are not inconsistent with the purposes and intent of the Plan, to
take into account any proposed or existing legislation or regulations (whether
U.S. federal, state, or local or foreign), or to obtain or maintain favorable
taxation, exchange control or securities regulatory treatment for the Company
or a Participant.


 


All decisions made
by the Committee pursuant to the provisions of the Plan shall be final and
binding, in the absence of bad faith or manifest error, on all persons
(including, without limitation, any interpretations of the Plan), including the
Company and Participants, and otherwise entitled to the maximum deference
permitted by law.


 


To the maximum
extent permitted by law, the Committee and the members thereof shall be
indemnified by the Company for all action and inaction by each of them in
connection with the administration of the Plan or otherwise in connection with
the Plan.


 


Section 3.  FSA Stock Subject to Plan.


 


The total number of
shares of FSA Stock reserved and available for distribution under the Plan
shall be 3,300,000; such shares may consist, in whole or in part, of authorized
and unissued shares, treasury shares, re-acquired shares, or shares purchased
by a grantor trust as provided for in Section 5.


 


If any shares of
FSA Stock issuable pursuant to any Performance Share or Performance Share Unit
award granted hereunder cease to be issuable thereunder, shall be paid in cash
or such award otherwise terminates, such shares shall again be available for
distribution in connection with future awards under the Plan.


 


The Plan
contemplates, but does not require, that the Committee will award Performance
Share Units each year in a number equal to approximately 1% of the number of issued
and outstanding shares of FSA Stock.  The
aggregate number of shares of FSA Stock reserved for issuance under the Plan
and the number of shares of FSA Stock issuable pursuant to outstanding
Performance Shares shall be appropriately adjusted by the Committee in the
event of any increase or decrease in the number of outstanding shares of FSA
Stock resulting from payment of an FSA Stock dividend on FSA Stock, a 


 


6

















 


subdivision or
combination of shares of FSA Stock, a reclassification of FSA Stock, a
recapitalization involving the Company or in the event of a merger or
consolidation in which the Company shall be the surviving corporation.


 


Section 4. 
Eligibility.


 


Officers and other
employees of the Company (but not any person who serves only as a director) who
are responsible for or contribute to the management, growth and/or
profitability of the business of the Company are eligible to be granted
Performance Shares, Dexia Restricted Stock and/or Performance Share Units under
the Plan.  The Participants under the
Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in
its sole discretion, the number of shares covered by each award.


 


Section 5. 
Performance Shares.


 


(a)                                  Administration
and Awards.  The Committee, in its
discretion, may grant Performance Shares to one or more Participants.  The terms and conditions of any grant of
Performance Shares shall be set forth in a written agreement between the
Company and the Participant.  Performance
Shares shall be denominated in shares of FSA Stock and, contingent upon the
attainment of specified Performance Objectives within one or more Performance
Cycles and, subject to the Company’s rights as set forth in paragraph (c) of
this Section 5, represent the right to receive a distribution of FSA
Stock and/or payment of cash following the completion of each Performance
Cycle, as provided in paragraph (b) of this Section 5.  The Committee shall determine the extent to
which any one or more Performance Objectives have been achieved by the Company
in the applicable Performance Cycle.  In
the absence of bad faith or manifest error, the Committee’s determination shall
be final and binding upon a Participant.


 


Performance Shares
may be granted to a Participant prior to or during a Performance Cycle, but
distributions and payments with respect thereto may only be made following the
completion of the Performance Cycle, except as otherwise provided in paragraph (e) of
this Section 5 following a Change in Control.  The number of Performance Shares subject to
an award shall be allocated among the Performance Cycle(s) covered by such
award in such manner as the Committee shall determine.  The written agreement evidencing the award of
Performance Shares shall specify the number of Performance Shares subject to
the award, the number and duration of the Performance Cycles to which those
Performance Shares relate, the Performance Objectives, the identification of
the Performance Cycle(s) within which such Performance Objectives must be
satisfied, the number of Performance Shares allocated to each such Performance
Cycle, and the vesting provisions with respect to such Performance Shares
(i.e., the date or, if vesting is on an installment basis, the dates after
which the Participant shall have indefeasible right to the distribution and/or
payment described in paragraph (b) of this Section 5, if any, with
respect to certain or all Performance Shares subject to the award), subject to
the limitations thereon described below. 
The number of Performance Shares allocated to a Performance Cycle under
any award of Performance Shares to a Participant shall not exceed 100,000.  Unless otherwise specified by the Committee
at the time of award, the Performance Objective for each Performance Cycle
shall be the ROE during such Performance Cycle.


