Document:

Exhibit 10.4

 

AMENDED EMPLOYMENT AGREEMENT

AMENDED AGREEMENT, effective as of January 1, 2005,
by and between Financial Security Assurance Holdings Ltd., a New York
corporation (“Company”), and Robert P. Cochran (“Employee”).

WHEREAS, Company and Employee previously entered
into an employment agreement, dated July 5, 2004; and

WHEREAS, Company and Employee desire to amend
the terms and conditions of this existing employment agreement to comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), to avoid taxation under Code Section 409A(a)(1); and

WHEREAS, Company desires to employ Employee and
Employee is willing to serve as an employee of Company, subject to the terms
and conditions described herein (the “Agreement);

NOW, THEREFORE, IN
CONSIDERATION OF the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:

1.             Employment.   Company hereby employs
Employee, and Employee agrees to serve as an employee of Company, on the terms
and conditions set forth in this Agreement.

2.             Term.   Employee’s employment shall
commence on July 5, 2004 (the “Effective Date”) and end on December 31,
2007 (the “Original Term”); provided, however, that this Agreement shall be
renewed and extended for two-year terms (the “Extended Terms”), unless notice
of termination is given by Employee or Company six months or more prior to the
end of the Original Term or one of the Extended Terms. The Original Term and
any Extended Term shall be referred to collectively as the “Term”.

3.             Duties During Employment.   During
Employee’s employment with Company, Employee shall initially serve as Chairman
and Chief Executive Officer of Company and shall have such duties and
responsibilities as are assigned to him by the Board of Directors of Company
(the “Board”) and as are consistent with the magnitude and scope of his duties
and responsibilities as of the Effective Date. Employee shall report directly
to the Board.

 

 

 

Employee shall devote Employee’s full business
time and attention and best efforts to the affairs of Company during his period
of employment, provided, however, that Employee may continue to engage in other
activities, such as activities involving professional, charitable, educational,
religious and similar types of organizations, speaking engagements, membership
on the board of directors of such other organizations, provided that such
activities do not interfere with the performance of his duties for Company. Employee
may also continue membership on the board of directors of White Mountains
Insurance Group, or it successors, and on any other corporate boards which do
not conflict with the performance of his duties or the interests of Company. Any
additional corporate board memberships must be reviewed with and approved by
the Board in advance of acceptance of such position.

At any point on or after the end of the Original
Term, Employee may elect to relinquish his Chief Executive responsibilities and
become Non-Executive Chairman of the Board for the remainder of the term and
any extensions. In this role it is anticipated he will devote approximately 25%
to 33% of full business time to Company duties with the remainder devoted to a
variety of interests not conflicting with the Company.

In the role of Non-Executive Chairman Employee
will receive annually as compensation the continuation of at least the then
current base salary as a Non-Executive Chairman fee (in lieu of any other Board
fees), no annual bonus expectations, performance shares having an estimated
economic value at least equal to 50% of normal prior awards, continuation of
participation in employee benefit plans, and a one-time pro-rata annual bonus
for the portion of the year spent as Chief Executive before the change to
Non-Executive Chairman occurred. In addition, as Non-Executive chairman,
employee will be furnished with normal support including office and assistant.

4.             Current
Cash Compensation.

(a)           Base
Salary.   As compensation for his services hereunder, Company will pay
to Employee during the period of his employment a base salary at the annual rate
in effect immediately prior to the Effective Date, payable in accordance with
Company’s payroll practices for senior executives. Company shall review the
base salary bi-annually (with the first review to take place January 2005)
and in light of such review may, in the discretion of the Board (but shall not
be obligated to), increase such base salary taking into account any change in
Employee’s then responsibilities, performance by Employee, and other pertinent
factors.

(b)           Annual
Bonus.   Company shall maintain a bonus pool (the “Bonus Pool”) for the
benefit of Company employees in such amount and pursuant to such formulae as
the Human Resources Committee of the Board (“HR Committee”) shall from time to
time determine. The Company shall also maintain a reserve bonus pool (the “Rainy
Day Fund”) made

 

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up of previously earned but undistributed Bonus
Pool allocations from prior years, which shall be distributable upon the
recommendation of the management of the Company and with the approval of the HR
Committee. Employee shall receive an annual cash bonus equal to at least 5% and
be considered for a portion of an additional 2% that must be allocated between
Employee and Sean W. McCarthy (or other executive acting as President of the
Company) of  the Bonus Pool. It should be
noted that the above described percentages are a minimum and that it is
anticipated that the HR Committee may exercise its discretion above such
amount.

(c)           Performance
Shares.   In each calendar year in the Term, beginning in 2005,
Employee shall receive an annual Performance Share grant under the Company’s
long-term incentive compensation plan (the “Performance Share Plan”), as
presently in effect or as may be modified or added to by Company from time to
time, having an estimated economic value at least equal to Employee’s 2004
Performance Share grant. Except as provided herein, such Performance Shares
shall vest according to the terms of the Performance Share Plan. All references
to Performance Shares in this Agreement shall include Dexia Restricted Shares
issued pursuant to the Performance Share Plan and any other form of long-term
incentive compensation provided under the Plan as amended from time to time.

5.             Other Employee Benefits.   In addition
to the cash compensation provided for in Section 4 hereof, Employee,
subject to meeting eligibility provisions thereof, shall be entitled to
participate in Company’s employee benefit plans, as presently in effect or as
they may be modified or added to by Company from time to time to the same
extent as are otherwise enjoyed by the senior executives of Company, which
shall not be reduced in any material respect from plans in existence as of the
Effective Date.

6.             Termination.

(a)           Termination by Company Without
Cause;

                Termination by Employee for
Good Reason.

(i)  During
the Original Term.   If Company should terminate Employee’s
employment without Cause (as defined below) or if Employee should terminate his
employment for Good Reason (as defined below), Company shall pay to Employee
the pro-rata annual base salary through the date of termination, a pro-rata
annual bonus through the date of termination and an amount (the “Severance
Payment”) equal to two times the sum of :

(A)                              Employee’s annual base salary at the rate
in effect immediately prior to the date of termination,

(B)                                the average annual bonus payable to
Employee for the two years immediately prior to the year during which
termination occurred.

