Exhibit 10.21

 

ASSURED GUARANTY LTD.
REPLACEMENT AWARD PLAN

(April, 2004)

 

SECTION 1
GENERAL

 

1.1.  Purpose.  The Assured Guaranty Ltd. Replacement Award Plan (the “Plan”)
has been established by Assured Guaranty Ltd. (the “Company”) to award
restricted stock units to certain continuing employees of the Company and its
Subsidiaries who, on the date of the initial public offering of Shares of the
Company (the “Offering”), forfeited restricted shares of ACE Limited.

 

1.2.  Participation.  The “Participants” in the Plan are those employees of the
Company designated for the receipt of an Award by the Board, which designated
employees are set forth in Exhibit C to those resolutions of the Board providing
for the adoption of the Plan; provided, however, that the Committee may
designate additional employees of the Company or its Subsidiaries to be
Participants in the Plan, if the Committee determines, in its sole discretion,
that such individuals were intended to be included in the original designation
of Award recipients and otherwise fulfill the requirements under the Plan. 
Notwithstanding any provision of Plan to the contrary, no employee of the
Company or its Subsidiaries who has received notice of termination of employment
on or prior to the Effective Date shall be eligible for an Award under the Plan.

 

1.3.  Operation, Administration, and Definitions.  The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 3 (relating to operation and
administration).  Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 6).

 

SECTION 2
RESTRICTED STOCK UNIT AWARDS

 

2.1.  Definition.  A “Restricted Stock Unit Award” is the grant of a right to
receive one or more Shares at the end of the Deferral Period.  If the
determination of the number of units to be awarded to a Participant who has
forfeited restricted shares of ACE Limited would result in the delivery of
fractional Shares, the Restricted Stock Unit Award shall be rounded to the
nearest whole Share. A Participant shall be fully vested in the Restricted Stock
Unit Award on the date on which the Award is granted; provided, however, that
the delivery of Shares underlying the Award shall not occur until the end of the
Deferral Period and shall be subject to the Participant not having engaged in
any Detrimental Activity (as defined in Section 2.2 below) at any time during
the Deferral Period.  The “Deferral Period” is the period beginning on the date
the Restricted Stock Unit Award is granted and ending on the date that is the
18-month anniversary of the date of grant.  The grant of Restricted Stock Unit
Awards may also be subject to such other conditions, restrictions and
contingencies, as determined by the Committee.

 

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2.2.  Detrimental Activity.  The term “Detrimental Activity” shall mean (i) the
rendering of services for any of the following organizations: ACA, AMBAC
Financial Group Inc., Channel Re, CIFG, DePfa, Financial Guaranty Insurance
Company, Financial Security Assurance Inc., MBIA, Inc., Radian Group Inc., Ram
Re, SJAG, and XL Capital, or any of their affiliates; (ii) the disclosure to
anyone outside the Company or the Subsidiaries, or the use in other than the
Company’s or its Subsidiaries’ business, without prior written authorization
from the Company or its Subsidiaries, of any confidential information or
material, relating to the business of the Company or its Subsidiaries, acquired
by the Participant either during or after employment with the Company or its
Subsidiaries; (iii) a violation of any rules, policies, procedures or guidelines
of the Company or its Subsidiaries, including but not limited to the Company’s
business conduct guidelines; or (iv) the Participant being convicted of, or
entering a guilty plea with respect to, a crime connected with the Company. 
Notwithstanding the foregoing, activity occurring after the Date of Termination
shall constitute Detrimental Activity only if it is described in clause (i)
(relating to competition) or (ii) (relating to confidentiality) above.  “Date of
Termination” shall mean, with respect to an employee, the date on which the
Participant’s employment with the Company and Subsidiaries terminates for any
reason, and with respect to a Director, the date immediately following the last
day on which the Participant serves as a Director; provided that a Date of
Termination shall not be deemed to occur by reason of a Participant’s transfer
of employment between the Company and a Subsidiary or between two Subsidiaries;
further provided that a Date of Termination shall not be deemed to occur by
reason of a Participant’s cessation of service as a director of the Company if
immediately following such cessation of service the Participant becomes or
continues to be employed by the Company or a Subsidiary, nor by reason of a
Participant’s termination of employment with the Company or a Subsidiary if
immediately following such termination of employment the Participant becomes or
continues to be a director of the Company; and further provided that a
Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.

