Document:

Exhibit 10.2

 

 

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

2004 DEFERRED COMPENSATION PLAN

 

 

amended and restated as of May 18,
2006

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  	
  ESTABLISHMENT AND PURPOSE OF THE PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  PARTICIPATION

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  DEFERRAL ELECTIONS

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  CREDITING OF DEFERRAL AMOUNTS AND ACCRUAL OF 

  INVESTMENT GAINS OR LOSSES

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  COMMENCEMENT OF BENEFITS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  BENEFICIARY DESIGNATION

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  MAINTENANCE AND VALUATION OF ACCOUNTS

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  FUNDING

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  AMENDMENT AND TERMINATION

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
  FINANCIAL HARDSHIP WITHDRAWALS

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
  ADMINISTRATION

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
  GENERAL PROVISIONS

  	
   

  	
  20

  

 

 

FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD.

2004 DEFERRED COMPENSATION PLAN

ARTICLE I

ESTABLISHMENT AND
PURPOSE OF THE PLAN

1.1           Effective as of June 1, 1995,
Financial Security Assurance Holdings Ltd. (the “Company”) established for the
benefit of certain of its employees, certain employees of its affiliates or
subsidiaries and certain members of its board of directors an unfunded plan by
which eligible employees or eligible directors can elect to defer,
respectively, receipt of all or a portion of their compensation or fees. This
plan, as amended and restated, is known as the Financial Security Assurance
Holdings Ltd. 1995 Deferred Compensation Plan (the “1995 Deferred Compensation
Plan”). Effective as of December 17, 2004, the Company established a new deferred
compensation plan, serving the same purposes as the 1995 Deferred Compensation
Plan, pursuant to which eligible participants can elect to defer, respectively,
receipt of all or a portion of their compensation or fees earned or vested on
or after January 1, 2005. This new plan, as amended from time to time, is
known as the Financial Security Assurance Holdings Ltd. 2004 Deferred
Compensation Plan (the “Plan”). The Plan was amended and restated as of January 24,
2005 and is further amended and restated as set forth in this Plan document,
effective as of May 18, 2006, to provide that payments due upon a
separation from service shall generally not be paid during the six months
following the separation from service and to make certain other changes.

 

 

 

ARTICLE II

DEFINITIONS

Unless the context otherwise requires, the following
terms, when used herein, shall have the meaning assigned to them in this Article II.

2.1           The term “Account” shall mean a
Participant’s individual account, as described in Article VIII of the
Plan.

2.2           The term “Beneficiary” shall mean the
person or persons designated by the Participant (including an individual,
trust, estate, partnership, association, company, corporation or any other
entity), pursuant to Article VII of the Plan, to receive benefits under
the Plan in the event of the Participant’s death.

2.3           The term “Board” shall mean the Board
of Directors of the Company.

2.4           The term “Bonus” shall mean:  (i) bonus compensation payable in cash;
and (ii) an amount payable pursuant to a “Performance Shares” award under
the Equity Participation Plan.

2.5           The term “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time. Any references
herein to a specific section of the Code shall be deemed to refer to the rules and
regulations under the Code in respect of such section, and to the corresponding
provisions of any future internal revenue law and the rules and
regulations thereunder.

2.6           The
term “Committee” shall mean the Human Resources Committee of the Board.

 

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2.7           The
term “Company” shall mean Financial Security Assurance Holdings Ltd., a New
York corporation.

2.8           The
term “Compensation” shall mean, in respect of any Year and in each case before
any deductions for amounts deferred under the Plan: (i) in the case of an
Eligible Employee, the total of his or her annual salary and Bonus with respect
to such Year; and (ii) in the case of an Eligible Director, the total of
his or her fees from the Company, or any direct or indirect subsidiary thereof,
with respect to such Year.

2.9           The
term “Deferral Amount” shall mean the amount of Compensation that a Participant
defers under the terms of the Plan.

2.10         The
term “Deferral Period” shall mean the period of time during which a Participant
elects to defer the receipt of the Deferral Amount under the terms of the Plan.

2.11         The
term “Deferred Compensation Plan Election Change Form” shall mean the form
prescribed or accepted by the Committee by which a Participant may change a
previous election of a Deferral Amount.

2.12         The
term “Deferred Compensation Plan Election Form” shall mean the form prescribed
or accepted by the Committee by which a Participant elects a Deferral Amount.

2.13         The
term “Disability” shall mean, in the case of a Participant, that, as determined
by the Committee, the Participant is (i) unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months or (ii)

 

 

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by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, receiving income replacement benefits
for a period of not less than 3 months under an accident and health plan
covering employees of the Company.

2.14         The
term “Eligible Director” shall mean any member of the Board, or any member of
the board of directors of any direct or indirect subsidiary of the Company, in
each case who is not an employee of the Company or any of its subsidiaries.

2.15         The
term “Eligible Employee” shall mean any participant in the Company’s
Supplemental Executive Retirement Plan and any other employee of a Participating
Company as may be designated from time to time by the Committee as eligible to
participate in the Plan.

2.16         The
term “Equity Participation Plan” shall mean the Financial Security Assurance
Holdings Ltd. 1993 Equity Participation Plan or 2004 Equity Participation Plan,
as the case may be, in each case as amended from time to time.

2.17         The
term “Participant” shall mean an Eligible Employee or Eligible Director who
defers payment of Compensation under the terms of the Plan, including any
former Eligible Employee or Eligible Director who is receiving or will become
eligible to receive benefits under the Plan at a later date.

2.18         The
term “Participating Company” shall mean, with respect to an Eligible Employee,
the Company or any affiliate or subsidiary of the Company employing an Eligible
Employee.

 

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2.19         The
term “Plan” shall mean the Financial Security Assurance Holdings Ltd. 2004
Deferred Compensation Plan, as set forth herein and as amended from time to
time.

2.20         The term “Unforeseen Emergency” shall
mean a severe financial hardship to the Participant resulting from an illness
or accident of the Participant, the Participant’s spouse, or a dependent (as
defined in Section 152(a) of the Code) of the Participant, loss of
the Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant.

2.21         The
term “Year” shall mean the initial period from January 1, 2005 through December 31,
2005 and each 12-month calendar year thereafter beginning with January 1,
2006.

ARTICLE III

PARTICIPATION

3.1           Each Eligible Employee and each
Eligible Director shall become a Participant, as of the date specified in Section 3.2,
by electing a Deferral Amount in accordance with Section 4.1.

3.2           Subject to Section 3.4, an
Eligible Employee or Eligible Director shall become a Participant in the Plan
as of the date a Deferral Amount is credited to his or her Account and shall
remain a Participant until the complete distribution of the Participant’s
Account, subject to Article VII hereof.

3.3           Notwithstanding anything in the Plan to
the contrary, the Committee shall be authorized to take such steps as may be
necessary to ensure that the Plan (a) is and remains at all times an
unfunded deferred compensation arrangement for a select group of management or 

 

 

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highly compensated employees, within the meaning of the Employee
Retirement Income Security Act of 1974, as amended from time to time and (b) satisfies
the requirements of Section 409A of the Code for exclusion from gross
income of amounts deferred under the Plan.

3.4           Notwithstanding anything in the Plan to
the contrary, no Deferral Amount may be elected by any Eligible Director or
Eligible Employee if such Deferral Amount would be subject to current income
taxes in any non-U.S. jurisdiction notwithstanding any deferral of such
Compensation under the Plan. To the extent that, due to a change in law or
administrative oversight, a Deferral Amount is credited and would be subject to
taxes as aforesaid, the Company shall distribute such Compensation, adjusted
for gains or losses in accordance with Article V of the Plan, to the
Participant in the form of a lump sum distribution promptly following
confirmation by the Committee of such change in law or administrative
oversight; provided, however, that such distribution shall be made only to the
extent permitted by Section 409A of the Code for exclusion from gross
income of amounts deferred under the Plan.

