Document:

Exhibit
10.6

 

FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD.

AGREEMENT
EVIDENCING AN AWARD OF PERFORMANCE SHARES

 

                                                                                                                                                 February 14,
2008

 

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”) an award of (Number of Shares) (             ) Performance Shares has been
granted 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, the Performance Shares will be valued based upon
the Company’s return on equity during two performance cycles, each having a
term of three years.  The Performance
Shares will be allocated (i) 33-1/3% to the three-year performance cycle
beginning January 1, 2008 and ending December 31, 2010 (the “2008/2009/2010
Cycle”) and (ii) 66-2/3% to the three-year performance cycle beginning
January 1, 2009 and ending December 31, 2011 (the “2009/2010/2011
Cycle”).  Subject to Section 7
of this Agreement, payouts for Performance Shares allocated to each Performance
Cycle will be made in cash and/or shares of common stock, $.01 par value per
share (the “FSA Stock”) of the Company following the end of such
Performance Cycle, or deferred as provided in this Agreement.  Until such time as FSA
Stock becomes publicly traded, the Company does not expect to allow payouts
with respect to Performance Shares in FSA Stock.

 

1.             Purpose of Award.

 

The purpose of the Plan pursuant to which this award of Performance
Shares has been granted 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 S. A. by obtaining
a proprietary interest in the Company or Dexia S. A. and/or the cash equivalent
thereof.

 

2.             Acceptance of
the Performance Shares Award Agreement.

 

Your execution of this Performance Shares 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.             Performance
Cycles.

 

The Performance Shares subject to this Performance Shares award shall
be allocated to the following two Performance Cycles:

 

 

	
  Performance Cycle

  	
   

  	
  % of Performance Shares Allocated

  
	
   

  	
   

  	
   

  
	
  The 2008/2009/2010 Cycle

  (January 1, 2008 through December 31, 2010)

  	
   

  	
  33-1/3%

  
	
   

  	
   

  	
   

  
	
  The 2009/2010/2011 Cycle

  (January 1, 2009 through December 31, 2011)

  	
   

  	
  66-2/3%

  

 

4.             Performance Objectives.

 

Subject to the
terms of this Agreement, you shall be entitled to receive FSA Stock and/or cash
as provided in Section 6 of this Agreement following the end of a
Performance Cycle based upon  the Company’s  Return on Equity or ROE (as defined below) during such
Performance Cycle, which is the Performance Objective designated by the
Committee with respect to your Performance Shares.

 

For purpose of the
foregoing:

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

related to future
installment premiums.

 

“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 IFRS financial statements for the period ended on such date.  For purposes hereof, Book Value shall be
determined excluding the after-tax effect of (i) accumulated other
comprehensive income (the total mark-to-market on investment assets not subject
to hedge accounting and the credit risk component of the mark-to-market on
investment assets subject to hedge accounting), (ii) the credit risk
component of the mark-to-market on liabilities accounted for under the fair
value option and (iii) 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.

 

The effect that
the ROE for a particular Performance Cycle shall have on the value of the
Performance Shares allocated to such Performance Cycle is set forth in Section 6
below.  The Committee shall determine the
extent to which the Performance Objective defined herein has been achieved by
the Company in the applicable Performance Cycle.  Such determination by the Committee shall, in
the absence of bad faith or manifest error, be final and binding on you.

 

If, any time after
the date of the award made hereunder, 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, then 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,
as defined below, (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, with respect to your outstanding
Performance Shares, you 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. 
For purposes hereof, “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.

 

3

 

To reflect a
change in, or a change in the application by the Company of, tax laws or
regulations or accounting principles (including, without limitation, by reason
of any error in applying such laws, regulations or principles), the Performance
Objectives relating to Performance Cycles not then completed under this award
shall be adjusted by the Committee 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 your compensation if it is, in
the reasonable belief of the Committee, subject thereto.  Further, if the Company’s deductibility with
respect to your 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, make adjustments to the Performance
Objective hereunder in respect of Performance Cycles not then completed so as
to reflect a change in, or a change in the application by the Company of, tax
laws or regulations or accounting principles (including, without limitation, by
reason of any error in applying such laws, regulations or principles) to preserve
the value of the Performance Shares consistent with the intent and the purpose
of the Plan and, in addition, may make adjustments to the Performance Objective
hereunder and other terms hereof that are not, in the reasonable belief of the
Committee, materially adverse to you or the value of the Performance Shares as
shall allow the Performance Shares awarded hereunder to qualify as “equity
instruments” provided in exchange for employee services within the meaning of
Statement of Financial Accounting Standards No. 123 as in effect from time
to time.

