Document:

Exhibit 10.1

 

[Approved by Board of Directors—11/18/04]

 

 

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

 

 

2004 Equity Participation Plan

 

 

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

 

2004 Equity Participation Plan

 

 

	
  SECTION

  	
   

  	
  CONTENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  General
  Purpose of Plan; Definitions

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Administration

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Stock Subject to Plan

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Eligibility

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Performance Shares

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Dexia Restricted Stock

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Performance Share Units

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Transfer, Leave of
  Absence, etc.

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Amendments and Termination

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  General Provisions

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Effective Date of Plan

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Term of Plan

  	
   

  	
   

  

 

 

Exhibit 10.1

 

[Approved by Board of Directors—11/18/04]

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

 

2004 Equity Participation Plan

 

Section 1.  General Purpose of Plan; Definitions.

 

The
name of this plan is the Financial Security Assurance Holdings Ltd. 2004 Equity
Participation Plan (the “Plan”). 
The purpose of the Plan is to enable the Company to retain and attract
executives and employees who will contribute to the Company’s success by their
ability, ingenuity and industry, and to enable such executives and employees to
participate in the long-term growth of the Company and Dexia by obtaining a
proprietary interest in the Company or Dexia or the cash equivalent thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

l.                                          “Dexia”
means Dexia S.A., a limited liability company under Belgium law having its registered
office at 1000 Brussels, Square de Meeus 1, registered with the Commercial
Registry of Brussels under 604.748 (or any successor thereto).

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

v.                                      “Investment Grade” means exposure at
or above the investment grade category by, or in accordance with criteria of,
Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.

 

w.                                    “Operating Earnings” means, as of a
particular date, net income of the Company for the first four completed
calendar quarters ended on or prior to such date less the after-tax effect of gains or losses attributable to
mark-to-market of Investment Grade credit derivatives, as determined by the

 

3

 

Company,
consistent, as applicable, with its determination of net income reported from
time to time in the Company’s quarterly reports on Form 10-Q.

 

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

 

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

 

z.                                        “Performance
Cycle” means a time period specified by the Committee at the time a grant
of Performance Shares is made, during which the performance of the Company, a
Subsidiary or a Division will be measured.

 

aa.                                 “Performance
Objectives” means goals set by the Committee with respect, but not limited,
to:  (i) earnings per share of FSA Stock
or Dexia Stock, (ii) pre-tax profits, (iii) net earnings or net worth,
(iv) absolute and/or relative return on equity or assets, (v) any combination
of the foregoing, or (vi) any other standard or standards deemed appropriate by
the Committee at the time a grant of Performance Shares is made.  Performance Objectives may be in respect of
the performance of the Company and its Subsidiaries (which may be on a
consolidated basis), a Subsidiary or a Division.

 

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

 

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

 

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

 

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

 

(i)                                     the
discount rate (expressed as an annual percentage rate) such that (a) the
Adjusted Book Value per share of FSA Stock on the last day of the Performance
Cycle, adjusted to exclude the after-tax change in accumulated other
comprehensive income (unrealized gains and losses in the Company’s investment
portfolio and any other component of other comprehensive income) during such
Performance Cycle, and the dividends paid per share during such Performance
Cycle, each discounted at such discount rate to the first day of such
Performance Cycle, equals (b) the Adjusted Book Value per share of FSA Stock on
the first day of such Performance Cycle; and

 

(ii)                                  the
discount rate (expressed as an annual percentage rate) such that (a) the Book
Value per share of FSA Stock on the last day of the Performance Cycle, adjusted
to exclude the after-tax change in accumulated other comprehensive income
(unrealized gains and losses in the Company’s investment portfolio and any
other component of other comprehensive income) during such Performance Cycle,
and the dividends paid per share during such Performance Cycle, each discounted
at such

 

4

 

discount
rate to the first day of such Performance Cycle, equals (b) the Book Value per
share of FSA Stock on the first day of such Performance Cycle.

 

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

 

Section 2.  Administration.

 

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

 

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

 

In
particular, the Committee shall have the authority:

 

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

 

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

 

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

 

(iv)                              to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any award granted hereunder (including, but not limited to, any
vesting requirements or other restrictions or performance criteria relating to
any Performance Shares, Dexia Restricted Stock or Performance Share Units
awarded hereunder and/or any shares of FSA Stock or Dexia Stock relating
thereto);

 

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

 

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

 

The
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret

 

5

 

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

 

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

 

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

 

Section 3.  FSA Stock Subject to Plan.

