Document:

Exhibit 10.2

 

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

SEVERANCE POLICY FOR SENIOR
MANAGEMENT

 

(As Amended and Restated Effective May 21,
2008)

 

 

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

  	
  3

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  OFFSETS

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  PAYMENT OF SEVERANCE PAY

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  REINSTATEMENT

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  WAIVER AND RELEASE AGREEMENT

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  PLAN ADMINISTRATION

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  CLAIMS PROCEDURES

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  AMENDMENT/TERMINATION/VESTING

  	
  10

  
	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
  PAY AND OTHER BENEFITS

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
  NO ASSIGNMENT

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
  RECOVERY OF PAYMENTS MADE BY
  MISTAKE

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
  REPRESENTATIONS CONTRARY TO THE
  PLAN

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
  COMPLIANCE WITH CODE
  SECTION 409A

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
  NO EMPLOYMENT RIGHTS

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
  COMPANY INFORMATION

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
  CONFIDENTIALITY

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 19.

  	
  PLAN FUNDING

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 20.

  	
  APPLICABLE LAW

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 21.

  	
  SEVERABILITY

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 22.

  	
  PLAN YEAR

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 23.

  	
  RETURN OF COMPANY PROPERTY

  	
  14

  

 

 

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 previously was amended and restated effective March 13,
2000; May 17, 2001; November 13, 2003; September 9, 2004 and January 1,
2005.  The Plan is intended to be, in
part, a separation pay plan that does not provide for the deferral of compensation
under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and, to the extent considered a plan providing
deferred compensation plan, to comply with the requirements of Code Section 409A.  The Plan is hereby amended and restated, effective
as of May 21, 2008, as provided in this Plan document.

 

The Plan is an unfunded
welfare benefit plan (i.e., a
severance pay plan within the meaning of United States Department of Labor
regulations §2510.3-2(b)) for purposes of the Employee Retirement Income
Security Act of 1974, as amended (hereinafter “ERISA”)
that is maintained primarily for the purpose of providing benefits for a select
group of management or highly compensated employees as determined in accordance
with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.  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.  The Plan is established under and shall be
construed in accordance with ERISA and, to the extent not preempted by ERISA,
with the internal laws of the State of New York.  This Plan also is intended to comply with Section 409A
of the Code and the regulations thereunder, and shall be interpreted, operated
and administered accordingly.

 

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
members of the Executive Management Committee of the Company on May 21,
2008 and any person who shall thereafter 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 members of the Executive Management Committee of the Company on the
effective date of the Plan, as amended and restated herein, 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 the Company.

 

 

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

 

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 terminates employment with the Company and all Affiliates
within two years of the date on which, but without the eligible employee’s
consent, the eligible employee’s compensation or responsibilities are
materially reduced, provided, however, that unless the eligible employee gives
notice to the Plan Administrator of such reduction in compensation or responsibilities
with 90 days of the date on which such reduction occurs and the condition is
not remedied within 30 days of receipt of such notice, the eligible employee’s
termination of employment shall not be a constructive termination under the
Plan.  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).

 

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;

 

2

 

(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.

 

“Disability”
means a period of medically determined physical or mental impairment that is
expected to last for a period of not less than 12 months during which an
employee qualifies for income replacement benefits under the Company’s
long-term disability plan for at least three (3) months, or, if an
employee does not participate in such a plan, a period of disability during
which the employee is unable to engage in any substantial gainful activity by
reason of any medically determined 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.

 

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)                                  Other Members of Executive
Management Committee and other Participants:  Each eligible
employee who served as a member of the Executive Management Committee of the
Company (and who did not serve as the Chief Executive Officer or the Chief
Operating Officer of the Company), or who is otherwise eligible to receive
benefits under this Plan, shall be eligible to receive twelve (12) months of
pay.

 

3

 

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 purposes of the Plan, “separation date,”
“termination date” and like terms shall
mean the date on which the eligible employee has a separation from service
within the meaning of Code Section 409A, as determined by the Plan
Administrator.

 

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, as determined by the Plan
Administrator.

 

                                                (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 COBRA continuation period; however, the eligible
employee must pay the full premium for such coverage plus the applicable
administrative charge.  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

 

4

 

to continue COBRA
coverage for the remainder of the COBRA continuation period; however, they must
pay the full premium cost for such coverage plus the applicable administrative
charge.  The Company’s payment of
premiums for the dental (or any other self-insured) health benefits may be
taxable to the employee or the employee’s family.

 

(2)                                  Life Insurance Benefits.  Coverage under
the Financial Security Assurance Inc. Life and AD&D Insurance Plan 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, provided that the life insurance coverage may be a taxable
benefit.

 

(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.

 

(c)                                  Certain Additional
Payments.
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.

 

                                                (d)                                 Gross-Up Payments by the Company.