 


If any change
shall occur in or affect the FSA Stock or Performance Shares on account of any
increase or decrease in the number of outstanding shares of FSA Stock resulting
from payment of a stock dividend on FSA Stock, a subdivision or combination of
shares of FSA Stock, a reclassification of FSA Stock, a recapitalization
involving the Company or in the event of a merger or consolidation in which the
Company shall be the surviving corporation, the Committee shall make such
adjustments, if any, that it deems necessary in the number of shares of FSA
Stock allocated to awards of Performance Shares then outstanding to reflect
such change.  In the event of an Internal
Reorganization (providing for a new


 


7

















 


holding company
for the FSA group of companies), (i) the Committee shall make such
adjustments to then outstanding Performance Shares (including Performance
Shares underlying outstanding Performance Share Units) as it shall deem
appropriate to reflect such Internal Reorganization so that the holders of
outstanding Performance Shares are compensated based upon the overall
performance of the reconstituted FSA group of companies, including, without
limitation, adjusting the number of shares of FSA Stock allocated to such
Performance Shares and adjusting the Performance Objectives or manner of
calculating the Performance Objectives in respect of such Performance Shares;
and (ii) the term “Company” shall be deemed to refer to such new holding
company and the term “FSA Stock” shall be deemed to refer to the securities of
such new holding company for all purposes of the Plan.


 


To reflect a
change in, or a change in the application by the Company of, tax laws or
regulations or accounting principles (including, without limitation, by reason
of any error in applying such laws, regulations or principles), the Committee
shall make such adjustments in the Performance Objectives set forth in all
outstanding awards of Performance Shares in respect of Performance Cycles not
then completed so as to reflect such change to preserve the value of the
Performance Shares consistent with the intent and the purpose of the Plan,
provided the Company’s independent auditors shall have determined that such
adjustments shall not result in the Company’s loss of deductibility under Section 162(m) with
respect to Participants whose compensation is, in the reasonable belief of the
Committee, subject thereto.  Further,
with respect to a Participant, the deductibility of whose award of Performance
Shares will not, in the reasonable belief of the Committee, be subject to Section 162(m) of
the Code, the Committee may, in its discretion and independent of any
determination made by the Company’s independent auditors, adjust the
Performance Objective(s) in respect of Performance Cycles not then
completed so as to reflect a change in, or a change in the application by the
Company of, tax laws or regulations or accounting principles (including,
without limitation, by reason of any error in applying such laws, regulations
or principles) to preserve the value of the Performance Shares consistent with
the intent and the purpose of the Plan.


 


Any adjustment of
Performance Objectives or the manner of calculating Performance Objectives
after the grant of a Performance Share shall be made in accordance with the
requirements of Section 409A of the Code to avoid taxation under Section 409A(a)(1) of
the Code.


 


Performance Shares
shall be vested at such time or times as determined by the Committee (taking
into account, without limitation, Section 16 of the Act) at the date of
award, provided that acceleration of vesting may be granted by the Committee after
the date of award, but in no event shall the Committee provide a vesting
schedule which would vest fewer Performance Shares in a Participant through the
completion of a particular Performance Cycle than the aggregate number of
Performance Shares allocated to such Performance Cycle and all Performance
Cycles included in such award which have been previously completed.  If the Committee provides, in its discretion,
that any award is vested only in installments, the Committee may waive such
installment vesting provisions at any time.


 


Upon termination
of a Participant’s employment by the Company without Cause and upon Retirement,
unvested Performance Shares shall vest pro-rata in proportion to the percentage
of the Performance Cycle for such Performance Shares during which the
Participant was employed by the Company. 
In addition, all unvested Performance Shares shall vest (i) upon
death or Disability while employed by the Company and (ii) as set forth in
paragraph (e) of this Section 5 in the event of a Change in
Control.  Except as provided above,
Performance Shares not vested on the date of termination of employment shall be
forfeited.


 


(b)                                 Distributions
and Payments on Completion of Performance Cycle.  In furtherance of an election discussed in
paragraph (c) of this Section 5, distributions of shares of FSA Stock
and/or payments of cash with respect to Performance Shares allocated to a
particular Performance Cycle


 


8

















 


covered by an
award shall be made to the Participant within one hundred twenty (120) days
after the completion of such Performance Cycle in accordance with the Committee’s
determination of the achievement of the applicable Performance Objectives,
except to the extent deferred under the Financial Security Assurance Holdings
Ltd. 2004 Deferred Compensation Plan, as amended from time to time.  Provided a Participant who has been
granted a Performance Shares award shall have been employed by the Company
through the date on which a particular Performance Cycle shall have been
completed, or such Participant’s employment with the Company shall have been
terminated prior thereto by reason of death or Disability, or such Participant’s
Performance Shares award is otherwise vested pursuant to paragraph (a) of
this Section 5, such Participant shall be entitled to receive with respect
to each such award:


