Document:

Exhibit 10.3

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE (I) BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR (II) BY A NOMINEE OF THE DEPOSITARY OR THE DEPOSITARY TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY
ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE
TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES
LAWS.  TERMS USED ABOVE HAVE THE MEANINGS
GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.

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CUSIP:
[U31745AA7/31769PAB6]

ISIN:
USU31745AA71/US31769PAB67]

Junior Subordinated Debenture, Series 2006-1

	
  No. R-[     ]

  	
   

  	
  $[     ]

  

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

hereby promises to pay to
CEDE & CO. or registered assigns, the principal sum of [     ] DOLLARS ($[    ]) as such amount may be adjusted as set
forth on the Schedule of Increases or Decreases annexed hereto on
December 15, 2066 or such later date as shall become the Final Repayment
Date pursuant to clause (ix) of Section 4 of this Security, or if any such
day is not a Business Day, the following Business Day; provided that the
principal amount of, and all accrued and unpaid interest on, this Security
shall be payable in full on December 15, 2036, or if such day is not a
Business Day, the following Business Day, or any subsequent Monthly Interest
Payment Date to the extent set forth in Section 4 of this Security.  Financial Security Assurance Holdings Ltd.
further promises to pay interest on said principal sum from November 22, 2006
or from the most recent Interest Payment Date for which interest has been paid
or duly provided for.  This Security
shall bear interest as set forth in Section 5 of this Security.

Additional provisions of
this Security are set forth on the other side of this Security.

IN WITNESS WHEREOF, the
parties have caused this instrument to be duly executed.

	
  

  	
  FINANCIAL SECURITY ASSURANCE 

  HOLDINGS LTD.,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Joseph Simon

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce E. Stern

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  

 

TRUSTEE’S CERTIFICATE OF
AUTHENTICATION

This is one of the
Securities of the series designated therein referred to in the within-mentioned
Indenture.

	
  Dated:

  
	
   

  
	
  THE BANK OF NEW YORK, as Trustee,

  
	
   

  
	
  by

  	
   

  	
   

  
	
  Authorized Signatory

  

 

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[Reverse of Debenture]

FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD.

Junior
Subordinated Debenture, Series 2006-1

1.              Indenture

This Security is one of a duly authorized issue of
Securities of the Company, designated as its Junior Subordinated Debentures,
Series 2006-1 (herein called the “Debentures”), issued and to be issued
under an indenture, dated as of November 22, 2006 (herein called the “Indenture”),
between FINANCIAL SECURITY ASSURANCE HOLDINGS LTD., a New York corporation
(such company, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the “Company”), and THE BANK OF NEW YORK, as
trustee (the “Trustee”), to which Indenture and all indentures supplemental
thereto relevant to the Debentures reference is hereby made for a complete
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Debentures.  Capitalized terms used but
not defined in this Debenture shall have the meanings ascribed to them in the
Indenture.

Each Debenture is subject to, and qualified by, all
such terms as set forth in the Indenture, certain of which are summarized
herein, and each Holder of a Debenture is referred to the corresponding
provisions of the Indenture for a complete statement of such terms.  To the extent that there is any inconsistency
between the summary provisions set forth in this Debenture and the Indenture,
the provisions of this Debenture shall govern.

2.              Definitions

For all purposes of this Debenture, except as
otherwise expressly provided or unless the context otherwise requires,
(i) references to any section or subdivision are references to a section
or other subdivision of this Debenture, (ii) all capitalized terms used
herein and not defined herein shall have the meanings set forth in the
Indenture, (iii) all words and phrases defined in the Indenture shall have
the same meaning in this Debenture, except as otherwise appears in this
section, and (iv) the following terms used in this Debenture, have the
following respective meanings:

“Additional Interest” means the interest, if
any, that shall accrue on any interest on the Debentures the payment of which
has not been made when due and which
shall accrue, to the extent permitted by law, at the rate per annum in effect
on the Debentures from the applicable Interest Payment Date, compounded on each
subsequent Interest Payment Date until paid in accordance with Section 8.

“APM Commencement Date” means, with respect to
any Deferral Period, the earlier of (i) the first Interest Payment Date following the commencement of such Deferral
Period on which the Company pays any current interest on the Debentures and
(ii) the fifth anniversary of the commencement of such Deferral Period.

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“APM Period” means, with respect to any
Deferral Period, the period commencing on the APM Commencement Date and ending
on the next Interest Payment Date on which the Company has raised an amount of Eligible Proceeds at least equal
to the aggregate amount of accrued and unpaid deferred interest, including
Additional Interest, on the Debentures.

“Applicable Rate” means in the case of an
Optional Redemption, 0.25% and in the case of a Tax or Rating Agency
Redemption, 0.50%.

“Bankruptcy Event” means any of the events set forth in
Section 5.01(5) or Section 5.01(6) of the Indenture.

“Business Day” is any day, other than a
Saturday, a Sunday or (i) a day on which banking institutions in the City
of New York are authorized or required by law, regulation or executive order to
remain closed, or (ii) on or after December 15, 2036, a day on which
commercial banks are open for general business (including dealings in deposits
in U.S. dollars) in London, England.

“Calculation Agent” means the Trustee, or its successor appointed by the Company,
acting as calculation agent for this Debenture.

“Commercially Reasonable Efforts” has the
meaning set forth in Section 4(vi).

“Common Stock” means common stock of the
Company.

“Common Stock Issuance Cap” has the meaning set forth in Section
9(1).

“Company Market Disruption Event” means the
occurrence or existence of any of the following events or sets of
circumstances:

(a) trading in securities generally on the
New York Stock Exchange or any other national securities exchange or
over-the-counter market on which the Common Stock and/or the Preferred Stock is
then listed or traded shall have been suspended or its settlement generally
shall have been materially disrupted;

(b) the Company would be required to obtain the consent or approval of its
shareholders (if Common Stock is Publicly Traded) or a regulatory body
(including, without limitation, any securities exchange) or governmental
authority to issue Common Stock and Qualifying Non-Cumulative Perpetual
Preferred Stock pursuant to Section 9 or to issue Qualifying Capital Securities
pursuant to Section 4, as the case may be, and the Company fails to obtain such
consent or approval notwithstanding its commercially reasonable efforts to
obtain such consent or approval; or

(c) an event occurs and is continuing as a result of which the
offering document for the offer and sale of Common Stock and Qualifying
Non-Cumulative Perpetual Preferred Stock or Qualifying Capital Securities, as
the case may be, would, in the Company’s reasonable judgment, contain an untrue
statement of a material fact or 

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omit to state a material fact required to be stated in such offering document or necessary to make
the statements in such offering document not misleading and either (i) the
disclosure of such event, in the Company’s reasonable judgment, would have a
material adverse effect on its business or (ii) the disclosure relates to
a previously undisclosed proposed or pending material business transaction, the
disclosure of which would impede the Company’s ability to consummate such
transaction; provided that
one or more events described in this clause (c) shall not constitute a
Company Market Disruption Event (A) with respect to more than one
Semi-Annual Interest Payment Date (or after the Scheduled Maturity Date, six
consecutive Monthly Interest Payment Dates) in any APM Period with respect to
the Company’s obligations pursuant to Section 9 or (B) with respect to
more than six Monthly Interest Payment Dates (whether or not consecutive) in
connection with the Company’s obligations pursuant to Section 4.

“Contribution Agreement” means the Contribution
Agreement, dated as of November 22, 2006, between Dexia S.A. and the
Company.