 

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

 

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

 

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

 

Section 4.  Eligibility.

 

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

 

6

 

Section 5.  Performance Shares.

 

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

 

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

 

If any
change shall occur in or affect the FSA Stock or Performance Shares on account
of any increase or decrease in the number of outstanding shares of FSA Stock
resulting from payment of a stock dividend on FSA Stock, a subdivision or
combination of shares of FSA Stock, a reclassification of FSA Stock, a
recapitalization involving the Company or in the event of a merger or
consolidation in which the Company shall be the surviving corporation, the
Committee shall make such adjustments, if any, that it deems necessary in the
number of shares of FSA Stock allocated to awards of Performance Shares then outstanding
to reflect such change.  In the event of
an Internal Reorganization (providing for a new holding company for the FSA
group of companies), (i) the Committee shall make such adjustments to then
outstanding Performance Shares (including Performance Shares underlying
outstanding Performance Share Units) as it shall deem appropriate to reflect
such Internal Reorganization so that the holders of outstanding Performance
Shares are compensated based upon the overall performance of the reconstituted
FSA group of companies, including, without limitation, adjusting the number of
shares of FSA Stock allocated to such Performance Shares and adjusting the
Performance Objectives or manner of calculating the Performance Objectives in
respect of such Performance Shares; and (ii) the term “Company” shall be deemed
to refer to such new holding company and the term “FSA Stock” shall be deemed
to refer to the securities of such new holding company for all purposes of the
Plan.

 

7

 

To
reflect a change in tax laws or regulations or accounting principles, the
Committee shall make such adjustments in the Performance Objectives set forth
in all outstanding awards of Performance Shares in respect of Performance
Cycles not then completed so as to reflect such change to preserve the value of
the Performance Shares consistent with the intent and the purpose of the Plan,
provided the Company’s independent auditors shall have determined that such
adjustments shall not result in the Company’s loss of deductibility under Section 162(m)
with respect to Participants whose compensation is, in the reasonable belief of
the Committee, subject thereto.  Further,
with respect to a Participant, the deductibility of whose award of Performance
Shares will not, in the reasonable belief of the Committee, be subject to Section 162(m)
of the Code, the Committee may, in its discretion and independent of any
determination made by the Company’s independent auditors, adjust the
Performance Objective(s) in respect of Performance Cycles not then completed so
as to reflect a change in tax laws or regulations or accounting principles to
preserve the value of the Performance Shares consistent with the intent and the
purpose of the Plan.

 

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

 

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

 

(b)                                 Distributions
and Payments on Completion of Performance Cycle.  In furtherance of an election discussed in
paragraph (c) of this Section 5, distributions of shares of FSA Stock
and/or payments of cash with respect to Performance Shares allocated to a
particular Performance Cycle covered by an award shall be made to the
Participant within one hundred twenty (120) days after the completion of such
Performance Cycle in accordance with the Committee’s determination of the
achievement of the applicable Performance Objectives, unless the agreement
evidencing the award provides for the deferral of such distribution or payment,
in which event the terms and conditions of the deferral shall be set forth in
the agreement.  Provided a Participant
who has been granted a Performance Shares award shall have been employed by the
Company through the date on which a particular Performance Cycle shall have
been completed, or such Participant’s employment with the Company shall have
been terminated prior thereto by reason of death or Disability, such
Participant shall be entitled to receive with respect to each such award:

 

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

 

a x b = c
; or

 

8

 

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

 

a x b x d
= e; or

 

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

 

where:

 

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

 

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

 

	
  Performance

  	
   

  	
  Percentage of Performance

  
	
  Cycle ROE

  	
   

  	
  Objective Achieved

  
	
   

  	
   

  	
   

  
	
  19% or higher

  	
   

  	
  200%

  	
   

  
	
  16%

  	
   

  	
   

  	
  150%

  	
   

  
	
  13%

  	
   

  	
   

  	
  100%

  	
   

  
	
  10%

  	
   

  	
   

  	
  50%

  	
   

  
	
  7%

  	
   

  	
   

  	
  0%

  	
   

  

 

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

 

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

 

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

 

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

 

The Committee may, in its
sole and absolute discretion, provide that in the event a Participant shall not
have been employed by the Company through the date on which a particular
Performance Cycle covered by such Participant’s award shall have been completed,
such Participant may be entitled to a distribution of FSA Stock and/or cash in
respect of Performance Shares which have vested but with respect to which a
distribution or payment had not previously been made with respect thereto, by
allocating such vested, but unpaid, Performance Shares to the remaining
uncompleted Performance Cycles covered by such

 

9

 

Participant’s award in
such amounts as it determines, but in no event shall such Participant receive
allocations more favorable than the original allocations made in such
Participant’s award.

