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Advisory Agreement

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Sectors: Insurance
Governing Law: New York, View New York State Laws
Effective Date: December 18, 1996
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EXHIBIT 10.5


ALLIANCE CAPITAL MANAGEMENT L.P.


Discretionary Investment Advisory Agreement


with


Commercial Guaranty Assurance, Ltd.
-----------------------------------
(Name of Client)


Dated December 18, 1996
(Effective Date)


Alliance Capital management L.P. (the "Adviser") and the undersigned (the "Client") hereby agree as of the above date that the Adviser shall act as discretionary investment manager with respect to assets of the Client described below (the "Investment Account") on the following terms and conditions:


1. The Investment Account


The Investment Account shall initially consist of cash, cash equivalents, stocks, bonds, and other securities or assets the Client places in the Investment Account or which shall become part of the Investment Account as a result of transactions.


The Client may make additions to and withdrawals from the Investment Account provided the Adviser receives at least five (5) business days' prior written notice of withdrawals. All cash, securities and other assets in the Investment Account shall be held by such other party as the client shall designate as trustee or custodian (the "Custodian"). The Adviser shall not be responsible for any custodian arrangements involving any assets of the Investment Account or for the payment of any custodial charges and fees, nor shall the Adviser have possession or custody of any such assets. All payments, distributions and other transactions in cash, securities or other assets in respect of the Investment Account shall be made directly to or from the Custodian, and the Adviser shall have no responsibility or liability with respect to transmittal or safekeeping of such cash, securities or other assets of the Investment Account, or the acts or omissions of the Custodian or others with respect thereto unless such acts or omissions of the Custodian are a direct result of the Adviser's negligence, wilful misconduct, fraud, dishonesty or malfeasance. The Client shall direct the Custodian to furnish to the Adviser from time to time such reports concerning assets, receipts and disbursements with respect to the Investment Account as the Adviser shall reasonably request.


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2. Services of Adviser


By execution of this Agreement, the Adviser accepts appointment as discretionary investment manager for the Investment Account with full discretion and agrees to supervise and direct the investments of the Investment Account in accordance with the written investment objectives, policies and restrictions of the Client previously furnished to the Adviser and attached as Schedule A to this agreement as the same may be amended by the Client from time to time. In the performance of its services, the Adviser will not be liable for any error in judgment or any acts or omissions to act except those resulting from the Adviser's negligence, wilful misconduct or malfeasance. Nothing herein shall in any way constitute a waiver or limitation of any right of any person under the Federal Securities Laws or any State Securities Laws.


The Adviser will render to the Client at least monthly a written report and inventory of the investments in the Investment Account. It is agreed that the Adviser, in the maintenance of its records, does not assume responsibility for the accuracy of information furnished by the Client or any other person not being an agent or subcontracter of the Adviser.


3. Funding Policy


The Client shall from time to time inform the Adviser in writing of the funding policy applicable with respect to the Client and of its cash disbursement requirements. The Adviser shall make its investment decisions for the Investment Account in accordance with such funding policy and requirements.


4. Investment Objectives, Policies and Restrictions


It will be the Client's responsibility to notify the Adviser in writing of the investment objectives and policies of the Investment Account, and of any modifications therein, as well as any specific investment restrictions applicable thereto and to give the Adviser prompt written notice if the Client deems any investments made for the Investment Account to be inconsistent with such objectives, policies or restrictions. The Client is also required to notify the Adviser in writing of specific restrictions governing the Investment Account under the current or future laws of any jurisdiction or by virtue of the terms of any other contract or instrument known by the Client to be binding on the Client.


5. Delivery of Client Documentation


No later than the date of this Agreement, the Client will provide the Adviser with copies of all documents relevant to the Adviser's management of the Investment Account which relate to the Adviser's management of the Investment Account, including the written statement of the Client's investment objectives, policies and restrictions referred to above. The Client further agrees to promptly deliver to the Adviser true and complete copies of all amendments or supplements to such documents. The Adviser will be indemnified and held harmless against any and all losses,


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costs, claims and liabilities which it may suffer or incur arising solely out of the failure by the Client to provide to the Adviser the documents required to be furnished in accordance with the above provisions.


6. Discretionary Authority


It is understood that, to the extent permitted by the written statement of investment objectives, policies and restrictions referred to in Schedule A, the Adviser, whenever it deems appropriate and without prior consultation with the Client, may (i) buy, sell, exchange, convert, liquidate or otherwise trade in any stock, bonds and other securities (including money market instruments) and (ii), subject to the provisions of paragraph 7 hereof, place orders for the execution of such transactions with or through such brokers, dealers or issuers as the Adviser in its absolute discretion may select.


It is understood that, to the extent permitted by the written statement of investment objectives, policies and restrictions referred to in Schedule A, the Adviser may also effect transactions for the Investment Account in options and financial futures, stock market index futures and other commodity contracts. In such event, the Client will execute any additional documentation which the Adviser deems necessary to enable it to engage in such transactions on behalf of the Investment Account.


7. Allocation of Brokerage


When placing orders for the execution of transactions for the Investment Account, the Adviser may, unless the Client otherwise directs, allocate such transactions to such broker-dealers, for execution on such markets, at such prices and at such commission rates, as in the good faith judgment of the Adviser will be in the best interests of the Client. In the selection of such broker-dealers, the Adviser will take into consideration not only the available prices and rates of brokerage commissions, but also other relevant factors (such as, without limitation, execution capabilities, research and other services provided by such broker-dealers which are expected to enhance the general portfolio management capabilities of the Adviser, and the value of an ongoing relationship of the Adviser with such broker-dealers) without having to demonstrate that such factors are of a direct benefit to the Investment Account. As a result, the commissions charged to the Investment Account with respect to a particular transaction may be somewhat higher than those another broker-dealer might charge for the same transaction. The Adviser will exercise good faith in negotiating the commissions paid by the Investment Account and will seek to obtain the best price and execution for each transaction for the Investment Account, taking into consideration the value of any brokerage and research services provided by the broker-dealer effecting the transaction. As set forth in Part II of the Adviser's Form AD
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