 

(1)                                  Gross-Up Payments. 
Anything
in the Plan to the contrary notwithstanding (including the provisions of  Section 15), 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.  All determinations required to be made under
this Section 3(d), 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

 

5

 

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
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(d) (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.  Notwithstanding the foregoing,
no Gross-Up Payment or Underpayment shall be paid later than the end of the
calendar year following the calendar year in which the eligible employee pays
the Excise Tax to which it relates.

 

SECTION 4                          OFFSETS

 

(a)                                  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 or restructuring benefit
plan or program sponsored by the Company or any severance benefit mandated by
law.  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 a self-employed
individual) 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 during the severance period and, if employed with
another employer during the severance period (other than as a consultant or a
self-employed individual), Severance Benefits shall cease.  The eligible employee shall be obligated to
refund any amounts paid by the Company as Severance Pay or Severance Benefits
that exceed the amount of Severance Pay and Severance Benefits payable to the
eligible employee hereunder giving effect to the offsets 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 employment (including as a

 

6

 

consultant or a
self-employed individual) of such eligible employee during the severance
period.

 

(b)                                 If, as of the time of termination of
employment, an eligible employee is indebted to the Company, whether or not
evidenced by a written instrument, the Company shall have the right to reduce
any or all of the amounts due such eligible employee under this Plan by such
outstanding indebtedness, provided such offset is permitted under applicable
law.  Notwithstanding the foregoing, any
offset of such eligible employee’s against any payment made to such eligible
employee under this Plan shall not be made in a manner that violates Code Section 409A.  Any election not to reduce such payment shall
not constitute a waiver of the claim for such indebtedness.

 

SECTION 5                                                                               PAYMENT OF SEVERANCE PAY

 

Except as otherwise
provided in the Plan, 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 if, at the time of the eligible employee’s
separation from service, such employee is deemed to be a “specified employee”
of a public company as defined in Treasury Regulation Section 1.409A-1(i),
any Severance Pay payable pursuant to Section 3(a), the value of any
Severance Benefits provided pursuant to Sections 3(b)(2) and 3(b)(3), any
enhancements made pursuant to Section 3(c) and any Gross-Up Payments
or Underpayments made pursuant to Section 3(d) that are paid or
provided during the six-month-and-one-day period following the eligible
employee’s separation date (the “restricted period”)
shall not exceed two times the lesser of:

 

(a)                                  the eligible employee’s annualized
compensation based upon the annual rate of pay for services provided to the
Company and all Affiliates for the calendar year preceding the calendar year in
which the eligible employee has a separation from service (adjusted for any
increase during the year in which the eligible employee has a separation from
service that would be expected to continue indefinitely if the eligible
employee had not separated from service); or

 

(b)                                 the maximum amount that may be taken into
account under a qualified plan pursuant to Code Section 401(a)(17) for
such year.

 

Any Severance Pay under Section 3(a),
Severance Benefits under Sections 3(b)(2) and 3(b)(3), Gross-Up Payments
or Underpayments under Section 3(c) or enhancements under Section 3(d) otherwise
payable or to be provided during the restricted period that exceed the
limitation above shall be accumulated and paid or provided to the eligible
employee, without any interest thereon, on the first regular payroll payment
date that is at least six months and one day after the eligible employee’s
separation date.  All legally required
taxes, and any sums owing to the Company under Section 4, shall be
deducted from Severance Pay payments.

 

7

 

SECTION 6                                                                               REINSTATEMENT

 

In the event that an
eligible employee who is receiving Severance Pay or Severance Benefits is
permanently reemployed by the Company or an Affiliate, 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 in a form satisfactory to FSA (the “Release”) to the Plan Administrator no later than
twenty-one (21) days after the Release has been furnished to the employee.  If the Plan Administrator determines that the
termination of the eligible employee is part of a group termination, the signed
Release must be submitted to the Plan Administrator no later than forty-five
(45) days after his or her separation date. 
In the event of a group termination, attached to the Release will be
such additional information relating to the group termination as is required by
applicable law in order to make the Release effective.  An eligible employee may revoke his or her
signed Release within seven (7) days of his or her signing the
Release.  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 Release shall not be
eligible to receive any Severance Pay and Severance Benefits under the
Plan.  An eligible employee who timely
submits a signed Release 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 attorneys to review the Release if they so
desire.

 

SECTION 8                                                                               PLAN ADMINISTRATION

 

FSA shall be the “administrator”
of the Plan for purposes of Section 3(16)(A) of ERISA.  FSA hereby delegates to its Executive
Management Committee the responsibility for the administration of the Plan, and
the Executive Management Committee 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, 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.  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.

 

8

 

SECTION 9                                                                               CLAIMS PROCEDURES

 

The Plan Administrator
shall appoint an individual or committee of individuals (the “decisionmaker”) to evaluate claims made under the Plan.  Within 90 days after the Plan Administrator
receives a written claim for benefits under the Plan, the decisionmaker will
either approve the claim or notify the claimant that the claim is denied.  The decisionmaker may extend this time period
by up to an additional 90 days under special circumstances and shall notify the
claimant of the extension and the reasons therefore within the initial 90-day
period.