 


(i)                                     a
number of shares of FSA Stock to be determined in accordance with the following
formula:


 


a x b
= c ; or


 


(ii)                                  a
cash payment in an amount to be determined in accordance with the following
formula:


 


a x b x d
= e; or


 


(iii)                               a
combination of FSA Stock and cash in the amounts determined in accordance with
the formulae set forth in clauses (i) and (ii) above, provided,
however, that, in such event, in each such formula a
shall be multiplied by the percentage that represents the portion of the
Performance Shares allocated to such Performance Cycle to be paid in FSA Stock
or cash, as the case may be;


 


where:


 


a
=                the number of
Performance Shares granted in such award allocated to the applicable
Performance Cycle;


 


b
=                a percentage
(which may be more than 100%), which represents the extent to which the
Performance Objectives set forth in such award have been achieved by the
Company in the applicable Performance Cycle; specifically, unless otherwise
specified by the Committee at the time of award, the ROE calculated for each
Performance Cycle will determine such percentage according to the following
table:


 


	
  Performance

  	
   

  	
  Percentage of Performance

  
	
  Cycle ROE

  	
   

  	
  Objective Achieved

  
	
  19% or higher

  	
   

  	
  200%

  
	
  16%

  	
   

  	
  150%

  
	
  13%

  	
   

  	
  100%

  
	
  10%

  	
   

  	
  50%

  
	
  7%

  	
   

  	
  0%

  



 


All points in
between will be interpolated using the straight line method.


 


c
=                 the number of
shares of FSA Stock to be distributed to a Participant at the end of the
applicable Performance Cycle pursuant to such award;


 


9














 


d
=                the Fair Market
Value of a share of FSA Stock as of the last day of the applicable Performance
Cycle or such other date as the Committee shall specify in such award; and


 


e
=                 the amount of the
cash to be paid to the Participant at the end of the applicable Performance
Cycle pursuant to such award.


 


(c)           Election to Receive Stock or Cash.  Subject to any deferral election made
pursuant to the terms and conditions of an agreement evidencing an award
hereunder, at a date determined by the Company and notified to each Participant
prior to the date on which a Performance Cycle shall be completed with respect
to a Participant’s award of Performance Shares, such Participant may make an
election to receive such Participant’s distribution, if any, following completion
of such Performance Cycle, in shares of FSA Stock and/or cash.  Such election shall be made in writing and
shall be delivered to the Company’s Chief Financial Officer or General Counsel,
or such other officer as the Committee shall from time to time designate.  Notwithstanding any such election, the
Committee may in its sole and absolute discretion satisfy the Company’s
obligations to any Participant either by delivery of shares of FSA Stock,
subject to the availability of such FSA Stock under the Plan, or by paying
cash.  If the Participant shall fail to
make a timely election, the Committee shall have the sole discretion to deliver
shares of FSA Stock and/or pay cash to satisfy any such obligation.


 


In the event
Participants elect to receive shares of FSA Stock in satisfaction of the
Company’s obligations under paragraph (b) of this Section 5 with
respect to the completion of a particular Performance Cycle, and the aggregate
number of shares of FSA Stock subject to such elections exceeds the maximum number
of shares of FSA Stock reserved and available for distribution under the Plan,
the Committee shall have the absolute and sole discretion to satisfy such
obligations by reducing the number of shares of FSA Stock subject to such
elections to that number which equals the maximum number of shares of FSA Stock
so reserved and available for distribution under the Plan.  In such event, the Committee shall reduce the
number of shares of FSA Stock pursuant to each Participant’s election pro rata,
based upon the number of shares of FSA Stock otherwise issuable pursuant to
such elections.  The Company shall
satisfy the obligations to such Participants, which remain unsatisfied
following a distribution made pursuant to the foregoing reduction, by paying
cash to such Participants in accordance with the formula, and within the time
period, set forth in paragraph (b) of this Section 5.


 


(d)           Change in Control.  In the event of a Change in Control, the
Committee shall make such adjustments, if any, to the Performance Objectives
and/or the method of calculating the Performance Objectives as it shall deem
necessary or appropriate to preserve the value of all Performance Shares then
unpaid consistent with the intent and the purpose of the Plan.  Any adjustment of Performance Objectives or
the method of calculating Performance Objectives after the grant of a
Performance Share shall be made in accordance with the requirements of Section 409A
of the Code to avoid taxation under Section 409A(a)(1) of the Code.


