Exhibit 10.4


 


[Approved by HR Committee—11/17/04]


FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.


AGREEMENT EVIDENCING AN AWARD OF DEXIA RESTRICTED STOCK


 


January [      ],
2005


 


To:  [                ]”Employee”


 


We are pleased to notify you that by the determination of the Human
Resources Committee (the “Committee”) of the Board of Directors of
Financial Security Assurance Holdings Ltd. (together with any successor thereto, the
“Company”) (Number of Shares) (                )
shares of Dexia Restricted
Stock have been awarded to you under the Financial
Security Assurance Holdings Ltd. 2004 Equity Participation Plan (as
amended from time to time, the “Plan”). 
Unless otherwise defined herein, all capitalized terms contained herein
shall have the definitions that are ascribed to them in the Plan.


 


As
described herein, your shares of Dexia Restricted Stock
will be allocated (i) 33-1/3% to the
three-year Restricted Period scheduled to end
December 31, 2007 and (ii)
66-2/3% to the four-year Restricted
Period scheduled to end December 31, 2008.  Pursuant
to Section 6 of this
Agreement, payment in respect of vested Dexia Restricted Stock
allocated to each Restricted  Period
will be made in cash,  unrestricted
shares of Dexia Stock
or a combination of shares and
cash following the end of the
Restricted Period for such vested
shares of Dexia Restricted Stock.  During
the Restricted Period, your shares of Dexia Restricted Stock
will be held in custody in a securities account
maintained by a custodian designated by the Company,
subject to the provisions of this Agreement and the Plan.


 


1.                                       Purpose of Award.


 


The
purpose of the Plan pursuant to which your shares
of Dexia Restricted Stock have been awarded
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 and/or the
cash equivalent thereof.


 


2.                                       Acceptance
of the Dexia Restricted Stock Award Agreement.


 


Your execution
of this Dexia Restricted Stock award agreement (this “Agreement”) will indicate
your acceptance of, and your agreement to be bound by, the terms set forth in
this Agreement and in the Plan.


 


3.                                       Vesting Period.


 


On the date hereof, you
are vested in none of the shares of Dexia Restricted Stock subject to this
award.  Subject to the provisions of this
Section 3 and the Plan, your shares of Dexia Restricted Stock shall vest
according to the following schedule:


 




	
  Vesting
  Date

  	
   

  	
  % of Dexia Restricted Stock Award Vesting

  
	
  June 30, 2007

  	
   

  	
  33-1/3%

  
	
  June 30, 2008

  	
   

  	
  66-2/3%

  






 


The period from the date of grant of your shares of
Dexia Restricted Stock to the date such shares are scheduled to become vested
is referred to as the “Normal Vesting Period.”


 


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In the event of
termination of your employment for any reason during the Normal Vesting Period,
(i) you shall forfeit all your shares of Dexia Restricted Stock that have not
become vested prior to your date of termination, except as specified below in
this Section 3, and (ii) you shall be entitled to payment in respect of
your shares of vested Dexia Restricted Stock (including shares that become
vested as specified below in this Section 3) in the form of shares of
unrestricted Dexia Stock, cash or a combination of shares and cash upon the
conclusion of the applicable Restricted Period. 
The period from the date of award of your Dexia Restricted Stock to the
actual date of vesting (taking into account the earlier vesting as a result of
the events described below in this Section 3) is referred to as the “Forfeiture
Period.”


 


•                                          Upon termination of your employment by the Company
without Cause, a portion of your shares of Dexia Restricted Stock subject to
this 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 (i) the number
of days in the Normal Vesting Period applicable to such shares that have
elapsed as of the date of termination, over (ii) the total number of days in
such Normal Vesting Period.


 


•                                          Upon becoming eligible for Retirement at age 55
(your “Retirement Eligibility Date”), a portion of your shares of Dexia
Restricted Stock subject to this award that have not become vested prior to
your Retirement Eligibility Date shall vest as of such date, such portion to
equal the ratio of (i) the number of days in the Normal Vesting Period applicable
to such shares that have elapsed as of the Retirement Eligibility Date, over
(ii) the total number of days in such Normal Vesting Period.  The shares of Dexia Restricted Stock subject
to this award that are still unvested following your 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, you remain
employed by the Company until the applicable vesting date.


 


•                                          All your unvested shares of Dexia Restricted Stock
awarded hereunder shall vest (i) upon your death or Disability while you are
employed by the Company or (ii) to the same extent that Performance Shares vest,
in the event of a Change in Control while you are employed by the Company.