 

If a claim is denied, in
whole or in part, the decisionmaker shall furnish to the claimant, at the time
of the denial, a written notice setting forth in a manner calculated to be
understood by the claimant: (i) the reason(s) for the denial,
including a reference to any applicable provisions of the Plan; (ii) a
description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; (iii) an explanation of the Plan’s review
procedures and the time limits applicable to such procedures; and (iv) a
statement of the claimant’s right to bring a civil action under ERISA following
an adverse determination on appeal.

 

In the context of a claim
involving a disability determination, the initial claim determination shall be
made within 45 days, and the maximum extension of time available to the
decisionmaker is 30 days.  Further, the
information included in any denial also shall include identification of any
medical or vocational experts whose advice was obtained in connection with a
claim determination, whether or not their judgment was relied upon in making
the determination.

 

A claimant who has
received a notice denying a claim, in whole or in part, may request in writing
a review of the claim within 60 days after receiving a notice of denial.  Such request may be made either in person or
by a duly authorized representative and shall set forth all the bases of the
request for review, any facts supporting the review and any issues or comments
the claimant deems pertinent.  The
claimant may submit documents, records and other information in support of the
review and shall be provided upon request, free of charge, reasonable access to
and copies of all documents, records and other information relevant to the
claimant’s appeal.

 

The Plan Administrator
shall appoint an individual or committee of individuals to review the appeal of
any claim denial under the Plan (the “claim reviewer”).  The claim reviewer shall make a decision with
respect to a claim review promptly, but not later than 60 days (45 days in the
context of a claim involving a disability determination) after receipt of the
appeal.  The claim reviewer may extend
this time period by up to an additional 60 days (45 days in the context of a
claim involving a disability determination) under special circumstances by
providing the claimant with notice of the extension and the reasons therefore
within the initial 60-day (or 45-day) period. 
The claim reviewer will be a different person(s) from the person(s) who
made the initial determination and will not be a subordinate of the original
decisionmaker or a relative of such subordinate.  The claim reviewer will not grant deference
to the initial decision and will consider all information submitted, regardless
of whether it was considered in connection with the initial claim.

 

The final decision of the
claim reviewer shall be in writing, give specific reasons for the decision,
provide specific references to the pertinent provisions of the Plan on which
the decision is based

 

9

 

and include both a
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to and copies of all documents, records and other
information relevant to the claimant’s claim for benefits and a statement of
the claimant’s right to bring an action under ERISA.  Any action (whether at law, in equity or
otherwise) must be commenced within three (3) years and must be brought in
a court of competent jurisdiction sitting in New York, New York.  This three (3) year period shall be
computed from the earlier of: (a) the date a final determination denying
such benefit, in whole or in part, is issued under the Plan’s claim review
procedure; and (b) the date such individual’s cause of action first
accrued (as determined under the laws of the State of New York without regard
to principles of choice of laws).

 

SECTION 10                                                                        AMENDMENT/TERMINATION/VESTING

 

(a)                                  FSA 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 the
effective date of this restatement.  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, provided that:  (i) no such amendment shall materially
diminish the rights of a participant (or beneficiary, as the case may be)
without the participant’s (or beneficiary’s) consent, except as may be
otherwise required by law; and (ii) FSA reasonably determines that such
amendment would not result in penalties under Code Section 409A.  Notwithstanding the foregoing, FSA may make
any such amendments to the Plan which are administrative, technical or required
by law, including amendments to conform the Plan to the requirements of Code Section 409A.

 

(b)                                 FSA may terminate the Plan at any time
and, anything in this Plan to the contrary notwithstanding, distribute the
value of the Severance Pay to each participant who has severed from employment
(or to his or her beneficiary, as the case may be) in a lump sum as soon as
practicable after such termination, or in the alternative, pay such amount in
accordance with the provisions of Section 5, but only if the Plan
Administrator reasonably determines that such distribution would not result in
penalties under Code Section 409A. 
Termination of the Plan shall not serve to reduce the Severance Pay and
Severance Benefits previously granted under the Plan to a participant who has
severed from employment at the time of termination without the written consent
of the participant unless the Plan Administrator reasonably determines that
such reduction is needed for the Plan to comply with Code Section 409A.

 

(c)                                  Any Affiliate of FSA that participates in
this Plan may prospectively terminate participation or withdraw from this Plan
upon giving FSA at least 30 days (or such other period as may be needed to
satisfy Code Section 409A) notice of its intention to terminate or
withdraw, but FSA may waive the requirement of notice.  FSA and the Affiliate may agree that, to the
extent permitted by applicable law, such termination or withdrawal shall be
treated as retroactive.  FSA in its

 

10

 

discretion may
direct any participating Affiliate to terminate participation or withdraw from
the Plan at any time and without prior notice.

 

SECTION 11                                                                        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 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.

  
								

 

11

 

SECTION 12                                                                        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. 
Notwithstanding the preceding sentence, all or a portion of a
Participant’s Severance Pay may be paid to another person as specified in a “domestic
relations order” within the meaning of Section 414(p)(1)(B) of the
Code in accordance with the rules and procedures established by the Plan
Administrator.