 

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

 

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

 

(d)                                 Change
in Control.  In the event of a Change
in Control, all Participants who then hold awards of Performance Shares will
immediately become fully vested with respect thereto (“Accelerated Shares”);
provided that such accelerated vesting shall not apply if a Plan Continuation
shall have occurred as provided below in this paragraph (d) (“Non-Accelerated
Shares”).  In the event of a Change
in Control, a Participant shall be entitled to a cash payment, or payments,
pursuant to paragraph (b) of this Section 5 with respect to all
Performance Cycles completed on or prior to the date of the Change in Control
as provided in said paragraph; in addition, the Committee shall value all
Accelerated Shares in respect of Performance Cycles which shall not have been
completed on or before the date of the Change in Control based upon the
formulae set forth in paragraph (b) of this Section 5 except that b shall be equal to a percentage (the “Minimum Percentage”)
equal to (i) for all Performance Cycles that do not include at least one
completed year at the Operative Date (as defined below), 100%, and (ii) for all
Performance Cycles that include at least one completed year at the Operative
Date, a percentage (which may be more than 100%), which represents the extent
to which the Performance Objectives set forth in such award have been achieved
by the Company in the applicable Performance Cycle assuming that the Company
achieved 100% of its Performance Objectives for each year not completed at the
Operative Date.  For purposes of the
foregoing, the “Operative Date” shall mean the date of the Change in
Control.  On the date one year after the
Change in Control (the “One-Year Period”), the Company shall pay a
Participant the cash to which such Participant is entitled with respect to the
Performance Shares whose vesting has been accelerated based on the Change in
Control unless, prior thereto, such Participant’s employment shall have been
terminated by the Company for Cause or such Participant shall have voluntarily
terminated his/her employment without Good Reason (defined below), in either of
which

 

10

 

events such Participant
shall forfeit all rights to such Performance Shares whose vesting has been
accelerated based upon the Change in Control and which would not otherwise have
vested and all rights to payment attributable to application of the Minimum
Percentage and any distribution of FSA Stock and/or cash with respect
thereto.  In the case of any Performance
Cycle completed during the One-Year Period, payment of any amount due shall be
made in accordance with paragraph (b) of this Section 5, provided that any
incremental payment due pursuant to the foregoing provisions of this paragraph
(d) by reason of application of the Minimum Percentage shall be payable at the
end of the One-Year Period unless forfeited.

 

In the
event of a Change in Control, the Board of Directors may elect by resolution
prior to the Change in Control to continue the Plan (a “Plan Continuation”),
in which event all Non-Accelerated Shares shall vest and be payable as if no
Change in Control had occurred except as otherwise provided in the next two
succeeding sentences.  Following a Plan
Continuation, if a Participant’s employment shall be terminated by the Company
without Cause or such Participant shall voluntarily terminate his or her
employment for Good Reason, in either case prior to the completion of any
Performance Cycle in respect of any Non-Accelerated Shares, then (i) all
Non-Accelerated Shares outstanding at the date of the Change in Control and
having Performance Cycles which shall not have been completed prior to the date
of termination of employment shall be deemed to be Accelerated Shares (“Re-Accelerated
Shares”) for purposes of this paragraph (d) and (ii) payment in respect of
such Re-Accelerated Shares shall be made as provided in this paragraph (d) for
Accelerated Shares (except that the “Operative Date” shall mean the date
of termination of employment) and shall be paid immediately as if the One-Year
Period shall have elapsed.  In the event
of a Plan Continuation, the Committee shall make such adjustments, if any, to
the Performance Objectives and/or the method of calculating the Performance
Objectives as it shall deem necessary or appropriate to preserve the value of
the Non-Accelerated Shares consistent with the intent and the purpose of the
Plan.