“Deferral Period” means each period beginning
on an Interest Payment Date with respect to which the Company elects pursuant
to Section 7 to defer all or part of any interest payment and ending on the
earlier of (i) the tenth anniversary of such Interest Payment Date and
(ii) the next Interest Payment Date on which the Company has paid all
deferred interest and all other accrued and unpaid interest on this Debenture
(including Additional Interest thereon).

“Eligible Proceeds” means, with respect to any
Interest Payment Date, the Net Proceeds the Company has received during the
180-day period prior to such Interest Payment Date from the issuance of Common
Stock and Qualifying Non-Cumulative Perpetual Preferred Stock to Persons that
are not Subsidiaries of the Company.

“Extension Certificate” has the meaning set
forth in Section 4(ix)(E).

“Extension Date” has the meaning set forth in
Section 4(ix).

“Final Repayment Date” has the meaning set forth in Section 4(ix).

“Intent-Based Replacement Disclosure” has the
meaning ascribed to it in the Replacement Capital Covenant.

“Interest Payment Date” means a Monthly
Interest Payment Date or a Semi-Annual Interest
Payment Date, as the case may be.

“Interest Period” means the period from and including any Interest
Payment Date (or, in the case of the first Interest Payment Date, November 22, 2006) to but excluding the next
Interest Payment Date.

“LIBOR Determination Date” means the second
London Banking Day immediately preceding the first day of the relevant Interest
Period.

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“London Banking Day” means any day on which
commercial banks are open for general business (including dealings in deposits
in U.S. dollars) in London, England.

“Make-Whole Redemption Price” means the present
value of scheduled payments of principal and interest from the Redemption Date to December 15,
2036, on any Debenture being redeemed, discounted to the Redemption Date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at a discount rate equal to the Treasury Rate plus the Applicable Rate.

“Market Capitalization” means, as of any date,
an amount equal to the number of shares of Common Stock Outstanding on
such date multiplied by the current market price of one share of Common
Stock on such date.

“Mandatory Trigger Provision” has the meaning
ascribed to it in the Replacement Capital Covenant.

“Maximum Contribution Amount” has the meaning
ascribed to it in the Contribution Agreement.

“MoneyLine Telerate Page” means the display on
MoneyLine Telerate, Inc., or any successor service, on Telerate Page 3750.

“Monthly Interest Payment Date” has the meaning
set forth in Section 5.

“Moody’s” has the meaning set forth in
Section 4(ix)(A).

“Nationally Recognized Statistical Rating
Organization” has the same meaning as used in Rule 15c3-1(c)(2)(vi)(F)
under the Securities Exchange Act of 1934, as amended.

“Net Proceeds” means, with respect to the issuance
or sale of any securities, the net proceeds of such issuance or sale (after
underwriters’ or placement agents’ fees, commissions or discounts and other
expenses relating to the issuance).

“One-month LIBOR” means, with respect to any
Interest Period, the rate (expressed
as a percentage per annum) for deposits in U.S. dollars for a one-month
period commencing on the first day of that Interest Period and ending on the
next Interest Payment Date that appears on MoneyLine Telerate Page as of
11:00 a.m. (London time) on the LIBOR Determination Date for that Interest
Period. If such rate does not appear on MoneyLine Telerate Page, One-month
LIBOR will be determined on the basis of the rates at which deposits in
U.S. dollars for a one-month period commencing on the first day of that
Interest Period and in a principal amount of not less than $1,000,000 are
offered to prime banks in the London interbank market by four major banks in
the London interbank market selected by the Calculation Agent (after
consultation with the Company), at approximately 11:00 a.m., London time
on the LIBOR Determination Date for that Interest Period. The Calculation Agent
will request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are 

 6
 

 

provided, one-month LIBOR
with respect to that Interest Period will be the arithmetic mean (rounded
upward if necessary to the nearest whole multiple of 0.00001%) of such
quotations. If fewer than two quotations are provided, one-month LIBOR with
respect to that Interest Period will be the arithmetic mean (rounded upward if
necessary to the nearest whole multiple of 0.00001%) of the rates quoted by
three major banks in New York City selected by the Calculation Agent
(after consultation with the Company), at approximately 11:00 a.m.,
New York City time, on the first day of that Interest Period for loans in
U.S. dollars to leading European banks for a one-month period commencing
on the first day of that Interest Period and in a principal amount of not less
than $1,000,000. However, if fewer than three banks selected by the Calculation
Agent to provide quotations are quoting as described above, one-month LIBOR for
that Interest Period will be the same as one-month LIBOR as determined for the
previous Interest Period or, in the case of the Interest Period commencing on
the Scheduled Maturity Date, 5.32%. The establishment of one-month LIBOR for
each Interest Period commencing on or after the Scheduled Maturity Date by the
Calculation Agent shall (in the absence of manifest error) be final and
binding.

“Optional Redemption” has the meaning set forth
in Section 12.

“Parent” means Dexia S.A., a Belgian
corporation.

“Permitted Remedies” has the meaning ascribed
to it in the Replacement Capital Covenant.

“Preferred Stock” means any preferred stock of
the Company.

“Preferred Stock Issuance Cap” has the meaning
set forth in Section 9(1).

“Publicly Traded” means with respect to any
security, that such security is listed for trading on a national securities
exchange or quoted in the Nasdaq National Market.

“Qualifying Capital Securities” has the meaning
ascribed to it in the Replacement Capital Covenant.

“Qualifying Non-Cumulative Perpetual Preferred
Stock” means the Company’s non-cumulative perpetual Preferred Stock that
(i) has no maturity date, (ii) contains no remedies other than
Permitted Remedies, and (iii) (a) is subject to Intent-Based Replacement
Disclosure and has a Mandatory Trigger Provision or (b) is subject to a
replacement capital covenant substantially similar to the Replacement Capital
Covenant.

“Rating Agency Event” means a change by any
Nationally Recognized Statistical Rating Organization that currently publishes
a rating for the Company (a “Rating Agency”) to its equity credit
criteria for securities such as the Debentures, as such criteria is in effect
on the date of the initial issuance of the Debentures (the “Current Criteria”),
which change results in a lower equity credit being given to the Debentures as
of the date of such change than the equity credit that would have been assigned
to the 

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Debentures as of the date
of such change by such Rating Agency pursuant to its Current Criteria.  For the avoidance of doubt, a Rating Agency
Event will not have occurred if at any date after the date of the initial
issuance of the Debentures the equity credit given to the Debentures is reduced
solely due to a failure of the Final Repayment Date to be extended.

“Regular Record Date” for the interest payable on any Interest Payment Date
with respect to the Debentures means (i) in the case of Debentures represented
by one or more Global Securities, the Business Day preceding such Interest
Payment Date and (ii) in the case of Debentures not represented by one or more
Global Securities, the date which is fifteen days next preceding such Interest
Payment Date (whether or not a Business Day).

“Repayment Date” means the Scheduled Maturity
Date and each of the Monthly Interest Payment Dates thereafter.

“Replacement Capital Covenant” means the Replacement Capital Covenant, dated as
of November 22, 2006, of the Company, without giving any effect to any
amendment or supplement thereto.

“S&P” has the meaning set forth in
section 4(ix)(A).

“Scheduled Maturity Date” has the meaning set forth in Section 4(i).

“Semi-Annual Interest Payment Date” has the
meaning set forth in Section 5.

“Senior Indebtedness” has the meaning set forth in Section 16.