 

SECTION 13                                                                        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.  If the Plan makes an overpayment, the Plan
will have the right, at any time, as elected by the Plan Administrator, to:

 

(a)                                  recover that overpayment from the person
to whom it was made;

 

(b)                                 offset the amount of that overpayment
from a future payment to such person; or

 

(c)                                  a combination of both.

 

The Plan shall be
considered to have established an equitable lien by agreement with the person
to whom such overpayment was made.  Such
employee or beneficiary shall, upon request, execute and deliver such
instruments and papers as may be required and shall do whatever else is
necessary to secure such rights of recovery to the Plan.

 

SECTION 14                                                                        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.

 

SECTION 15                                                                        COMPLIANCE WITH CODE SECTION 409A

 

Notwithstanding any other
provision of the Plan to the contrary, the Plan is intended to comply with the
requirements of Code Section 409A to be a separation pay plan that does
not provide for the deferral of compensation under Code Section 409A or,
as applicable, a plan that complies with the requirements of Code Section 409A
to avoid taxation under Code Section 409A(a)(1) and shall at all
times be interpreted and operated consistent with this intention.  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 16                                                                        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 or its Affiliates and nothing in
the

 

12

 

Plan
shall restrict the right of the Company and its Affiliates to terminate the
employment of any eligible employee at any time.

 

SECTION 17                        COMPANY
INFORMATION

 

In connection with their
employment, 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 must 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 as a result of such
disclosure or use of Company Information, 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 or Its Affiliates, 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.  “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 (except when available based
upon the eligible employee’s actions in contravention of this provision).

 

SECTION 18                        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.

 

SECTION 19                        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.

 

13

 

SECTION 20                        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. For purposes of ERISA, this Plan is
intended to constitute a nonqualified, unfunded plan for the purpose of
providing welfare benefits for a select group of management or highly
compensated employees.

 

SECTION 21                        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 22                        PLAN YEAR

 

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

 

SECTION 23                        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.

 

14

 

[Senior Executive Over 40 Individual Release]

 

FORM OF RELEASE

(individual termination)

 

WAIVER AND RELEASE AGREEMENT

 

This Waiver and
Release Agreement (“Agreement”) sets forth the agreement reached concerning the
termination of my employment with FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD. 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 the “Company”).  I acknowledge and agree that my employment
with the Company ends for all purposes on
            , 2008.

 

(1)           Waiver and Release, Etc.

 

(a)  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 the Company from all debts, obligations, promises, covenants,
agreements, contracts, endorsements, bonds, controversies, suits, actions,
causes of action, judgments, damages, expenses, claims or demands, in law or in
equity, which I ever had, now have, or which may arise in the future, regarding
any matter arising on or before the date of my execution of this Agreement,
including but not limited to all claims (whether known or unknown) regarding my
employment at or termination of employment from the Company, any contract
(express or implied), any claim for equitable relief or recovery of punitive,
compensatory, or other damages or monies, attorneys’ fees, any tort, and all
claims for alleged discrimination based upon age, race, color, sex, sexual
orientation, marital status, religion, national origin, handicap, disability,
or retaliation, including any claim, asserted or unasserted, which could arise
under Title VII of the Civil Rights Act of 1964; the Equal Pay Act of 1963; the
Age Discrimination in Employment Act of 1967; the Older Workers Benefit
Protection Act of 1990; the Americans With Disabilities Act of 1990; the Civil
Rights Act of 1866, 42 U.S.C. § 1981; the Employee Retirement Income Security
Act of 1974; the Civil Rights Act of 1991; the Worker Adjustment and Retraining
Notification Act of 1988; the
Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C.
§ 1514A, also known as the Sarbanes Oxley Act; the New York State
Human Rights Law; the New York City Human Rights Law; the California Fair Employment and Housing Act;  Chapter 21 of the Texas Labor Code; and any other federal,
state or local laws, rules or regulations, whether equal employment
opportunity laws, rules or regulations or otherwise, or any right under
any Company pension, welfare, or stock plans. 
This Agreement may not be cited as, and does not constitute any
admission by the Company of, any violation of any such law or legal obligation
with respect to any aspect of my employment or termination therefrom.

 

(b)  I hereby expressly waive and relinquish all
rights and benefits afforded to me by Section 1542 of the Civil Code of
California and do so understanding and acknowledging the

 

A-1

 

significance
and consequence of such specific waiver of Section 1542.  Section 1542 of the Civil Code of
California states as follows:

 

A general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
settlement with the debtor.

 

Thus,
notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release of the Company, I expressly
acknowledge that this Agreement is also intended to include in its effect,
without limitation, all claims which I do not know or suspect to exist at the
time of my execution of this Agreement, and that this Agreement contemplates
the extinguishment of any such claim or claims.