ARTICLE IV

DEFERRAL ELECTIONS

4.1           In
December of each Year, each Eligible Director then serving and each
Eligible Employee then employed at a Participating Company shall have the right
to determine his or her Deferral Amount for the next Year, subject to the
limitations set forth in this Article IV. Any such Deferral Amount may be
comprised of salary and/or cash Bonus payable in respect of such next Year
and/or “Performance Shares” awarded pursuant to the Equity Participation Plan
having “Performance Cycles” scheduled to end at December 31 of such next
Year; provided that deferrals of salary may only be made with the approval the
Committee (or the Chief Executive in 

 

 

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respect of all Participants). With respect to the initial Year, cash
Bonuses payable in 2005 that were earned in 2004 and deferred in 2003 under the
1995 Deferred Compensation Plan shall be deemed to have been deferred under the
Plan rather than under the 1995 Deferred Compensation Plan to the extent that
the requirements of Section 409A of the Code apply to such deferrals for
exclusion from gross income of such deferred cash Bonuses. With respect to any
individual who becomes an Eligible Employee or Eligible Director for the first
time on or after January 1 but before March 1 in any Year, the
election of a Deferral Amount can be made within thirty days of becoming an
Eligible Employee or Eligible Director but only with respect to Compensation
for services rendered subsequent to the election. Subject to Section 4.3,
such Deferral Amount shall reduce the amount that is to be paid to the
Participant for the Year of reference. Subject to the foregoing, an Eligible
Employee may submit a separate election for a Year with respect to salary
payable in that Year, with respect to a cash Bonus payable for that Year and
with respect to any amount payable in respect of “Performance Shares” awarded
pursuant to the Equity Participation Plan having “Performance Cycles” scheduled
to end at December 31 of that Year. Prior to the commencement of any Year,
the Chief Executive Officer or the Committee may provide, by notice to Eligible
Employees, that salary or other specified components of compensation do not
qualify for deferral under the Plan for that Year.

4.2           An Eligible Employee or Eligible
Director who does not elect a Deferral Amount in December of any Year will
not be permitted to make such an election until the following December,
effective for the following Year; provided that any individual who becomes an
Eligible Employee or Eligible Director for the first time on or after January 1
but before March 1 in any year may elect a Deferral Amount within thirty
days of becoming an Eligible Employee or 

 

 

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Eligible Director but only with respect to Compensation for services
rendered subsequent to the election.

4.3           No deferral agreement with respect to a
Year shall provide for a Deferral Amount of less than $5,000 for such Year;
provided, however, that an election by an Eligible Employee with respect to
salary or Bonus may be conditioned upon the amount of the Eligible Employee’s
salary or Bonus (or component thereof) awarded.

4.4           Any election of a Deferral Amount shall
be effected by the execution of a valid Deferred Compensation Plan Election
Form, timely filed with the Company, and shall be irrevocable for the Year with
respect to which the election is made; provided, however, that anytime prior to
December 31, 2005 (or such earlier date as may be designated by the Chief
Executive Officer or the Committee), Participants shall be entitled to cancel
any deferral election in respect of cash Bonuses payable in 2005 that were
earned in 2004 and deferred in 2003 under the 1995 Deferred Compensation Plan
that have been deemed to have been deferred under the Plan rather than under
the 1995 Deferred Compensation Plan pursuant to Section 4.1. Such
cancellation shall be effective by the execution of a Deferral Cancellation
Form, in the form provided by the Company or accepted by the Committee, timely
filed with the Company and shall be irrevocable.

4.5           Each validly executed and timely filed
Deferred Compensation Plan Election Form shall be effective solely with
respect to the specified Year. An Eligible Director or Eligible Employee who
wishes to elect a Deferral Amount with respect to a succeeding Year must make a
separate and timely election for such Year.

 

 

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4.6           An election with respect to a Deferral
Amount for a Year must specify the Deferral Period applicable to that Deferral
Amount. With respect to a Deferral Amount for any Year, the Participant may
elect a Deferral Period of a specific number of years, provided that in no
event may the number of years be less than three (3). Alternatively, the
Participant may elect a Deferral Period which ends on (a) his or her
separation from service as an employee or director, (b) the date which is
thirteen (13) months after such separation from service, or (c) the
earlier of such separation from service (or the date which is thirteen (13)
months after such separation from service) or a specified number of years
pursuant to the preceding sentence. A Participant may elect a different
Deferral Period for each Year’s Deferral Amount or for any specified portion of
any Year’s Deferral Amounts, except that, unless the Committee (or the Chief
Executive Officer in respect of all Participants) otherwise directs, the
Deferral Period referred to in clause (c) of the preceding sentence may
only be elected by a Participant if so elected for all Deferral Amounts of such
Participant for all Years. A Participant may elect to extend, but not shorten,
a previously elected Deferral Period at any time at least 12 months before the
end of such previously elected Deferral Period by the execution of a valid
Deferred Compensation Plan Election Change Form, timely filed with the Company;
provided that a Deferral Period extension must be a minimum of five years. If
such previously elected Deferral Period ended upon separation from service as
an employee or director, then a Deferred Compensation Plan Election Change Form shall
only be effective in respect of Deferral Amounts that would not otherwise have
been distributed during the 12-month period after the filing of such
Form. Notwithstanding the foregoing, at any time before December 31, 2006
(or such earlier date as the Committee may establish), a Participant shall be
entitled to cancel any previously elected Deferral Period with respect to a
Deferral Amount not otherwise payable in 

 

 

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2006 and elect any new Deferral Period with respect to such Deferral
Amount that the Participant could have elected as an initial Deferral Period,
as set forth above; provided, however, that any newly elected Deferral Period
shall not be required to be at least three years; but further provided that the
new Deferral Period may not end before June 30, 2007. Such cancellation
and new election shall be made by the execution of a Deferral Period Change
Form, in the form provided by the Company or accepted by the Committee, and
shall be irrevocable.

4.7           Each deferral election also must
specify the payment option that will apply for the Deferral Amount, or any
portion thereof, for that Year, and earnings credited on that amount. The
normal form of payment shall be a lump sum payment. A Participant may elect
that the distribution be made in installments payable over a specified number
of years, not longer than 15 years; provided, however, that in no event may
installment payments be elected over a number of years that is more than the
Participant’s life expectancy or the life expectancy of the designated primary
Beneficiary, whichever is greater. If a Participant elects the installment
payment option, the Participant also must elect whether installments should be
made annually, quarterly or, if the Committee (or the Chief Executive Officer
in respect of all Participants) shall direct to offer such alternative,
monthly. Different payment options may be elected with respect to the Deferral
Amount, or any portion thereof, for each Year, and earnings credited on such
amount.

4.8           Anything
in Section 4.6 or 4.7 to the contrary notwithstanding, on his or her
Deferred Compensation Plan Election Form, the Participant may elect that in the
event of his or her death or Disability any Deferral Period or form of
distribution election otherwise applicable to a Deferral Amount is nullified
and: (i) distribution shall be made after the date of death or Disability;
and (ii) distribution of his or her entire Account, or of any Deferral
Amount, shall be 

 

 

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made either in a lump sum or in installments payable
over a specified number of years, not longer than 15. Unless otherwise elected
pursuant to the preceding sentence, in the event of the Participant’s death or
Disability, payment of a Participant’s Account shall be made in the form of a
lump sum as soon as administratively practicable following the date of death or
Disability.

ARTICLE V

CREDITING OF
DEFERRAL AMOUNTS AND

ACCRUAL OF INVESTMENT GAINS OR LOSSES

5.11        All Deferral Amounts will be withheld from
the electing Participant’s Compensation and credited on the Company’s books in
the Account maintained in such Participant’s name.

