Document:

Exhibit 10.4

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

SEVERANCE POLICY FOR SENIOR MANAGEMENT

 

(As Amended and Restated Effective February 14, 2008)

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
   

  	
  ESTABLISHMENT
  AND PURPOSE OF THE PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  ELIGIBLE
  EMPLOYEES

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  SEVERANCE
  PAY AND SEVERANCE BENEFITS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  OFFSET

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  PAYMENT
  OF SEVERANCE PAY

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  REINSTATEMENT

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  WAIVER
  AND RELEASE AGREEMENT

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  PLAN
  ADMINISTRATION

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  CLAIMS
  PROCEDURES

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  AMENDMENT/TERMINATION/VESTING

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  PAY AND
  OTHER BENEFITS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.

  	
   

  	
  NO
  ASSIGNMENT

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.

  	
   

  	
  RECOVERY
  OF PAYMENTS MADE BY MISTAKE

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.

  	
   

  	
  REPRESENTATIONS
  CONTRARY TO THE PLAN

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
   

  	
  COMPLIANCE
  WITH CODE SECTION 409A

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 16.

  	
   

  	
  NO
  EMPLOYMENT RIGHTS

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 17.

  	
   

  	
  COMPANY
  INFORMATION

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 18.

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 19.

  	
   

  	
  PLAN
  FUNDING

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 20.

  	
   

  	
  APPLICABLE
  LAW

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 21

  	
   

  	
  SEVERABILITY

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 22.

  	
   

  	
  PLAN
  YEAR

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 23.

  	
   

  	
  RETURN
  OF COMPANY PROPERTY

  	
   

  	
  12

  

 

 

 

 

FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD.

SEVERANCE POLICY FOR SENIOR MANAGEMENT

 

SECTION 1                          ESTABLISHMENT
AND PURPOSE OF THE PLAN

 

FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD. (hereinafter “FSA”) has
adopted the FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. SEVERANCE
POLICY  FOR SENIOR MANAGEMENT
(hereinafter the “Plan”), for the
benefit of the Senior Management (as hereinafter defined) of FSA and its
current direct and indirect wholly-owned subsidiaries that have been designated
by it as participating employers under the Plan (collectively referred to
herein as the “Company”), as described
herein.  The Plan was adopted effective
as of February 8, 1995, and was amended and restated effective March 13,
2000, May 17, 2001, November 13, 2003, September 9, 2004 and January 1,
2005.  The Plan is intended to be, in
part, a separation pay plan that does not provide for the deferral of
compensation under Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”) and, in part, a plan that
complies with the requirements of Code Section 409A to avoid taxation
under Code Section 409A(a)(1).  The
Plan is hereby amended and restated, as set forth in this Plan document,
effective February 14, 2008 to comply with the final regulations under
Code Section 409A.  The Plan is an
unfunded welfare benefit plan for purposes of the Employee Retirement Income
Security Act of 1974, as amended (hereinafter “ERISA”)
and a severance pay plan within the meaning of the United States Department of
Labor regulations section 2510.3-2(b). 
The purpose of the Plan is to provide an eligible employee whose
employment terminates as described in Section 2 with Severance Pay and
Severance Benefits for a specified period of time.

 

SECTION 2                          ELIGIBLE EMPLOYEES

 

Members of Senior
Management who have been employed with the Company for at least one (1) year
and whose employment is (i) terminated by the Company for any reason other
than for cause or (ii) constructively terminated, are eligible to
participate in the Plan and shall be considered “eligible
employees” under the Plan.  “Senior Management” means, and shall be limited to, the
permanent members of the Management Committee of the Company on the effective
date of the Plan and any person who shall hereafter be designated as eligible
to participate in the Plan by written notice thereof, signed by the President
of the Company and expressly stating that such person is a member of “Senior
Management” for purposes of the Plan. 
The permanent members of the Management Committee of the Company on the
effective date of the Plan, as amended and restated, are (a) the Chief
Executive Officer of the Company, (b) the Chief Operating Officer of the
Company, (c) the General Counsel of the Company, (d) the Chief
Financial Officer of the Company, (e) the Managing Director in charge of
the Asset Finance Group of Financial Security Assurance Inc., and (f) the
Chief Risk Management Officer of Financial Security Assurance Inc.