“Tax Event” means that the Company has requested and received an opinion of
counsel experienced in such matters to the effect that, as a result of:

(a) any amendment to or change in the laws or
regulations of the United States or any political subdivision or taxing
authority of or in the United States that is enacted or becomes effective after
the initial issuance of this Debenture;

(b) any proposed change in those laws or
regulations that is announced after the initial issuance of this Debenture;

(c) any official administrative decision or
judicial decision or administrative action or other official pronouncement
interpreting or applying those laws or regulations that is announced after the
initial issuance of this Debenture; or

(d) any threatened challenge asserted in
connection with an audit of the Company or its Subsidiaries, or a threatened
challenge asserted in writing against any other taxpayer that has raised
capital through the issuance of securities that are substantially similar to
this Debenture, which challenge becomes publicly known after the initial
issuance of this Debenture,

 8
 

 

there is more than an insubstantial risk that interest
payable by the Company on this Debenture is not, or will not be, deductible by
the Company, in whole or in part, for United States federal income tax
purposes.

“Tax or Rating Agency Redemption” has the
meaning set forth in Section 12.

“Telerate Page 3750” means the display
designated on page 3750 on MoneyLine Telerate Page (or such other page as
may replace the 3750 page on the service or such other service as may be
nominated by the British Bankers’ Association for the purpose of displaying
London interbank offered rates for U.S. Dollar deposits).

“Treasury Dealer” means a nationally recognized
firm that is a primary U.S. Government Obligations dealer specified by the
Company.

“Treasury Price” means the bid-side price for
the Treasury Security as of the third trading day preceding the Redemption
Date, as set forth in the daily statistical release (or any successor release)
published by the Federal Reserve Bank of New York on that trading day and
designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”,
except that: (i) if that release (or any successor release) is not published or
does not contain that price information on that trading day or (ii) if the
Treasury Dealer determines that the price information is not reasonably
reflective of the actual bid-side price of the Treasury Security prevailing at
3:30 p.m., New York City time, on that trading day, then “Treasury Price” will
instead mean the bid-side price for the Treasury Security at or around 3:30
p.m., New York City time, on that trading day (expressed on a next trading day
settlement basis) as determined by the Treasury Dealer through such alternative
means as the Treasury Dealer considers to be appropriate under the
circumstances.

“Treasury Rate” means the semi-annual
equivalent yield to maturity of the Treasury Security that corresponds to the
Treasury Price (calculated in accordance with standard market practice and
computed as of the second trading day preceding the Redemption Date).

“Treasury Security” means the United States
Treasury security that the Treasury Dealer determines would be appropriate to
use, at the time of determination and in accordance with standard market
practice, in pricing the Debentures being redeemed in a tender offer based on a
spread to United States Treasury yields.

3.              Denominations

The Debentures will be issued only in fully registered
form, and the authorized minimum denominations of the Debentures shall be
$100,000 principal amount and integral multiples of $1,000 in excess of $100,000.

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4.              Scheduled
Maturity Date  

(i) The principal amount of, and all accrued
and unpaid interest on, the Debentures shall be due and payable in full on
December 15, 2036, or if such day is not a Business Day, the following
Business Day (the “Scheduled Maturity Date”);  provided that in the event the Company has
delivered an Officers’ Certificate to the Trustee pursuant to clause (vii)
of this Section 4 in connection with the Scheduled Maturity Date, (A) the
principal amount of Debentures due and payable on the Scheduled Maturity Date,
if any, shall be the principal amount set forth in the notice of repayment
accompanying such Officers’ Certificate, (B) such principal amount of
Debentures shall be repaid on the Scheduled Maturity Date pursuant to Section
18, and (C) subject to clause (ii) of this Section 4, the remaining
Debentures shall remain Outstanding and shall be due and payable on the
immediately succeeding Monthly Interest Payment Date or such earlier date on
which they are redeemed pursuant to Section 12 or shall become due and payable
pursuant to Section 5.02 of the Indenture. The entire principal amount of the
Debentures Outstanding shall be due and payable on the Scheduled Maturity Date
in the event the Company does not deliver an Officers’ Certificate to the
Trustee pursuant to clause (vii) of this Section 4 no more than 30 and no
less than five Business Days in advance of the Scheduled Maturity Date.

(ii) In the event the Company has delivered
an Officers’ Certificate to the Trustee pursuant to clause (vii) of this
Section 4 in connection with any Monthly Interest Payment Date, the principal
amount of Debentures due and payable on such Monthly Interest Payment Date
shall be the principal amount set forth in the notice of repayment, if any, accompanying
such Officers’ Certificate, such Debentures shall be repaid on such Monthly
Interest Payment Date pursuant to Section 18, and the remaining Debentures
shall remain Outstanding and shall be due and payable on the immediately
succeeding Monthly Interest Payment Date or such earlier date on which it shall
become due and payable pursuant to Section 5.02 of the Indenture. The
entire principal amount of the Debentures Outstanding shall be due and payable
on any Monthly Interest Payment Date in the event the Company does not deliver
an Officers’ Certificate pursuant to clause (vii) of this Section 4 to the
Trustee no more than 30 and no less than five Business Days in advance of the
Monthly Interest Payment Date.

(iii) Notwithstanding the preceding
clauses (i) and (ii), the principal amount of, and all accrued and unpaid
interest on, all Outstanding Debentures shall be due and payable on the Final
Repayment Date, or, if such day is not a Business Day, the following Business
Day.

(iv) The obligation of the Company to repay
the Debentures pursuant to this Section 4 on any date prior to the Final
Repayment Date shall be subject to (A) its obligations under Article XIII
of the Indenture to the holders of Senior Indebtedness and (B) its
obligations under Section 8 with respect to the payment of deferred interest on
the Debentures.

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(v) Until the Debentures are paid in full,
the Company shall use Commercially Reasonable Efforts (as defined in
clause (vi) below), subject to clause (vii) below:

(A) to raise sufficient
Net Proceeds from the issuance of Qualifying Capital Securities during a
180-day period ending on the date, not more than 30 and not less than five
Business Days prior to the Scheduled Maturity Date, on which the Company
delivers the notice required by Section 18(i) to permit repayment of the
Debentures in full on the Scheduled Maturity Date pursuant to clause (i)
of this Section 4; and

(B) if the Company is
unable for any reason to raise sufficient Net Proceeds from the issuance of
Qualifying Capital Securities to permit payment in full on the Scheduled
Maturity Date or any subsequent Monthly Interest Payment Date on which the
Company delivers the notice required by Section 18(i), to raise sufficient Net
Proceeds from the issuance of Qualifying Capital Securities to permit repayment
of the Debentures in full on such date pursuant to clause (ii) of this
Section 4; and

the Company shall apply any such Net Proceeds to the
repayment of the Debentures as provided in clause (viii) of this Section
4.

(vi) For purposes of this Section 4, “Commercially
Reasonable Efforts” to sell Qualifying Capital Securities means
commercially reasonable efforts to complete the offer and sale of Qualifying
Capital Securities to Persons other than Subsidiaries in public offerings or
private placements; provided that the Company shall not be considered to
have made commercially reasonable efforts to effect a sale of Qualifying
Capital Securities if it determines not to pursue or complete such sale due to
pricing, coupon, dividend rate or dilution considerations.