 

SECTION 3
OPERATION AND ADMINISTRATION

 

3.1.  Effective Date.  The Plan shall be effective on the date immediately prior
to the consummation of the Offering (the “Effective Date”).  The Plan shall be
unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Awards under it are outstanding.

 

3.2.  Shares and Other Amounts Subject to Plan.  The Shares for which Awards may
be granted under the Plan shall be subject to the following:

 

(a)                                  The Shares with respect to which Awards may
be made under the Plan shall be shares of the Company purchased from ACE Limited
under the directed share program or purchased in the open market.  The Company
may contribute to a trust an amount sufficient to so acquire Shares (as
determined by the Chief Executive Officer or the Chief Financial Officer of the
Company).

 

(b)                                 Subject to the following provisions of this
subsection 3.2, the maximum number of Shares that may be delivered to
Participants and their beneficiaries under the Plan shall

 

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be 438,479.  This maximum the number of Shares shall be the number of Shares,
par value $0.01 per share, of the Company purchased from ACE Limited under the
directed share program or in the open market, equal to the product of (i) the
number of ACE Limited Forfeited Shares (estimated to be approximately 183,450
shares) multiplied by the average of the closing price for an ordinary share of
ACE Limited on the three business days immediately prior to the date of the
consummation of the Offering; divided by (ii) the initial public offering price
for the Shares in the Offering of US$18.00 per share.  For purposes of the
preceding sentence, the “ACE Limited Forfeited Shares” shall be the total number
of restricted ordinary shares of ACE Limited forfeited by persons who performed
services for ACE Limited and its subsidiaries immediately prior to the
consummation of the Offering, to the extent that such forfeiture occurred in
connection with their cessation of employment by ACE Limited and its
subsidiaries and performance of services for the Company and its Subsidiaries
immediately after the consummation of the Offering, excluding, however, the ACE
Limited Forfeited Shares of any persons who received a notice of termination or
resigned or gave a notice of resignation prior to the execution of the
underwriting agreement for the Offering or who had transferred or were expected
to transfer to ACE Limited or its subsidiaries.  The foregoing determination is
solely for determining the number of Shares reserved under the Plan and does not
create a right of any individual to participate in the Plan.

 

(c)                                  While it is intended that all Awards shall
be designated in whole numbers resulting in the delivery of whole Shares, to the
extent provided by the Committee, any portion of any Award that is nonetheless a
fraction of a Share will be settled in cash rather than Shares.

 

(d)                                 Only Shares, if any, actually delivered to
the Participant or beneficiary on an unrestricted basis with respect to an Award
shall be treated as delivered for purposes of the determination under paragraph
(b) above, regardless of whether the Award is denominated in Shares or cash. 
Consistent with the foregoing:

 

(i)                                     To the extent any Shares covered by an
Award are not delivered to a Participant or beneficiary because the Award is
forfeited or canceled, or the Shares are not delivered on an unrestricted basis
(including, without limitation, by reason of the Award being settled in cash or
used to satisfy the applicable tax withholding obligation), such Shares shall
not be deemed to have been delivered for purposes of the determination under
paragraph (b) above.

 

(ii)                                  If the tax withholding obligation with
respect to any Award granted under the Plan is satisfied by tendering Shares to
the Company (by either actual delivery or by attestation), only the number of
Shares issued net of the Shares tendered shall be deemed delivered for purposes
of determining the number of Shares available for delivery under the Plan.

 

(e)                                  In the event of a corporate transaction
involving the Company (including, without limitation, any share dividend, share
split, extraordinary cash dividend, recapitalization, reorganization, merger,
amalgamation, consolidation, split-up, spin-off, sale of assets or Subsidiaries,
combination or exchange of shares), the Committee may adjust Awards to preserve
the benefits or potential benefits of the Awards.  Action by the Committee may

 

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include: (i) adjustment of the number and kind of shares which may be delivered
under the Plan; (ii) adjustment of the number and kind of shares subject to
outstanding Awards;  and (iii) any other adjustments that the Committee
determines to be equitable (which may include, without limitation, (A)
replacement of Awards with other Awards which the Committee determines have
comparable value and which are based on shares of a company resulting from the
transaction, and (B) cancellation of the Award in return for cash payment of the
current value of the Award, determined as though the Award is fully vested at
the time of payment).