 

Any adjustment of
Performance Objectives or the method of calculating Performance Objectives
after the grant of a Performance share will be made in accordance with the
requirements of Section 409A of the Internal Revenue Code to the extent
applicable.

 

5.             Vesting.

 

On the date hereof, you
are vested in none of the Performance Shares subject to this award.  You will become vested in your Performance
Shares immediately upon completion of the Performance Cycle to which those
Performance Shares attach, subject to earlier vesting or forfeiture as provided
in this Agreement or the Plan.

 

If your employment with
the Company should terminate prior to completion of a Performance Cycle for
Cause or other than by reason of death, Disability or Retirement or termination
by the Company without Cause, you will forfeit, and will not be entitled to any
distribution or payment under Section 6 of this Agreement with respect to,
Performance Shares which have not vested on or prior to such termination of
employment.

 

The Plan provides for
vesting of all your Performance Shares upon termination of employment upon your
death or Disability.  The Plan provides
for partial vesting of your Performance Shares upon termination of your employment
by the Company without Cause or Retirement prior to the completion of the
related Performance Cycle, with the percentage, if any, of your Performance
Shares vesting being equal to the percentage of the term of the Performance
Cycle during which you were employed by the Company (or such greater percentage
as the Committee, in its sole discretion, shall approve), and with the unvested
balance of your Performance Shares being forfeited.

 

                If, after a Qualified Change in Control (as defined
in the Plan), your employment is terminated without Cause or you voluntarily
terminate your employment for Good Reason prior to completion of any
Performance Cycle for Performance Shares outstanding at the time of the Change
in Control, then the Plan provides for accelerated vesting and payout of such
Performance Shares as described in Section 9 of this Agreement.

 

4

 

6.             Distributions and Payments on
Completion of Performance Cycle.

 

In furtherance of
an election made under Section 7 of this Agreement, and subject to the
Company’s rights thereunder, distributions of shares of FSA Stock and/or
payments of cash with respect to Performance Shares allocated to a particular
Performance Cycle covered by this award shall be made to you 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 Objective, unless you shall have made a deferral pursuant to Section 8
of this Agreement.  Provided you shall
have been employed by the Company through the date on which a particular
Performance Cycle shall have been completed, or your employment with the
Company shall have been terminated prior thereto by reason of death or Disability,
or the Performance Shares awarded hereunder are otherwise vested pursuant to
the terms of this Agreement or the Plan, you shall be entitled to receive with
respect to this Agreement:

 

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

 

a
x b = c; or

 

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

 

a
x b x d = e; or

 

5

 

(3)           a combination of FSA Stock and cash
in the amounts determined in accordance with the formulae set forth in clauses (1) and
(2) 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 allocated to the applicable Performance Cycle under this
  Agreement;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
                     

  	
   

  	
  b
  =

  	
   

  	
  the percentage
  (which may be more than 100%), which represents the extent to which the
  Performance Objective defined herein has been achieved by the Company in the
  applicable Performance Cycle; specifically, subject to Section 4 of this
  Agreement, 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 you at the end of the applicable
  Performance Cycle under this Agreement;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d
  =

  	
   

  	
  the Fair Market
  Value of a share of FSA Stock as of the day the Committee determines the
  extent to which the Performance Objective has been achieved by the Company in
  the applicable Performance Cycle; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e
  =

  	
   

  	
  the amount of
  the cash to be paid to you at the end of the applicable Performance Cycle
  under this Agreement.

  

 

For
purposes hereof, so long as the FSA Stock is not listed on a national
securities exchange, “Fair Market Value” of a share of FSA Stock shall
equal the greater of (i) 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 (ii) 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. 
For purposes of the foregoing, “Operating Earnings” shall mean, as of a particular date, net income of
the Company for the first four
completed calendar quarters ended on or prior to such date less the after-tax effect of (i) the
credit risk component of the mark-to-market on liabilities accounted for under
the fair value option and (ii) gains or losses attributable to
mark-to-market of Investment Grade credit derivatives, as determined by the
Company, consistent, as applicable, with its determination of net income from
time to time under IFRS.