5.2          Each month, the balance of each
Participant’s Account shall be credited with earnings or investment gains and
losses as provided below. The Committee may establish procedures permitting
Participants to designate one or more investment benchmarks specified by the
Chief Executive Officer or the Committee for the purpose of determining the
earnings or investment gains and losses to be credited or debited to a
Participant’s Account. Investment benchmarks so specified may be made available
to all Participants or selected Participants as the Chief Executive Officer or
the Committee may designate. The Committee shall have the sole discretion to
make such rules as it deems desirable with respect to the administration
of any such investment benchmark procedures, including rules permitting
the Participant to change the designation of investment benchmarks to be used
to measure the value of the Account. The Committee, however, retains the
discretion at any time to change the investment benchmarks available to
Participants, including any investment benchmarks previously specified by the
Chief 

 

 

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Executive Officer, or to discontinue the investment benchmark
procedure. If the Committee fails to implement an investment benchmark
procedure or discontinues such procedure, the Participant’s Account shall be
credited with earnings at a rate determined by the Committee in its sole
discretion, utilizing whatever factors or indicia it deems appropriate;
provided, however, that the rate of return on a Participant’s Account in such
circumstances shall not be less than the JP Morgan Chase Bank prime rate plus
one percent per annum. If the Participant fails to designate properly an
investment benchmark, the Participant’s Account shall be credited with earnings
at a rate determined by the Committee in its sole discretion, utilizing
whatever factors or indicia it deems appropriate; provided, however, that the
rate of return on a Participant’s Account in such circumstances shall not be
less than the “money market account” benchmark available to Participants at the
time or, if no such benchmark shall be available, then not less than the rate
of interest on 90-day treasury bills for the applicable period as
determined by the Committee. Nothing in this Article V or in the Committee’s
rules shall give a Participant the right to require the Company or a
Participating Company to acquire any asset for the Account of the Participant,
and if the Company or a Participating Company acquires any asset, or causes a
trustee on its behalf to acquire any asset, to permit it to satisfy its
obligations to pay the Participant’s Deferral Amount, the Participant shall
have no right or interest in any such asset, which shall be held by the Company
or the Participating Company subject to the rights of all unsecured creditors
of the Company or the Participating Company. The rights of the Participant with
respect to any designation of one or more investment benchmarks for measuring
the value of any Account hereunder shall be expressly subject to the provisions
of Article IX of the Plan.

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ARTICLE
VI

COMMENCEMENT
OF BENEFITS

6.1           At
the end of the Deferral Period selected by a Participant with respect to each
Deferral Amount or, if applicable, separation from service with a Participating
Company or of status as an Eligible Director, the amount credited with respect
to such Deferral Amount shall be distributable to such Participant in the form
of payment selected, commencing as soon as administratively practicable. Notwithstanding
the foregoing, effective as of May 18, 2006, any distribution payments due
on account of a Participant’s separation from service and otherwise payable
during the six-month period following the Participant’s separation from service
shall be paid on the first date of the seventh month following the Participant’s
separation from service.

6.2           Notwithstanding
Section 6.1, each Participant’s Account shall be distributed in accordance
with Section 4.8 in the event of the Participant’s death or Disability;
provided, however, that if the Participant becomes entitled to a distribution
pursuant to Section 6.1 on account of the Participant’s separation from
service and the Participant subsequently becomes Disabled, any distribution
payments otherwise payable during the six-month period following the
Participant’s separation from service shall be paid on the first date of the
seventh month following the Participant’s separation from service to the extent
required under Section 409A of the Code to avoid taxation under Section 409A(a)(1),
as interpreted by the Committee in its sole discretion.

6.3           Notwithstanding
any other provision of the Plan to the contrary, the Committee, in its sole
discretion, shall have the right, but shall not be required, to distribute all
or any portion of a Participant’s benefits under the Plan in the form of any
investment or security chosen by the 

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Participant at any time as an investment
benchmark for measuring the value of his or her Account pursuant to Section 5.2
of the Plan.

6.4           If
the Participant or the Participant’s Beneficiary is entitled to receive any
benefits hereunder and is in his or her minority, or is, in the judgment of the
Committee, legally, physically or mentally incapable of personally receiving
and receipting any distribution, the Committee may make distributions to a
legally appointed guardian or to such other person or institution as, in the
judgment of the Committee, is then maintaining or has custody of the payee.

6.5           After
all benefits have been distributed in full to the Participant or to the
Participant’s Beneficiary, all liability under the Plan to such Participant or
to his or her Beneficiary shall cease.

6.6           To
the extent required by law in effect at the time payments are made, the Company
or other Participating Company shall withhold from payments made hereunder the minimum
taxes required to be withheld by the federal or any state or local government,
or such greater withholding amount as a Participant or the Participant’s
Beneficiary may designate.

6.7           Notwithstanding any other provision of the Plan, any payment
required to be made by the Company on a specified date pursuant to the terms of
the Plan, or pursuant to any election made under the Plan, may be made as soon
thereafter as administratively practicable; provided, however, that such
payment will be made no later than the end of the calendar year that includes
the specified date or, if later, by the 15th day of the
third month following the specified date. Amounts in a Participant’s
Account shall continue to be credited with earnings and investment gains and
losses pursuant to Section 5.2 until distributed to the extent
administratively practicable.

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ARTICLE VII

 

BENEFICIARY
DESIGNATION

The Participant may, at any
time, designate a Beneficiary or Beneficiaries to receive the benefits payable
in the event of his or her death (and may designate a successor Beneficiary or
Beneficiaries to receive any benefits payable in the event of the death of any
other Beneficiary). Each Beneficiary designation shall become effective only
when filed in writing with the Company during the Participant’s lifetime on a
form prescribed or accepted by the Company (a “Beneficiary Designation Form”). The
filing of a new Beneficiary Designation Form will cancel any Beneficiary
Designation Form previously filed. If no Beneficiary shall be designated
by the Participant, or if the designated Beneficiary or Beneficiaries shall not
survive the Participant, payment of the Participant’s Account shall be made to
the Participant’s estate. If a Participant designated that payments be made in
installments and did not designate a successor Beneficiary, the Beneficiary of
such Participant may submit a Beneficiary Designation Form in respect of
himself or herself and the provisions of the Plan shall apply to such
Beneficiary as if the Beneficiary were the Participant hereunder.

ARTICLE
VIII

MAINTENANCE
AND VALUATION OF ACCOUNTS

8.1           The
Company shall establish and maintain a separate bookkeeping Account on behalf
of each Participant. The value of an Account as of any date shall equal the
Participant’s Deferral Amounts theretofore credited to such Account plus the
earnings and investment gains and losses credited to such Account in accordance
with Article V of the Plan through the day preceding such date and less
all payments made by the Company to the Participant or his or her Beneficiary
or Beneficiaries through the day preceding such date.

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8.2           Each
Account shall be valued by the Company as of each December 31 or on such
more frequent dates as designated by the Company. Accounts also may be valued
by the Company as of any other date as the Company may authorize for the
purpose of determining payment of benefits, or any other reason the Company
deems appropriate.

8.3           The
Company shall submit to each Participant, within 60 (sixty) days after the
close of each Year, a statement in such form as the Company deems desirable
setting forth the balance standing to the credit of each Participant in his or
her Account, including Deferral Amounts, earnings and investment gains or
losses and Deferral Periods.

ARTICLE
IX

FUNDING

9.1           The
benefits contemplated hereunder may be paid directly by the Company, any other
Participating Company or through any trust established by the Company hereunder
to assist in meeting its obligations. Nothing contained herein, however, shall
create any obligation on the part of the Company or any other Participating
Company to set aside or earmark any monies or other assets specifically for
payments under the Plan.

9.2           Notwithstanding
anything in the Plan to the contrary, Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any specific property or assets of the Company or any other
Participating Company, nor shall they be beneficiaries of, or have any rights,
claims or interests in, any funds, securities, life insurance policies, annuity
contracts, or the proceeds therefrom, owned or which may be acquired by the
Company. Such funds, securities, policies or other assets shall not be held in
any 

 

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way as collateral security for the
fulfillment of the obligations under the Plan. Any and all of such assets shall
be, and remain, for purposes of the Plan, the general unpledged, unrestricted
assets of the Company or Participating Company, as the case may be.

9.3           The
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company, or Participating Company pursuant to the succeeding
sentence, to pay money in the future. By action of its board of directors, any
Participating Company may assume joint and several liability with the Company
with respect to any obligations under the Plan for Eligible Employees or
Eligible Directors of the Participating Company.