 

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This Severance Payment, which shall be in lieu
of any amount payable to Employee under the Company’s Severance Policy for
Senior Management, shall be payable in substantially equal monthly installments
over the Restricted Period (as defined in Section 7(b) below).

In addition, and notwithstanding any provision
of the Performance Share Plan to the contrary:

(A)                              All Performance Shares awarded to
Employee and then outstanding shall vest, and

(B)                                Employee shall be deemed to have been
awarded and to have vested in all   of
the minimum annual Performance Share grant(s) provided for in Section 4(c) to
which he is otherwise entitled and for which a Performance Share grant has not
otherwise been made for the balance of the Term.

Employee shall receive a cash payment
with respect to all such Performance Shares valued pursuant to the valuation
mechanism provided in the Performance Share Plan as applicable to Performance
Shares outstanding at the Effective Date and Performance Shares granted
subsequent to the Effective Date, respectively. If the performance cycle
includes at least one completed year, the payout for each such completed year
shall be based on the actual results for the completed year(s) and 100%
will be used for uncompleted years; if the performance cycle does not include
any completed years, 100% payout. The value which is obtained by multiplying
the number of Performance Shares determined under (A) and (B) above
by the applicable share price will be increased with interest at 8% per year,
compounded semi-annually, from the date of termination to the date of
payment which shall be within five days after the end of the Restricted Period
(as defined in Section 7(b)).

Such cash payment shall be forfeited in the
event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

(ii)  During the Extended Terms.   Company shall pay to Employee
the same pro-rata base salary, pro-rata bonus and Severance Payment as defined
in Section 6(a)(i) and in the same manner.

All Performance Shares outstanding will
vest and will be valued in the same manner (including interest on the unpaid
balance) and paid at the same time as provided in Section 6(a)(i).

 

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Such cash payment shall be forfeited in
the event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

(iii)  After
the Term (in case this Agreement is not renewed for any reason).   Employee
will be entitled only to be paid the pro-rata annual base salary through
the date of termination, a pro-rata annual bonus through the date of
termination, a severance payment equal to the then current severance policy in
effect for senior management, which shall be payable in substantially equal
monthly installments over the Restricted Period, and all outstanding
Performance Shares shall vest pro-rata in proportion to the percentage of the
performance cycle for such Performance Shares during which Employee was
employed by Company. The value of such vested Performance Shares will be
determined as of the termination date in accordance with the terms of the
Performance Share Plan relating to pro-rata vesting, increased with interest
and paid as provided in Sections 6.(a)(i) and (ii).

Such cash payment shall be forfeited in the
event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

Definitions :

“Cause” shall mean (i) conviction or
plea of nolo contendere (or similar plea) in a criminal proceeding for
commission of a misdemeanor or a felony that is materially injurious to the
Company; (ii) willful and continued failure by Employee to perform
substantially his duties with Company (other than any such failure resulting
from incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to Employee by Company which specifically
identifies the manner in which Company believes Employee has not substantially
performed his duties; or (iii) Employee engages in willful misconduct in
carrying out his duties with Company which is directly and materially harmful
to the business or reputation of Company. Employee shall not be terminated for
Cause unless he is provided with notice stating in reasonable detail the
alleged misconduct and, if such misconduct is reasonably susceptible to cure,
he is allowed a period of time (not less than ten days) to cure the misconduct;
and a resolution is adopted by the Board at a scheduled meeting at which Employee
shall be entitled to attend and speak to the Board.

“Good Reason” shall mean, without
Cause:  (i) a diminution of any of
Employee’s significant duties or responsibilities, (ii) breach by the
Company of its obligations hereunder, (iii) Company’s requiring Employee
to be based at an office that is greater than twenty-five miles from the
location of Employee’s office as of the Effective Date, or (iv) a material
adverse change in Employee’s total compensation (other than as provided by the
performance-related terms of this Agreement), as in effect at the Effective
Date, in all cases such that the Employee’s termination of employment is
involuntary under Code Section 409A. 

 

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Notwithstanding the foregoing, Employee
shall not be deemed to have terminated his employment for Good Reason unless he
gives 60 days’ prior written notice to 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 Employee 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, Company does
not effect a cure within such 60-day period.

The terms “termination of employment,” “terminate
employment” and “termination,” as used herein, shall be interpreted
consistently with the requirements of Code Section 409A to avoid taxation
under Code Section 409A(a)(1).

(b)           Termination by Company for Cause;

                Termination
by Employee without Good Reason.

(i)  During
the Term.   If Company should terminate Employee’s employment
for Cause or Employee should terminate his employment without Good Reason,
Employee will be entitled only to be paid the pro-rata annual base salary
through the date of termination.

All Performance Shares that are unvested on the
date of termination shall be forfeited.

(ii)  After
the Term (in case this Agreement is not renewed for any reason).   Employee
will be entitled to be paid the pro-rata annual base salary through the
date of termination, a pro-rata annual bonus through the date of
termination, and all outstanding Performance Shares shall vest pro-rata in
proportion to the percentage of the performance cycle for such Performance
Shares during which Employee was employed by Company. The value of such vested
Performance Shares will be determined as of the termination date in accordance
with the terms of the Performance Share Plan relating to pro-rata vesting,
increased with interest and paid as provided in Sections 6(a)(i) and (ii).

Such cash payment shall be forfeited in the
event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

(c)           Additional
Payments.   If applicable, Employee shall be eligible to receive the
additional payments set forth on Annex A.

(d)           No
Disparaging Statements.   In the event of termination of Employee’s
employment for any reason by Company or Employee, Employee will not at any time
publicly denigrate, ridicule or intentionally criticize Company or any of its
affiliates including, without limitation, by way of news interviews, or the
expression of personal views,

 

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opinions or judgments to the news media. Similarly,
neither Company nor any of its affiliates will publicly denigrate, ridicule or
intentionally criticize Employee.