 

(2)           Covenant Not to Sue.  I represent and agree that I have not filed
any lawsuits or arbitrations against the Company, or filed or caused to be
filed any charges or complaints against the Company with any municipal, state
or federal agency charged with the enforcement of any law.  Pursuant to and as a part of my release and
discharge of the Company, as set forth herein,  with
the sole exception of my right to bring a proceeding pursuant to the Older
Workers Benefit Protection Act to challenge the validity of my release of
claims pursuant to the Age Discrimination in Employment Act (“ADEA”), I agree,
not inconsistent with EEOC Enforcement Guidance On Non-Waivable Employee Rights
Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest
extent permitted by law, not to sue or file a charge, complaint, grievance or
demand for arbitration against the Company in any forum or assist or otherwise
participate willingly or voluntarily in any claim, arbitration, suit, action,
investigation or other proceeding of any kind which relates to any matter that
involves the Company, and that occurred up to and including the date of my
execution of this Agreement, unless required to do so by court order, subpoena
or other directive by a court, administrative agency, arbitration panel or
legislative body, or unless required to enforce this Agreement.  To the extent any such action may be brought
by a third party, I expressly waive any claim to any form of monetary or other
damages, or any other form of recovery or relief in connection with any such
action.  Nothing in the foregoing
paragraph shall prevent me (or my attorneys) from (i) commencing an action
or proceeding to enforce this Agreement or (ii) exercising my right under
the Older Workers Benefit Protection Act of 1990 to challenge the validity of
my waiver of ADEA claims set forth in paragraph 1 of this Agreement.

 

(3)           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.

 

(4)           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

 

A-2

 

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.

 

(5)           Non-Disparagement.  I will not disparage or criticize the
Company, or issue any communication, written or otherwise, that reflects
adversely on or encourages any adverse action against the Company, except if testifying
truthfully under oath pursuant to any lawful court order or subpoena or
otherwise responding to or providing disclosures required by law.

 

(6)           Non-Disclosure.  I agree not to disclose the terms, contents
or execution of this Agreement, the claims that have been or could have been
raised against the Company, or the facts and circumstances underlying this
Agreement, except in the following circumstances:

 

a.                                       I
may disclose the terms of this Agreement to my immediate family, so long as
such family member agrees to be bound by the confidential nature of this
Agreement;

 

b.                                      I
may disclose the terms of this Agreement to: (i) my tax advisors so long
as such tax advisors agree in writing to be bound by the confidential nature of
this Agreement, (ii) taxing authorities if requested by such authorities
and so long as they are advised in writing of the confidential nature of this
Agreement, or (iii) my legal counsel; and

 

c.                                       Pursuant
to the order of a court or governmental agency of competent jurisdiction, or for
purposes of securing enforcement of the terms and conditions of this Agreement
should that ever be necessary.

 

(7)           Non-Solicitation.  I agree that for a period of twelve months
after the termination of my employment, I shall not: (a) directly or
indirectly solicit, induce or encourage any employee of the Company, or any
consultant or independent contractor providing services to the Company, to
leave the Company or to join or perform services for any other company, or (b) directly
or indirectly solicit, induce or encourage any entity or person who is a
customer or client of the Company to cease to engage the services of the
Company.

 

(8)           Consequences of Breach.  In the event that I breach this Agreement by
violating any of the provisions of paragraph (3), (4), (5), (6) or (7), 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 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.

 

A-3

 

(9)           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 during the severance period (including employment as a consultant or a
self-employed individual), and, if employed with another employer (other than
as a consultant or a self-employed individual), Severance Benefits shall
cease.  I agree to refund any amounts
paid by the Company as Severance Pay or Severance Benefits that exceed the
amount of Severance Pay and Severance Benefits payable to me under the Plan
giving effect to the offsets referred to in the preceding sentence.  I further agree to provide to the Company
prompt notice of the commencement of any such employment (including employment
as a consultant or a self-employed individual).

 

(10)         409A.  All payments or benefits under this Agreement
are subject to any applicable employment or tax withholdings or
deductions.  In addition, the parties hereby agree that it is their
intention that all payments or benefits provided under this Agreement comply
with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)
and this Agreement shall be interpreted accordingly.  I am advised to seek
independent advice from my tax advisor(s) with respect to the application
of Section 409A of the Code to any payments or benefits under this
Agreement.  Notwithstanding the foregoing, the Company does not guarantee
the tax treatment of any payments or benefits under this Agreement, including
without limitation under the Code, federal, state or local laws.

 

(11)         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.

 

(12)         Review.  Without detracting in any respect from any
other provision of this Agreement:

 

a.                                       I,
in consideration of the payment and benefits provided to me as described in
paragraph 1 of this Agreement, agree and acknowledge that this Agreement
constitutes a knowing and voluntary waiver of all rights or claims I have or
may have against the Company as set forth herein, including, but not limited
to, all rights or claims arising under the Age Discrimination in Employment Act
of 1967, as amended (“ADEA”), including, but not limited to, all claims of age
discrimination in employment and all claims of retaliation in violation of the
ADEA; and I have no

 

A-4

 

physical or mental
impairment of any kind that has interfered with my ability to read and
understand the meaning of this Agreement or its terms, and that I am not acting
under the influence of any medication or mind-altering chemical of any type in
entering into this Agreement.