 

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

 

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

 

(g)                                 Funding.  Prior to the award of any Performance Shares,
the Committee may establish a funding vehicle to assist the Company with its
obligations under this Section 5. 
The Committee may provide that credits and allocations otherwise provided
for by this Section 5 shall be adjusted to take into account the amount
and timing of purchases and sales of, and dividends with respect to, FSA Stock
under such fund; the manner in which such fund otherwise operates; the amount
of FSA Stock in such fund from time to time; and such other factors as the
Committee may deem relevant; provided that the limitation in Section 3
hereof may not be adjusted under this sentence. 
Any fund shall be designed not to cause the plan to be considered to be
funded for tax purposes or for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended.

 

11

 

Section 6.  Dexia Restricted Stock.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

Restricted
Stock awarded under the Plan (or have such shares attached or garnished);
provided that the Restricted Period for any shares of Dexia Restricted Stock
that are automatically sold to the Company or Dexia to satisfy withholding tax
requirements in accordance with paragraph (e) of this Section 6 shall
expire at the expiration of the applicable Forfeiture Period.

 

(ii)                                  Except
as otherwise provided in paragraph (c) of this Section 6, the recipient
shall have, in respect of the shares of Dexia Restricted Stock, all of the rights
of a stockholder of Dexia, including the right to vote the shares and the right
to receive any cash dividends, provided that any stock dividends paid, or
proceeds of stock splits, shall remain Dexia Restricted Stock subject to the
same custody arrangement, vesting provisions and Restricted Period applicable
to the Dexia Restricted Stock in respect of which such stock dividend was paid
or stock split was made.  The Committee
may, in its sole discretion, at the time of award defer the payment of any cash
dividends otherwise payable until expiration of the Restricted Period.

 

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

 

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

 

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

 

(vi)                              Upon
becoming eligible for Retirement at age 55 (a Participant’s “Retirement
Eligibility Date”), unless the Committee shall otherwise determine at the
time of award, a portion of the shares of Dexia Restricted Stock subject to
such award that have not become vested prior to such Participant’s Retirement
Eligibility Date shall vest as of such date, such portion to equal the ratio of
(A) the number of days in the Normal Vesting Period applicable to such shares
that have elapsed as of the Retirement Eligibility Date, over (B) the total
number of days in such Normal Vesting Period. 
The shares of Dexia Restricted Stock subject to such award that are
still unvested following the Participant’s Retirement Eligibility Date shall
vest in equal installments as of the last day of each of the Company’s fiscal
quarters ending during the remaining term of

 

13

 

the
applicable Normal Vesting Period, provided that, in the case of each such
installment, the Participant remains employed by the Company until the
applicable vesting date.

 

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

 

(d)                                 Election
to Receive Stock or Cash.  At a date
determined by the Company and notified to each Participant prior to the date on
which the Restricted Period shall be completed with respect to vested shares of
Dexia Restricted Stock granted to a Participant, such Participant may make an
election to receive payment in respect of such shares, if any, following
completion of such Restricted Period, in shares of Dexia Stock (not subject to
restrictions), cash or a combination of shares and cash.  Such election shall be made in writing and
shall be delivered to the Company’s Chief Financial Officer or General Counsel,
or such other officer as the Committee shall from time to time designate.  Notwithstanding any cash election, the
Committee may in its sole and absolute discretion satisfy the Company’s
obligations to any Participant with respect to vested shares of Dexia
Restricted Stock by delivery of shares of Dexia Stock.  If the Participant shall fail to make a
timely election with respect to any vested shares of Dexia Restricted Stock,
the Committee shall have the sole discretion to deliver shares of Dexia Stock
and/or pay cash to satisfy any such obligation with respect to such vested
shares of Dexia Restricted Stock.

 

With
respect to the cash settlement of any Dexia Restricted Stock awards pursuant to
this paragraph  (d), the amount of such
cash payment shall be determined by valuing each share of Dexia Restricted
Stock at the Fair Market Value of a share of Dexia Stock as of the last day of
the Restricted Period (or if such day is not a trading day for Dexia Stock,
then the first succeeding trading day for Dexia Stock).  Distribution of shares of Dexia Stock and/or
payments of cash with respect to Dexia Restricted Stock shall be made to the
Participant promptly after expiration of the applicable Restricted Period.