ARTICLE X

AMENDMENT
AND TERMINATION

10.1         The Board, or its duly authorized delegates, may at any time
amend the Plan in whole or in part; provided, however, that no amendment shall
be effective to decrease the accrued benefits or rights of any Participant
under the Plan except to the extent necessary or desirable to comply with the requirements
of Section 409A of the Code as interpreted by the Committee in its sole
discretion for the exclusion from gross income of amounts deferred under the
Plan. Written notice of any such amendment shall be given to each Participant.

10.2         The Board may at any time terminate the Plan; provided,
however, that such termination shall not decrease the accrued benefits or
rights of any Participant under the Plan. Upon any termination of the Plan
under this Section 10.2, Participants shall thereafter be prohibited from
making deferrals under the Plan and shall be prohibited from making any changes
to any Deferral Periods, and Deferral Amounts shall be paid to Participants as
soon as permissible under Section 409A of the Code as interpreted by the
Committee in its sole 

 17
 

 

 

discretion for the exclusion from gross
income of amounts deferred under the Plan, notwithstanding any election made by
Participants with respect to Deferral Periods. Accounts shall be maintained and
distributed pursuant to such terms, at such times and upon such conditions as
were effective immediately prior to the termination of the Plan; provided,
however, that the Committee, in its discretion, may direct that all benefits
payable under the Plan be distributed in the form of a lump sum distribution
following the Plan’s termination to the extent permitted by Section 409A
of the Code as interpreted by the Committee for exclusion from gross income of
amounts deferred under the Plan.

ARTICLE
XI

FINANCIAL
HARDSHIP WITHDRAWALS

11.1         Subject
to the provisions set forth herein, a Participant may withdraw up to 100% (one
hundred percent) of his or her Account balance as necessary to satisfy
immediate and heavy financial needs of the Participant which the Participant is
unable to meet from any other resource reasonably available to the Participant
due to the occurrence of an Unforeseen Emergency. The amount of such hardship
withdrawal may not exceed the amount required to meet such need plus taxes
reasonably anticipated as a result of distribution, after taking into account
the extent to which such hardship is or may be relieved through reimbursement
or compensation by insurance or otherwise or by liquidation of the Participant’s
assets (to the extent the liquidation of such assets would not itself cause severe
financial hardship). The Participant shall be required to furnish evidence of
qualification for a financial hardship withdrawal to the Committee on forms
prescribed by or acceptable to the Company.

 18
 

 

 

11.2         Notwithstanding
any other provision of the Plan to the contrary, upon written application of a
Participant, the Committee may, in the case of financial hardship, authorize
the cessation of deferrals by such Participant to the extent permitted by Section 409A
of the Code as interpreted by the Committee for exclusion from gross income of
amounts deferred under the Plan.

ARTICLE
XII

ADMINISTRATION

12.1         The
administration of the Plan shall be vested in the Committee.

12.2         The
Committee shall have general charge of the administration of the Plan and shall
have full power and authority to make its determinations effective. All
decisions of the Committee shall be by a vote of the majority of its members
and shall be final and binding unless the Board shall determine otherwise. Members
of the Committee, whether or not Eligible Employees or Eligible Directors,
shall be eligible to participate in the Plan while serving as a member of the
Committee, but a member of the Committee shall not vote or act upon any matter
which relates solely to such member as a Participant. The Committee may
delegate to any agent or to any sub-committee or member of the Committee its
authority to perform any act hereunder, including, without limitation, those
matters involving the exercise of discretion, provided that such delegation
shall be subject to revocation at any time by the Committee.

12.3         In
addition to all other powers vested in it by the Plan, the Committee shall have
power to interpret the Plan, to establish and revise rules and regulations
relating to the Plan and to make any other determinations that it believes
necessary or advisable for the administration of the Plan, including rules restricting
the availability to some or all Participants of deferral period 

 19
 

 

 

alternatives, investment benchmarks, or
distribution alternatives otherwise available under the Plan. The Committee
shall have absolute discretion and all decisions made by the Committee pursuant
to the exercise of its authority (including, without limitation, any
interpretation of the Plan) shall be final and binding, in the absence of
arbitrary or capricious action, on all persons and shall be accorded the
maximum deference permitted by law.

12.4         The
Company shall indemnify and hold harmless the members of the Committee against
any and all claims, loss, damage, expense or liability arising from any action
or failure to act with respect to the Plan to the fullest extent permitted by
law.

ARTICLE
XIII

GENERAL
PROVISIONS

13.1         Neither
the establishment of the Plan, nor any modification thereof, nor the creation
of an Account, nor the payment of any benefits shall be construed:  (a) as giving the Participant,
Beneficiary or other person any legal or equitable right against the Company
unless such right shall be specifically provided for in the Plan or conferred
by affirmative action of the Company in accordance with the terms and
provisions of the Plan; or (b) as giving an Eligible Employee the right to
be retained in the service of a Participating Company or to continue as a
member of the Board or the board of directors of any Participating Company, and
the Participant shall remain subject to discharge or removal to the same extent
as if the Plan had never been established.

13.2         No interest of any Participant or
Beneficiary hereunder shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Participant or the Participant’s Beneficiary. Notwithstanding

 20
 

 

 

the foregoing, pursuant to rules comparable
to those applicable to qualified domestic relations orders, as determined by
the Committee, the Committee may direct a distribution prior to any
distribution date otherwise described in the Plan, to an alternate payee (as
defined under the rules applicable to qualified domestic relations orders)
to the extent permitted by Section 409A of the Code as interpreted by the
Committee for exclusion from gross income of amounts deferred under the Plan.

13.3         All
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine or neuter, as the identity of the person or persons may require. As
the context may require, the singular may be read as the plural and the plural
as the singular.

13.4         Any
notice or filing required or permitted to be given to the Committee under the
Plan shall be sufficient if in writing and delivered, or sent by registered or
certified mail, to the principal office of the Company, directed to the
attention of each of the President and the General Counsel of the Company. Such
notice shall be deemed given as of the date of receipt.

13.5         Should
any provision of the Plan or any rule or procedure thereunder be deemed or
held to be unlawful or invalid for any reason, such fact shall not adversely
affect the other provisions of the Plan, or any rule or procedure
thereunder, unless such invalidity shall render impossible or impractical the
functioning of the Plan, and, in such case, the appropriate parties shall
immediately adopt a new provision or rule or procedure to take the place
of the one held illegal or invalid.

13.6         Any
dispute, controversy or claim between the Company and any Participant,
Beneficiary or other person arising out of or relating to the Plan shall be
settled by arbitration 

 21
 

 

 

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
arbitrary or capricious action by 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 favor of the
Participant, Beneficiary or other person asserting a claim under the Plan, such
person’s cost of the arbitration and the fees of the American Arbitration
Association shall be paid by the Company.

13.7         Nothing
contained herein shall preclude a Participating Company from merging into or
with, or being acquired by, another business entity.

13.8         The
liabilities under the Plan shall be binding upon any successor or assign of the
Company, or of another Participating Company that has assumed liability pursuant
to Section 9.3, and upon any purchaser of substantially all of the assets
of the Company or such Participating Company. Subject to Section 10.2, the
Plan shall continue in full force and effect after such an event, with all
references to the “Company” or a “Participating Company” herein referring also
to such successor, assignor or purchaser, as the case may be.

 22
 

 

 

13.9         The
Plan shall be governed by the laws of the State of New York to the extent they
are not preempted by the Employee Retirement Income Security Act of 1974, as
amended from time to time.

13.10       The
titles of the Articles in the Plan are for convenience of reference only, and,
in the event of any conflict, the text rather than such titles shall control.

 

 23Exhibit 10.3

 

 

 

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

SEVERANCE POLICY FOR SENIOR MANAGEMENT

(As Amended and Restated Effective January 1,
2005)

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  PAGE

  	
   

  
	
  SECTION 1.