(vii) The Company shall, if it has not raised
sufficient Net Proceeds from the issuance of Qualifying Capital Securities
pursuant to clause (v) above in connection with any Repayment Date,
deliver an Officers’ Certificate to the Trustee, no more than 30 and no less
than five Business Days in advance of such Repayment Date (which Officers’
Certificate the Trustee shall promptly forward upon receipt to each Holder of a
Debenture) stating the amount of Net Proceeds, if any, raised pursuant to
clause (v) above in connection with such Repayment Date. The Company shall
not be required to use Commercially Reasonable Efforts to sell Qualifying
Capital Securities pursuant to clause (v) above if such Officers’
Certificate further certifies that: (A) a Company Market Disruption Event
was existing during the 180-day period preceding the date of such Officers’
Certificate or, in the case of any Repayment Date after the Scheduled Maturity
Date, the 30-day period preceding the date of such Officers’ Certificate; and
(B) either (1) the Company Market Disruption Event continued for the
entire 180-day period or 30-day period, as the case may be, or (2) the
Company Market Disruption Event continued for only part of such period, but the
Company was unable after using its Commercially Reasonable Efforts to raise sufficient
Net Proceeds during the rest of that period to permit repayment of the
Debentures in full. Each Officers’ Certificate delivered pursuant to this 

 11
 

 

clause (vii), unless no principal amount of Debentures is to be
repaid on the applicable Repayment Date, shall be accompanied by a notice of
repayment pursuant to Section 18(i) setting forth the principal amount of the
Debentures to be repaid on such Repayment Date, which amount shall be
determined after giving effect to clause (viii) of this Section 4.

(viii) Net Proceeds of the issuance of any
Qualifying Capital Securities that the Company is permitted to apply to
repayment of the Debentures on any Repayment Date will be applied,  first,
to pay deferred interest (and Additional Interest thereon) to the extent of
Eligible Proceeds raised pursuant to Section 9, second, to pay current interest to the extent not paid
from other sources and, third,
to repay the principal of Debentures, subject to a minimum principal amount of
$5 million or such lesser amount as may then be Outstanding to be repaid on any
Repayment Date; provided that if the Company is obligated to sell Qualifying Capital
Securities and apply the Net Proceeds to payments of principal of or interest
on any outstanding securities in addition to the Debentures, then on any date
and for any period the amount of Net Proceeds received by the Company from
those sales and available for such payments shall be applied to the Debentures
and those other securities having the same scheduled maturity date as the Debentures pro rata in accordance with their respective
outstanding principal amounts and none of such Net Proceeds shall be applied to
any other securities having a later scheduled maturity date until the principal
of and all accrued and unpaid interest on the Debentures has been paid in full.

(ix) The “Final Repayment Date” shall
initially be December 15, 2066 and shall be extended to a date that is
five years after the then Final Repayment Date (and such date that is five
years after the then Final Repayment Date shall thereafter be the “Final
Repayment Date”) on each of December 15, 2011, 2016, 2021 and 2026
(each, an “Extension Date”) if:

(A)  on such Extension Date
(i) the Debentures are rated at least Baa2 by Moody’s Investors Service,
Inc. (“Moody’s”) and BBB by Standard & Poor’s Ratings Services
(“S&P”) and (ii) the Company’s then outstanding senior debt for
money borrowed, if any, is rated at least A2 by Moody’s and A by S&P, or,
if in the case of clause (i) or (ii), either Moody’s or S&P (or their
respective successors) are no longer in existence, the equivalent ratings by at
least two Nationally Recognized Statistical Rating Organizations;

(B)  as of such Extension Date,
the Company has never deferred interest on the Debentures;

(C)  during the three years prior
to such Extension Date, no Event of Default, as set forth in Section 11,
has occurred in respect of any of the Company’s then outstanding debt for money
borrowed;

(D)  on such Extension Date the
Contribution Agreement is in effect or has been amended or terminated only in
accordance with its terms (other than pursuant to clauses (i) or (iii) of
Section 4(a) of the Contribution Agreement), and 

 12
 

 

(i) the
Maximum Contribution Amount, less (ii) the aggregate purchase price that
Parent (and such other Person that has assumed Parent’s obligations under the
Contribution Agreement, if any) has paid to the Company to acquire shares of
Common Stock pursuant to the Contribution Agreement prior to the applicable
Extension Date, equals or exceeds $300,000,000; and

(E)  on such Extension Date the
Company has delivered a written certification to the Trustee dated as of such
date (an “Extension Certificate”) stating that on the applicable
Extension Date (i) the Company believes that the likelihood that the Company
will elect to defer interest on the Debentures is remote, (ii) the Company
expects to make all required payments on the Debentures in accordance with
their terms and (iii) the Company expects to be able to satisfy the Company’s
obligations under the Replacement Capital Covenant.

No more than 45 and no less than 30 days prior to the
then Final Repayment Date, the Trustee shall request from the Company the
Extension Certificate and Officers’ Certificate, if any.  The Company shall deliver an Extension Certificate
if the Company believes that the certifications to be made in such Extension
Certificate would be true and correct as of the date of such Extension
Certificate.  The Company shall deliver
an Officers’ Certificate to the Trustee, who shall mail such certificate by
first class mail, postage repaid, addressed to each holder of record of the
Debentures within 30 days after any extension of the Final Repayment Date
pursuant to this clause (ix), stating the applicable Extension Date and
the Final Repayment Date after giving effect to the applicable extension.

5.     Rate of Interest

The Debentures bear interest (i) from and
including November 22, 2006 to but excluding December 15, 2036 at the
annual rate of 6.40%, computed on the basis of a 360-day year comprised of
twelve 30-day months, and (ii) thereafter, as to any unpaid amounts that
remain Outstanding, at a floating rate equal to One-month LIBOR plus 2.215%,
computed on the basis of a 360-day year and the actual number of days elapsed.
Subject to Sections 8 and 9, interest on the Debentures shall be payable in
cash (i) semi-annually in arrears on June 15 and December 15 of
each year, or if such day is not a Business Day, the Business Day immediately
following such day (provided that no interest will accrue as a result of such
postponement), commencing on June 15, 2007, until December 15, 2036
(each such date, a “Semi-Annual Interest Payment Date”) and
(ii) thereafter, monthly in arrears on the 15th day of each month, or if
such day is not a Business Day, the Business Day immediately following such day
(each such date, a “Monthly Interest Payment Date”).  Any installment of interest (or portion
thereof) deferred in accordance with Section 7 or otherwise unpaid shall bear
interest, to the extent permitted by law, at the rate of interest then in
effect on the Debentures, from the relevant Interest Payment Date, compounded
on each subsequent Interest Payment Date, until paid in accordance with Section
8.

 13
 

 

6.     To Whom Interest Payable

Interest shall be payable to the Person in whose name
the Debentures are registered at the close of business on the Regular Record
Date next preceding the Interest Payment Date, except that (i) interest
payable on any Debentures pursuant to their repayment in full in accordance with
Section 18 and (ii) interest payable on the Final Repayment Date shall be
paid to the Person to whom principal is paid.