 


4.                                       Restricted Period.


 


From the date of award of
your Dexia Restricted Stock until 6 months following the expiration of the
Forfeiture Period (such period, the “Restricted Period”), you shall not be
permitted, voluntarily or involuntarily, to sell, transfer, pledge, anticipate,
alienate, encumber or assign your shares of Dexia Restricted Stock awarded
hereunder except by will or the laws of descent and distribution; provided that
the Restricted Period for any shares of Dexia Restricted Stock that are
automatically sold to the Company or to Dexia to satisfy withholding tax
requirements in accordance with Section 8 below shall expire at the
expiration of the applicable Forfeiture Period. 
The Restricted Periods set forth below shall apply to your shares of
Dexia Restricted Stock that vest at the conclusion of the Normal Vesting
Period:


 


	
  Vesting
  Date

  	
   

  	
  Restricted Period Ended

  	
   

  	
  % of Dexia Restricted Stock Award

  Becoming Unrestricted

  
	
  June 30, 2007

  	
   

  	
  December 31, 2007

  	
   

  	
  33-1/3%

  
	
  June 30, 2008

  	
   

  	
  December 31, 2008

  	
   

  	
  66-2/3%

  



 


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5.                                       Dividends and Voting Rights.


 


Other than the
restrictions on transfer during the Restricted Period, the risk of forfeiture
during the Vesting Period and any other terms and conditions of your award set
forth herein and in the Plan, you shall have all of the rights of a holder of
Dexia Stock in respect of your shares of Dexia Restricted Stock, 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.  Cash dividends received with respect to your
Dexia Restricted Stock shall be converted into U. S. dollars at the then
applicable exchange rates and paid to you promptly following receipt by the
custodian of such dividends.


 


6.                                       Election to Receive Stock or Cash.


 


Prior to the date on which
the Restricted Period shall be completed with respect to vested shares of Dexia
Restricted Stock awarded to you hereunder, you shall be given an opportunity to
make an election to receive payment in respect of such shares, if any,
following completion of such Restricted Period, in shares of Dexia Stock (not
subject to restrictions), cash or a combination of shares and 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 cash election made by
you, the Committee may, in its sole and absolute discretion, satisfy the
Company’s obligations to you by delivery of unrestricted Dexia Stock.  If you fail to make a timely election with
respect to any vested shares of Dexia Restricted Stock prior to completion of
the Restricted Period, the Committee shall have the sole discretion to deliver
unrestricted Dexia Stock and/or pay cash to satisfy the Company’s obligation to
you in respect of such Dexia Restricted Stock.


 


7.                                       Distributions and Payments on Completion of Restricted
Period.


 


In furtherance of an
election made under Section 6 of this Agreement, and subject to the
Company’s rights thereunder, distributions of Dexia Stock and/or payments of
cash with respect to shares of Dexia Restricted Stock allocated to a particular
Restricted Period covered by this award shall be made to you within ten (10)
days after the completion of such Restricted Period.  Within such time period, you shall be
entitled to receive with respect to each vested share of Dexia Restricted Stock
outstanding:


 


(i)                                     a share of Dexia Stock (not subject to restrictions
under the Plan); or


 


(ii)                                  a cash payment equal to the Fair Market Value of the
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), 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).


 


8.                                       Tax Withholding.


 


In accordance with Section 10(d)
of the Plan, you shall automatically sell to the Company a number of whole
and/or fractional shares of Dexia Stock that would otherwise be distributed to
you upon expiration of the Forfeiture Period in order to satisfy the minimum
withholding requirement for all applicable Federal, state and local income,
excise and employment taxes; provided that you 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


 


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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 Section 8 shall be valued
at their Fair Market Value on the date of the applicable withholding
requirement (or if such day is not a trading day for Dexia Stock, then the
first succeeding trading day for 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).