  	
   

  	
  ESTABLISHMENT AND PURPOSE OF THE PLAN

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  ELIGIBLE EMPLOYEES

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  SEVERANCE PAY AND SEVERANCE BENEFITS

  	
   

  	
  2

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  OFFSET

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  PAYMENT OF SEVERANCE PAY

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  REINSTATEMENT

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  WAIVER AND RELEASE AGREEMENT

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  PLAN ADMINISTRATION

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  AMENDMENT/TERMINATION/VESTING

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  PAY AND OTHER BENEFITS

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  NO ASSIGNMENT

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
   

  	
  RECOVERY OF PAYMENTS MADE BY MISTAKE

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
   

  	
  REPRESENTATIONS CONTRARY TO THE PLAN

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
   

  	
  COMPLIANCE WITH CODE SECTION 409A

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
   

  	
  NO EMPLOYMENT RIGHTS

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
   

  	
  COMPANY INFORMATION

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
   

  	
  PLAN FUNDING

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 19.

  	
   

  	
  APPLICABLE LAW

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 20.

  	
   

  	
  SEVERABILITY

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 21.

  	
   

  	
  PLAN YEAR

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 22.

  	
   

  	
  RETURN
  OF COMPANY PROPERTY

  	
   

  	
  10

  	
   

  

 

                         

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

SEVERANCE POLICY FOR SENIOR MANAGEMENT

SECTION 1                          ESTABLISHMENT AND
PURPOSE OF THE PLAN

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
(hereinafter “FSA”) has adopted the FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. SEVERANCE POLICY  FOR SENIOR MANAGEMENT (hereinafter the “Plan”),
for the benefit of the Senior Management (as hereinafter defined) of FSA and
its current direct and indirect wholly-owned subsidiaries that have been
designated by it as participating employers under the Plan (collectively
referred to herein as the “Company”), as
described herein. The Plan was adopted effective as of February 8, 1995,
and was amended and restated effective March 13, 2000, May 17, 2001, November 13,
2003 and September 9, 2004. The Plan is hereby amended and restated, as
set forth in this Plan document, effective as of January 1, 2005, to
comply with the requirements of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”) to avoid taxation under Code Section 409A(a)(1).
The Plan is an unfunded welfare benefit plan for purposes of the Employee
Retirement Income Security Act of 1974, as amended (hereinafter “ERISA”) and a severance pay plan within the meaning of the
United States Department of Labor regulations section 2510.3-2(b). The
purpose of the Plan is to provide an eligible employee whose employment
terminates as described in Section 2 with Severance Pay and Severance
Benefits for a specified period of time.

SECTION 2                          ELIGIBLE
EMPLOYEES

Members
of Senior Management who have been employed with the Company for at least one (1) year
and whose employment is (i) terminated by the Company for any reason other
than for cause or (ii) constructively terminated, are eligible to
participate in the Plan and shall be considered “eligible
employees” under the Plan. “Senior Management”
means, and shall be limited to, the permanent members of the Management
Committee of the Company on the effective date of the Plan and any person who
shall hereafter be designated as eligible to participate in the Plan by written
notice thereof, signed by the President of the Company and expressly stating
that such person is a member of “Senior Management” for purposes of the Plan. The
permanent members of the Management Committee of the Company on the effective
date of the Plan, as amended and restated, are (a) the Chief Executive
Officer of the Company, (b) the Chief Operating Officer of the Company, (c) the
General Counsel of the Company, (d) the Chief Financial Officer of the
Company, and (e) the Chief Risk Management Officer of Financial Security
Assurance Inc. Termination “for cause”
means termination for unethical practices, illegal conduct or gross
insubordination, but specifically excludes termination as a result of
substandard performance. “Constructive termination”
of employment occurs if an eligible employee’s compensation opportunity is
significantly reduced out of line with Company results, or if there is a
material reduction in responsibilities, such that the employee’s termination of
employment is an involuntary under Code Section 409A. The determination as
to whether an employee has been (i) terminated for cause, or (ii) constructively
terminated, will be made by the Plan Administrator, in its sole discretion,
consistent with the requirements of Code Section 409A to avoid taxation
under Code Section 409A(a)(1).

 1
 

                         

 

An
otherwise eligible employee shall not be
eligible for Severance Pay and Severance Benefits under the Plan if:

(a)                                  the
eligible employee’s employment with the Company terminates by reason of death
or disability;

(b)                                 the
eligible employee’s employment with the Company terminates through retirement,
voluntary resignation, job abandonment or failure to report for work;

(c)                                  the
eligible employee’s employment with the Company is involuntarily terminated
after the eligible employee refuses a transfer to a new position at the same
geographical location of the Company, and such transfer does not constitute a
constructive termination;

(d)                                 the
eligible employee is employed in a Company operation or facility substantially
all of the assets of which are sold and the eligible employee is offered a
comparable position, as determined by the Plan Administrator, with the
purchaser;

(e)                                  the
eligible employee fails or refuses to continue in the employment of the Company
until the end of the notice period provided for in the notice of termination
described in Section 3 below (absent constructive termination during such
notice period); or

(f)                                    the
Plan is terminated.

SECTION 3                          SEVERANCE
PAY AND SEVERANCE BENEFITS

In
exchange for providing the Plan Administrator a valid Waiver and Release
Agreement in a form acceptable to the Company, an eligible employee shall be
eligible to receive Severance Pay and Severance Benefits in accordance with the
paragraphs set forth below. The consideration for the voluntary Waiver and
Release Agreement shall be the Severance Pay and the Severance Benefits that
the eligible employee would not otherwise be eligible to receive.

(a)                                  Severance Pay. An eligible employee
shall be eligible to receive Severance Pay in accordance with the following:

(1)                                                       Chief Executive Officer and Chief Operating
Officer:  Each eligible
employee who served as the Chief Executive Officer or the Chief Operating
Officer of the Company shall be eligible to receive eighteen (18) months of
pay.

(2)                                                       Permanent Members of Management Committee:  Each eligible employee who served as a
permanent member of the Management Committee of the Company (and who did not
serve as the Chief Executive

Officer or the Chief
Operating Officer of the Company) shall be eligible to receive twelve (12)
months of pay.

 2
 

                         

 

For purposes of
determining the amount of Severance Pay to which an eligible employee is
entitled, “months of pay” (a) shall be
determined on the basis of (a) the eligible employee’s monthly salary on
his or her separation date and (b) shall include the eligible employee’s
most recent bonus (or three year average, if higher), with one-twelfth (1/12th)
of such bonus amount being allocated to each month of pay. An eligible employee’s
base salary and bonus shall include amounts deferred under the Financial
Security Assurance Holdings Ltd. Deferred Compensation Plan and the Financial
Security Assurance Inc. Cash or Deferred Plan, and amounts allocated to the
Financial Security Assurance Flex Plan. For this purpose, “bonus”
shall also include any amounts converted into an equity bonus under the
Financial Security Assurance Holdings Ltd. 1993 Equity Participation Plan. For
all purposes of the Plan, the term “separation date”
shall mean the date on which the eligible employee has a separation from
service pursuant to Code Section 409A. In the event an eligible employee
receives formal written notice of a future termination of employment and
employment is not terminated until the date provided in such notice, then the
Plan Administrator may, in its discretion, reduce the period of Severance Pay
by the length of the notice period, in an amount of up to one-third (1/3) of
the severance period. For purposes of the Plan, “severance
period” shall mean the period of time over which an eligible
employee is to receive Severance Pay pursuant to this Section 3.

(b)                                 Severance Benefits.