 

6

 

In the event you
shall not have been employed by the Company through the date on which a
particular Performance Cycle covered by this award has been completed, you
shall be entitled to receive the foregoing distribution and/or payment with
respect to the number of Performance Shares, if any, which have vested (by
reason of Termination without Cause or Retirement during such Performance Cycle
or otherwise) but with respect to which a distribution or payment had not
previously been made with respect thereto.

 

7.             Election to Receive FSA Stock or
Cash.

 

Subject to the
provisions of this Section 7, payouts for Performance Shares allocated to
each Performance Cycle will be made in cash and/or shares of FSA Stock of the
Company following the end of such Performance Cycle, or deferred as provided in
this Agreement.  Until such
time as FSA Stock becomes publicly traded, the Company does not expect to allow
payouts with respect to Performance Shares in FSA Stock.  In the event that the Company does allow
payouts with respect to Performance Shares in FSA Stock then, subject to Section 9
hereof, prior to the date on which a Performance Cycle shall be completed with
respect to this award of Performance Shares, you will have an opportunity to
make an election to receive your 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 made by
you, the Committee may, in its sole and absolute discretion, satisfy the
Company’s obligations to you either by delivery of FSA Stock, subject to the
availability of such FSA Stock under the Plan, or by paying cash.  If you 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 you
elect to receive shares of FSA Stock in satisfaction of all or part of the
Company’s obligations under Section 6 of this Agreement with respect to
the completion of a particular Performance Cycle, and the aggregate number of
shares of FSA Stock subject to elections made by all Participants exceeds the
maximum number of shares of FSA Stock reserved and available for distribution
under the Plan (the “Reserved Stock”), the Committee shall have the
absolute and sole discretion to satisfy such obligations by reducing the number
of shares of FSA Stock delivered pursuant to such elections to the number of
shares of FSA Stock then equal to the Reserved Stock.  In such event, the Committee shall reduce the
aggregate number of shares of FSA Stock deliverable to you pursuant to your
election pro rata among all Participants making similar elections, based upon
the number of shares of FSA Stock otherwise deliverable pursuant to such
elections.  The Company shall satisfy the
obligations to you, which remain unsatisfied following a distribution made
pursuant to the foregoing reduction, by paying cash in accordance with Section 6
of this Agreement.

 

8.             Election to Defer.

 

The Committee has
established procedures for deferral of award payments under the Plan and under
the Financial Security Assurance Holdings Ltd. 2004 Deferred Compensation Plan,
as amended from time to time (the “Deferred Compensation Plan”), for eligible
employees.  You may elect, if so
eligible, to defer receipt of any FSA Stock and/or cash to which you may be
entitled pursuant to this Agreement, provided such election to defer shall have
been made in writing to the Committee in accordance with procedures established
by the Company pursuant to the Deferred Compensation Plan.  The effect of a timely election to defer
under this Section 8 will be that the Committee shall direct that the
deferred amount be an obligation of the Company to you under the Plan or the
Deferred Compensation Plan, as the case may be, and your rights with respect
thereto will thereafter be governed by the Plan or the Deferred Compensation
Plan, as the case may be.

 

7

 

9.             Change in Control.

 

In the event of a
Change in Control, the Committee shall make such adjustments, if any, to the
Performance Objectives and/or the method of calculating the Performance
Objectives as it shall deem necessary or appropriate to preserve the value of
the Performance Shares consistent with the intent and the purpose of the Plan.

 

If your employment is terminated by the Company
without Cause or you voluntarily terminate your employment for Good Reason (as
defined in the Plan) after a Qualified Change in Control, in either case prior
to the completion of any Performance Cycle in respect of the Performance Shares
subject to this award, then all Performance Shares subject to this award
outstanding at the time of the Change in Control and having Performance Cycles
which shall not have been completed prior to the date of termination of
employment (the “Operative Date”) shall become fully vested and shall be
paid on the first regular payroll payment date that is at least six months
after the Operative Date (the “Six-Month Period”).  The Committee shall value all Performance
Shares in respect of Performance Cycles which shall not have been completed on
or before the Operative Date based upon the formulae set forth in Section 6
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, 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.  In the
case of any Performance Cycle completed during the Six-Month Period, payment of
any amounts due shall be made in accordance with Section 6 of this
Agreement, provided that any incremental payment due pursuant to the foregoing
provisions of this Section 9 by reason of application of the Minimum
Percentage shall be payable at the end of the Six-Month Period.