7.     Option to Defer Interest Payments

(i) The Company shall have the right, at any
time and from time to time prior to the Final Repayment Date to defer the
payment of interest on the Debentures for one or more consecutive Interest
Periods that do not exceed 10 years;  provided that
no Deferral Period shall extend beyond the Final Repayment Date or the earlier
repayment or redemption in full of the Debentures; provided, further, that,
so long as any Debentures remain Outstanding, if the Company has given notice
of its election to defer interest payments but the Deferral Period has not yet
commenced or a Deferral Period is continuing, the Company shall not, and shall
not permit any Subsidiary to:
(x) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company’s
capital stock; provided that the Company may, at any time:
(A) declare or pay dividends or distributions in additional shares of the
Company’s capital stock; (B) declare or pay a dividend on the Company’s
capital stock in connection with the implementation of a shareholders’ rights
plan, or issue the Company’s capital stock under such a plan, or redeem or
repurchase any rights with respect to the Company’s capital stock distributed
pursuant to such a plan; (C) purchase shares of the Company’s capital
stock for issuance pursuant to any employment agreement, benefit plan or
similar arrangement with or for the benefit of employees, officers, directors
or consultants; (D) purchase fractional interests in shares of the Company’s
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; and (E) purchase the
Company’s securities (other than from Parent, or such other Person in respect
of which the Company is a Subsidiary, or any of its, or such other Person’s,
Affiliates) pursuant to contractually binding agreements existing prior to the
giving of such notice or the commencement of such Deferral Period, as
applicable, including under a contractually binding stock repurchase plan;
(y) other than any repayment of the Debentures pursuant to Section 4 and,
except for any payments of deferred interest pursuant to Section 9, make any
payment of principal of, or interest or premium, if any, on, or repay,
repurchase or redeem any of the Company’s securities that rank pari passu with or junior to the Debentures; or
(z) make any guarantee payments with respect to any guarantee by the
Company of the subordinated debt securities of any Subsidiary of the Company if
such guarantee ranks pari passu with
or junior to the Debentures.

(ii) At the end of any ten-year Deferral
Period, the Company shall pay all deferred interest on the Debentures that has
not been paid as of the end of such 10-year Deferral Period (together with
Additional Interest thereon, if any, at the rate specified for the Debentures
to the extent permitted by applicable law), to the Persons in whose names 

 14
 

 

the Debentures are registered at the close of business on the Regular
Record Date with respect to the Interest Payment Date at the end of such
Deferral Period.

(iii) Subject to Section 17, in the case of
any Deferral Period that does not terminate on or prior to the first
anniversary of the commencement of such Deferral Period, the restrictions set
forth in clause (y) of the proviso to clause (i) above shall continue
in effect in respect of any repayment, redemption or repurchase of securities
that rank  pari  passu  with or junior to the
Debentures until the first anniversary of the date on which the Company has
paid all deferred interest and all other accrued and unpaid interest on this
Debenture (including Additional Interest thereon).

(iv) Upon termination of any Deferral Period
and upon the payment of all deferred interest and any Additional Interest then
due on any Interest Payment Date, the Company may elect to begin a new Deferral
Period pursuant to clause (i) of this Section 7.

(v) The Company may elect to pay interest on
any Interest Payment Date during any Deferral Period to the extent permitted by
Section 8.

(vi) The Company shall give written notice of
its election to begin or extend any Deferral Period to the Trustee at least one
Business Day prior to the Regular Record Date for the next succeeding Interest
Payment Date.

8.     Payment of Deferred Interest

The Company shall not pay deferred interest on the
Debentures (including Additional Interest thereon) prior to the Final Repayment
Date from any source other than Eligible Proceeds. Notwithstanding the
foregoing, the Company may pay current interest at all times from any available
funds and the Company shall pay deferred interest on the Debentures (and
Additional Interest thereon) from all sources (including Eligible Proceeds)
following the Final Repayment Date or an acceleration of the Debentures
pursuant to Section 5.02 of the Indenture. To the extent that the Company
applies Eligible Proceeds from the sale of Common Stock and Qualifying
Non-Cumulative Perpetual Preferred Stock to pay interest on the Debentures,
such proceeds shall be allocated first to deferred payments of interest
(including Additional Interest thereon) in chronological order based on the
date each payment was first deferred. The payment of interest from any other
source shall be applied to current or deferred interest as directed by the
Company and notified to the Trustee prior to the applicable Interest Payment
Date. To the extent any payment allocable to any installment of interest
(including Additional Interest thereon) is insufficient to pay such installment
in full, such payment shall be applied pro  rata to the
Outstanding Debentures. If the Company has outstanding securities in addition
to, and that rank pari  passu with, the Debentures under which it
is obligated to sell Common Stock or Qualifying Non-Cumulative Perpetual
Preferred Stock and apply the Net Proceeds to the payment of deferred interest
distributions, then on any date and for any period the amount of Net Proceeds
received by the Company from those sales and available for payment of the
deferred interest shall be applied to the Debentures and those 

 15
 

 

other securities on a pro
rata basis in proportion to the total amounts that are due on the
Debentures and such other securities.

9.     Alternative Payment Mechanism  

Immediately following any APM Commencement Date and
until the termination of the related Deferral Period, the Company shall issue
Common Stock and Qualifying Non-Cumulative Perpetual Preferred Stock until the
Company has raised an amount of Eligible Proceeds at least equal to the
aggregate amount of accrued and unpaid amount of deferred interest on the
Debentures (including Additional Interest thereon) and applied such Eligible
Proceeds on the next Interest Payment Date to the payment of deferred interest
(including Additional Interest thereon) in accordance with Section 8; provided that:

(1)  the foregoing obligations
under this Section 9 shall not apply to the extent that (i) if the
Common Stock is Publicly Traded, the Net Proceeds of such issuance, together
with the Net Proceeds of any prior issuance of shares of Common Stock that have
been applied to pay deferred interest attributable to the first five years of
any Deferral Period (including Additional Interest thereon) pursuant to the
Alternative Payment Mechanism, would exceed 2% of the Company’s Market
Capitalization as of the fourth Business Day preceding the date of such
issuance (the “Common Stock Issuance Cap”); provided  further
that following the fifth anniversary of the commencement of such related
Deferral Period the Common Stock Issuance Cap shall cease to limit the Company’s
obligation under this Section 9, including with respect to accrued and
unpaid amounts of interest deferred prior to such fifth anniversary; and
(ii) the Net Proceeds of any issuance of Qualifying Non-Cumulative
Perpetual Preferred Stock applied to pay interest on the Debentures pursuant to
the Alternative Payment Mechanism, together with the Net Proceeds of all prior
issuances of Qualifying Non-Cumulative Perpetual Preferred Stock so applied,
would exceed 25% of the aggregate principal amount of the Debentures initially
issued under the Indenture (the “Preferred Stock Issuance Cap”); provided
further that the Company is prohibited from issuing Qualified
Non-Cumulative Perpetual Preferred Stock to the extent that the Net Proceeds of
any issuance of Qualified Non-Cumulative Perpetual Preferred Stock applied to
pay interest on the Debentures pursuant to the Alternative Payment Mechanism,
together with the Net Proceeds of all prior issuances of Qualified
Non-Cumulative Perpetual Preferred Stock so applied, would exceed the Preferred
Stock Issuance Cap;

(2)  the foregoing obligations
under this Section 9 shall not apply in respect of any Interest Payment
Date if the Company shall have provided to the Trustee no more than 30 and no
less than five Business Days prior to such Interest Payment Date an Officers’
Certificate (which Officers’ Certificate the Trustee shall promptly forward
upon receipt to each Holder of a Debenture) stating that (i) a Company
Market Disruption Event was existing after the immediately preceding Interest
Payment Date and (ii) either (A) the Company Market Disruption Event
continued for the entire period from the Business Day 

 16
 

 

immediately
following the preceding Interest Payment Date to the Business Day immediately
preceding the date on which such Officers’ Certificate is provided or
(B) the Company Market Disruption Event continued for only part of such
period, but the Company was unable after using its commercially reasonable
efforts to raise sufficient Eligible Proceeds during the rest of that period to
pay all accrued and unpaid interest due on the Interest Payment Date with
respect to which such Officers’ Certificate is being delivered; and

(3)  to the extent that the
Company has raised some but not all Eligible Proceeds necessary to pay all
deferred interest (including Additional Interest thereon) on any Interest
Payment Date pursuant to this Section 9, such Eligible Proceeds shall be
applied in accordance with Section 8.