 

An eligible employee will
be considered to have a “termination” of
employment or have “terminated”
employment with the Company if the eligible employee has a separation from
service within the meaning of Code Section 409A.  An employee generally has a separation from
service within the meaning of Code Section 409A if the facts and
circumstances indicate that the Company and the eligible employee reasonably
anticipate that no further services will be performed by the eligible employee
for the Company or any Affiliate after the separation date or that the level of
bona fide services the eligible employee will perform for the Company and all 

 

 

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

 

Termination “for cause” means termination for unethical practices, illegal
conduct or gross insubordination, but specifically excludes termination as a
result of substandard performance.  “Constructive termination” of employment occurs if an
eligible employee terminates employment with the Company and all Affiliates
within two years of the date on which, without the eligible employee’s consent,
the eligible employee’s compensation or responsibilities are materially
reduced, provided, however, that if the eligible employee gives notice to the
Plan Administrator of such reduction in compensation or responsibilities with
90 days of the date on which such reduction occurs and the condition is
remedied within 30 days of receipt such notice, the eligible employee’s
termination of employment shall not be a constructive termination under the
Plan.  The determination as to whether an
employee has been (i) terminated for cause or (ii) constructively
terminated, will be made by the Plan Administrator, in its sole discretion,
consistent with the requirements of Code Section 409A to avoid taxation
under Code Section 409A(a)(1).  An
otherwise eligible employee shall not be
eligible for Severance Pay and Severance Benefits under the Plan if:

 

                                                (a)                                  the eligible employee’s employment with
the Company terminates by reason of death or disability;

 

                                                (b)                                 the eligible employee’s employment with
the Company terminates through retirement, voluntary resignation, job
abandonment or failure to report for work;

 

                                                (c)                                  the eligible employee’s employment with
the Company is involuntarily terminated after the eligible employee refuses a
transfer to a new position at the same geographical location of the Company,
and such transfer does not constitute a constructive termination;

 

                                                (d)                                 the eligible employee is employed in a
Company operation or facility substantially all of the assets of which are sold
and the eligible employee is offered a comparable position, as determined by
the Plan Administrator, with the purchaser;

 

 

2

 

                                                (e)                                  the eligible employee fails or refuses to
continue in the employment of the Company until the end of the notice period
provided for in the notice of termination described in Section 3 below
(absent constructive termination during such notice period); or

 

                                                (f)                                    the Plan is terminated.

 

SECTION 3                          SEVERANCE PAY AND SEVERANCE BENEFITS

 

In exchange for providing
the Plan Administrator a valid Waiver and Release Agreement in a form
acceptable to the Company, an eligible employee shall be eligible to receive
Severance Pay and Severance Benefits in accordance with the paragraphs set
forth below.  The consideration for the
voluntary Waiver and Release Agreement shall be the Severance Pay and the
Severance Benefits that the eligible employee would not otherwise be eligible
to receive.

 

(a)                                  Severance Pay.  An eligible
employee shall be eligible to receive Severance Pay in accordance with the
following:

 

                                                                (1)           
                      Chief Executive Officer
and Chief Operating Officer:  Each eligible employee who served as the
Chief Executive Officer or the Chief Operating Officer of the Company shall be
eligible to receive eighteen (18) months of pay.

 

                                                                (2)                   
                Permanent Members of Management Committee:  Each eligible
employee who served as a permanent member of the Management Committee of the
Company (and who did not serve as the Chief Executive

                                                                                                                                                Officer or the Chief Operating Officer of
the Company) shall be eligible to receive twelve (12) months of pay.

 

                For purposes of determining the amount of Severance
Pay to which an eligible employee is entitled, “months of
pay” (a) shall be determined on the basis of (a) the
eligible employee’s monthly salary on his or her separation date and (b) shall
include the eligible employee’s most recent bonus (or three year average, if
higher), with one-twelfth (1/12th) of such bonus amount being allocated to each
month of pay.  An eligible employee’s
base salary and bonus shall include amounts deferred under the Financial
Security Assurance Holdings Ltd. Deferred Compensation Plan and the Financial
Security Assurance Inc. Cash or Deferred Plan, and amounts allocated to the
Financial Security Assurance Flex Plan. 
For this purpose, “bonus” shall
also include any amounts converted into an equity bonus under the Financial
Security Assurance Holdings Ltd. 1993 Equity Participation Plan.  For all purposes of the Plan, the term “separation date” shall mean the date on which the eligible
employee has a termination of employment.  
In the event an eligible employee receives formal written notice of a
future termination of employment and employment is not terminated until the
date provided in such notice, then the Plan Administrator may, in its
discretion, reduce the period of Severance Pay by the length of the notice
period, in an amount of up to one-third (1/3) of the severance period.  For purposes of the Plan, “severance 

 

 

3

 

period” shall mean the period of time over
which an eligible employee is to receive Severance Pay pursuant to this Section 3.

 

                                                (b)           Severance Benefits.