 

(e)                                  Tax
Withholding.  In accordance with Section 10(d),
each Participant shall automatically sell to the Company a number of whole
and/or fractional shares of Dexia Stock that would otherwise be distributed to
the Participant upon expiration of the Forfeiture Period in order to satisfy
the minimum withholding requirement for all applicable Federal, state and local
income, excise and employment taxes; provided that the Participant may elect to
satisfy any such withholding requirement by the delivery of cash.  Such election must be made in writing and
delivered to the Company’s Chief Financial Officer or General Counsel or such
other officer as the Committee shall from time to time designate no later than
thirty (30) days prior to the date of any such withholding requirement.  Any shares of Dexia Stock sold to the Company
pursuant to this paragraph  (e) shall be
valued at their Fair Market Value on the date of the applicable withholding
requirement (or if such day is not a trading day for Dexia Stock, then the
first succeeding trading day for Dexia Stock).

 

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

 

14

 

Committee in its sole
discretion; provided that (i) to the extent that the Realization Consideration consists
of shares, the provisions hereof applicable to Dexia Restricted Stock shall
apply to such shares as if such shares were Dexia Restricted Stock; and (ii) to
the extent that the Realization Consideration consists of cash (the “Restricted
Cash Amount”), the Restricted Cash Amount shall be (A) converted into U.S.
dollars using the noon buying rate published by the Federal Reserve Bank of New
York for the date of receipt of such cash (or if such rate is no longer published,
such other rate as the Committee shall approve) and (B) credited with a rate of
return equal to the Company’s ROE from the date of conversion into cash until
the conclusion of the Restricted Period. 
The Company’s obligation to pay the Restricted Cash Amount, along with
any deemed earnings or losses thereon, shall be an unfunded contractual
obligation that will be satisfied out of the Company’s general assets.  Participants shall have only the rights of a
general unsecured creditor of the Company with respect to such amounts.  For purposes of the foregoing, ROE means, in
respect of any period, the average of:

 

(i)                                     the
discount rate (expressed as an annual percentage rate) such that (a) the
Adjusted Book Value per share of FSA Stock on the last day of the last calendar
quarter in such period, adjusted to exclude the after-tax change in accumulated
other comprehensive income (unrealized gains and losses in the Company’s
investment portfolio and any other component of other comprehensive income)
during such period, and the dividends paid per share during such period, each
discounted at such discount rate to the first day of the first calendar quarter
in such period, equals (b) the Adjusted Book Value per share of FSA Stock on
the first day of the first calendar quarter in such period; and

 

(ii)                                  the
discount rate (expressed as an annual percentage rate) such that (a) the Book
Value per share of FSA Stock on the last day of the last calendar quarter in
such period, adjusted to exclude the after-tax change in accumulated other
comprehensive income (unrealized gains and losses in the Company’s investment
portfolio and any other component of other comprehensive income) during such
period, and the dividends paid per share during such period, each discounted at
such discount rate to the first day of the first calendar quarter in such
period, equals (b) the Book Value per share of FSA Stock on the first day of
the first calendar quarter in such period.

 

Section 7.  Performance Share Units.

 

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

 

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

 

15

 

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

 

Section 8.  Transfer, Leave of Absence,
etc.

 

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

 

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

 

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

 

Section 9.  Amendments and Termination.

 

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

 

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

 

Section 10.  General Provisions.

 

a.                                       All
certificates for shares of FSA Stock delivered under the Plan pursuant to any
award of Performance Shares or Performance Share Units, and all certificates
for shares of Dexia Stock delivered under the Plan pursuant to any award of
Dexia Restricted Stock or Performance Share Units, shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the FSA Stock or Dexia
Stock, as the case may be, is then listed, and any applicable Federal, state or
foreign securities law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.  The foregoing provisions
of this paragraph applicable to FSA Stock and Dexia Stock shall not be
effective if and to the extent that the shares of FSA Stock or Dexia Stock
delivered under the Plan are covered by an effective and current registration
statement under the Securities Act of 1933, as amended, such that application
of such provisions is no longer required, or if and so long as the Committee
otherwise determines that such application is no longer required.

 

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

 

c.                                       Nothing
contained in the Plan shall prevent the Board of Directors from adopting other
or additional compensation arrangements, subject to stockholder approval if
such approval is required;

 

16

 

and such arrangements may
be either generally applicable or applicable only in specific cases.  The adoption of the Plan shall not confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company, nor shall it interfere in any way with the right
of the Company to terminate the employment of any of its employees at any time.

 

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

 

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

 

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

 

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

 

Section 11.  Effective Date of Plan.

 

The
Plan shall be effective on the date it is approved by a vote of the holders of
a majority of the total outstanding Stock. 
The Plan shall not become effective unless it is so approved.