 

10.           No Rights as a Stockholder.

 

Neither you, nor
any person entitled to exercise your rights hereunder in the event of death,
shall have any rights of a stockholder with respect to any shares of FSA Stock
subject to your award of Performance Shares, except to the extent that a
certificate for such shares shall have been issued as provided for herein.

 

11.           Non-Transferability of Performance
Shares.

 

This award of
Performance Shares shall not be transferable except by will or the laws of
descent and distribution.

 

12.           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.

 

13.           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 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 

 

8

 

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 FSA
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 the FSA Stock
is then listed, and any applicable Federal or state 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 section
shall not be effective if and to the extent that the shares of FSA Stock
delivered under the Plan and hereunder are covered by an effective 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.

 

(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)           The Company shall be entitled to
withhold from any distribution of FSA Stock or cash made under this Agreement
the amount of taxes the Company deems necessary to satisfy any applicable
federal, state and local income and employment tax withholding obligations
arising from the payment of the award or to make other appropriate arrangements
with you to satisfy such obligations. 
The Committee, in its discretion (and giving consideration to, without
limitation, Section 16 of the Securities Act of 1933, as amended), may
permit you to satisfy the obligation, in whole or in part, by irrevocably
electing to have the Company withhold FSA Stock that you already own, having a
value equal to the amount required to be withheld.  The value of shares to be withheld, or
delivered to the Company, shall be based on the Fair Market Value of the
shares, as determined in accordance with procedures to be established by the
Committee, on the date the amount of tax to be withheld is to be determined.

 

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

 

9

 

(f)            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 13.

 

(g)           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.

 

(h)           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.  By
acceptance of this Agreement, you hereby agree that the Plan, as amended
through February 14, 2008, shall apply to all outstanding awards of
Performance Shares held by you, and that any award agreement(s) in respect
of such outstanding awards shall be deemed amended to be consistent with the
Plan as so amended.

 

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

 

	
   

  	
   

  	
  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)

  	
   

  
			

 

10Exhibit 10.7

 

AMENDED EMPLOYMENT AGREEMENT

 

                                AMENDED AGREEMENT, effective as of February 14, 2008,
by and between Financial Security Assurance Holdings Ltd., a New York
corporation (“Company”), and Robert P. Cochran (“Employee”).

 

                                WHEREAS, Company and Employee previously
entered into an employment agreement, dated July 5, 2004, and amended such
employment agreement effective as of January 1, 2005; and

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 

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

 

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

 

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

 

                                4.             Current Cash
Compensation.

 

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

 

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

 

 

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

 

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

 

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

 

                                6.                                       Termination.

 

                                (a)           Termination by Company Without
Cause;

                                                Termination
by Employee for Good Reason.

 

                                (i)  During the Original Term.  If Company should terminate Employee’s
employment without Cause (as defined below) or if Employee should terminate his
employment for Good Reason (as defined below), Company shall pay to Employee
the pro-rata annual base salary through the date of termination and a pro-rata
annual bonus through the date of termination, such amounts to be paid within 90
days of the Employee’s termination of employment, and an amount (the “Severance
Payment”) equal to two times the sum of:

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

                                (iii) 
After the Term (in case this Agreement is
not renewed for any reason). 
Employee will be entitled only to be paid the pro-rata annual base
salary through the date of termination and a pro-rata annual bonus through the
date of termination, such amounts to be paid within 90 days of the Employee’s
termination of employment, and a severance payment equal to the then current
severance policy in effect for senior management, which shall be payable in
substantially equal monthly installments over the Restricted Period, and all
outstanding Performance Shares shall vest pro-rata in proportion to the
percentage of the performance cycle for such Performance Shares during which
Employee was employed by Company. The value of such vested Performance Shares
will be determined as of the termination date in accordance with the terms of
the Performance Share Plan relating to pro-rata vesting, increased with
interest and paid as provided in Sections 6.(a)(i) and (ii).

 

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

 

Definitions :

 

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

 

                                “Good
Reason” shall mean, without Cause:  (i) a
diminution of any of Employee’s significant duties or responsibilities, (ii) breach
by the Company of its obligations hereunder, (iii) Company’s requiring
Employee to be based at an office that is greater than twenty-five miles from the
location of Employee’s office as of the Effective Date, or (iv) a material
adverse change in Employee’s total compensation (other than as provided by the

 

 

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performance-related terms of this
Agreement), as in effect at the Effective Date, in all cases such that the
Employee’s termination of employment is involuntary under Code Section 409A.  Notwithstanding the foregoing, Employee shall
not be deemed to have terminated his employment for Good Reason unless he gives
60 days’ prior written notice to Company stating in reasonable detail the basis
upon which “Good Reason” is asserted, such notice is given within 120 days of
the later of the occurrence of the event or the date Employee knows or should
have known of the event which would otherwise constitute Good Reason and, if
such failure or breach is reasonably susceptible to cure, Company does not
effect a cure within such 60-day period.