 

(1)                                  Continuation of Hospital,
Medical, Dental, Prescription Drug and Vision Coverages. 
An eligible employee may elect continuation of his or her Company
sponsored hospital, medical, dental, prescription drug and vision benefits (“health benefits”) under COBRA, as defined in Code Section 4980B(f)(2) (“COBRA coverage”) for a period of up to eighteen (18) months
following the separation date.  The
eligible employee shall pay the same premium paid by active employees for their
Company sponsored health benefits, and the Company shall pay the remaining
portion of the premium during the severance period.  The COBRA coverage provided at this reduced
cost shall continue until the end of the month for which the eligible employee
is permitted to pay the same premium paid by similarly situated active
employees for their Company sponsored health benefits.  After the end of the severance period, the
eligible employee may elect to continue his or her health benefits under COBRA
for up to the remainder of the eighteen (18) months; however, the eligible
employee must pay the full premium for such coverage plus a two percent (2%)
administrative charge, or 102% of the total premium cost.  If the eligible employee dies prior to the
end of the period of time that he or she would have received his or her
Severance Benefits, and if the eligible employee’s spouse and/or dependents are
entitled to continued COBRA coverage, the Company shall pay the entire cost of
such coverage for the remainder of the severance period.  Thereafter, the spouse and/or dependents may
elect to continue COBRA coverage; however they must pay the full premium cost
for such coverage plus a two percent (2%) administrative charge.

 

(2)                                  Life Insurance Benefits. 
Coverage under the Financial Security Assurance Inc. Life and AD &
D Insurance Plan shall continue on the same basis as similarly situated active
employees during the severance period to the extent, if any, that the insurance
carrier will so allow.

 

(3)                                  Disability Insurance
Coverage.  Coverage under Company sponsored disability
insurance shall continue on the same basis as for similarly situated active
employees during the severance period to the extent, if any, that the insurance
carrier will so allow.

 

                                                (c)           Gross-Up Payments by the Company.

 

(1)                                  Gross-Up Payments. 
Anything
in the Plan to the contrary notwithstanding (including the provisions of  Section 15), in the event that it shall
be determined that any payment or distribution by the Company to or for the
benefit of an eligible employee (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise)

 

 

4

 

(a “Payment”)
would be subject to the excise tax imposed by Sections 280G and 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”),
or that any interest or penalties are incurred by an eligible employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the eligible employee shall be entitled
to receive an additional payment (the “Gross-Up  Payment”) in an amount such that after payment by the
eligible employee of all taxes (including any interest or penalties imposed
with respect to such taxes and Excise Tax) imposed upon the Gross-Up Payment,
the eligible employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.

 

(2)                                  Determination of Gross-Up
Payments.  All determinations required to be made under
this Section 3(c), including whether and when the Gross-Up Payment is
required and the amount of such Gross-Up Payment including any determination of
the parachute payments under Code Section 280G(b)(2), and the assumptions
to be utilized in arriving at such determinations shall be made by a nationally
recognized certified public accounting firm that is mutually selected by the
eligible employee and the Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and
the eligible employee within 15 business days of the receipt of notice from the
eligible employee that there has been a Payment, or such earlier time as is
requested by the Company.  All fees and
expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment shall be paid by the
Company to the eligible employee within five days of the receipt of the
Accounting Firm’s determination.  Any
determination by the Accounting Firm shall be binding upon the Company and the
eligible employee.  As a result of
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
the Gross-Up Payment made will have been an amount less than the Company should
have paid pursuant to this Section 3(c) (the “Underpayment”).  In the event that the eligible employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the eligible
employee.  Notwithstanding the foregoing,
no Gross-Up Payment or Underpayment shall be paid later than the end of the
calendar year following the calendar year in which the eligible employee pays
the Excise Tax to which it relates.

 

(d)                                 Certain Additional
Payments.
The Plan Administrator, acting in its sole discretion may, in writing, enhance
the amount of Severance Pay and/or Severance Benefits that an eligible employee
is eligible to receive over the amount of Severance Pay and Severance Benefits
described above and/or make available to the eligible employee other forms of
Severance Benefits.

 

 

5

 

 

SECTION 4                          OFFSET

 

Severance Pay and
Severance Benefits provided under the Plan shall be offset by any severance pay
or severance benefits provided to an eligible employee under an authorized
written employment agreement containing a severance provision, an authorized
written severance agreement, any other group reorganization/restructuring
benefit plan or program sponsored by the Company or any severance benefit
mandated by law.  By accepting Severance
Pay and Severance Benefits under the Plan, an eligible employee waives all
rights to receive benefits under the Financial Security Assurance Holdings Ltd.
Severance Policy.  In the event an
eligible employee who is receiving Severance Pay and Severance Benefits under
the Plan is employed in any respect (including as a consultant or self-employed)
during the severance period, due and unpaid Severance Pay shall be offset by an
amount equal to fifty percent (50%) of the compensation received by the
eligible employee from the new employment during the severance period, and, if
employed with another employer, Severance Benefits shall cease. The eligible
employee shall be obligated to refund any amounts paid by the Company as
Severance Pay that exceed the amount of Severance Pay payable to the eligible
employee hereunder giving effect to the offset referred to in the preceding
sentence.  An eligible employee shall, as
a condition of receiving Severance Pay and Severance Benefits under the Plan,
undertake to provide to the Company prompt notice of the commencement of any
new employment of such eligible employee during the severance period.