(e)           Six
Month Delay in Payments to Comply with Code Section 409A.   Notwithstanding
any other provision of this Agreement, any payment otherwise due to Employee
under this Agreement during the six-month period following his termination of
employment shall be accumulated and paid to Employee with interest at the rate
payable on three-month Treasury bills on the first date of the seventh month
following termination of employment, except to the extent that any such payment
would otherwise be a short-term deferral under I.R.S. Notice 2005-1,
Q&A 4, or any subsequent binding guidance or final regulation under Code Section 409A,
in which case such payment shall be made at its regularly scheduled time to the
extent permitted under Code Section 409A to avoid taxation under Code Section 409A(a)(1).

7.             Restrictive Covenants.

(a)           Confidential
Information.   Employee agrees to keep secret and retain in the
strictest confidence all confidential matters which relate to Company or any
affiliate of Company, including, without limitation, customer lists, client
lists, trade secrets, pricing policies and other nonpublic business affairs of
Company and any affiliate of Company learned by him from Company or any such
affiliate or otherwise before or after the date of this Agreement, and not to
disclose any such confidential matter to anyone outside Company or any of its
affiliates, whether during or after his period of service with Company, except
as may be required by a court of law, by any governmental agency having
supervisory authority over the business of Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction to
order him to divulge, disclose or make accessible such information. Employee
agrees to give Company advance written notice of any disclosure pursuant to the
preceding sentence and to cooperate at the Company’s expense with any efforts
by Company to limit the extent of such disclosure. Upon request by Company,
Employee agrees to deliver promptly to Company upon termination of his services
for Company, or at any time thereafter as Company may request, all Company or
affiliate memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof)
relating to Company’s or any affiliate’s business and all property of Company
or any affiliate associated therewith, which he may then possess or have under
his control, other than personal notes, diaries, rolodexes and correspondence.

(b)           Covenant
Not to Compete.   “Restricted Period” shall mean the greater of (i) the
remainder of the Term or (ii) a period of two years from the date of
termination of Employee’s employment for any reason.  During the Restricted Period, Employee shall
not, directly or indirectly, own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or be
employed by or connected in any manner with, any

 

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competing business, whether for compensation or
otherwise, without the prior written consent of Company (excluding less than 5%
stakes in public vehicles). For the purposes of this Agreement, a “competing
business” shall be any financial services business which is a significant
competitor of Company or its affiliates. Should Employee, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be employed by or connected
in any manner with any competing business during the Restricted Period, all
payments under this Agreement shall cease.

(c)           Covenant
Not to Solicit Company Clients or Employees.   During the Term and for
the Restricted Period, Employee shall not, in any manner, directly or
indirectly, (i) raid or solicit any client or prospective client of
Company or its affiliates to whom Employee provided services, or for whom
Employee transacted business, or whose identity became known to Employee in
connection with Employee’s employment with Company, to transact business with a
competing business or reduce or refrain from doing any business with Company or
its affiliates or (ii) interfere with or damage (or attempt to interfere
with or damage) any relationship between Company or its affiliates and any such
client or prospective client. During the Term and for the Restricted Period,
Employee further agrees that Employee shall not, in any manner, directly or
indirectly, solicit any person who is an employee of Company or its affiliates
to apply for or accept employment with any competing business. “Solicit” as
used in this Agreement means any communication of any kind whatsoever,
regardless of by whom initiated, inviting, encouraging or requesting any person
or entity to take or refrain from taking any action.

(d)           Availability
and Assistance.   Employee agrees that during his employment and
thereafter Employee shall be available to Company and Parent and shall assist
Company and Parent in connection with any litigation brought by or against
Company or its affiliates and Parent relating to the period during which
Employee was employed by Company; provided, however, that all costs and
expenses in connection with the foregoing shall be borne by Company and/or
Parent and advanced to the Employee.

(e)           Survivability.   The
provisions of this Section 7 shall survive the termination or expiration
of this Agreement in accordance with the terms hereof. It is the intention of
the parties hereto that the restrictions contained in this Section 7 be
enforceable to the fullest extent permitted by law. Therefore, to the extent
any court of competent jurisdiction shall determine that any portion of the
foregoing restrictions is excessive, such provision shall not be entirely void,
but rather shall be limited or revised only to the extent necessary to make it
enforceable.

 

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8.                                       Retirement.

(a)  Employee shall retire
and terminate employment with the Company on Employee’s 65th birthday, and this
Agreement shall be deemed to have reached the end of its Term on such date. In
such event, (i) Employee shall receive the pro-rata annual base salary and
a pro-rata annual bonus through the date of retirement, (ii) all
Performance Shares granted prior to the date of retirement shall be fully
vested and payments with respect to such Performance Shares shall be made to
Employee at the same time, including any required holding period, and in the
same amounts as if Employee remained in the employ of Company.

Such cash payment shall be forfeited in the
event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

(b)          
Employee may retire and terminate employment with the Company at the end
of any Term which occurs after Employee’s 60th birthday, in which event
Employee shall receive the same compensation as provided in Section 8(a)(i) and
(ii).

Such cash payment shall be forfeited in the
event Employee breaches his obligations under Section 7(b) or (c) of
this Agreement.

9.             Compliance with Code Section 409A and Limitation
of Liability. Notwithstanding any other provision of the Agreement
to the contrary, the terms of the Agreement shall be deemed to be amended to
comply with the requirements of Code Section 409A to avoid taxation under
Code Section 409A(a)(1). The Company, in its sole discretion, shall
determine the requirements of Code Section 409A applicable to the Agreement
and shall interpret the terms of the Agreement consistently therewith. Under no
circumstances, however, shall the Company have any liability to Employee for
any taxes, penalties or interest due on amounts paid or payable under the
Agreement, including any taxes, penalties or interest imposed under Code Section 409A(a)(1),
except as provided in Annex A.