 

b.                                      I
understand that, by entering into this Agreement, I do not waive rights
or claims that may arise after the date of my execution of this Agreement,
including without limitation any rights or claims that I may have to secure
enforcement of the terms and conditions of this Agreement.

 

c.                                       I
agree and acknowledge that the consideration provided to me under this
Agreement is in addition to anything of value to which I am already entitled.

 

d.                                      The
Company hereby advises me to consult with an attorney prior to executing this
Agreement.

 

e.                                       I
acknowledge that I was informed that I had at least twenty-one (21) days in
which to review and consider this Agreement, and to consult with an attorney
regarding the terms and effect of this Agreement.

 

(13)         Revocation Period.  The Company agrees that I may revoke this
Agreement within seven (7) days from the date I sign this Agreement, in
which case this Agreement shall be null and void and of no force or effect on
either the Company or me.  Any revocation
must be in writing and received by the Plan Administrator by 5:00 p.m. on
or before the seventh day after this Agreement is executed by me.  Such revocation must be sent to the Director
of Human Resources, Financial Security Assurance Holdings, Ltd. at 31 West 52nd
Street, New York, NY 10019.

 

(14)         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.

 

(15)         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 Company and I hereby waive any rights to a jury trial in connection
with any disputes, controversies or claims under this Agreement.

 

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.

 

A-5

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Print name)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Date)

  

 

A-6

 

[Senior Executive Over 40 Group Release]

 

FORM OF RELEASE

(group termination)

 

WAIVER AND RELEASE AGREEMENT

 

This Waiver and
Release Agreement (“Agreement”) sets forth the agreement reached concerning the
termination of my employment with FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD. 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 the “Company”).  I acknowledge and agree that my employment
with the Company ends for all purposes on
            , 2008.

 

(1)           Waiver and Release, Etc.

 

(a)  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 the Company from all debts, obligations, promises, covenants,
agreements, contracts, endorsements, bonds, controversies, suits, actions,
causes of action, judgments, damages, expenses, claims or demands, in law or in
equity, which I ever had, now have, or which may arise in the future, regarding
any matter arising on or before the date of my execution of this Agreement,
including but not limited to all claims (whether known or unknown) regarding my
employment at or termination of employment from the Company, any contract
(express or implied), any claim for equitable relief or recovery of punitive,
compensatory, or other damages or monies, attorneys’ fees, any tort, and all
claims for alleged discrimination based upon age, race, color, sex, sexual
orientation, marital status, religion, national origin, handicap, disability,
or retaliation, including any claim, asserted or unasserted, which could arise
under Title VII of the Civil Rights Act of 1964; the Equal Pay Act of 1963; the
Age Discrimination in Employment Act of 1967; the Older Workers Benefit
Protection Act of 1990; the Americans With Disabilities Act of 1990; the Civil
Rights Act of 1866, 42 U.S.C. § 1981; the Employee Retirement Income Security
Act of 1974; the Civil Rights Act of 1991; the Worker Adjustment and Retraining
Notification Act of 1988; the
Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C.
§ 1514A, also known as the Sarbanes Oxley Act; the New York State
Human Rights Law; the New York City Human Rights Law; the California Fair Employment and Housing Act;  Chapter 21 of the Texas Labor Code; and any other federal,
state or local laws, rules or regulations, whether equal employment
opportunity laws, rules or regulations or otherwise, or any right under
any Company pension, welfare, or stock plans. 
This Agreement may not be cited as, and does not constitute any
admission by the Company of, any violation of any such law or legal obligation
with respect to any aspect of my employment or termination therefrom.

 

B-1

 

(b)  If I worked in
California, I hereby
expressly waive and relinquish all rights and benefits afforded to me by Section 1542
of the Civil Code of California and do so understanding and acknowledging the
significance and consequence of such specific waiver of Section 1542.  Section 1542 of the Civil Code of
California states as follows:

 

A general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
settlement with the debtor.

 

Thus,
notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release of the Company, I expressly
acknowledge that this Agreement is also intended to include in its effect,
without limitation, all claims which I do not know or suspect to exist at the
time of my execution of this Agreement, and that this Agreement contemplates
the extinguishment of any such claim or claims.