 


9.                                       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 awarded hereunder
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) of the Plan 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 applicable Restricted Period and the Forfeiture Period,
unless, in any such case, waived by the Committee in its sole discretion;
provided that (i) 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; and (ii) to the
extent that the Realization Consideration consists of cash (the “Restricted
Cash Amount”), the Restricted Cash Amount shall be (A) 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 (B) credited
with a rate of return equal to the Company’s ROE from the date of conversion
into cash until the conclusion of the Restricted Period.  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 purpose 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 the Company’s common stock (“FSA Stock”) on the last day of the
last calendar quarter in such period, adjusted to exclude the after-tax change
in accumulated other comprehensive income (unrealized gains and losses in the
Company’s investment portfolio and any other component of other comprehensive
income) during 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,
adjusted to exclude the after-tax change in accumulated other comprehensive
income (unrealized gains and losses in the Company’s investment portfolio and
any other component of other comprehensive income) during 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


 


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period, equals
(b) the Book Value per share of FSA Stock on the first day of the first
calendar quarter in such period.


 


“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 U. S.
GAAP 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.


 


For purposes hereof, Adjusted Book Value shall be determined excluding
the after-tax effect of gains or losses attributable to mark-to-market of
Investment Grade credit derivatives.


 


“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.


 


“Book Value” means, as of a particular date, the Company’s
total shareholders’ equity on such date, as derived from the Company’s U. S.
GAAP financial statements for the period ended on such date.  For
purposes hereof, Book Value shall be determined excluding the after-tax effect
of gains or losses attributable to mark-to-market of Investment Grade credit
derivatives.


 


“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.


 


10.                                 Subject to Terms of the Plan.


 


This
Agreement shall be subject in all respects to the terms and conditions of the
Plan and in the event of any question or controversy relating to the terms of
the Plan, or any ambiguity in interpreting the provisions thereof, the decision
of the Committee shall be conclusive.


 


11.                                 Miscellaneous.


 


(a)                                  All decisions made by the Committee pursuant
to the provisions of this Agreement and the Plan (including without limitation
any interpretation of this Agreement and the Plan) shall be final and binding,
in the absence of bad faith or manifest error, on all persons and otherwise


 


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entitled to the maximum deference permitted by law, including the Company and
you.  Any dispute, controversy or claim
between the parties hereto arising out of or relating to this Agreement shall
be settled by arbitration conducted in the City of New York, in accordance with
the Commercial Rules of the American Arbitration Association then in force and
New York law.  In any dispute or controversy
or claim challenging any determination by the Committee, the arbitrator(s)
shall uphold such determination in the absence of the arbitrator’s finding of
the presence of bad faith or manifest error of the Committee.  The arbitration decision or award shall be
final and binding upon the parties.  The
arbitration shall be in writing and shall set forth the basis therefor.  The parties hereto shall abide by all awards
rendered in such arbitration proceedings, and all such awards may be enforced
and executed upon in any court having jurisdiction over the party against whom
enforcement of such award is sought. 
Each party shall bear its own costs with respect to such arbitration,
including reasonable attorneys’ fees; provided, however, that: (i) the fees of
the American Arbitration Association shall be borne equally by the parties; and
(ii) if the arbitration is resolved in your favor, your costs of arbitration
(including such fees) shall be paid by the Company.


 


(b)                                 All certificates for shares of Dexia
Stock delivered pursuant to this Agreement 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 Dexia
Stock is then listed, and any applicable Federal,
state or foreign securities law,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.


 


(c)                                  This Agreement shall not confer upon you
any right to continued employment with the Company, nor shall it interfere in
any way with the right of the Company to terminate your
employment at any time.  Notwithstanding any other provisions of this
Agreement or the Plan, if the Committee determines that any 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 different individual, without any
further responsibility with respect thereto under this Agreement or the Plan.


 


(d)                                 All notices hereunder shall be in writing
and, if to the Company, shall be delivered or mailed to its principal office,
addressed to the attention of the General Counsel; and if to you, shall be
delivered personally or mailed to you at the address appearing in the records
of the Company.  Such addresses may be
changed at any time by written notice to the other party given in accordance
with this Section 11.


 


(e)                                  The failure of you or the Company to insist
upon strict compliance with any provision of this Agreement or the Plan, or to
assert any right you or the Company may have under this Agreement or the Plan,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement or the Plan.


 


(f)                                    This Agreement contains the entire agreement
between the parties with respect to the subject hereof and supersedes all prior
agreements, written or oral, with respect thereto.


 


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


 


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  Sincerely
  yours,

  
	
   

  	
   

  
	
   

  	
  FINANCIAL
  SECURITY ASSURANCE HOLDINGS LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Sean
  W. McCarthy, President

  
	
   

  	
   

  
	
  Agreed
  to and accepted as of the

  date first set forth above (Please sign on the line

  below and print name in the space provided):

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (signature)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  (print name)

  	
   

  
					



 


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