10.           Remedy.  Should Employee engage in or perform, either
directly or indirectly, any of the acts prohibited by Section 7 hereof, it
is agreed that Company shall be entitled to full injunctive relief, to be
issued by any competent court of equity, enjoining and restraining Employee and
each and every other person, firm, organization, association, or corporation
concerned therein, from the continuance of such violative acts. The foregoing
remedy available to Company shall not be deemed to limit or prevent the
exercise by Company of any or all further rights and remedies which may be
available to  Company hereunder or at law
or in equity.

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11.                Prior Notice to Prospective Employer.  Prior to accepting employment with
any other person or entity during Employee’s employment or the Restricted
Period, Employee shall provide such prospective employer with written notice of
the provisions of this Agreement.

12.                Arbitration.          If a dispute arises between the parties respecting the terms
of this Agreement or Employee’s employment by Company, such dispute shall be
settled only by binding arbitration in New York, New York, in accordance with
the commercial arbitration rules of the American Arbitration Association. Company
will pay the costs of arbitration and reasonable legal fees, provided, in the
case of any claim brought by Employee, that the claim is determined not to be
frivolous.

13.                Directors’ and Officers’ Insurance.                During the Employee’s employment,
Company shall maintain directors’ and officers’ liability insurance covering
Employee, which contains at least the same coverage and amounts and contains
terms and conditions no less advantageous than that coverage provided by
Company as of the Effective Date to the extent commercially available.

14.                Governing Law. This Agreement is governed
by and is to be construed and enforced in accordance with the laws of the State
of New York, without reference to principles relating to conflict of laws. If
under such law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation or ordinance, such
portion shall be deemed to be modified or altered to conform thereto or, if that
is not possible, to be omitted from this Agreement; the invalidity of any such
portion shall not affect the force, effect and validity of the remaining
portion hereof.

15.                Notices. All notices
under this Agreement shall be in writing and shall be deemed effective when
delivered in person, or five days after deposit thereof in the U.S. mails,
postage prepaid, for delivery as registered or certified mail, addressed to the
respective party at the address set forth below or to such other address as may
hereafter be designated by like notice. Unless otherwise notified as set forth
above, notice shall be sent to each party as follows:

	
  

  	
  (a)

  	
  Employee, to:

  	
   

  
	
   

  	
  Robert P.
  Cochran

  	
   

  
	
   

  	
  1000 Park
  Avenue, Apt. 12A

  	
   

  
	
   

  	
  New York, New
  York 10028

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Company, to:

  	
   

  
	
   

  	
  Financial
  Security Assurance Holdings Ltd.

  	
   

  
	
   

  	
  31 West 52nd Street

  	
   

  

 

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  New York, NY
  10019

  	
   

  
	
   

  	
  Attention:
  General Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  
	
   

  	
  Dexia Credit
  Local

  	
   

  
	
   

  	
  7 à 11 quai
  André Citröen BP-1002

  	
   

  
	
   

  	
  75 901 Paris
  Cedex 15

  	
   

  
	
   

  	
  Attention: Jean-Paul
  Gauzès

  	
   

  

 

In lieu of personal notice or notice by deposit
in the U.S. mail, a party may give notice by confirmed telegram, telex or fax,
which shall be effective upon receipt.

16.         Entire Agreement.              This Agreement constitutes the
entire understanding between Company and Employee relating to the terms of
employment of Employee by Company and supersedes and cancels all prior written
and oral agreements and understandings with respect to the subject matter of
this Agreement. This Agreement may be amended but only by a subsequent written
agreement of the parties. This Agreement shall be binding upon and shall inure
to the benefit of Employee, Employee’s heirs, executors, administrators and
beneficiaries, and Company and its successors.

17.         Successors.          This
Agreement is personal to Employee and without the prior written consent of
Company shall not be assignable by Employee otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by Employee’s legal representatives. This Agreement shall inure
to the benefit of and be binding upon Company and its successors and assigns.

18.         Withholding Taxes.              All amounts
payable to Employee under this Agreement shall be subject to applicable
withholding of income, wage and other taxes.

19.         Waiver of Breach.               The waiver by either party of a breach of any term of
this Agreement shall not operate nor be construed as a waiver of any subsequent
breach thereof. Any waiver must be in writing and signed by Employee or an
authorized officer of the Company, as the case may be.

20.         Survivorship.          The respective rights
and obligations of the parties hereunder shall survive any termination of
Employee’s employment to the extent necessary to the intended preservation of
such rights and obligations.

21.         Severability.           If any one or more
of the provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable law, the

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validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby.

22.         Headings.              The
headings of the sections contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

23.         Counterparts.   This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together will constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.

	
  

  	
  Financial Security Assurance Holdings Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ BRUCE E. STERN

  
	
   

  	
  Title:

  	
  General Counsel and Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ ROBERT P. COCHRAN

  
	
   

  	
   

  	
  Robert P. Cochran

  

 

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ANNEX A

Additional Payments

(a)  Except
as set forth below, in the event it shall be determined that any payment or
distribution by Company to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of the Agreement
or otherwise, but determined without regard to any additional payments required
under this Annex A) (a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)
or any interest or penalties are incurred by Employee with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), then Employee shall
be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by Employee of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.

(b)  Subject
to the provisions of paragraph (c), all determinations required to be made
under this Annex A, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by Company’s
independent auditors or such other certified public accounting firm reasonably
acceptable to Employee as may be designated by Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to Company and
Employee within 15 business days of the receipt of notice from Employee that
there has been a Payment, or such earlier time as is requested by Company. All
fees and expenses of the Accounting Firm shall be borne solely by Company. Any
Gross-Up Payment, as determined pursuant to this Annex A, shall be paid
by Company to Employee not later than the due date for the payment of any
Excise Tax. Any determination by the Accounting Firm shall be binding upon
Company and Employee. As a result of the 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 Gross-Up Payments which will not have been
made by Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that Company exhausts
its remedies pursuant to paragraph (c) and Employee thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Company to or for the benefit of Employee. In the event the
amount of the Gross-up Payment exceeds the amount necessary to reimburse
Employee for the Excise Tax (the “Overpayment”), the Accounting Firm shall
determine the amount of the Overpayment that has been made and any such
Overpayment shall be promptly paid by Employee (to the extent Employee has
received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Employee shall
cooperate, to the extent expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.