 


If, after the occurrence
of a Qualified Change in Control, a Participant’s employment is terminated by
the Company without Cause or such Participant shall voluntarily terminate his
or her employment for Good Reason, in either case prior to the completion of a
Performance Cycle in respect of any Performance Shares awarded to the
Participant, then (i) all of the Participant’s Performance Shares
outstanding at the date of the Change in Control and having Performance Cycles
which shall not have been completed prior to the date of termination of
employment (the “Operative Date”) shall become fully vested, and (ii) payment
in respect of such Performance Shares shall be made on the first regular
payroll payment date that is at least six months after the Operative Date (the “Six-Month
Period”).  The Committee shall value
all such Performance Shares in respect of Performance Cycles which shall not
have been completed on or before the Operative Date based upon the formulae set
forth in paragraph (b)


 


10

















 


of this Section 5
except that b shall be equal to a percentage (the “Minimum
Percentage”) equal to (i) for all Performance Cycles that do not
include at least one completed year as of the Operative Date, 100%, and (ii) for
all Performance Cycles that include at least one completed year as of the
Operative Date, a percentage (which may be more than 100%), which represents
the extent to which the Performance Objectives set forth in such award have
been achieved by the Company in the applicable Performance Cycle assuming that
the Company achieved 100% of its Performance Objectives for each year not
completed as of the Operative Date.  In
the case of any Performance Cycle completed during the Six-Month Period,
payment of any amount due shall be made in accordance with paragraph (b) of
this Section 5, provided that any incremental payment due pursuant to the
foregoing provisions of this paragraph (e) by reason of application of the
Minimum Percentage shall be payable at the end of the Six-Month Period.


 


For purposes of this paragraph (d) of Section 5, a
termination of employment shall mean only a termination of employment that is
also a “separation from service” within the meaning of Section 409A of the
Code to the extent so required to avoid taxation under Section 409A(a)(1) of
the Code.  A Participant generally has a
separation from service within the meaning of Section 409A of the Code if
the facts and circumstances indicate that the Company and the Participant
reasonably anticipate that no further services will be performed by the
Participant for the Company or any Affiliate or that the level of bona fide
services the Participant will perform for the Company and all Affiliates
(whether as an employee or as an independent contractor) will decrease to no
more than 20% of the average level of bona fide services performed (whether as
an employee or an independent contractor) over the immediately preceding
36-month period (or the full period of services if the Participant has been
providing services for less than 36 months). 
Notwithstanding the foregoing, the employment relationship is treated as
continuing while the Participant is on military leave, sick leave or other bona
fide leave of absence if the period of leave does not exceed six months, or if
longer, so long as the individual retains the right to reemployment with the
Company or any Affiliate under an applicable statute or contract.  When a leave of absence is due to any
medically determinable physical or mental impairment that can be expected to
result in death or to last for a period of at least six months and such
impairment causes the Participant to be unable to perform the duties of his or
her position or any substantially similar position, a 29-month maximum period
of absence shall be substituted for the six-month maximum period described in
the preceding sentence.  For purposes of
the foregoing, the term “Affiliate” means any corporation or other business
entity that would be considered a single employer with the Company pursuant to
Sections 414(b) or 414(c) of the Code.


 


(e)           Holders of Performance Shares Not
To Be Treated As Stockholders. 
Neither any Participant awarded Performance Shares hereunder, nor any
person entitled to exercise a Participant’s rights thereto in the event of death,
shall have any rights of a stockholder with respect to any share of FSA Stock
subject to such Participant’s award of Performance Shares, except to the extent
that a certificate for such shares shall have been issued as provided for
herein.


 


(f)            Non-Transferability of
Performance Shares.  No Performance
Share shall be transferable by a Participant, or otherwise subject to voluntary
or involuntary sale, pledge, anticipation, alienation, encumbrance, assignment,
garnishment or attachment, other than by will or by the laws of descent and
distribution.


 


11

















 


Section 6.  Dexia Restricted Stock.


 


(a)           Administration.  Shares of Dexia Restricted Stock may be
issued either alone or in addition to other awards granted under the Plan.  The Committee shall determine the officers
and key employees of the Company to whom, and the time or times at which,
grants of Dexia Restricted Stock will be made, the number of shares to be
awarded, the time or times within which such awards may be subject to
forfeiture, and all other conditions of the awards.  The provisions of Dexia Restricted Stock
awards need not be the same with respect to each recipient.


 


(b)           Awards and Custody Arrangement.  Each award of shares of Dexia Restricted Stock
shall be evidenced by a written agreement, in such form as the Committee shall
from time to time approve, setting forth the terms and conditions applicable to
such award, including terms relating to the vesting, restricted period and
transfer restrictions applicable thereto. 
The Participant who is the prospective recipient of an award of Dexia
Restricted Stock shall not have any rights with respect to such award unless
and until such recipient has executed such written agreement evidencing the
award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.