 

(2)           Covenant Not to Sue.  I represent and agree that I have not filed
any lawsuits or arbitrations against the Company, or filed or caused to be
filed any charges or complaints against the Company with any municipal, state
or federal agency charged with the enforcement of any law.  Pursuant to and as a part of my release and
discharge of the Company, as set forth herein,  with
the sole exception of my right to bring a proceeding pursuant to the Older
Workers Benefit Protection Act to challenge the validity of my release of
claims pursuant to the Age Discrimination in Employment Act (“ADEA”), I agree,
not inconsistent with EEOC Enforcement Guidance On Non-Waivable Employee Rights
Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest
extent permitted by law, not to sue or file a charge, complaint, grievance or
demand for arbitration against the Company in any forum or assist or otherwise
participate willingly or voluntarily in any claim, arbitration, suit, action,
investigation or other proceeding of any kind which relates to any matter that
involves the Company, and that occurred up to and including the date of my execution
of this Agreement, unless required to do so by court order, subpoena or other
directive by a court, administrative agency, arbitration panel or legislative
body, or unless required to enforce this Agreement.  To the extent any such action may be brought
by a third party, I expressly waive any claim to any form of monetary or other
damages, or any other form of recovery or relief in connection with any such
action.  Nothing in the foregoing
paragraph shall prevent me (or my attorneys) from (i) commencing an action
or proceeding to enforce this Agreement or (ii) exercising my right under
the Older Workers Benefit Protection Act of 1990 to challenge the validity of
my waiver of ADEA claims set forth in paragraph 1(a) of this Agreement.

 

(3)           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.

 

(4)           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

 

B-2

 

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.

 

(5)           Non-Disparagement.  I will not disparage or criticize the
Company, or issue any communication, written or otherwise, that reflects
adversely on or encourages any adverse action against the Company, except if
testifying truthfully under oath pursuant to any lawful court order or subpoena
or otherwise responding to or providing disclosures required by law.

 

(6)           Non-Disclosure.  I agree not to disclose the terms, contents
or execution of this Agreement, the claims that have been or could have been
raised against the Company, or the facts and circumstances underlying this
Agreement, except in the following circumstances:

 

d.                                      I
may disclose the terms of this Agreement to my immediate family, so long as
such family member agrees to be bound by the confidential nature of this
Agreement;

 

e.                                       I
may disclose the terms of this Agreement to: (i) my tax advisors so long
as such tax advisors agree in writing to be bound by the confidential nature of
this Agreement, (ii) taxing authorities if requested by such authorities
and so long as they are advised in writing of the confidential nature of this
Agreement, or (iii) my legal counsel; and

 

f.                                         Pursuant
to the order of a court or governmental agency of competent jurisdiction, or
for purposes of securing enforcement of the terms and conditions of this
Agreement should that ever be necessary.

 

(7)           Non-Solicitation.  I agree that for a period of twelve months
after the termination of my employment, I shall not: (a) directly or
indirectly solicit, induce or encourage any employee of the Company, or any
consultant or independent contractor providing services to the Company, to
leave the Company or to join or perform services for any other company, or (b) directly
or indirectly solicit, induce or encourage any entity or person who is a
customer or client of the Company to cease to engage the services of the
Company.

 

(8)           Consequences of Breach.  In the event that I breach this Agreement by
violating any of the provisions of paragraph (3), (4), (5), (6) or (7), 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 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

 

B-3

 

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.

 

(9)           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 during the severance period (including employment as a consultant or a
self-employed individual), and, if employed with another employer (other than
as a consultant or a self-employed individual), Severance Benefits shall
cease.  I agree to refund any amounts
paid by the Company as Severance Pay or Severance Benefits that exceed the
amount of Severance Pay and Severance Benefits payable to me under the Plan
giving effect to the offsets referred to in the preceding sentence.  I further agree to provide to the Company
prompt notice of the commencement of any such employment (including employment
as a consultant or a self-employed individual).

 

(10)         409A.  All payments or benefits under this Agreement
are subject to any applicable employment or tax withholdings or
deductions.  In addition, the parties hereby agree that it is their
intention that all payments or benefits provided under this Agreement comply
with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)
and this Agreement shall be interpreted accordingly.  I am advised to seek
independent advice from my tax advisor(s) with respect to the application
of Section 409A of the Code to any payments or benefits under this
Agreement.  Notwithstanding the foregoing, the Company does not guarantee
the tax treatment of any payments or benefits under this Agreement, including
without limitation under the Code, federal, state or local laws.

 

(11)         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.

 

(12)         Review.  Without detracting in any respect from any
other provision of this Agreement:

 

f.                                         I,
in consideration of the payment and benefits provided to me as described in
paragraph 1 of this Agreement, agree and acknowledge that this Agreement
constitutes a knowing and voluntary waiver of all rights or claims I have or
may have against the Company as set forth herein, including, but not limited
to, all rights or claims arising under the Age Discrimination in Employment Act
of 1967, as amended (“ADEA”), including, but 

 

B-4

 

not limited to,
all claims of age discrimination in employment and all claims of retaliation in
violation of the ADEA; and I have no physical or mental impairment of any kind
that has interfered with my ability to read and understand the meaning of this
Agreement or its terms, and that I am not acting under the influence of any
medication or mind-altering chemical of any type in entering into this
Agreement.

 

g.                                      I
understand that, by entering into this Agreement, I do not waive rights
or claims that may arise after the date of my execution of this Agreement,
including without limitation any rights or claims that I may have to secure
enforcement of the terms and conditions of this Agreement.

 

h.                                      I
agree and acknowledge that the consideration provided to me under this
Agreement is in addition to anything of value to which I am already entitled.