 

SECTION 5                          PAYMENT OF SEVERANCE PAY

 

Severance Pay that
becomes payable shall be paid in substantially equal installments in accordance
with the Company’s regular payroll payment schedule commencing with the first
regular payroll payment date occurring after expiration of the seven (7) day
period during which an eligible employee may revoke his or her Waiver and
Release Agreement (as explained more fully below under the Section entitled
“WAIVER AND RELEASE AGREEMENT”), but no
later than the first regular payroll payment date that is at least six months
after the eligible employee’s separation date; provided, however, any Severance
Pay payable pursuant to Section 3(a), the value of any Severance Benefits
provided pursuant to Sections 3(b)(2) and 3(b)(3), any Gross-Up Payments
or Underpayments made pursuant to Section 3(c) and any enhancements
made pursuant to Section 3(d) that are paid or provided during the
six-month period following the eligible employee’s separation date (the “restricted  period”)
shall not exceed two times the lesser of:

 

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

 

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

 

 

6

 

Any Severance Pay under Section 3(a),
Severance Benefits under Sections 3(b)(2) and 3(b)(3),  Gross-Up Payments or Underpayments under Section 3(c) or
enhancements under Section 3(d) otherwise payable or to be provided
during the restricted period that exceed the limitation above shall be
accumulated and paid or provided to the eligible employee on the first regular
payroll payment date that is at least six months after the eligible employee’s
separation date.  All legally required
taxes and any sums owing to the Company shall be deducted from Severance Pay
payments.

 

SECTION 6                          REINSTATEMENT

 

In the event that an
eligible employee who is receiving Severance Pay or Severance Benefits is
permanently reemployed by the Company, the payment of Severance Pay and the
availability of Severance Benefits under the Plan shall cease as of the date
his or her reemployment begins.

 

SECTION 7                          WAIVER AND RELEASE AGREEMENT

 

In order to receive
Severance Pay and Severance Benefits, an eligible employee must submit a signed
Waiver and Release Agreement form to the Plan Administrator no later than
twenty-one (21) days after his or her separation date.  If the termination of the eligible employee
is part of a group termination, the signed Waiver and Release Agreement must be
submitted to the Plan Administrator no later than forty-five (45) days after
his or her separation date.  Attached to
the Waiver and Release Agreement, if required by law, as Attachment I will be a
list of job titles and ages of employees of the Company who are eligible for
the Plan, and as Attachment II will be a list of the ages of employees of the
Company who are not eligible for the Plan. 
An eligible employee may revoke his or her signed Waiver and Release
Agreement within seven (7) days of his or her signing the Waiver and
Release Agreement.  A revocation by an
eligible employee must be made in writing and must be received by the Plan
Administrator within such seven (7) day period.  An eligible employee who timely revokes his
or her Waiver and Release Agreement shall not be eligible to receive any
Severance Pay and Severance Benefits under the Plan.  An eligible employee who timely submits a
signed Waiver and Release Agreement form and who does not exercise his or her
right of revocation shall be eligible to receive Severance Pay and Severance
Benefits.  Eligible employees shall be
encouraged to contact their personal attorney to review the Waiver and Release
Agreement form if they so desire.

 

SECTION 8                          PLAN ADMINISTRATION

 

FSA shall serve as the “Plan
Administrator” of the Plan and a “named fiduciary” within the meaning of such
terms as defined in ERISA.  The Plan
Administrator shall have the discretionary authority to determine eligibility
for Plan benefits and to construe the terms of the Plan, including the making
of factual determinations.  The Plan
Administrator shall have the discretionary authority to determine eligibility
for, and the amount of, Plan benefits and to construe the terms of the Plan,
including making any factual determinations. 
The decisions and constructions of the Plan Administrator shall be
final, binding, and conclusive as to all parties, unless found by a court of
competent jurisdiction to be arbitrary and capricious.  The Plan Administrator may delegate to other
persons responsibilities for performing certain of the duties of the Plan
Administrator under the terms of the Plan and may seek such expert advice as
the Plan Administrator deems reasonably necessary with respect to the
Plan.  The Plan Administrator shall be entitled
to rely upon the information and advice furnished by such delegatees and 

 

 

7

 

experts, unless actually
knowing such information and advice to be inaccurate or unlawful.  In no event shall an eligible employee or any
other person be entitled to challenge a decision of the Plan Administrator in
court or in any other administrative proceeding unless and until the claim and
appeals procedures established under the Plan have been complied with and
exhausted.

 

SECTION 9                          CLAIMS
PROCEDURES

 

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

 

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

 

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

 

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

 

The final decision of the
claim reviewer shall be in writing, give specific reasons for the decision,
provide specific references to the pertinent provisions of the Plan on which
the decision is based and include both a statement that the claimant is
entitled to receive, upon request and free of charge, reasonable access to and
copies of all documents, records and other information relevant to the claimant’s
claim for benefits and a statement of the claimant’s right to bring an action
in court.