 


The shares of
Dexia Restricted Stock granted to a Participant shall be held in custody during
the Restricted Period applicable to such shares in a securities account
maintained by a custodian selected by the Company on behalf of the
Participant.  Upon grant of an award of
shares of Dexia Restricted Stock (and subject to the Participant’s execution
and delivery of the related award agreement), Dexia shall cause the custodian
to be recorded as the record holder of such shares in the records of Dexia’s
transfer agent or in the records of holders of Dexia Stock maintained by the
Depositary Trust Company and the custodian shall credit such shares to a
notional account maintained for such Participant in the books and records of
the custodian.


 


In the event that
Dexia determines that shares of Dexia Restricted Stock will be evidenced by
stock certificates, such stock certificates shall be registered in the name of,
and held in custody by, the custodian designated by the Company until the
Restricted Period with respect thereto shall have expired.  The custodian shall credit such shares to a notional
account maintained for such Participant in the books and records of the
custodian.


 


If and when the
Restricted Period expires with respect to any shares of Dexia Restricted Stock,
Dexia shall cause the Participant to be substituted for the custodian as the
record holder of such shares in the records of Dexia’s transfer agent or in the
records of holders of Dexia Stock maintained by the Depositary Trust Company
and the custodian shall make a corresponding reduction to the number of shares
credited to such Participant’s notional account in the books and records of the
custodian.  Alternatively, any shares of
Dexia Restricted Stock that have been certificated in the name of the custodian
shall be cancelled upon the expiration of the related Restricted Period and
shall be reissued in the name of, and delivered to, the Participant and the
shares evidenced by such stock certificates shall be recorded in the name of
such Participant in Dexia’s share registry.


 


(c)           Restrictions and Conditions.  The shares of Dexia Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:


 


(i)            Subject to the provisions of the
Plan and the award agreements, during a period set by the Committee commencing
with the grant date of such award and ending on such date or dates established
by the Committee, which date or dates shall not be less than six months
following the expiration of the Forfeiture Period applicable to any such shares
of Restricted Dexia Stock (the “Restricted Period”), the Participant
shall not be permitted voluntarily or


 


12

















 


involuntarily to
sell, transfer, pledge, anticipate, alienate, encumber or assign shares of
Dexia Restricted Stock awarded under the Plan (or have such shares attached or
garnished); provided that the Restricted Period for any shares of Dexia
Restricted Stock that are automatically sold to the Company or Dexia to satisfy
withholding tax requirements in accordance with paragraph (e) of this Section 6
shall expire at the time of such sale.


 


(ii)           Except as otherwise provided in
paragraph (c) of this Section 6, the recipient shall have, in respect
of the shares of Dexia Restricted Stock, all of the rights of a stockholder of
Dexia, including the right to vote the shares and the right to receive any cash
dividends, provided that any stock dividends paid, or proceeds of stock splits,
shall remain Dexia Restricted Stock subject to the same custody arrangement,
vesting provisions and Restricted Period applicable to the Dexia Restricted
Stock in respect of which such stock dividend was paid or stock split was
made.  The Committee may, in its sole
discretion, at the time of an award, defer the payment of any cash dividends
otherwise payable until a time specified in the award agreement or a date following
(A) the recipient’s separation from service within the meaning of Section 409A
of the Code, (B) the recipient’s death, (C) the recipient’s Qualified
Disability or (D) a Qualified Change in Control.


 


(iii)          The shares of Dexia Restricted Stock
shall be vested at such time or times as determined by the Committee at the
date of award, provided that acceleration of vesting may be granted by the
Committee after the date of award.  The
period from the date of grant of any shares of Dexia Restricted Stock to the
date such shares are scheduled to become vested (without regard to the
acceleration of the vesting of such shares pursuant to paragraph (c)(v), (vi) or
(vii) of this Section 6 or otherwise) shall be referred to as the “Normal
Vesting Period” and the period from the date of grant of any such shares of
Dexia Restricted Stock to the date of vesting of such shares (including the
vesting of any such shares pursuant to paragraph (c)(v), (vi) or (vii) of
this Section 6) shall be referred to as the “Forfeiture Period.”  If the Committee provides, in its discretion
at the time of award, that any award is vested only in installments, the
Committee may waive such installment vesting provisions at any time.


 


(iv)          Upon termination of employment for any
reason during the Normal Vesting Period, (A) all shares of Dexia
Restricted Stock still unvested shall be forfeited by the Participant, subject
to the provisions of the award agreement and paragraphs (c)(v), (vi) and (vii) of
this Section 6, and (B) shares of vested Dexia Restricted Stock shall
be delivered to the Participant upon the conclusion of the applicable
Restricted Period in accordance with this paragraph (c).