For the avoidance of doubt, once the Company reaches
the Common Stock Issuance Cap, the Company shall not be required to issue more
Common Stock prior to the fifth anniversary of the commencement of such related
Deferral Period (including Additional Interest thereon) pursuant to Section 9
even if the Company’s Market Capitalization subsequently increases prior to
such fifth anniversary.  The Company
shall not be excused from its obligations under this Section 9 if it determines
not to pursue or complete the sale of Common Stock or Qualifying Non-Cumulative
Perpetual Preferred Stock due to pricing, coupon dividend rate or dilution
considerations.

10.   Contribution Agreement  

If at any time (i) the Company is required to
issue shares of Common Stock or Qualifying Non-Cumulative Perpetual Preferred
Stock pursuant to Section 9, (ii) the Company has attempted to issue
shares of Qualifying Non-Cumulative Perpetual Preferred Stock but has not
raised sufficient Eligible Proceeds through the sale of Common Stock and
Qualifying Non-Cumulative Perpetual Preferred Stock to pay all deferred
interest (including Additional Interest thereon) and (iii) the Contribution
Agreement is in full force and effect, then the Company is required to
(a) promptly make a request under the Contribution Agreement to Parent (or
such other Person that has assumed Parent’s obligations under the Contribution
Agreement) to use its commercially reasonable efforts to raise common equity to
the extent it is required to do so pursuant to the Contribution Agreement and
(b) enforce the Contribution Agreement after the Company makes such a
request if within a reasonable period of time after such request Parent (or
such other Person) fails to comply with the Contribution Agreement.

11.   Events of Default

For purposes of the Debentures, clauses (1), (3)
and (4) of Section 5.01 of the Indenture shall not apply. In addition to
clauses (2), (5), (6) and (7) of Section 5.01 of the Indenture, the following
clause (1) shall constitute an Event of Default:

(1)  default in the payment of
interest, including Additional Interest thereon, in full on any Debenture for a
period of 30 days after the conclusion of a ten-year period following the
commencement of any Deferral Period.

 17
 

 

For the avoidance of doubt, and without prejudice to
any other remedies that may be available to the Trustee or the Holders of the
Debentures under the Indenture, no breach by the Company of any other covenant
or obligation under the Indenture or the terms of the Debentures shall be an
Event of Default with respect to the Debentures.

12.   Redemption  

The Debentures shall be redeemable (a) in whole
or in part at the option of the Company at any time prior to December 15,
2036 at a Redemption Price equal to the greater of (i) 100% of the
principal amount of the Debentures then Outstanding plus accrued and unpaid
interest to the Redemption Date or (ii) the applicable Make-Whole
Redemption Price, provided that in the event of a redemption in part
that the principal amount Outstanding after such redemption is at least
$50,000,000 (any such redemption, an “Optional Redemption”) and
(b) in whole but not in part, prior to December 15, 2036, within
90 days following the occurrence of a Tax Event or Rating Agency Event at
a Redemption Price equal to the greater of (i) 100% of the principal
amount of the Debentures then Outstanding plus accrued and unpaid interest to
the Redemption Date or (ii) the applicable Make-Whole Redemption Price
(any such redemption, a “Tax or Rating Agency Redemption”).

13.   Replacement Capital Covenant

The Company shall not modify the Replacement Capital
Covenant to impose additional restrictions on the type or amount of Qualifying
Capital Securities for purposes of determining the extent to which repayment,
redemption, repurchase or defeasance of the Debentures is permitted on or after
the Scheduled Maturity Date, except with the consent of the Holders of a
majority by principal amount of the Debentures. 
Except as aforesaid, the Company may modify the Replacement Capital
Covenant without the consent of the Holders of the Debentures.

14.   Limitation on Claims in the Event of
Bankruptcy, Insolvency or Receivership  

Each Holder, by such Holder’s acceptance of the
Debentures, agrees that if a Bankruptcy Event shall occur prior to the
redemption or repayment of such Debentures, the Holder of Debentures will have
no claim for, and thus no right to receive, optionally deferred and unpaid
interest (including Additional Interest thereon) that has not been settled
through the application of the Alternative Payment Mechanism, to the extent the
amount of such interest exceeds two years of accumulated and unpaid interest
(including Additional Interest thereon) on such Holder’s Debentures.

15.   Sinking Fund  

The Debentures shall not be subject to any sinking
fund or similar provisions.

 18
 

 

16.   Subordination

The subordination provisions of Article XIII of
the Indenture shall apply.  The
Debentures are subordinated in right of payment, in the manner and to the
extent set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness. Each Holder by accepting a Debenture agrees to such subordination
and authorizes the Trustee to give it effect. For the purposes of the Debentures (but not for the purposes of
any other Securities unless specifically set forth in the terms of such
Securities or the instrument creating the same), “Senior Indebtedness”
as used in connection with the Debentures has the meaning in ascribed to it in
the Indenture, except that (i) all other Securities issued under the
Indenture shall also be Senior Indebtedness, unless, by their express terms or
by the express terms of the supplemental indenture under which such Securities
are issued, such Securities rank pari  passu or junior to the
Debentures and (ii) Senior Indebtedness shall not include trade accounts
payable and accrued liabilities arising in the ordinary course of business.

17.   Business Combinations  

If the Company engages in any transaction that is
subject to Section 8.01 of the Indenture, where immediately after the
consummation of such transaction more than 50% of the voting securities of the
Person formed by such transaction, or the Person that is the surviving entity
of such transaction, or the Person to whom such properties and assets are
conveyed, transferred or leased in such transaction, are owned by the
securityholders of the other party to such transaction, then (i) the
requirement that the Company issue Common Stock and Qualifying Non-Cumulative
Perpetual Preferred Stock pursuant to Section 9 and the first sentence of
Section 8 shall not apply to any interest on the Debentures that is deferred
and unpaid as of the date of consummation of such transaction and (ii) the
provisions of clause (iii) of Section 7 shall not apply to any Deferral
Period that is terminated on the next Interest Payment Date following the date
of consummation of such transaction.

18.   Repayment of the Debentures

(i) Repayment.  The Company shall, not more than 30 nor less
than five Business Days prior to each Repayment Date, notify the Trustee of the
Debentures of the principal amount of Debentures to be repaid on such date
pursuant to Section 4.

(ii) Selection of Securities to be Repaid.  If less than all the Debentures are to be
repaid on any Repayment Date (unless such repayment affects only a single
Debenture), the particular Debentures to be repaid shall be selected not more
than 30 days prior to such Repayment Date by the Trustee, from the
Outstanding Debentures not previously repaid or called for redemption, by lot,
provided that
the portion of the principal amount of any Debenture not repaid shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Debenture.

The Trustee shall promptly notify the Company in writing of the
Debentures selected for partial repayment and the principal amount thereof to
be repaid. 

 19
 

 

For all purposes hereof,
unless the context otherwise requires, all provisions relating to the repayment
of Debentures shall relate, in the case of any Debenture repaid or to be repaid
only in part, to the portion of the principal amount of such Debenture which
has been or is to be repaid. If the Company shall so direct, Debentures
registered in the name of the Company, any Affiliate or any Subsidiary thereof
shall not be included in the Debentures selected for repayment.