 

 

8

 

SECTION 10                        AMENDMENT/TERMINATION/VESTING

 

The Company may terminate or amend the Plan at any time
and from time to time, for any reason or no reason; provided, however,
that any such termination or amendment of the Plan that is adverse to the
interest of any eligible employee under the Plan shall be effective only (i) as
to any eligible employee first becoming an employee after the date of such
amendment or termination or (ii) as to any other employee, on or after December 31,
2004.  Any amendment or termination of
the Plan shall be adopted by the Board of Directors of FSA and executed by an
authorized officer of FSA.  In no event
will the termination of the Plan reduce Severance Pay and Severance Benefits
previously granted under the Plan to an eligible employee who has terminated
employment.

 

SECTION 11                        PAY AND OTHER BENEFITS

 

An eligible employee’s
participation in all of the Company’s employee pension benefit plans and
employee welfare plans in which he or she is enrolled as of his or her
separation date shall cease as of his or her separation date, except as
provided above with respect to COBRA coverage and life and disability insurance
benefits.  All pay and other benefits,
including unreimbursed valid business expenses and accrued but unpaid salary
(but excluding Plan benefits), payable to an eligible employee upon his or her
separation date shall be paid in accordance with the terms of those established
policies, plans and procedures.  An
eligible employee who is participating in the Plan shall not be eligible for
any other type of severance benefits under any other severance pay plan,
program or policy of the Company. 
Eligible employees shall receive payment for unused vacation days on the
first payroll date following the eligible employee’s termination of
employment.  Such payment shall be equal
to one twentieth (1/20th) of one month of Severance Pay for every vacation day
and shall be paid in a single lump sum payment. 
Such payment shall not reduce the amount of Severance Pay otherwise
payable to the eligible employee under the Plan.  For purposes of the foregoing,

 

                                                (a)                                  total vacation days for any eligible
employee in respect of any calendar year shall equal the sum of:

 

                                                                                                (1)                                  carryover vacation days to which the
eligible employee is entitled in accordance with Company policy from the year
prior to the year in which the eligible employee’s separation date occurred;
and

 

                                                                                                (2)                                  the product (rounded up to the nearest
whole number) of:

 

(A)                              the annual number of vacation days to
which the eligible employee is entitled in accordance with Company policy; and

 

                                                                                                                                                (B)                                a fraction,

 

                                                                                                                                                                                                (i)                                     the numerator of which is the number of
days of the year which have elapsed from the January 1 of the year in
which 

 

9

 

                                                                                                                                                                                                                                                the eligible employee’s separation date
occurs through and including the eligible employee’s separation date, and

 

                                                                                                                                                                                                (ii)                                  the denominator of which is three hundred and
sixty-five (365); and

 

                                                (b)                                 unused vacation days for any eligible employee in
respect of any calendar year will equal total vacation days in respect of such
year determined in accordance with subsection (a) above, less vacation
days used in such year.

 

SECTION 12                                                                        NO ASSIGNMENT

 

Severance Pay or
Severance Benefits payable under the Plan shall not be subject to anticipation,
alienation, pledge, sale, transfer, assignment, garnishment, attachment,
execution, encumbrance, levy, lien, or charge, and any attempt to cause such
Severance Pay or Severance Benefits to be so subjected shall not be recognized,
except to the extent required by law.

 

SECTION 13                                                                        RECOVERY OF PAYMENTS MADE
BY MISTAKE

 

An eligible employee
shall be required to return to the Company any Severance Pay or Severance
Benefits, or portion thereof, made by a mistake of fact or law.

 

SECTION 14                                                                        REPRESENTATIONS CONTRARY
TO THE PLAN

 

No employee, officer, or director of the Company has
the authority to alter, vary or modify the terms of the Plan except by means of
an authorized written amendment to the Plan. 
No verbal or written representations contrary to the terms of the Plan
and its written amendments shall be binding upon the Plan, the Plan
Administrator or the Company.

 

SECTION 15                                                                        COMPLIANCE WITH CODE SECTION 409A

 

Notwithstanding any other
provision of the Plan to the contrary, the Plan is intended to comply with the
requirements of Code Section 409A to avoid taxation under Code Section 409A(a)(1) or,
as applicable, to be a separation pay plan that does not provide for the
deferral of compensation under Code Section 409A and shall, at all times,
be interpreted and operated consistent with this intention.  Under no circumstances, however, shall the
Company have any liability to any person for any taxes, penalties or interest
due on amounts paid or payable under the Plan, including any taxes, penalties
or interest imposed under Code Section 409A(a)(1), except as provided in Section 3(c).

 

SECTION 16                                                                        NO EMPLOYMENT RIGHTS

 

The Plan shall not confer employment rights upon any
person.  No person shall be entitled, by
virtue of the Plan, to remain in the employ of the Company and nothing in the
Plan shall restrict the right of the Company to terminate the employment of any
eligible employee at any time.