 


(v)           Upon termination of a Participant’s
employment by the Company without Cause, unless the Committee shall otherwise
determine at the time of award, a portion of the shares of Dexia Restricted
Stock subject to such award that have not become vested prior to the date of
such termination shall vest as of such date, such portion to equal the ratio of
(A) the number of days in the Normal Vesting Period applicable to such
shares that have elapsed as of the date of termination, over (B) the total
number of days in such Normal Vesting Period.


 


(vi)          Upon becoming eligible for Retirement
at age 55 with 5 Years of Service (a Participant’s “Retirement Eligibility
Date”), unless the Committee shall otherwise determine at the time of
award, a portion of the shares of Dexia Restricted Stock subject to such award
that have not become vested prior to such Participant’s Retirement Eligibility
Date shall vest as of such date, such portion to equal the ratio of (A) the
number of days in the Normal Vesting Period applicable to such shares that have
elapsed as of the Retirement Eligibility Date, over (B) the total number
of days in such Normal Vesting Period. 
The shares of Dexia Restricted Stock


 


13

















 


subject to such
award that are still unvested following the Participant’s Retirement
Eligibility Date shall vest in equal installments as of the last day of each of
the Company’s fiscal quarters ending during the remaining term of the
applicable Normal Vesting Period, provided that, in the case of each such
installment, the Participant remains employed by the Company until the
applicable vesting date.


 


(vii)         All unvested Dexia Restricted Stock
granted to a Participant shall vest (A) upon the death or Disability of
such Participant while employed by the Company or (B) to the same extent
that Performance Shares vest, in the event of a Change in Control while such
Participant is employed by the Company.


 


(d)           Election to Sell Stock.  At a date determined by the Company and
notified to each Participant prior to the date on which the Restricted Period
shall be completed with respect to vested shares of Dexia Restricted Stock
granted to a Participant, such Participant may make an election to sell to the
Company all or a portion of the vested shares, if any, that such Participant
would be entitled to receive following completion of such Restricted
Period.  Such election shall be made in
writing and shall be delivered to the Company’s Chief Financial Officer or
General Counsel, or such other officer as the Committee shall from time to time
designate.  Notwithstanding any election
to sell, the Committee, in its sole and absolute discretion, may refuse to
purchase shares of Dexia Stock from a Participant.  If the Participant shall fail to make a
timely election to sell any vested shares of Dexia Stock, the Committee, in its
sole discretion, may nonetheless purchase shares of Dexia Stock offered to it
for sale by the Participant.


 


Any Dexia Stock
purchased by the Company pursuant to this paragraph (d) shall be purchased
at the Fair Market Value of Dexia Stock as of the last day of the Restricted
Period (or if such day is not a trading day for Dexia Stock, then the first
succeeding trading day for Dexia Stock). 
Distribution of shares of Dexia Stock and/or payments of cash with
respect to Dexia Stock purchased by the Company shall be made to the Participant
promptly after expiration of the applicable Restricted Period.


 


(e)           Tax Withholding.  In accordance with Section 11(d), each
Participant shall automatically sell to the Company a number of whole and/or
fractional shares of Dexia Stock in order to satisfy the minimum withholding
requirement for all applicable national, state and local income, excise and
employment taxes that may become due and payable in respect of any award of
Dexia Stock, the expiration of the Forfeiture Period in respect thereof or otherwise
in connection therewith; provided that the Participant may elect to satisfy any
such withholding requirement by the delivery of cash.  Such election must be made in writing and
delivered to the Company’s Chief Financial Officer or General Counsel or such
other officer as the Committee shall from time to time designate no later than
thirty (30) days prior to the date of any such withholding requirement.  Any shares of Dexia Stock sold to the Company
pursuant to this paragraph  (e) shall
be valued at their Fair Market Value on the date of the applicable withholding
requirement or the date of the applicable withholding, as determined by the
Company (or if such day is not a trading day for Dexia Stock, then the first
succeeding trading day for Dexia Stock).