 

 13Exhibit 10.5

AMENDED EMPLOYMENT AGREEMENT

AMENDED AGREEMENT, effective as of January 1, 2005,
by and between Financial Security Assurance Holdings Ltd., a New York
corporation (“Company”), and Sean W. McCarthy (“Employee”).

WHEREAS, Company and Employee previously entered
into an employment agreement, dated July 5, 2004; and

WHEREAS, Company and Employee desire to amend
the terms and conditions of this existing employment agreement to comply with
the requirements of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), to avoid taxation under Code Section 409A(a)(1); and

WHEREAS, Company desires to employ Employee and
Employee is willing to serve as an employee of Company, subject to the terms
and conditions described herein (the “Agreement”);

NOW, THEREFORE, IN
CONSIDERATION OF the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:

1.             Employment.   Company
hereby employs Employee, and Employee agrees to serve as an employee of
Company, on the terms and conditions set forth in this Agreement.

2.             Term.   Employee’s
employment shall commence on July 5, 2004 (the “Effective Date”) and end
on December 31, 2007 (the “Original Term”); provided, however, that this
Agreement shall be renewed and extended for two-year terms (the “Extended Terms”),
unless notice of termination is given by Employee or Company six months or more
prior to the end of the Original Term or one of the Extended Terms. The
Original Term and any Extended Term shall be referred to collectively as the “Term”.

3.             Duties
During Employment.   During Employee’s employment with Company,
Employee shall initially serve as President and Chief Operating Officer of
Company and shall have such duties and responsibilities as are assigned to him
by the Board of Directors of Company (the “Board”) and as are consistent with
the magnitude and scope of his duties and responsibilities as of the Effective
Date. Employee shall report directly to the Chairman and Chief Executive
Officer of Company.

 

 

 

Employee shall devote
Employee’s full business time and attention and best efforts to the affairs of
Company during his period of employment, provided, however, that Employee may
continue to engage in other activities, such as activities involving
professional, charitable, educational, religious and similar types of
organizations, speaking engagements, membership on the board of directors of
such other organizations, provided that such activities do not interfere with
the performance of his duties for Company. Any corporate board memberships must
be reviewed with and approved by the Board in advance of acceptance of such
position.

If promoted to Chief
Executive Officer during the Term, the Employee will then have all of the
normal authorities, duties and responsibilities of that position. The total
compensation for the Chief Executive Officer role, including in aggregate base
salary, bonus and performance shares, will be set at least equal to 90% of the
amount most recently received by Robert P. Cochran.

4.             Current Cash Compensation.

(a)           Base Salary.   As
compensation for his services hereunder, Company will pay to Employee during
the period of his employment a base salary at the annual rate in effect
immediately prior to the Effective Date, payable in accordance with Company’s
payroll practices for senior executives. Company shall review the base salary
bi-annually (with the first review to take place January 2005) and in
light of such review may, in the discretion of the Board (but shall not be
obligated to), increase such base salary taking into account any change in Employee’s
then responsibilities, performance by Employee, and other pertinent factors.

(b)           Annual Bonus.   Company
shall maintain a bonus pool (the “Bonus Pool”) for the benefit of Company
employees in such amount and pursuant to such formulae as the Human Resources
Committee of the Board (“HR Committee”) shall from time to time determine. The
Company shall also maintain a reserve bonus pool (the “Rainy Day Fund”) made up
of previously earned but undistributed Bonus Pool allocations from prior years,
which shall be distributable upon the recommendation of the management of the
Company and with the approval of the HR Committee. Employee shall receive an
annual cash bonus equal to at least 4% and be considered for a portion of an
additional 2% that must be allocated between Employee and Robert P. Cochran (or
other executive acting as Chief Executive Officer of the Company) of the Bonus
Pool. It should be noted that the above described percentages are a minimum and
that it is anticipated that the HR Committee may exercise its discretion above
such amount.

(c)           Performance Shares.   In
each calendar year in the Term, beginning in 2005, Employee shall receive an
annual Performance Share grant under the Company’s long-

 

 

 2
 

 

 

term incentive compensation plan (the “Performance
Share Plan”), as presently in effect or as may be modified or added to by
Company from time to time, having an estimated economic value at least equal to
Employee’s 2004 Performance Share grant. Except as provided herein, such
Performance Shares shall vest according to the terms of the Performance Share
Plan. All references to Performance Shares in this Agreement shall include
Dexia Restricted Shares issued pursuant to the Performance Share Plan and any
other form of long-term incentive compensation provided under the Plan as
amended from time to time.

5.             Other
Employee Benefits.   In addition to the cash compensation
provided for in Section 4 hereof, Employee, subject to meeting eligibility
provisions thereof, shall be entitled to participate in Company’s employee
benefit plans, as presently in effect or as they may be modified or added to by
Company from time to time to the same extent as are otherwise enjoyed by the
senior executives of Company, which shall not be reduced in any material
respect from plans in existence as of the Effective Date.

6.             Termination.

(a)                                  Termination by Company Without Cause;

Termination by Employee for Good Reason.

(i)  During the Original Term.   If Company
should terminate Employee’s employment without Cause (as defined below) or if
Employee should terminate his employment for Good Reason (as defined below),
Company shall pay to Employee the pro-rata annual base salary through the date
of termination, a pro-rata annual bonus through the date of termination and an
amount (the “Severance Payment”) equal to two times the sum of :

(A)                              Employee’s annual base salary at the rate
in effect immediately prior to the date of termination,

(B)                                the average annual bonus payable to
Employee for the two years immediately prior to the year during which
termination occurred.

This Severance
Payment, which shall be in lieu of any amount payable to Employee under the
Company’s Severance Policy for Senior Management, shall be payable in
substantially equal monthly installments over the Restricted Period (as defined
in Section 7(b) below).