 

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

 

                                (b)           Termination by Company for Cause;

                                                Termination
by Employee without Good Reason.

 

                                (i)  During the Term.  If Company should terminate Employee’s
employment for Cause or Employee should terminate his employment without Good
Reason, Employee will be entitled only to be paid the pro-rata annual base
salary through the date of termination, such amount to be paid within 90 days
of the Employee’s termination of employment,.

 

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

 

(ii)  After
the Term (in case this Agreement is not renewed for any reason).  Employee will be entitled to be paid the
pro-rata annual base salary through the date of termination and a pro-rata
annual bonus through the date of termination, such amounts to be paid within 90
days of the Employee’s termination of employment, and all outstanding
Performance Shares shall vest pro-rata in proportion to the percentage of the
performance cycle for such Performance Shares during which Employee was
employed by Company. The value of such vested Performance Shares will be
determined as of the termination date in accordance with the terms of the
Performance Share Plan relating to pro-rata vesting, increased with interest
and paid as provided in Sections 6(a)(i) and (ii).

 

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

 

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

 

 

6

 

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

 

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

 

7.                                       Restrictive Covenants.

 

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

 

 

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

 

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

 

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

 

                                (e)           Survivability.   The
provisions of this Section 7 shall survive the termination or expiration
of this Agreement in accordance with the terms hereof.  It is the intention of the parties hereto
that the restrictions contained in this Section 7 be enforceable to the
fullest extent permitted by law. 
Therefore, to the extent any court of competent jurisdiction shall
determine that any portion of the foregoing restrictions is excessive, such
provision shall 

 

 

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not
be entirely void, but rather shall be limited or revised only to the extent
necessary to make it enforceable.

 

8.                                       Retirement.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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of
any or all further rights and remedies which may be available to Company
hereunder or at law or in equity.

 

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

 

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

 

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

 

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

 

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

 

                                (a)           Employee, to:

                                                Robert
P. Cochran

                                                1000
Park Avenue, Apt. 12A

                                                New
York, New York  10028

 

 

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                                (b)           Company, to:

                                                Financial
Security Assurance Holdings Ltd.

                                                31
West 52nd Street

                                                New
York, NY  10019

                                                Attention:
General Counsel

 

                                                With
a copy to:

                                                Dexia
Credit Local

                                                1,
passerelle des Reflets

                                                Tour
Dexia—La Defense 2

                                                F-92919
La Defense Cedex

                                                France

                                                Attention:
Secretary General.

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

	
   

  	
   

  	
   

  	
   

  	
  Financial Security Assurance Holdings Ltd.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  General Counsel and Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Robert P. Cochran

  	
   

  

 

 

 

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ANNEX A—Additional Payments

 

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

 

                (b) 
Subject to the provisions of paragraph (c), all determinations required to be
made under this Annex A, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Company’s independent auditors
or such other certified public accounting firm reasonably acceptable to
Employee as may be designated by Company (the “Accounting Firm”) which shall
provide detailed supporting calculations both to Company and Employee within 15
business days of the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by Company.  All fees and expenses of the Accounting Firm
shall be borne solely by Company.  Any
Gross-Up Payment, as determined pursuant to this Annex A, shall be paid by Company
to Employee not later than the due date for the payment of any Excise Tax. Any
determination by the Accounting Firm shall be binding upon Company and
Employee.  As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder.  In the event that Company exhausts its
remedies pursuant to paragraph (c) and Employee thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Company (but
in no event later than the end of the calendar year following the calendar year
in which the Employee pays the Excise Tax to which it relates) to or for the
benefit of Employee.  In the event the amount of the Gross-up
Payment exceeds the amount necessary to reimburse Employee for the Excise Tax
(the “Overpayment”), the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment shall be promptly paid
by Employee (to the extent Employee has received a refund if the applicable
Excise Tax has been paid to the Internal Revenue Service) to or for the benefit
of the Company.  Employee shall
cooperate, to the extent expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.

 

 

 

13

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