(1)                                  Continuation of Hospital, Medical, Dental,
Prescription Drug and Vision Coverages. An eligible employee may
elect continuation of his or her Company sponsored hospital, medical, dental,
prescription drug and vision benefits (“health benefits”)
under COBRA, as defined in Code Section 4980B(f)(2) (“COBRA coverage”) for a period of up to eighteen (18) months
following the separation date. The eligible employee shall pay the same premium
paid by active employees for their Company sponsored health benefits and the
Company shall pay the remaining portion of the premium during the severance
period. The COBRA coverage provided at this reduced cost shall continue until
the end of the month for which the eligible employee is permitted to pay the
same premium paid by similarly situated active employees for their Company
sponsored health benefits. After the end of the severance period, the eligible
employee may elect to continue his or her health benefits under COBRA for up to
the remainder of the eighteen (18) months; however, the eligible employee must
pay the full premium for such coverage plus a two percent (2%) administrative
charge, or 102% of the total premium cost. If the eligible employee dies prior
to the end of the period of time that he or she would have received his or her
Severance Benefits, and if the eligible employee’s spouse and/or dependents are
entitled to continued COBRA coverage, the Company shall pay the entire cost of
such coverage for the remainder of the severance period. Thereafter, the spouse
and/or dependents may elect to continue COBRA coverage; however they must 

 3
 

                         

 

pay the full
premium cost for such coverage plus a two percent (2%) administrative charge.

(2)                                  Life Insurance Benefits. An
eligible employee may elect to continue coverage under the Financial Security
Assurance Inc. Life and AD & D Insurance Plan on the same basis as
similarly situated active employees during the severance period to the extent,
if any, that the insurance carrier will so allow; provided, however, that the
eligible employee shall pay the full premium for such coverage.

(3)                                  Disability Insurance Coverage. Coverage
under Company sponsored disability insurance shall continue on the same basis
as for similarly situated active employees during the severance period to the
extent, if any, that the insurance carrier will so allow.

(4)                                  Company Prepayment of Premiums. Within
thirty days following an eligible employee’s separation date, the Company shall
pay to the eligible employee an amount equal to 100% of the monthly premium for
coverage that will be provided pursuant to Sections 3(b)(2) multiplied by
the number of months in the severance period.

(c)                                  Gross-Up Payments by the Company.

(1)                              Gross-Up Payments. Anything in the
Plan to the contrary notwithstanding, in the event that it shall be determined
that any payment or distribution by the Company to or for the benefit of an
eligible employee (whether paid or payable or distributed or distributable
pursuant to the terms of the Plan or otherwise) (a “Payment”)
would be subject to the excise tax imposed by Sections 280G and 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”),
or that any interest or penalties are incurred by an eligible employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the eligible employee shall be entitled
to receive an additional payment (the “Gross-Up  Payment”) in an amount such that after payment by the
eligible employee of all taxes (including any interest or penalties imposed
with respect to such taxes and Excise Tax) imposed upon the Gross-Up
Payment, the eligible employee retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.

(2)                              Determination of Gross-Up Payments. Notwithstanding
the provisions of Section 10, all determinations required to be made under
this Section 3(c), including whether and when the Gross-Up Payment
is required and the amount of such Gross-Up Payment including any
determination of the parachute payments under Code Section 280G(b)(2), and
the assumptions to be utilized in arriving at such determinations shall be made
by a nationally recognized certified public accounting firm that is 

 4
 

                         

 

mutually selected by the
eligible employee and the Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and
the eligible employee within 15 business days of the receipt of notice from the
eligible employee that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment shall be paid by the
Company to the eligible employee within five days of the receipt of the
Accounting Firm’s determination. Any determination by the Accounting Firm shall
be binding upon the Company and the eligible employee. As a result of
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
the  Gross-Up Payment made will
have been an amount less than the Company should have paid pursuant to this Section 3(c) (the
“Underpayment”). In the event that the
eligible employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
eligible employee.

The
Plan Administrator, acting in its sole discretion may, in writing, enhance the
amount of Severance Pay and/or Severance Benefits that an eligible employee is
eligible to receive over the amount of Severance Pay and Severance Benefits
described above and/or make available to the eligible employee other forms of
Severance Benefits; provided, however, that such enhancement shall not extend the
severance period over which benefits are paid.

SECTION 4                          OFFSET

Severance
Pay and Severance Benefits provided under the Plan shall be offset by any
severance pay or severance benefits provided to an eligible employee under an
authorized written employment agreement containing a severance provision, an
authorized written severance agreement, any other group
reorganization/restructuring benefit plan or program sponsored by the Company
or any severance benefit mandated by law. By accepting Severance Pay and
Severance Benefits under the Plan, an eligible participant waives all rights to
receive benefits under the Financial Security Assurance Holdings Ltd. Severance
Policy. In the event an eligible employee who is receiving Severance Pay and
Severance Benefits under the Plan is employed in any respect (including as a
consultant or self-employed) during the severance period, due and unpaid
Severance Pay shall be offset by an amount equal to fifty percent (50%) of the
compensation received by the eligible employee from the new employment during
the severance period, and, if employed with another employer, Severance
Benefits shall cease. The eligible employee shall be obligated to refund any
amounts paid by the Company as Severance Pay that exceed the amount of Severance
Pay payable to the eligible employee hereunder giving effect to the offset
referred to in the preceding sentence. An eligible employee shall, as a
condition of receiving Severance Pay and Severance Benefits under the Plan,
undertake to provide to the Company prompt notice of the commencement of any
new employment of such eligible employee during the severance period.

 5
 

                         

 

SECTION 5                          PAYMENT
OF SEVERANCE PAY

Severance
Pay that becomes payable shall be paid in substantially equal installments in
accordance with the Company’s regular payroll payment schedule commencing with
the first regular payroll payment date occurring after expiration of the seven (7) day
period during which an eligible employee may revoke his or her Waiver and
Release Agreement (as explained more fully below under the Section entitled
“WAIVER AND RELEASE AGREEMENT”);
provided, however, that any Severance Pay payable during the six months
following an eligible employee’s separation date shall be accumulated and paid
to the eligible employee on the first date of the seventh month following his
separation date, except to the extent that any such payment would otherwise be
a short-term deferral under I.R.S. Notice 2005-1, Q&A 4, or any
subsequent binding guidance or final regulation under Code Section 409A,
in which case such payment shall be made at its regularly scheduled time to the
extent permitted under Code Section 409A to avoid taxation under Code Section 409A(a)(1).
All legally required taxes and any sums owing to the Company shall be deducted
from Severance Pay payments.

SECTION 6                          REINSTATEMENT

In
the event that an eligible employee who is receiving Severance Pay or Severance
Benefits is permanently reemployed by the Company, the payment of Severance Pay
and the availability of Severance Benefits under the Plan shall cease as of the
date his or her reemployment begins.

SECTION 7                          WAIVER
AND RELEASE AGREEMENT

In
order to receive Severance Pay and Severance Benefits, an eligible employee
must submit a signed Waiver and Release Agreement form to the Plan
Administrator no later than twenty-one (21) days after his or her separation
date. If the termination of the eligible employee is part of a group
termination, the signed Waiver and Release Agreement must be submitted to the
Plan Administrator no later than forty-five (45) days after his or her
separation date. Attached to the Waiver and Release Agreement, if required by
law, as Attachment I will be a list of job titles and ages of employees of the
Company who are eligible for the Plan, 
and as Attachment II will be a list of the ages of employees of the
Company who are not eligible for the Plan. An eligible employee may revoke his
or her signed Waiver and Release Agreement within seven (7) days of his or
her signing the Waiver and Release Agreement. A revocation by an eligible
employee must be made in writing and must be received by the Plan Administrator
within such seven (7) day period. An eligible employee who timely revokes
his or her Waiver and Release Agreement shall not be eligible to receive any
Severance Pay and Severance Benefits under the Plan. An eligible employee who
timely submits a signed Waiver and Release Agreement form and who does not
exercise his or her right of revocation shall be eligible to receive Severance
Pay and Severance Benefits. Eligible employees shall be encouraged to contact
their personal attorney to review the Waiver and Release Agreement form if they
so desire.