In addition, and
notwithstanding any provision of the Performance Share Plan to the contrary:

 

 3
 

 

 

(A)                              All Performance Shares awarded to Employee
and then outstanding shall vest, and

(B)                                Employee shall be deemed to have been
awarded and to have vested in all of the minimum annual Performance Share grant(s)
provided for in Section 4(c) to which he is otherwise entitled and for
which a Performance Share grant has not otherwise been made for the balance for
the Term.

Employee
shall receive a cash payment with respect to all such Performance Shares valued
pursuant to the valuation mechanism provided in the Performance Share Plan as
applicable to Performance Shares outstanding at the Effective Date and
Performance Shares granted subsequent to the Effective Date, respectively. If
the performance cycle includes at least one completed year, the payout for each
such completed year shall be based on the actual results for the completed year(s)
and 100% will be used for uncompleted years; if the performance cycle does not
include any completed years, 100% payout. The value which is obtained by
multiplying the number of Performance Shares determined under (A) and (B) above
by the applicable share price will be increased with interest at 8% per year,
compounded semi-annually, from the date of termination to the date of
payment, which shall be within five days after the end of the Restricted Period
(as defined in Section 7(b)).

Such cash payment
shall be forfeited in the event Employee breaches his obligations under Section 7(b)
or (c) of this Agreement.

(ii)  During the Extended Terms.   Company shall pay to
Employee the same pro-rata base salary, pro-rata bonus and Severance Payment as
defined in Section 6(a)(i) and in the same manner.

All Performance Shares outstanding will
vest and will be valued in the same manner (including interest on the unpaid
balance) and paid at the same time as provided in Section 6(a)(i).

Such cash payment shall be forfeited in
the event Employee breaches his obligations under Section 7(b) or (c)
of this Agreement.

(iii)  After the Term (in case this Agreement is not renewed
for any reason).   Employee will be entitled only to be paid the
pro-rata annual base salary through the date of termination, a pro-rata
annual bonus through the date of termination, a severance payment equal to the
then current severance policy in effect for senior management, which shall be
payable in substantially equal monthly installments over the Restricted Period,
and all outstanding Performance Shares shall vest pro-rata in proportion to the
percentage of the performance cycle for such Performance Shares during which
Employee was employed by Company. The value of 

 

 

 4
 

 

 

such vested Performance Shares will be
determined as of the termination date in accordance with the terms of the
Performance Share Plan relating to pro-rata vesting, increased with interest and
paid as provided in Sections 6.(a)(i) and (ii).

Such cash payment
shall be forfeited in the event Employee breaches his obligations under Section 7(b)
or (c) of this Agreement.

Definition:

“Cause” shall mean (i) conviction or
plea of nolo contendere (or similar plea) in a criminal proceeding for
commission of a misdemeanor or a felony that is materially injurious to the
Company; (ii) willful and continued failure by Employee to perform
substantially his duties with Company (other than any such failure resulting
from incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to Employee by Company which specifically
identifies the manner in which Company believes Employee has not substantially
performed his duties; or (iii) Employee engages in willful misconduct in
carrying out his duties with Company which is directly and materially harmful
to the business or reputation of Company. Employee shall not be terminated for
Cause unless he is provided with notice stating in reasonable detail the
alleged misconduct and, if such misconduct is reasonably susceptible to cure,
he is allowed a period of time (not less than ten days) to cure the misconduct;
and a resolution is adopted by the Board at a scheduled meeting at which
Employee shall be entitled to attend and speak to the Board.

“Good Reason” shall mean, without
Cause:  (i) a diminution of any of
Employee’s significant duties or responsibilities, (ii) breach by the
Company of its obligations hereunder, (iii) Company’s requiring Employee
to be based at an office that is greater than twenty-five miles from the
location of Employee’s office as of the Effective Date, (iv) a material
adverse change in Employee’s total compensation (other than as provided by the
performance-related terms of this Agreement), as in effect at the Effective
Date, or (v) if the Chief Executive Officer position of the Company is
vacated for any reason and Employee is not within 30 days promoted into that
position with all of the appropriate authorities, duties, and responsibilities,
in all cases such that the Employee’s termination of employment is involuntary
under Code Section 409A. Notwithstanding the foregoing, Employee shall not
be deemed to have terminated his employment for Good Reason unless he gives 60 days’
prior written notice to 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 Employee 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, Company does not effect a
cure within such 60-day period.

 

 5
 

 

 

The terms “termination of employment,” “terminate
employment” and “termination,” as used herein, shall be interpreted
consistently with the requirements of Code Section 409A to avoid taxation
under Code Section 409A(a)(1).

(b)                                 Termination by Company for Cause;

Termination by Employee without Good Reason.

(i)  During the Term.   If Company should
terminate Employee’s employment for Cause or Employee should terminate his
employment without Good Reason, Employee will be entitled only to be paid the
pro-rata annual base salary through the date of termination.

All Performance Shares
that are unvested on the date of termination shall be forfeited.

(ii)  After the Term (in case this Agreement is not renewed
for any reason).   Employee will be entitled to be paid the pro-rata
annual base salary through the date of termination, a pro-rata annual
bonus through the date of termination, and all outstanding Performance Shares
shall vest pro-rata in proportion to the percentage of the performance cycle
for such Performance Shares during which Employee was employed by Company. The
value of such vested Performance Shares will be determined as of the
termination date in accordance with the terms of the Performance Share Plan
relating to pro-rata vesting, increased with interest and paid as provided in
Sections 6(a)(i) and (ii).

Such cash payment shall
be forfeited in the event Employee breaches his obligations under Section 7(b)
or (c) of this Agreement.

(c)           Additional
Payments.   If applicable, Employee shall be eligible to receive the
additional payments set forth on Annex A.

(d)           No
Disparaging Statements.   In the event of termination of Employee’s
employment for any reason by Company or Employee, Employee will not at any time
publicly denigrate, ridicule or intentionally criticize Company or any of its
affiliates including, without limitation, by way of news interviews, or the
expression of personal views, opinions or judgments to the news media. Similarly,
neither Company nor any of its affiliates will publicly denigrate, ridicule or
intentionally criticize Employee.