 

i.                                          The
Company hereby advises me to consult with an attorney prior to executing this
Agreement.

 

j.                                          I
acknowledge that I was informed that I had at least forty-five (45) days in
which to review and consider this Agreement, to review the information as
required by the ADEA, a copy of such information being attached to and made
part of this Agreement, and to consult with an attorney regarding the terms and
effect of this Agreement.

 

(13)         Revocation Period.  The Company agrees that I may revoke this
Agreement within seven (7) days from the date I sign this Agreement, in
which case this Agreement shall be null and void and of no force or effect on
either the Company or me.  Any revocation
must be in writing and received by the Plan Administrator by 5:00 p.m. on
or before the seventh day after this Agreement is executed by me.  Such revocation must be sent to the Director
of Human Resources, Financial Security Assurance Holdings, Ltd. at 31 West 52nd Street, New York,
NY 10019.

 

(14)         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.

 

(15)         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 Company and I hereby waive any rights to a jury trial in connection
with any disputes, controversies or claims under this Agreement.

 

B-5

 

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)

  

 

B-6

 

EXHIBIT A

 

The following information
is provided in accordance with the ADEA:

 

1.             The decisional unit is
                      ’s
                                    
Department.

 

2.             All employees in the
                                    
Department are eligible for the program. 
All employees in this Department whose employment terminated in
                    
are selected for the program.

 

3.             All employees in the
                                    
Department who are being offered consideration under a waiver agreement and
asked to waive claims under the ADEA must sign the agreement and return it to
                      
within 45 days after receiving the waiver agreement.  Once the signed waiver agreement is returned
to
                      ,
the employee has 7 days to revoke the waiver agreement.

 

4.             The following is a listing of the ages and job titles of
employees in the
                                    
Department who were and were not selected for termination and the offer of
consideration for signing a waiver:

 

	
  Job Title

  	
   

  	
  Age

  	
   

  	
  #Selected

  	
   

  	
  #Not Selected

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[List same job title for
each age in which there is an incumbent.]

 

B-7Exhibit 10.3

 

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

 

FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.

 

2004 Equity Participation Plan

 

As amended and restated
effective as of May 21, 2008

 

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

 

2004 Equity Participation Plan

 

	
  SECTION

  	
   

  	
  CONTENTS

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  General Purpose of Plan; Definitions

  	
   

  	
  1

  
	
  Section 2.

  	
   

  	
  Administration

  	
   

  	
  5

  
	
  Section 3.

  	
   

  	
  FSA Stock Subject to Plan

  	
   

  	
  6

  
	
  Section 4.

  	
   

  	
  Eligibility

  	
   

  	
  7

  
	
  Section 5.

  	
   

  	
  Performance Shares

  	
   

  	
  7

  
	
  Section 6.

  	
   

  	
  Dexia Restricted Stock

  	
   

  	
  12

  
	
  Section 7.

  	
   

  	
  Performance Share Units

  	
   

  	
  15

  
	
  Section 8.

  	
   

  	
  Transfer, Leave of Absence, etc.

  	
   

  	
  16

  
	
  Section 9.

  	
   

  	
  Amendments and Termination

  	
   

  	
  16

  
	
  Section 10.

  	
   

  	
  Compliance
  with Code Section 409A

  	
   

  	
  16

  
	
  Section 11.

  	
   

  	
  General Provisions

  	
   

  	
  16

  
	
  Section 12.

  	
   

  	
  Effective Date of Plan

  	
   

  	
  17

  
	
  Section 13.

  	
   

  	
  Term of Plan

  	
   

  	
  18

  

 

 

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

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

 

2004 Equity Participation Plan

 

Section 1.  General Purpose of Plan; Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

Section 2. 
Administration.

 

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

 

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

 

In particular, the
Committee shall have the authority:

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 3.  FSA Stock Subject to Plan.

 

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

 

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

 

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

 

6

 

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

 

Section 4. 
Eligibility.

 

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

 

Section 5. 
Performance Shares.

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

a x b
= c ; or

 

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

 

a x b x d
= e; or

 

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

 

where:

 

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

 

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

 

	
  Performance

  	
   

  	
  Percentage of Performance

  
	
  Cycle ROE

  	
   

  	
  Objective Achieved

  
	
  19% or higher

  	
   

  	
  200%

  
	
  16%

  	
   

  	
  150%

  
	
  13%

  	
   

  	
  100%

  
	
  10%

  	
   

  	
  50%

  
	
  7%

  	
   

  	
  0%

  

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

11

 

Section 6.  Dexia Restricted Stock.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

Section 7. 
Performance Share Units.

 

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

 

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

 

15

 

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

 

Section 8.  Transfer, Leave of Absence, etc.

 

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

 

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

 

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

 

Section 9.  Amendments and Termination.

 

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

 

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

 

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

 

Section 10.  
Compliance with Code Section 409A.

 

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

 

Section 11. 
General Provisions.

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 12. 
Effective Date of Plan.

 

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

 

17

 

Section 13. 
Term of Plan.

 

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

 

18

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