 


(f)            Dexia Stock Ceases to be
Outstanding.  If, as a result of any
merger, reorganization or other business combination or any other event or
occurrence (a “Realization Event”), Dexia Stock is converted or
exchanged for cash, shares or other consideration (the “Realization
Consideration”), each share of Dexia Restricted Stock outstanding
immediately prior to such Realization Event shall be converted into the
Realization Consideration at the same time and on the same terms as applicable
to Dexia Stock in general and shall be subject to the terms and conditions of Section 6(c) applicable
to the Dexia Restricted Stock for which the Realization Consideration was paid,
including the timing of payment, transfer and forfeiture provisions applicable
with respect to the remaining term of the


 


14

















 


 applicable Restricted Period and the
Forfeiture Period, unless, in any such case, waived by the Committee in its
sole discretion, subject to the following terms of this Section 6(f).  To the extent that the Realization
Consideration consists of shares, the provisions hereof applicable to Dexia
Restricted Stock shall apply to such shares as if such shares were Dexia
Restricted Stock.  To the extent that the
Realization Consideration consists of cash (the “Restricted Cash Amount”),
such Restricted Cash Amount shall be paid to Participants on the first regular
payroll payment date that is at least six months after the end of the Normal
Vesting Period applicable to the Dexia Restricted Stock for which the
Restricted Cash Amount was substituted, or at such other time or times as the
Committee shall determine consistent with the requirements of Section 409A
of the Code to avoid taxation under Section 409A(a)(1) of the
Code.  Such Restricted Cash Amount shall
be converted into U.S. dollars using the noon buying rate published by the
Federal Reserve Bank of New York for the date of receipt of such cash (or if
such rate is no longer published, such other rate as the Committee shall approve)
and credited with a rate of return equal to the Company’s ROE from the date of
conversion into cash until the date of payment. 
The Company’s obligation to pay the Restricted Cash Amount, along with
any deemed earnings or losses thereon, shall be an unfunded contractual
obligation that will be satisfied out of the Company’s general assets.  Participants shall have only the rights of a
general unsecured creditor of the Company with respect to such amounts.  For purposes of the foregoing, ROE means, in
respect of any period, the average of:


 


(i)            the discount rate (expressed as an
annual percentage rate) such that (a) the Adjusted Book Value per share of
FSA Stock on the last day of the last calendar quarter in such period, and the
dividends paid per share during such period, each discounted at such discount
rate to the first day of the first calendar quarter in such period, equals (b) the
Adjusted Book Value per share of FSA Stock on the first day of the first
calendar quarter in such period; and


 


(ii)           the discount rate (expressed as an
annual percentage rate) such that (a) the Book Value per share of FSA
Stock on the last day of the last calendar quarter in such period, and the
dividends paid per share during such period, each discounted at such discount
rate to the first day of the first calendar quarter in such period, equals (b) the
Book Value per share of FSA Stock on the first day of the first calendar
quarter in such period.


 


Section 7. 
Performance Share Units.


 


(a)           Administration.  Performance Share Units may be issued either
alone or in addition to other awards granted under the Plan.  The Committee shall determine the officers
and key employees of the Company to whom, and the time or times at which,
grants of Performance Share Units will be made, the number of Performance
Shares and shares of Dexia Restricted Stock to be represented by each
Performance Share Unit, and all other conditions of the awards.  The provisions of awards of Performance Share
Units need not be the same with respect to each recipient.


 


(b)           Awards.  The prospective recipient of an award of
Performance Share Units shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the
Performance Share award and Dexia Restricted Stock award comprising such
Performance Share Units, and has delivered fully executed copies thereof to the
Company, and has otherwise complied with the then applicable terms and
conditions.  Unless otherwise specified
by the Committee at the time of award, each award of Performance Share Units
shall be comprised of (i) a number of Performance Shares equal to 90% of
the number of Performance Share Units and (ii) a number of shares of Dexia
Restricted Stock equal to (A) the product of (x) 10% of the number of
Performance Share Units times (y) the Fair Market Value of one share of
FSA Stock determined as of December 31 of


 


15

















 


the year
immediately preceding the year in which the award is made divided by (B) the
Fair Market Value of one share of Dexia Stock determined as of the day
preceding the date of the award.


 


Section 8.  Transfer, Leave of Absence, etc.


 


For purposes of
the Plan, the following events shall not be deemed a termination of employment:


 


a.                                      a
transfer of an employee from the Company to a Subsidiary, or from a Subsidiary
to the Company, or from one Subsidiary to another; or


 


b.                                     a
leave of absence, approved in writing by the Committee, for military service or
sickness, or for any other purpose approved by the Company if the period of
such leave does not exceed ninety (90) days (or such longer period as the
Committee may approve in its sole discretion consistent with the requirements
of Section 409A of the Code).


 


Section 9.  Amendments and Termination.


 


The Board may
amend, alter, or discontinue the Plan (or any portion thereof), but no
amendment, alteration or discontinuation shall be made which would impair the
rights of any recipient with respect to any award of Performance Shares, Dexia
Restricted Stock or Performance Share Units theretofore granted, without the
recipient’s consent; provided that the Board may not make any amendment to the
Plan that would, if such amendment were not approved by the holders of FSA
Stock, cause the Plan to fail to comply with (a) Section 16 of the
Act (or Rule 16b-3 under the Act), or (b) any other requirement of
applicable law or regulation, unless and until the approval of the holders of
FSA Stock is obtained.