 

Section 12.  Term of Plan.

 

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

 

17Exhibit 10.2

 

[Approved by HR Committee—11/17/04]

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

AGREEMENT EVIDENCING AN AWARD OF DEXIA
RESTRICTED STOCK

 

January [     ], 2005

 

To:  [                  ]”Employee”

 

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

 

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

 

1.                                       Purpose of Award.

 

The
purpose of the Plan pursuant to which your shares of Dexia Restricted
Stock have been awarded
is to enable the Company to retain and attract executives and employees who will
contribute to the Company’s success by their ability, ingenuity and
industry, and to enable such executives and employees to participate in the
long-term growth of the Company and Dexia by
obtaining a proprietary interest in the Company or Dexia and/or
the
cash equivalent thereof.

 

2.             Acceptance of the Dexia
Restricted Stock Award Agreement.

 

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

 

3.                                       Vesting Period.

 

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

 

	
  Vesting
  Date

  	
   

  	
  % of Dexia Restricted Stock Award Vesting

  
	
  June 30, 2007

  	
   

  	
  33-1/3%

  
	
  June 30, 2008

  	
   

  	
  66-2/3%

  

 

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

 

1

 

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

 

•                                          Upon termination of your employment by the Company without Cause, a
portion of your shares of Dexia Restricted Stock subject to this award that
have not become vested prior to the date of such termination shall vest as of
such date, such portion to equal the ratio of (i) the number of days in the
Normal Vesting Period applicable to such shares that have elapsed as of the
date of termination, over (ii) the total number of days in such Normal Vesting
Period.

 

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

 

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

 

4.                                       Restricted Period.

 

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

 

	
  Vesting
  Date

  	
   

  	
  Restricted Period Ended

  	
   

  	
  % of Dexia Restricted Stock Award

  Becoming Unrestricted

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  June 30, 2007

  	
   

  	
  December 31, 2007

  	
   

  	
  33-1/3%

  
	
  June 30, 2008

  	
   

  	
  December 31, 2008

  	
   

  	
  66-2/3%

  

 

 

2

 

5.                                       Dividends and Voting Rights.

 

Other than the
restrictions on transfer during the Restricted Period, the risk of forfeiture
during the Vesting Period and any other terms and conditions of your award set
forth herein and in the Plan, you shall have all of the rights of a holder of
Dexia Stock in respect of your shares of Dexia Restricted Stock, including the
right to vote the shares and the right to receive any cash dividends; provided
that any stock dividends paid, or proceeds of stock splits, shall remain Dexia
Restricted Stock subject to the same custody arrangement, vesting provisions
and Restricted Period applicable to the Dexia Restricted Stock in respect of
which such stock dividend was paid or stock split was made.  Cash dividends received with respect to your
Dexia Restricted Stock shall be converted into U. S. dollars at the then
applicable exchange rates and paid to you promptly following receipt by the
custodian of such dividends.

 

6.                                       Election to Receive Stock or Cash.

 

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

 

7.                                       Distributions and Payments on Completion of Restricted Period.

 

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

 

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

 

(ii)                                  a cash payment equal to the Fair Market Value of the Dexia Stock as of
the last day of the Restricted Period (or if such day is not a trading day for
Dexia Stock, then the first succeeding trading day for Dexia Stock), converted
into U. S. dollars using the noon buying rate published by the Federal Reserve Bank of New York
for such date (or, if such rate is no longer published, such other rate as the
Committee shall approve).

 

8.                                       Tax Withholding.

 

In accordance with Section 10(d)
of the Plan, you shall automatically sell to the Company a number of whole
and/or fractional shares of Dexia Stock that would otherwise be distributed to
you upon expiration of the Forfeiture Period in order to satisfy the minimum
withholding requirement for all applicable Federal, state and local income,
excise and employment taxes; provided that you may elect to satisfy any such
withholding requirement by the delivery of cash.  Such election must be made in writing and
delivered to the Company’s Chief Financial Officer or General Counsel or such
other officer as the Committee shall from time to time designate no

 

3

 

later than thirty (30) days prior to the date of any
such withholding requirement.  Any shares
of Dexia Stock sold to the Company pursuant to this Section 8 shall be
valued at their Fair Market Value on the date of the applicable withholding
requirement (or if such day is not a trading day for Dexia Stock, then the
first succeeding trading day for Dexia Stock), converted into U. S. dollars
using the noon
buying rate published by the Federal Reserve Bank of New York for such date (or,
if such rate is no longer published, such other rate as the Committee shall
approve).