(e)           Six
Month Delay in Payments to Comply with Code Section 409A.   Notwithstanding
any other provision of this Agreement, any payment otherwise due to Employee
under this Agreement during the six-month period following his termination of
employment shall be accumulated and paid to Employee with interest at the rate
payable on three-month Treasury 

 

 

 6
 

 

 

bills on the first date of the seventh
month following termination of employment, except to the extent that any such
payment would otherwise be a short-term deferral under I.R.S. Notice 2005-1,
Q&A 4, or any subsequent binding guidance or final regulation under
Code Section 409A, in which case such payment shall be made at its
regularly scheduled time to the extent permitted under Code Section 409A
to avoid taxation under Code Section 409A(a)(1).

7.             Restrictive
Covenants.

(a)           Confidential Information.   Employee
agrees to keep secret and retain in the strictest confidence all confidential
matters which relate to Company or any affiliate of Company, including, without
limitation, customer lists, client lists, trade secrets, pricing policies and
other nonpublic business affairs of Company and any affiliate of Company
learned by him from Company or any such affiliate or otherwise before or after
the date of this Agreement, and not to disclose any such confidential matter to
anyone outside Company or any of its affiliates, whether during or after his
period of service with Company, except as may be required by a court of law, by
any governmental agency having supervisory authority over the business of
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information. Employee agrees to give Company advance written
notice of any disclosure pursuant to the preceding sentence and to cooperate at
the Company’s expense with any efforts by Company to limit the extent of such
disclosure. Upon request by Company, Employee agrees to deliver promptly to
Company upon termination of his services for Company, or at any time thereafter
as Company may request, all Company or affiliate memoranda, notes, records,
reports, manuals, drawings, designs, computer files in any media and other
documents (and all copies thereof) relating to Company’s or any affiliate’s
business and all property of Company or any affiliate associated therewith,
which he may then possess or have under his control, other than personal notes,
diaries, rolodexes and correspondence.

(b)           Covenant Not to Compete.   “Restricted
Period” shall mean the greater of (i) the remainder of the Term or (ii) a
period of two years from the date of termination of Employee’s employment for
any reason.  During the Restricted
Period, Employee shall not, directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation or control of,
or be employed by or connected in any manner with, any competing business,
whether for compensation or otherwise, without the prior written consent of Company
(excluding less than 5% stakes in public vehicles). For the purposes of this
Agreement, a “competing business” shall be any financial services business
which is a significant competitor of Company or its affiliates. Should
Employee, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, or be
employed by or connected in any manner with any competing business during the
Restricted Period, all payments under this Agreement shall cease.

 

 7
 

 

 

(c)           Covenant Not to Solicit Company
Clients or Employees.   During the Term and for the Restricted Period,
Employee shall not, in any manner, directly or indirectly, (i) raid or
solicit any client or prospective client of Company or its affiliates to whom
Employee provided services, or for whom Employee transacted business, or whose
identity became known to Employee in connection with Employee’s employment with
Company, to transact business with a competing business or reduce or refrain
from doing any business with Company or its affiliates or (ii) interfere
with or damage (or attempt to interfere with or damage) any relationship
between Company or its affiliates and any such client or prospective client. During
the Term and for the Restricted Period, Employee further agrees that Employee
shall not, in any manner, directly or indirectly, solicit any person who is an
employee of Company or its affiliates to apply for or accept employment with
any competing business. “Solicit” as used in this Agreement means any
communication of any kind whatsoever, regardless of by whom initiated,
inviting, encouraging or requesting any person or entity to take or refrain
from taking any action.

(d)           Availability and Assistance.   Employee
agrees that during his employment and thereafter Employee shall be available to
Company and Parent and shall assist Company and Parent in connection with any
litigation brought by or against Company or its affiliates and Parent relating
to the period during which Employee was employed by Company; provided, however,
that all costs and expenses in connection with the foregoing shall be borne by
Company and/or Parent and advanced to the Employee.

(e)           Survivability.   The
provisions of this Section 7 shall survive the termination or expiration
of this Agreement in accordance with the terms hereof. It is the intention of
the parties hereto that the restrictions contained in this Section 7 be
enforceable to the fullest extent permitted by law. Therefore, to the extent
any court of competent jurisdiction shall determine that any portion of the
foregoing restrictions is excessive, such provision shall not be entirely void,
but rather shall be limited or revised only to the extent necessary to make it
enforceable.

8.             Retirement.

(a)  Employee
shall retire and terminate employment with the Company on Employee’s 65th birthday,
and this Agreement shall be deemed to have reached the end of its Term on such
date. In such event, (i) Employee shall receive the pro-rata annual base
salary and a pro-rata annual bonus through the date of retirement, (ii) all
Performance Shares granted prior to the date of retirement shall be fully
vested and payments with respect to such Performance Shares shall be made to
Employee at the same time, including any required holding period, and in the
same amounts as if Employee remained in the employ of Company.

 

 8
 

 

 

Such cash payment
shall be forfeited in the event Employee breaches his obligations under Section 7(b)
or (c) of this Agreement.

(b)           Employee
may retire and terminate employment with the Company at the end of any Term
which occurs after Employee’s 60th birthday, in which event Employee shall
receive the same compensation as provided in Section 8(a)(i) and (ii).

Such cash payment shall
be forfeited in the event Employee breaches his obligations under Section 7(b)
or (c) of this Agreement.

9.             Compliance
with Code Section 409A and Limitation of Liability.   Notwithstanding
any other provision of the Agreement to the contrary, the terms of the
Agreement shall be deemed to be amended to comply with the requirements of Code
Section 409A to avoid taxation under Code Section 409A(a)(1). The
Company, in its sole discretion, shall determine the requirements of Code Section 409A
applicable to the Agreement and shall interpret the terms of the Agreement
consistently therewith. Under no circumstances, however, shall the Company have
any liability to Employee for any taxes, penalties or interest due on amounts
paid or payable under the Agreement, including any taxes, penalties or interest
imposed under Code Section 409A(a)(1), except as provided in Annex A.