 

 

10

 

SECTION 17                        COMPANY INFORMATION

 

Eligible employees may
have access to Company Information. 
Recognizing that the disclosure or improper use of such Company
Information will cause serious and irreparable injury to the Company, as a
condition of receiving Severance Pay and Severance Benefits eligible employees
with such access acknowledge that (i) they will not at any time, directly
or indirectly, disclose Company Information to any third party or otherwise
retain or use such Company Information for their own benefit or the benefit of
others, (ii) if they disclose or improperly use any Company Information,
the Company shall be entitled to apply for and receive an injunction to
restrain any violation of this paragraph, and (iii) eligible employees
shall be liable for any damages the Company incurs, including litigation costs
and reasonable attorneys’ fees.

 

“Company
Information” shall mean any confidential, financial, marketing,
business, technical or other information, including, without limitation,
information that the eligible employee prepared, caused to be prepared,
received in connection with and/or contemporaneous with his or her employment
with the Company, such as information provided by customers that is not
generally known in the industry, objective and subjective evaluations of
management, transactions or proposed transactions, trade secrets, personnel
information and marketing methods and techniques.  The term “Company
Information” specifically excludes information that is generally
known in the industry (except when known based upon the eligible employee’s
actions in contravention of this provision) or that is otherwise publicly
available.

 

SECTION 18                        CONFIDENTIALITY

 

Eligible employees are prohibited from disclosing the
existence of this Plan and its terms and conditions, to any other past, present
or future employees of the Company, or to any other person, except (and in such
cases, only to the extent necessary) to the eligible employee’s immediate
family, attorneys, accountants, financial advisors, lending institutions,
federal, state or local taxing authorities, or as otherwise required by law, or
for the enforcement of the Plan terms.

 

SECTION 19                        PLAN FUNDING

 

No eligible employee
shall acquire by reason of the Plan any right in or title to any assets, funds,
or property of the Company.  Any
Severance Pay or Severance Benefits that become payable under the Plan are
unfunded obligations of the Company and shall be paid from the general assets
of the Company.  No employee, officer,
director or agent of the Company guarantees in any manner the payment of
Severance Pay or Severance Benefits.

 

SECTION 20                        APPLICABLE LAW

 

The Plan shall be governed and construed in accordance
with ERISA and in the event that any reference shall be made to State law, the
internal laws of the State of New York shall apply.

 

SECTION 21                        SEVERABILITY

 

If any provision of the Plan is found, held or deemed
by a court of competent jurisdiction to be void, unlawful or unenforceable
under any applicable statute or other controlling law, the remainder of the
Plan shall continue in full force and effect.

 

 

11

 

SECTION 22                        PLAN YEAR

 

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

 

SECTION 23                        RETURN OF
COMPANY PROPERTY

 

All Company property (including
keys, credit cards, identification cards, office equipment, portable computers
and cellular telephones) and Company Information (including all copies,
duplicates, reproductions or excerpts thereof) must be returned by the eligible
employee as of his or her separation date in order for such eligible employee
to commence receiving Severance Pay and Severance Benefits under the Plan.

 

	
  FINANCIAL SECURITY ASSURANCE
  HOLDINGS LTD.

  	
   

  
	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  By:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Its:

  	
   

  	
   

  	 

					

 

 

12

 

Attachment I to

Financial Security Assurance Holdings Ltd. Severance Policy for Senior
Management

 

WAIVER
AND RELEASE AGREEMENT

 

                (1)           Waiver and Release, Etc.  In consideration for the Severance Pay and
Severance Benefits to be provided to me under the terms of the FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. SEVERANCE POLICY FOR SENIOR
MANAGEMENT (hereinafter, the “Plan”), I, on behalf of myself and my
heirs, executors, administrators, attorneys and assigns, hereby waive, release
and forever discharge FINANCIAL SECURITY
ASSURANCE HOLDINGS LTD. (hereinafter, the “Company”) and the Company’s
parent, subsidiaries, divisions and affiliates, whether direct or indirect, its
and their joint ventures and joint venturers (including its and their
respective directors, officers, associates, employees, shareholders, partners
and agents, past, present and future), and each of its and their respective
successors and assigns (hereinafter collectively referred to as “Releasees”),
from any and all known or unknown actions, causes of action, claims or
liabilities of any kind which have or could be asserted against the Releasees
arising out of or related to my employment with and/or separation from
employment with the Company and/or any of the other Releasees and/or any other occurrence
up to and including the later of the date of this Agreement and the date of
termination of employment with the Company and/or any of the other Releasees,
including but not limited to:

 

                                                (a)                                  claims,
actions, causes of action or liabilities arising under Title VII of the Civil
Rights Act, as amended, the Age Discrimination in Employment Act, as amended
(the “ADEA”), the Employee Retirement Income Security Act, as amended, the
Rehabilitation Act, as amended, the Americans with Disabilities Act, as amended,
the Family and Medical Leave Act, as amended, and/or any other federal, state,
municipal, or local employment discrimination statutes (including, but not
limited to, claims based on age, sex, attainment of benefit plan rights, race,
religion, national origin, marital status, sexual orientation, ancestry,
harassment, parental status, handicap, disability, retaliation, and veteran
status); and/or