 

 6
 

                         

 

SECTION 8                          PLAN
ADMINISTRATION

FSA shall serve as
the “Plan Administrator” of the Plan and a “named fiduciary” within the meaning
of such terms as defined in ERISA. The Plan Administrator shall have the
discretionary authority to determine eligibility for Plan benefits and to
construe the terms of the Plan, including the making of factual determinations.
The Plan Administrator shall have the discretionary authority to determine
eligibility for, and the amount of, Plan benefits and to construe the terms of
the Plan, including making any factual determinations. The decisions and
constructions of the Plan Administrator shall be final, binding, and conclusive
as to all parties, unless found by a court of competent jurisdiction to be
arbitrary and capricious. The Plan Administrator may delegate to other persons
responsibilities for performing certain of the duties of the Plan Administrator
under the terms of the Plan and may seek such expert advice as the Plan
Administrator deems reasonably necessary with respect to the Plan. The Plan
Administrator shall be entitled to rely upon the information and advice furnished
by such delegatees and experts, unless actually knowing such information and
advice to be inaccurate or unlawful. The Plan Administrator shall establish and
maintain a reasonable claims procedure, including a procedure for appeal of
denied claims. In no event shall an eligible employee or any other person be
entitled to challenge a decision of the Plan Administrator in court or in any
other administrative proceeding unless and until the claim and appeals
procedures established under the Plan have been complied with and exhausted.

SECTION 9                          AMENDMENT/TERMINATION/VESTING

The Company may terminate
or amend the Plan at any time and from time to time, for any reason or no
reason; provided, however, that any such termination or amendment
of the Plan that is adverse to the interest of any eligible employee under the
Plan shall be effective only (i) as to any eligible employee first
becoming an employee after the date of such amendment or termination or (ii) as
to any other employee, on or after December 31, 2004. Any amendment or
termination of the Plan shall be adopted by the Board of Directors of FSA and
executed by an authorized officer of FSA. In no event will the termination of
the Plan reduce Severance Pay and Severance Benefits previously granted to an
eligible employee under the Plan.

SECTION 10                        PAY AND
OTHER BENEFITS

An
eligible employee’s participation in all of the Company’s employee pension
benefit plans and employee welfare plans in which he or she is enrolled as of
his or her separation date shall cease as of his or her separation date, except
as provided above with respect to COBRA coverage and life and disability
insurance benefits. All pay and other benefits, including unreimbursed valid
business expenses and accrued but unpaid salary (but excluding Plan benefits),
payable to an eligible employee upon his or her separation date shall be paid
in accordance with the terms of those established policies, plans and
procedures. An eligible employee who is participating in the Plan shall not be
eligible for any other type of severance benefits under any other severance pay
plan, program or policy of the Company. Eligible employees shall receive
payment for unused vacation days on the first payroll date following the
eligible employee’s termination of employment. Such payment shall be equal to
one twentieth (1/20th) of one month of Severance Pay for every vacation day and
shall be paid in a single lump sum payment. Such payment shall 

 7
 

                         

 

not
reduce the amount of Severance Pay otherwise payable to the eligible employee
under the Plan. For purposes of the foregoing,

(a)                                  total
vacation days for any eligible employee in respect of any calendar year shall
equal the sum of:

(1)                                  carryover
vacation days to which the eligible employee is entitled in accordance with
Company policy from the year prior to the year in which the eligible employee’s
separation date occurred; and

(2)                                  the
product (rounded up to the nearest whole number) of:

(A)                           the
annual number of vacation days to which the eligible employee is entitled in
accordance with Company policy; and

(B)                             a
fraction,

(i)                                    the
numerator of which is the number of days of the year which have elapsed from
the January 1 of the year in which the eligible employee’s separation date
occurs through and including the eligible employee’s separation date, and

(ii)                                 the
denominator of which is three hundred and sixty-five (365); and

(b)                                 unused
vacation days for any eligible employee in respect of any calendar year will
equal total vacation days in respect of such year determined in accordance with
subsection (a) above, less vacation days used in such year.

SECTION 11                        NO
ASSIGNMENT

Severance
Pay or Severance Benefits payable under the Plan shall not be subject to
anticipation, alienation, pledge, sale, transfer, assignment, garnishment,
attachment, execution, encumbrance, levy, lien, or charge, and any attempt to
cause such Severance Pay or Severance Benefits to be so subjected shall not be
recognized, except to the extent required by law.

SECTION 12                        RECOVERY
OF PAYMENTS MADE BY MISTAKE

An
eligible employee shall be required to return to the Company any Severance Pay
or Severance Benefits, or portion thereof, made by a mistake of fact or law.

SECTION 13                        REPRESENTATIONS
CONTRARY TO THE PLAN

No
employee, officer, or director of the Company has the authority to alter, vary
or modify the terms of the Plan except by means of an authorized written
amendment to the Plan. No verbal or written representations contrary to the
terms of the Plan and its written amendments shall be binding upon the Plan,
the Plan Administrator or the Company.

 

 8

 

 

SECTION 14                                                                        COMPLIANCE
WITH CODE SECTION 409A

Notwithstanding
any other provision of the Plan to the contrary, the terms of the Plan shall be
deemed to be amended to comply with the requirements of Code Section 409A
to avoid taxation under Code Section 409A(a)(1). The Plan Administrator,
in its sole discretion, shall determine the requirements of Code Section 409A
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 under the Plan, including any taxes, penalties or interest
imposed under Code Section 409A(a)(1), except as provided in Section 3(c).

SECTION 15                        NO
EMPLOYMENT RIGHTS

The Plan shall not confer
employment rights upon any person. No person shall be entitled, by virtue of
the Plan, to remain in the employ of the Company and nothing in the Plan shall
restrict the right of the Company to terminate the employment of any eligible
employee at any time.

SECTION 16                        COMPANY
INFORMATION

Eligible
employees may have access to Company Information. Recognizing that the
disclosure or improper use of such Company Information will cause serious and
irreparable injury to the Company, as a condition of receiving Severance Pay
and Severance Benefits eligible employees with such access acknowledge that (i) they
will not at any time, directly or indirectly, disclose Company Information to
any third party or otherwise retain or use such Company Information for their
own benefit or the benefit of others, (ii) if they disclose or improperly
use any Company Information, the Company shall be entitled to apply for and
receive an injunction to restrain any violation of this paragraph, and (iii) eligible
employees shall be liable for any damages the Company incurs, including
litigation costs and reasonable attorneys’ fees.

“Company Information” shall mean
any confidential, financial, marketing, business, technical or other
information, including, without limitation, information that the eligible
employee prepared, caused to be prepared, received in connection with and/or
contemporaneous with his or her employment with the Company, such as
information provided by customers that is not generally known in the industry,
objective and subjective evaluations of management, transactions or proposed
transactions, trade secrets, personnel information and marketing methods and
techniques. The term “Company Information”
specifically excludes information that is generally known in the industry
(except when known based upon the eligible employee’s actions in contravention
of this provision) or that is otherwise publicly available.

SECTION 17                        CONFIDENTIALITY

Eligible
employees are prohibited from disclosing the existence of this Plan and its
terms and conditions, to any other past, present or future employees of the
Company, or to any other person, except (and in such cases, only to the extent
necessary) to the eligible employee’s immediate family, attorneys, accountants,
financial advisors, lending institutions, federal, state or local taxing
authorities, or as otherwise required by law, or for the enforcement of the
Plan terms.

   
 
 9
 

 

 

SECTION 18                        PLAN
FUNDING

No
eligible employee shall acquire by reason of the Plan any right in or title to
any assets, funds, or property of the Company. Any Severance Pay or Severance
Benefits that become payable under the Plan are unfunded obligations of the
Company and shall be paid from the general assets of the Company. No employee, officer,
director or agent of the Company guarantees in any manner the payment of
Severance Pay or Severance Benefits.

SECTION 19                        APPLICABLE
LAW

The Plan shall be
governed and construed in accordance with ERISA and in the event that any
reference shall be made to State law, the internal laws of the State of New
York shall apply.

SECTION 20                        SEVERABILITY

If
any provision of the Plan is found, held or deemed by a court of competent
jurisdiction to be void, unlawful or unenforceable under any applicable statute
or other controlling law, the remainder of the Plan shall continue in full
force and effect.

SECTION 21                        PLAN YEAR

The ERISA plan year of the Plan shall be the calendar
year.