(iii) Notice of Repayment.  Notice of repayment shall be given by
first-class mail, postage prepaid, mailed not earlier than the 30th day,
and not later than the fifth day, prior to the Repayment Date, to each
Holder of Securities to be repaid, at the address of such Holder as it appears
in the Securities Register.

Each notice of repayment shall identify the Debentures to be repaid (including CUSIP number, if a
CUSIP number has been assigned to the Debentures) and shall state:

(1) the Repayment Date;

(2) the principal amount
of the Debentures to be repaid;

(3) if less than all
Outstanding Debentures are to be repaid, the identification (and, in the case
of partial repayment, the respective principal amounts) of the particular
Debentures to be redeemed;

(4) that on the Repayment
Date, the principal amount of the Debentures to be repaid will become due and
payable upon each such Debenture or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after said date; and

(5) the place or places
where such Debentures are to be surrendered for payment of the principal amount
thereof.

Notice of repayment shall be given by the Trustee in
the name and at the expense of the Company and shall be irrevocable. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives such notice. In any case, a failure to give such notice by mail
or any defect in the notice to the Holder of any Debentures designated for
repayment as a whole or in part shall not affect the validity of the
proceedings for the repayment of any other Debentures.

(iv) Deposit of Repayment Amount.  Prior to 10:00 a.m. New York City
time on the Repayment Date specified in the notice of repayment given as
provided in Section 18(iii), the Company will deposit with the Trustee or with
one or more Paying Agents (or if the Company is acting as its own Paying Agent,
the Company will segregate and hold in trust as provided in Section 10.03
of the Indenture) an amount of money sufficient to pay the principal amount of,
and any accrued interest (including Additional Interest) on, all the Debentures
which are to be repaid on that date.

 20
 

 

(v) Payment of Debentures Subject to
Repayment.  If any notice of
repayment has been given as provided in this Section 18(iii), the Debentures or
portion of the Debentures with respect to which such notice has been given
shall become due and payable on the date and at the place or places stated in
such notice. On presentation and surrender of such Debenture at a Place of
Payment in said notice specified, the said securities or the specified portions
thereof shall be paid by the Company at their principal amount, together with
accrued interest (including any Additional Interest) to the Repayment Date;
provided that, except in
the case of a repayment in full of all Outstanding Debentures, installments of
interest whose Stated Maturity is on or prior to the Repayment Date will be
payable to the Holders of such Debentures, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.07 of the
Indenture.

Upon presentation of any Debenture repaid in part
only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder
thereof, at the expense of the Company, a new Debenture or Debentures, of
authorized denominations, in aggregate principal amount equal to the portion of
the Debenture not repaid and so presented and having the same date of original
issuance, Stated Maturity and terms.

If any Debenture called for repayment shall not be so
paid upon surrender thereof, the principal of such Debenture shall, until paid, bear interest from
the Repayment Date at the rate prescribed therefore in the Debenture.

19.   Successors and Assigns

All covenants and agreements in this Debenture by the
Company shall bind its successors and assigns, whether so expressed or not.

20.   Governing Law

THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

21.   Rule 144A Information

The Company will furnish to Holders of the Debentures
and to prospective investors, upon request, any information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as
the Debentures are not freely transferable under the Securities Act.

*
* * *

 21
 

 

SCHEDULE OF
INCREASES OR DECREASES

The initial
principal amount of this Security is $200,000. 
The following increases or decreases in this Security have been made:

	
  Date of

  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount of this

  Security

  	
   

  	
  Amount of increase in

  Principal Amount of this

  Security

  	
   

  	
  Principal amount of this

  Security following such

  decrease or increase

  	
   

  	
  Signature of authorized

  signatory of Trustee or

  Securities Custodian

  
	
      

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
      

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 22Exhibit
10.4

EXECUTION COPY

CONTRIBUTION AGREEMENT
dated as of November 22, 2006 (this “Agreement”), between DEXIA
S.A., a Belgian corporation (“Parent”), and FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD., a New York corporation (“Issuer”).

WHEREAS, Parent is the ultimate beneficial owner of a
majority of the outstanding common stock of Issuer; and

WHEREAS, Parent and Issuer desire to enter into this
agreement in connection with the issuance by Issuer of $300,000,000 of its
Junior Subordinated Debentures pursuant to the Indenture (the “Debentures”) on
the date hereof;

NOW, THEREFORE, in consideration of the mutual
promises herein contained, the parties hereto agree as follows:

SECTION 1.             Definitions.  Capitalized terms used but not defined herein
shall have the respective meanings given to them in the Indenture dated as of November
22, 2006 (the “Indenture”) between Issuer and The Bank of New York, as
indenture trustee (the “Trustee”), or the Debentures.

SECTION 2.             Contribution.  (a)  If,
at any time, (i) Issuer, in accordance with the terms of the Indenture,
optionally defers interest on the Debentures for a period of five years or,
optionally defers interest on the Debentures and pays current interest thereon
prior to the fifth anniversary of the commencement of the applicable Deferral
Period, and therefore is required to issue shares of its common stock or
Qualifying Non-Cumulative Perpetual Preferred Stock pursuant to Section 9 of
the Debentures and (ii) Issuer has attempted to issue shares of its
Qualifying Non-Cumulative Perpetual Preferred Stock but has not raised
sufficient Eligible Proceeds through the sale of its common stock and
Qualifying Non-Cumulative Perpetual Preferred Stock to pay all deferred
interest (including compounded amounts thereon), then, subject to paragraph (b)
of this Section 2, Parent shall, upon receipt of a request of Issuer (an “Issuance
Request”), (1) prior to the date that Parent obtains the Dexia Stock
Issuance Board Approval, promptly use its commercially reasonable efforts, taking
into account its own funding requirements, to subscribe for additional shares
of Issuer’s common stock for an amount equal to the Shortfall Amount with any
source of funds then available to it, and (2) from and after the date that
Parent obtains the Dexia Stock Issuance Board Approval, promptly use its
commercially reasonable efforts to raise common equity providing Parent with
net proceeds (after underwriters’ or placement agents’ fees, commissions or
discounts and other expenses relating to the issuance) in an amount equal to
the Shortfall Amount.  If Parent is
successful in raising any such common equity pursuant to the preceding clause
(2), then Parent shall promptly subscribe for additional shares of Issuer’s
common stock with such net proceeds.  If,
subsequent to Parent obtaining the Dexia Stock Issuance Board Approval, Parent
is not successful in raising any such common equity pursuant to the preceding
clause (2), then Parent will not be required to subscribe for additional shares
of Issuer’s common stock or otherwise have any obligation to contribute any of
its

 

assets to Issuer
under the preceding clause (2), and specifically, Parent shall not be required
to apply any of its other assets to discharge its obligations under the
preceding clause (2).

(b)  Notwithstanding the foregoing
Parent shall not be required to (i) issue common equity or subscribe for
shares of Issuer’s common stock to the extent that the net proceeds of such
issuance of common equity, together with the net proceeds of all other common
equity which has been previously issued pursuant to Issuance Requests, would exceed,
in the aggregate, an amount equal to the Shortfall Amount, (ii) use its
commercially reasonable efforts to issue common equity during the continuance
of a Parent Market Disruption Event or (iii) issue common equity or subscribe
for shares of Issuer’s common stock at any time after Parent has acquired
shares of Issuer’s common stock pursuant to this Agreement for an aggregate
purchase price equal to the Maximum Contribution Amount.