 

                                                (b)                                 claims,
actions, causes of action or liabilities arising under any other federal,
state, municipal, or local statute, law, ordinance or regulation; and/or

 

                                                (c)                                  any other claim
whatsoever including, but not limited to, claims for severance pay, claims
based upon breach of contract, wrongful termination, defamation, intentional
infliction of emotional distress, tort, personal injury, invasion of privacy,
violation of public policy, negligence and/or any other common law, statutory
or other claim whatsoever arising out of or relating to my employment with
and/or separation from employment with the Company and/or any of the other
Releasees,

 

but excluding the right to file an administrative charge or participate
in an investigation conducted by the Equal Employment Opportunity Commission
(the “EEOC”), any claims that I may make under state workers’ compensation or
unemployment laws, and/or any claims that by law I cannot waive.  I am waiving, however, any right to monetary
recovery should the EEOC or any other agency pursue any claim on my behalf.  I further waive, release, and discharge the
Company and/or any of the other Releasees from any reinstatement rights that I
have or could 

 

 

1

 

have and I acknowledge that I have not suffered any on-the-job injury
for which I have not already filed a claim. 
I also agree never to sue the Company and/or any of the Releasees on the
basis of any and all claims of any type to date arising out of any aspect of my
employment with and/or separation from employment with the Company and/or any
of the Releasees, except for a claim under the ADEA, including a challenge to
the validity of this Agreement under that law. 
I understand that this Agreement includes a release of all known and
unknown claims arising up to and including the date of this Agreement.

 

                (2)           Company Information.  I acknowledge that I may have access to
certain confidential and other information of the Company, referred to in the
Plan as “Company Information”. 
Recognizing that the disclosure or improper use of Company Information
may cause serious and irreparable injury to the Company, I agree that I will
not at any time, directly or indirectly, disclose Company Information or use
Company Information for my own benefit or the benefit of any other party except
as permitted under the Plan.

 

                (3)           Cooperation; Return of Company
Property.  I agree to cooperate with
the Company with respect to providing information with respect to matters with
which I was involved at the time of my termination of employment and to
cooperate, at the expense of the Company, in the defense or pursuit by the
Company of, or response by the Company to, any litigation, investigation or
dispute relating to matters in which I participated during my term of
employment with the Company.  I agree to
return to the Company all Company property in my possession as promptly as
practicable, including, without limitation, any keys, credit cards, documents
and records, identification cards, office equipment, portable computers, mobile
telephones and parking permits.

 

                (4)           Consequences of Breach.  In the event that I breach this Agreement by
violating any of the provisions of paragraph (1), (2) or (3), I
acknowledge that (a) the Company shall be entitled to apply for and
receive an injunction to restrain any violation of such paragraphs, (b) I
shall be required to pay the Company’s and/or any of the Releasees’ litigation
costs and expenses, including reasonable attorneys’ fees, associated with
defending against my lawsuit and (c) I shall be obligated to repay to the
Company eighty percent (80%) of the Severance Pay already paid to me and to
forfeit eighty percent (80%) of the Severance Pay not yet paid to me.  Such repayment and/or forfeiture shall not
affect the validity of this Agreement.

 

                (5)           Offset.  I
understand that, in the event I become employed during the severance period,
due and unpaid Severance Pay will be offset by an amount equal to fifty percent
(50%) of the compensation received by me from the new employment during the
severance period (including employment as a consultant or self-employed), and, if
employed with another employer, Severance Benefits shall cease.  I agree to refund any amounts paid by the
Company as Severance Pay that exceed the amount of Severance Pay payable to me
under the Plan giving effect to the offset referred to in the preceding
sentence.  I further agree to provide to
the Company prompt notice of the commencement of any such new employment.

 

 

2

 

                (6)           Other Plans.  I understand that this Agreement will not
limit any of my rights or obligations in respect of any Company sponsored
plans, each of which has its own provisions governing the rights of employees
thereunder in respect of which I agree to remain bound, except that I hereby
waive, release and shall not assert in any forum any claim or right arising out
of or

 

in connection with my termination of employment on the basis that such
termination interfered with attainment of any rights under such a plan or was
otherwise discriminatory or illegal.  The
foregoing plans include the Company’s pension plans (Money Purchase Plan and
Supplemental Executive Retirement Plan), Cash or Deferred Plan (401(k) plan),
home computer program, cafeteria plan (“flex plan”), medical plans,
Supplemental Restricted Stock Plan, 1993 Equity Participation Plan and Deferred
Compensation Plan.  I understand that,
for purposes of determining my rights under the foregoing plans, my employment
with the Company will be deemed to have been terminated by the Company without
cause.