 


The Committee may
amend the terms of any award or option theretofore granted, prospectively or
retroactively, but no such amendment shall impair the rights of any holder
without his or her consent.


 


Notwithstanding
the foregoing, the Board may amend the Plan or the terms of any award
thereunder to preserve the favorable tax treatment of the awards and benefits
provided under the Plan.


 


Section 10.  
Compliance with Code Section 409A.


 


Notwithstanding
any other provision of the Plan to the contrary, the terms of the Plan and any
award thereunder shall be construed or deemed to be amended as necessary to
comply with the requirements of Section 409A of the Code to avoid taxation
under Section 409A(a)(1) of the Code. 
The Committee, in its sole discretion, shall determine the requirements
of 409A of the Code applicable to the Plan and shall interpret the terms of the
Plan consistently therewith.  Under no
circumstances, however, shall the Company have any liability to any person for
any taxes, penalties or interest due on amounts paid or payable pursuant to the
Plan, including any taxes, penalties or interest imposed under Section 409A(a)(1) of
the Code.


 


Section 11. 
General Provisions.


 


a.             All certificates for shares of FSA
Stock delivered under the Plan pursuant to any award of Performance Shares or
Performance Share Units, and all certificates for shares of Dexia Stock
delivered under the Plan pursuant to any award of Dexia Restricted Stock or
Performance Share Units, shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the FSA Stock or Dexia Stock, as the case may be,
is then listed, and any applicable Federal, state or foreign securities law,
and the Committee may cause a legend or legends to


 


16

















 


be put on any such
certificates to make appropriate reference to such restrictions.  The foregoing provisions of this paragraph
applicable to FSA Stock and Dexia Stock shall not be effective if and to the
extent that the shares of FSA Stock or Dexia Stock delivered under the Plan are
covered by an effective and current registration statement under the Securities
Act of 1933, as amended, such that application of such provisions is no longer
required, or if and so long as the Committee otherwise determines that such
application is no longer required.


 


b.             Subject to paragraph (d) below,
recipients of Dexia Restricted Stock or FSA Stock in respect of Performance
Shares under the Plan are not required to make any payment or provide
consideration other than the rendering of past services and/or the commitment
to render and rendering of future services.


 


c.             Nothing contained in the Plan shall
prevent the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.  The adoption of the Plan
shall not confer upon any employee of the Company or any Subsidiary any right
to continued employment with the Company, nor shall it interfere in any way
with the right of the Company to terminate the employment of any of its
employees at any time.


 


d.             Each Participant shall, no later
than the date as of which the value of an award first becomes includible in the
gross income of the Participant for national, state or local income tax
purposes, pay to the Company or make arrangements satisfactory to the Committee
regarding payment of any national, state or local taxes of any kind required by
law to be withheld with respect to the award; provided, however, that such tax
withholding requirement may be met by the withholding or sale to the Company of
shares of FSA Stock or Dexia Stock otherwise deliverable to or vested in the
Participant, pursuant to procedures approved by the Committee.  The obligations of the Company under the Plan
shall be conditional on such payment or arrangements and the Company shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.


 


e.             At the time of grant, the Committee
may provide in connection with any grant made under the Plan that the shares of
FSA Stock or Dexia Stock received as a result of such grant shall be subject to
a right of first refusal, pursuant to which the Participant shall be required
to offer to the Company any shares that the Participant wishes to sell, with
the price being the then Fair Market Value of the FSA Stock or Dexia Stock, as
the case may be, subject to such other terms and conditions as the Committee
may specify at the time of grant.


 


f.              Notwithstanding any other
provision of the Plan, if the Committee determines that an individual entitled
to take action or receive payments hereunder is an infant or incompetent by
reason of physical or mental disability, it may permit such action to be made
by or cause such payments to be made to a legal guardian, custodian or
comparable party, without any further responsibility with respect thereto under
the Plan.


 


g.             THIS PLAN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICT OF LAWS.


 


Section 12. 
Effective Date of Plan.


 


The Plan was
originally effective on the date it was approved by a vote of the holders of a
majority of the total outstanding Stock. 
The amendment and restatement of the Plan, as set forth in this Plan
document, is effective May 21, 2008.


 


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Section 13. 
Term of Plan.


 


No award of
Performance Shares, Dexia Restricted Stock or Performance Share Units shall be
granted pursuant to the Plan on or after the tenth anniversary of the date of
the most recent stockholder approval of the Plan, but awards theretofore
granted may extend beyond that date.


 


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