SECTION 22                        RETURN OF
COMPANY PROPERTY

All
Company property (including keys, credit cards, identification cards, office
equipment, portable computers and cellular telephones) and Company Information
(including all copies, duplicates, reproductions or excerpts thereof) must be
returned by the eligible employee as of his or her separation date in order for
such eligible employee to commence receiving Severance Pay and Severance
Benefits under the Plan.

	
  

  	
   

  	
  FINANCIAL
  SECURITY ASSURANCE HOLDINGS LTD

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  

 

   
 
 10
 

 

 

Attachment I to

Financial Security Assurance
Holdings Ltd. Severance Policy for Senior Management

WAIVER AND RELEASE AGREEMENT

(1)  Waiver
and Release, Etc. In consideration for the Severance Pay and Severance
Benefits to be provided to me under the terms of the FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD. SEVERANCE POLICY FOR SENIOR MANAGEMENT
(hereinafter, the “Plan”), I, on behalf of myself and my heirs, executors,
administrators, attorneys and assigns, hereby waive, release and forever
discharge FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. (hereinafter,
the “Company”) and the Company’s parent, subsidiaries, divisions and
affiliates, whether direct or indirect, its and their joint ventures and joint
venturers (including its and their respective directors, officers, associates,
employees, shareholders, partners and agents, past, present and future), and
each of its and their respective successors and assigns (hereinafter
collectively referred to as “Releasees”), from any and all known or unknown
actions, causes of action, claims or liabilities of any kind which have or
could be asserted against the Releasees arising out of or related to my
employment with and/or separation from employment with the Company and/or any
of the other Releasees and/or any other occurrence up to and including the
later of the date of this Agreement and the date of termination of employment
with the Company and/or any of the other Releasees, including but not limited
to:

(a)  claims, actions, causes of action or
liabilities arising under Title VII of the Civil Rights Act, as amended, the
Age Discrimination in Employment Act, as amended (the “ADEA”), the Employee
Retirement Income Security Act, as amended, the Rehabilitation Act, as amended,
the Americans with Disabilities Act, as amended, the Family and Medical Leave
Act, as amended, and/or any other federal, state, municipal, or local
employment discrimination statutes (including, but not limited to, claims based
on age, sex, attainment of benefit plan rights, race, religion, national
origin, marital status, sexual orientation, ancestry, harassment, parental
status, handicap, disability, retaliation, and veteran status); and/or

(b)  claims, actions, causes of action or
liabilities arising under any other federal, state, municipal, or local
statute, law, ordinance or regulation; and/or

(c)  any other claim whatsoever including, but not
limited to, claims for severance pay, claims based upon breach of contract,
wrongful termination, defamation, intentional infliction of emotional distress,
tort, personal injury, invasion of privacy, violation of public policy,
negligence and/or any other common law, statutory or other claim whatsoever
arising out of or relating to my employment with and/or separation from
employment with the Company and/or any of the other Releasees,

but excluding the right to file an administrative charge or participate
in an investigation conducted by the Equal Employment Opportunity Commission
(the “EEOC”), any claims that I may make under state workers’ compensation or
unemployment laws, and/or any claims that by law I cannot waive. I am waiving,
however, any right to monetary recovery should the EEOC or 

   
 
 11
 

 

 

any other agency pursue any claim on my behalf. I further waive,
release, and discharge the Company and/or any of the other Releasees from any
reinstatement rights that I have or could have and I acknowledge that I have
not suffered any on-the-job injury for which I have not already filed a claim. I
also agree never to sue the Company and/or any of the Releasees on the basis of
any and all claims of any type to date arising out of any aspect of my
employment with and/or separation from employment with the Company and/or any
of the Releasees, except for a claim under the ADEA, including a challenge to
the validity of this Agreement under that law. I understand that this Agreement
includes a release of all known and unknown claims arising up to and including
the date of this Agreement.

(2)  Company
Information. I acknowledge that I may have access to certain confidential
and other information of the Company, referred to in the Plan as “Company
Information”. Recognizing that the disclosure or improper use of Company
Information may cause serious and irreparable injury to the Company, I agree
that I will not at any time, directly or indirectly, disclose Company
Information or use Company Information for my own benefit or the benefit of any
other party except as permitted under the Plan.

(3)  Cooperation;
Return of Company Property. I agree to cooperate with the Company with
respect to providing information with respect to matters with which I was
involved at the time of my termination of employment and to cooperate, at the
expense of the Company, in the defense or pursuit by the Company of, or
response by the Company to, any litigation, investigation or dispute relating
to matters in which I participated during my term of employment with the
Company. I agree to return to the Company all Company property in my possession
as promptly as practicable, including, without limitation, any keys, credit
cards, documents and records, identification cards, office equipment, portable
computers, mobile telephones and parking permits.

(4)  Consequences
of Breach. In the event that I breach this Agreement by violating any of
the provisions of paragraph (1), (2) or (3), I acknowledge that (a) the
Company shall be entitled to apply for and receive an injunction to restrain
any violation of such paragraphs, (b) I shall be required to pay the
Company’s and/or any of the Releasees’ litigation costs and expenses, including
reasonable attorneys’ fees, associated with defending against my lawsuit and (c) I
shall be obligated to repay to the Company eighty percent (80%) of the
Severance Pay already paid to me and to forfeit eighty percent (80%) of the
Severance Pay not yet paid to me. Such repayment and/or forfeiture shall not
affect the validity of this Agreement.

(5)  Offset. I
understand that, in the event I become employed during the severance period,
due and unpaid Severance Pay will be offset by an amount equal to fifty percent
(50%) of the compensation received by me from the new employment during the
severance period (including employment as a consultant or self-employed), and,
if employed with another employer, Severance Benefits shall cease. I agree to
refund any amounts paid by the Company as Severance Pay that exceed the amount
of Severance Pay payable to me under the Plan giving effect to the offset
referred to in the preceding sentence. I further agree to provide to the
Company prompt notice of the commencement of any such new employment.

   
 
 12
 

 

 

(6)  Other
Plans. I understand that this Agreement will not limit any of my rights or
obligations in respect of any Company sponsored plans, each of which has its
own provisions governing the rights of employees thereunder in respect of which
I agree to remain bound, except that I hereby waive, release and shall not
assert in any forum any claim or right arising out of or in connection with my
termination of employment on the basis that such termination interfered with
attainment of any rights under such a plan or was otherwise discriminatory or
illegal. The foregoing plans include the Company’s pension plans (Money
Purchase Plan and Supplemental Executive Retirement Plan), Cash or Deferred
Plan (401(k) plan), home computer program, cafeteria plan (“flex plan”),
medical plans, Supplemental Restricted Stock Plan, 1993 Equity Participation
Plan and Deferred Compensation Plan. I understand that, for purposes of
determining my rights under the foregoing plans, my employment with the Company
will be deemed to have been terminated by the Company without cause.

(7)  Review
and Revocation Periods. I acknowledge that I have been given at least
twenty-one (21) days to consider this Agreement thoroughly and I was encouraged
to consult with my personal attorney, if desired, before signing below. I
understand that I may revoke this Agreement within seven (7) days after
its signing and that any revocation must be made in writing and submitted
within such seven (7) day period to the Plan Administrator. I understand
that this Agreement will not be effective or enforceable until after this seven
(7) day period. I further understand that if I revoke this Agreement,
I shall not receive Severance Pay and Severance Benefits under the Plan.

(8)  Severability.
I agree that if any provision of this Agreement is found, held or deemed by
a court of competent jurisdiction to be void, unlawful or unenforceable under
any applicable statute or controlling law, the remainder of this Agreement
shall continue in full force and effect.

(9)  Governing
Law. This Agreement is deemed made and entered into in the State of New
York, and in all respects shall be interpreted, enforced and governed under the
internal laws of the State of New York, to the extent not governed by federal
law. Any dispute under this Agreement shall be adjudicated by a court of
competent jurisdiction in the State of New York.

The undersigned hereby acknowledges and agrees
that he or she has carefully read and fully understands all the provisions of
this Agreement and has voluntarily entered into this Agreement by signing below
as of the date set forth below.

	
  

  	
   

  	
   

  
	
  (Print name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Date)

  

 

 

   
 
 13

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