(c)  For purposes of this
Agreement, “Dexia Stock Issuance Board Approval” means the approval by
Parent’s Board of Directors of Parent’s obligation to raise common equity
described under clause (a)(2) of this Section 2.

(d)  For purposes of this
Agreement, “Parent Market Disruption Event” means the occurrence or
existence of any of the following events or sets of circumstances: (i) a
material suspension of or limitation on trading or on settlement procedures for
transactions in Parent’s common equity and/or preferred securities through
the primary stock exchange or exchanges on which such securities are then
traded or the principal central securities depositary through which such
securities are then cleared; (ii) a prohibition or material restriction imposed
by applicable law (or by order, decree or regulation of any governmental
entity, stock exchange or self-regulating body having jurisdiction) on the
ability of Parent to issue or transfer its common equity or preferred
securities; (iii) Parent would be required to obtain the consent or approval of
its shareholders to issue common equity as required by this Agreement, and
Parent fails to obtain that consent or approval notwithstanding its
commercially reasonable efforts to obtain that consent or approval; or (iv)
Parent is subject to a “blackout’’ period which, under applicable securities
laws or Parent policies then in place, would not permit Parent to issue common
equity and/or preferred securities until the release of information which has
resulted in the commencement of such blackout period or such blackout period
has otherwise terminated.

(e)  For purposes of this Agreement, “Shortfall
Amount” means, as of any date, (i) the aggregate amount of interest
accrued (including compounded amounts thereon and interest accrued after Issuer
is required to issue common stock and Qualifying Non-Cumulative Perpetual
Preferred Stock pursuant to the Alternative Payment Mechanism) on the
Debentures during the then current Deferral Period, measured as of the next
regularly scheduled Interest Payment Date, minus (ii) the amount of any
Eligible Proceeds that Issuer has raised by issuing common stock and/or
Qualifying Non-Cumulative Perpetual Preferred Stock pursuant to the Alternative
Payment Mechanism in respect of the then current Deferral Period.

 2
 

 

(f)  For purposes of this
Agreement, “Maximum Contribution Amount” means the greater of (i)
$300,000,000 and (ii) such amount to which Parent shall have, in its sole
discretion by written notice to Issuer, elected to increase the Maximum
Contribution Amount.

SECTION 3.           Waivers.  Parent hereby waives any failure or delay on
the part of Issuer in asserting or enforcing any of its rights or in making any
claims or demands hereunder.

SECTION 4.           Termination.  This Agreement shall remain in full force and
effect for so long as any of the Debentures are outstanding, provided, however,
that this Agreement may be terminated by (a) Parent upon 10 business days’
prior notice to Issuer at any time on or after which:

(i)  Parent and
its Subsidiaries have sold or otherwise transferred 50% or more of Issuer’s
outstanding voting securities to another Person (other than Parent or one of
its Subsidiaries) that has not assumed Parent’s obligations under this
Agreement; provided that Parent has used its commercially reasonable efforts to
cause such Person to agree to assume such obligations;

(ii)  Parent and
its Subsidiaries have ceased to beneficially own securities constituting
greater than 50% of Issuer’s outstanding voting securities; provided that as of
such date Issuer’s common stock is listed for trading on a national securities
exchange or is quoted in the Nasdaq National Market; or

(iii)  Issuer
has conveyed, transferred or leased all or substantially all of its properties
to another Person, and if such Person is a Subsidiary of another Person (the “Third
Party Parent Company”), such Third Party Parent Company has not assumed Parent’s
obligations under this Agreement; provided that Parent has used its
commercially reasonable efforts to cause such Third Party Parent Company to agree
to assume such obligations; or

(b)  Parent or
Issuer at any time that Issuer shall have received an opinion of counsel
experienced in such matters to the effect that such termination would not
increase the risk that the Debentures will be treated other than as debt for
U.S. federal income tax purposes.

SECTION 5.           Amendments
and Waivers.  This Agreement may not
be amended, and none of the terms or provisions of this Agreement may be
waived, except by an instrument in writing signed on behalf of each of the
parties hereto; provided that no such amendment or waiver shall be effective
unless Issuer shall have received an opinion of counsel experienced in such
matters to the effect that such amendment or waiver would not increase the risk
that the debentures will be treated other than as debt for U.S. federal income
tax purposes.

 3
 

 

SECTION 6.           Notices.  All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be delivered
by hand or sent by facsimile or sent, postage prepaid, by registered, certified
or express mail or recognized overnight courier service and shall be deemed
given when so delivered by hand or facsimile, or if mailed, three days after
mailing (one Business Day in the case of express mail or overnight courier
service), as follows:

(i) if to Parent,

Dexia S.A.

Dexia Tower

Place Roger II

1210 Brussels

Belgium

Phone:  011 322 213 5736

Fax:  011 322 213 5890

Attention:  Secretary General;

and

(ii) if to Issuer,

Financial
Security Assurance Holdings Ltd.

31 West 52nd
Street

New York, New
York, 10019, U.S.A.

Phone:  001 212 826 0100

Fax:  001 212 857 0541

Attention: General Counsel.

SECTION 7.           Governing
Law; Jurisdiction; Service of Process. 
(a)  This Agreement shall be
governed by the laws of the State of New York, but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.

(b) Each of Parent and Issuer hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or U.S. Federal court sitting in the
Borough of Manhattan in The City of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of
Parent and Issuer hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State court or, to the extent permitted by law, in such U.S. Federal
court.  Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

 4
 

 

(c)  Parent has
irrevocably appointed Dexia Credit Local New York Branch as its authorized
agent (the “Authorized Agent”),
upon whom service of process may be served in any suit, action or proceeding
arising out of or based upon this Agreement that may be instituted in any such
court.  Parent hereby represents and
warrants that the Authorized Agent has accepted such appointment and has agreed
to act as said agent for service of process, and Parent agrees to take any and
all action, including the filing of any and all documents that may be necessary
to continue such appointment in full force and effect as aforesaid.  Service of process upon the Authorized Agent
shall be deemed, in every respect, effective service of process upon
Parent.  Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.  If for any
reason the Authorized Agent is unable to serve in such capacity, Parent shall
appoint another agent reasonably satisfactory to the Trustee.

(d)  Each of
Parent and Issuer irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection to any suit, action or proceeding that may be
brought in connection with this Agreement in such courts whether on grounds of
venue, residence or domicile or on the ground that any such suit, action or
proceeding has been brought in an inconvenient forum.  Each Parent and Issuer hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

SECTION 8.           No
Third Party Beneficiaries.  Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy
or claim under or with respect to this Agreement or any provision of this
Agreement.  This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.

SECTION 9.           Successors
and Assigns.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

 

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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective authorized officers as
of the day and year first above written.

	
  

  	
  DEXIA S.A.,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
        /s/ Axel Miller

  
	
   

  	
   

  	
   

  	
  Name: Axel Miller

  
	
   

  	
   

  	
   

  	
  Title: 

  	
  Managing Director and Chairman 

  of the Management Board

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FINANCIAL SECURITY ASSURANCE 

  HOLDINGS LTD.,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  	
        /s/ Joseph W.
  Simon

  
	
   

  	
   

  	
   

  	
  Name: Joseph W. Simon

  
	
   

  	
   

  	
   

  	
  Title: 

  	
  Managing Director and Chief 

  Financial Officer of Holdings

  
						

 

 6

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