 

9.                                       Dexia Stock Ceases to be Outstanding.

 

If,
as a result of any merger, reorganization or other business combination or any
other event or occurrence (a “Realization Event”), Dexia Stock is
converted or exchanged for cash, shares or other consideration (the “Realization
Consideration”), each share of Dexia Restricted Stock awarded hereunder
outstanding immediately prior to such Realization Event shall be converted into
the Realization Consideration at the same time and on the same terms as
applicable to Dexia Stock in general and shall be subject to the terms and
conditions of Section 6(c) of the Plan applicable to the Dexia Restricted
Stock for which the Realization Consideration was paid, including the timing of
payment, transfer and forfeiture provisions applicable with respect to the
remaining term of the applicable Restricted Period and the Forfeiture Period,
unless, in any such case, waived by the Committee in its sole discretion;
provided that (i) to the extent that the Realization Consideration consists of
shares, the provisions hereof applicable to Dexia Restricted Stock shall apply
to such shares as if such shares were Dexia Restricted Stock; and (ii) to the
extent that the Realization Consideration consists of cash (the “Restricted
Cash Amount”), the Restricted Cash Amount shall be (A) converted into U.S.
dollars using the noon buying rate published by the Federal Reserve Bank of New
York for the date of receipt of such cash (or if such rate is no longer published,
such other rate as the Committee shall approve) and (B) credited with a rate of
return equal to the Company’s ROE from the date of conversion into cash until
the conclusion of the Restricted Period. 
The Company’s obligation to pay the Restricted Cash Amount, along with
any deemed earnings or losses thereon, shall be an unfunded contractual
obligation that will be satisfied out of the Company’s general assets.  Participants shall have only the rights of a
general unsecured creditor of the Company with respect to such amounts.

 

For purpose of the foregoing:

 

“ROE” means, in respect of any period, the average of:

 

(i)                                     the discount rate
(expressed as an annual percentage rate) such that (a) the Adjusted Book Value
per share of the Company’s common stock (“FSA Stock”) on the last day of
the last calendar quarter in such period, adjusted to exclude the after-tax
change in accumulated other comprehensive income (unrealized gains and losses
in the Company’s investment portfolio and any other component of other
comprehensive income) during such period, and the dividends paid per share
during such period, each discounted at such discount rate to the first day of the
first calendar quarter in such period, equals (b) the Adjusted Book Value per
share of FSA Stock on the first day of the first calendar quarter in such period;
and

 

(ii)                                  the discount rate
(expressed as an annual percentage rate) such that (a) the Book Value per share
of FSA Stock on the last day of the last calendar quarter in such period,
adjusted to exclude the after-tax change in accumulated other comprehensive
income (unrealized gains and losses in the Company’s investment portfolio and
any other component of other comprehensive income) during such period, and the
dividends paid per share during such period, each discounted at such discount
rate to the first day of the first calendar quarter in such

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10.                                 Subject to Terms of the Plan.

 

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

 

11.                                 Miscellaneous.

 

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

 

5

 

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

 

(b)                                 All certificates for shares of Dexia Stock
delivered pursuant to this Agreement shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which Dexia
Stock is then listed, and any applicable Federal, state or foreign securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

 

(c)                                  This Agreement shall not confer upon you
any right to continued employment with the Company, nor shall it interfere in
any way with the right of the Company to terminate your  employment at any
time.  Notwithstanding any other
provisions of this Agreement or the Plan, if the Committee determines that any
individual entitled to take action or receive payments hereunder is an infant
or incompetent by reason of physical or mental disability, it may permit such
action to be made by or cause such payments to be made to a different
individual, without any further responsibility with respect thereto under this
Agreement or the Plan.

 

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

 

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

 

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

 

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

 

6

 

	
   

  	
  Sincerely
  yours,

  
	
   

  	
   

  
	
   

  	
  FINANCIAL
  SECURITY ASSURANCE HOLDINGS LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Sean
  W. McCarthy, President

  	
   

  
	
   

  	
   

  
	
  Agreed
  to and accepted as of the

  	
   

  
	
  date
  first set forth above (Please sign on the line

  	
   

  
	
  below
  and print name in the space provided):

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (signature)

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  (print name)

  	
   

  	
   

  

 

7

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