10.           Remedy.   Should
Employee engage in or perform, either directly or indirectly, any of the acts
prohibited by Section 7 hereof, it is agreed that Company shall be
entitled to full injunctive relief, to be issued by any competent court of
equity, enjoining and restraining Employee and each and every other person,
firm, organization, association, or corporation concerned therein, from the
continuance of such violative acts. The foregoing remedy available to Company
shall not be deemed to limit or prevent the exercise by Company of any or all
further rights and remedies which may be available to  Company hereunder or at law or in equity.

11.           Prior
Notice to Prospective Employer.   Prior to accepting employment
with any other person or entity during Employee’s employment or the Restricted
Period, Employee shall provide such prospective employer with written notice of
the provisions of this Agreement.

12.           Arbitration.   If
a dispute arises between the parties respecting the terms of this Agreement or
Employee’s employment by Company, such dispute shall be settled only by binding
arbitration in New York, New York, in accordance with the commercial
arbitration rules of the American Arbitration Association. Company will
pay the costs of arbitration and reasonable legal fees, provided, in the case
of any claim brought by Employee, that the claim is determined not to be
frivolous.

 

 9
 

 

 

13.           Directors’
and Officers’ Insurance.   During the Employee’s employment,
Company shall maintain directors’ and officers’ liability insurance covering
Employee, which contains at least the same coverage and amounts and contains
terms and conditions no less advantageous than that coverage provided by
Company as of the Effective Date to the extent commercially available.

14.           Governing
Law.   This Agreement is governed by and is to be construed and
enforced in accordance with the laws of the State of New York, without
reference to principles relating to conflict of laws. If under such law, any
portion of this Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement; the invalidity of any such portion shall not
affect the force, effect and validity of the remaining portion hereof.

15.           Notices.   All
notices under this Agreement shall be in writing and shall be deemed effective
when delivered in person, or five days after deposit thereof in the U.S. mails,
postage prepaid, for delivery as registered or certified mail, addressed to the
respective party at the address set forth below or to such other address as may
hereafter be designated by like notice. Unless otherwise notified as set forth
above, notice shall be sent to each party as follows:

(a)                                  Employee, to:

Sean W. McCarthy

452 Greenwich Street

New York, New York  10013

(b)                                 Company, to:

Financial Security Assurance Holdings Ltd.

31 West 52nd Street

New York, NY  10019

Attention: General Counsel

With a copy to:

Dexia Credit Local

7 à 11 quai André Citröen BP-1002

75 901 Paris Cedex 15

Attention: Jean-Paul Gauzès.

In lieu of personal
notice or notice by deposit in the U.S. mail, a party may give notice by
confirmed telegram, telex or fax, which shall be effective upon receipt.

 

 10
 

 

 

16.           Entire Agreement.   This Agreement constitutes the entire understanding
between Company and Employee relating to the terms of employment of Employee by
Company and supersedes and cancels all prior written and oral agreements and
understandings with respect to the subject matter of this Agreement. This
Agreement may be amended but only by a subsequent written agreement of the
parties. This Agreement shall be binding upon and shall inure to the benefit of
Employee, Employee’s heirs, executors, administrators and beneficiaries, and
Company and its successors.

17.           Successors.   This Agreement is
personal to Employee and without the prior written consent of Company shall not
be assignable by Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by Employee’s legal representatives. This Agreement shall inure to the benefit
of and be binding upon Company and its successors and assigns.

18.           Withholding Taxes.   All
amounts payable to Employee under this Agreement shall be subject to applicable
withholding of income, wage and other taxes.

19.           Waiver of Breach.   The
waiver by either party of a breach of any term of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach thereof. Any
waiver must be in writing and signed by Employee or an authorized officer of
the Company, as the case may be.

20.           Survivorship.   The respective rights
and obligations of the parties hereunder shall survive any termination of
Employee’s employment to the extent necessary to the intended preservation of
such rights and obligations.

21.           Severability.   If any one or more of
the provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby.

22.           Headings.   The headings of the
sections contained in this Agreement are for convenience only and shall not be
deemed to control or affect the meaning or construction of any provision of
this Agreement.

23.           Counterparts.   This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same instrument.

 

 11
 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.

	
  

  	
  Financial
  Security Assurance Holdings Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ROBERT P.
  COCHRAN

  
	
   

  	
  Title:

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ SEAN W.
  MCCARTHY

  
	
   

  	
   

  	
  Sean W. McCarthy

  

 

 12
 

 

 

ANNEX A

Additional
Payments

(a)   Except as set forth below, in
the event it shall be determined that any payment or distribution by Company to
or for the benefit of Employee (whether paid or payable or distributed or
distributable pursuant to the terms of the Agreement or otherwise, but determined
without regard to any additional payments required under this Annex A) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are
incurred by Employee with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), then Employee shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment by
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.

(b)   Subject to the provisions of
paragraph (c), all determinations required to be made under this Annex A,
including whether and when a Gross-Up Payment is required and the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Company’s independent auditors or such
other certified public accounting firm reasonably acceptable to Employee as may
be designated by Company (the “Accounting Firm”) which shall provide detailed
supporting calculations both to Company and Employee within 15 business
days of the receipt of notice from Employee that there has been a Payment, or
such earlier time as is requested by Company. All fees and expenses of the
Accounting Firm shall be borne solely by Company. Any Gross-Up Payment,
as determined pursuant to this Annex A, shall be paid by Company to Employee
not later than the due date for the payment of any Excise Tax. Any
determination by the Accounting Firm shall be binding upon Company and Employee.
As a result of the 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 Gross-Up Payments which will not have been made by
Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that Company exhausts
its remedies pursuant to paragraph (c) and Employee thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Company to or for the benefit of Employee. In the event the
amount of the Gross-up Payment exceeds the amount necessary to reimburse
Employee for the Excise Tax (the “Overpayment”), the Accounting Firm shall
determine the amount of the Overpayment that has been made and any such
Overpayment shall be promptly paid by Employee (to the extent Employee has
received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Employee shall
cooperate, to the extent expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.

 13

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