 

                (7)           Review and Revocation Periods.  I acknowledge that I have been given at least
twenty-one (21) days to consider this Agreement thoroughly and I was encouraged
to consult with my personal attorney, if desired, before signing below.  I understand that I may revoke this Agreement
within seven (7) days after its signing and that any revocation must be
made in writing and submitted within such seven (7) day period to the Plan
Administrator.  I understand that this
Agreement will not be effective or enforceable until after this seven (7) day
period.  I further understand
that if I revoke this Agreement, I shall not receive Severance Pay and
Severance Benefits under the Plan.

 

                (8)           Severability.  I agree that if any provision of this
Agreement is found, held or deemed by a court of competent jurisdiction to be
void, unlawful or unenforceable under any applicable statute or controlling
law, the remainder of this Agreement shall continue in full force and
effect.

 

                (9)           Governing Law. 
This Agreement is deemed made and entered into in the State of New York,
and in all respects shall be interpreted, enforced and governed under the
internal laws of the State of New York, to the extent not governed by federal
law.  Any dispute under this Agreement
shall be adjudicated by a court of competent jurisdiction in the State of New
York.

 

                The undersigned hereby acknowledges and agrees that he or she has
carefully read and fully understands all the provisions of this Agreement and
has voluntarily entered into this Agreement by signing below as of the date set
forth below.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  (Print name)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  (Date)Exhibit 10.5

 

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.

AGREEMENT EVIDENCING AN AWARD OF DEXIA RESTRICTED STOCK

 

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”) (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, 2010 and
(ii) 66-2/3% to the four-year
Restricted Period scheduled to end
December 31, 2011.  Pursuant
to the terms of the Plan and this Agreement, the restrictions on vested Dexia
Restricted Stock allocated to each Restricted Period will lapse at the end of
such Restricted Period and unrestricted
shares of Dexia Stock will be distributed at that time.  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, 2010

  	
   

  	
  33-1/3%

  
	
  June 30, 2011

  	
   

  	
  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.”

 

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) any shares of vested Dexia Restricted Stock
held by you (including shares that become vested as specified below in this
Section 3) will be distributed in the form of shares of unrestricted Dexia
Stock at the conclusion of the applicable Restricted Period, subject to your
right to sell such shares to the Company as described in Section 6.  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 with 5 Years of Service (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, 2010

  	
   

  	
  December 31, 2010

  	
   

  	
  33-1/3%

  
	
  June 30, 2011

  	
   

  	
  December 31, 2011

  	
   

  	
  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 Normal 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 but, in any event, not later than 2 1⁄2 months
following the year in which such cash dividends are received by the custodian.

 

6.             Election
to Sell Stock.

 

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 elect to sell to the Company all or a portion of such
shares, if any, that you would be entitled to receive following completion of
such Restricted Period.  Such election
shall be made in writing and shall be delivered to the Company’s Chief
Financial Officer or General Counsel, or such other officer as the Committee
shall from time to time designate. 
Notwithstanding any election to sell made by you, the Committee may, in
its sole and absolute discretion, on behalf of the Company, refuse to purchase
shares of unrestricted Dexia Stock from you. 
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,
in its sole discretion, may nonetheless purchase shares of Dexia Stock that you
offer for sale to the Company.  Any Dexia
Stock purchased by the Company pursuant to this Section 6 shall be
purchased at the Fair Market Value of Dexia Stock as of the last day of the
Restricted Period (or if such day is not a trading day for Dexia Stock, then
the first succeeding trading day for Dexia Stock), 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).

 

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 for the
purchase of 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.

 

8.             Tax
Withholding.

 

In accordance with Section 11(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 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 

 

3

 

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 paid to you on the first regular payroll
payment date that is at least six months after the end of the Normal Vesting
Period applicable to the Dexia Restricted Stock for which the Restricted Cash Amount
was substituted.  Such Restricted Cash
Amount shall be converted into U.S. dollars using the noon buying rate
published by the Federal Reserve Bank of New York for the date of receipt of
such cash (or if such rate is no longer published, such other rate as the
Committee shall approve) and credited with a rate of return equal to the
Company’s ROE from the date of conversion into cash until the date of
payment.  The Company’s obligation to pay
the Restricted Cash Amount, along with any deemed earnings or losses thereon,
shall be an unfunded contractual obligation that will be satisfied out of the
Company’s general assets.  Participants
shall have only the rights of a general unsecured creditor of the Company with respect
to such amounts.

 

For 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, and the dividends
paid per share during such period, each discounted at such discount rate to the
first day of the first calendar quarter in such period, equals (b) the
Adjusted Book Value per share of FSA Stock on the first day of the first
calendar quarter in such period; and

 

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

 

“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

 

4

 

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.

 

“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.

 

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 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

 

5

 

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)           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.

 

(f)            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.

 

(g)           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 Dexia Restricted Stock held by you, and that any 

 

6

 

award agreement(s) in respect of such outstanding awards shall be
deemed amended to be consistent with the Plan as so amended.

 

(h)           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)

  	
   

  
			

 

7

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