 

3.3.  General Restrictions.  Delivery of Shares or other amounts under the Plan
shall be subject to the following:

 

(a)                                  Notwithstanding any other provision of the
Plan, the Company shall have no obligation to deliver any Shares or make any
other distribution of benefits under the Plan unless such exercise, delivery or
distribution complies with all applicable laws (including, without limitation,
the requirements of the United States Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity or other
regulatory authority with respect to the issue of shares and securities by the
Company.

 

(b)                                 To the extent that the Plan provides for
issuance of share certificates to reflect the issuance of Shares, the issuance
may be effected on a non-certificated basis, to the extent not prohibited by or
may be made in compliance with applicable law, the Bye-laws of the Company, or
the applicable rules of any stock exchange.

 

3.4.  Tax Withholding.  All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any Shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations.  Except as otherwise provided by the
Committee and subject to applicable law, such withholding obligations may be
satisfied (i) through cash payment by the Participant; (ii) through the
surrender of Shares which the Participant already owns (provided, however, that
to the extent Shares described in this clause (ii) are used to satisfy more than
the minimum statutory withholding obligation, as described below, then, except
as otherwise provided by the Committee, payments made with Shares in accordance
with this clause (ii) shall be limited to Shares held by the Participant for not
less than six months prior to the payment date); or (iii) through the surrender
of Shares to which the Participant is otherwise entitled under the Plan;
provided, however, that such Shares under this clause (iii) may be used to
satisfy not more than the Company’s minimum statutory withholding obligation
(based on minimum statutory withholding rates for Federal and state tax
purposes, including payroll taxes, that are applicable to such supplemental
taxable income).

 

3.5.  Grant and Use of Awards.  Subject to section 3.2(e), no awards other then
Restricted Stock Unit Awards may be granted under the Plan.

 

3.6.  Dividends and Dividend Equivalents.  An Award will provide the Participant
with the right to receive dividend or dividend equivalent payments with respect
to Shares subject to the Award, which payments may be either made currently or
credited to an account for the Participant, and will be settled in cash unless
otherwise determined by the Committee.  Any such settlements, and any such
crediting of dividends or dividend equivalents, will be subject to the

 

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Company’s Bye-laws as well as applicable law and further may be subject to such
conditions, restrictions and contingencies as the Committee shall establish.

 

3.7.  Settlement of Awards.  The obligation to make payments and distributions
with respect to Awards shall be satisfied through the delivery of Shares,
subject to such conditions, restrictions and contingencies as the Committee
shall determine.  Any obligation to make a payment pursuant to a portion of any
Award that is a fraction of a Share shall be made in cash.  Each Subsidiary
shall be liable for payment due under the Plan with respect to any Participant
to the extent that such benefits are attributable to the services rendered for
that Subsidiary by the Participant.  Any disputes relating to liability of a
Subsidiary for payments shall be resolved by the Committee.

 

3.8.  Transferability.  Except as otherwise provided by the Committee, Awards
under the Plan are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.

 

3.9.  Form and Time of Elections.  Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, if any, and any permitted modification, or
revocation thereof, if any, shall be in writing filed with the Committee at such
times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.

 

3.10.  Agreement With Company.  An Award under the Plan shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Committee shall, in
its sole discretion, prescribe.  The terms and conditions of any Award to any
Participant shall be reflected in such form of written (including electronic)
document as is determined by the Committee.  A copy of such document shall be
provided to the Participant, and the Committee may, but need not require that
the Participant sign a copy of such document.  Such document is referred to in
the Plan as an “Award Agreement” regardless of whether any Participant signature
is required.

 

3.11.  Action by Company or Subsidiary.  Any action required or permitted to be
taken by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.

 

3.12.  Gender and Number.  Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.

 

3.13.  Limitation of Implied Rights.

 

(a)                                  Neither a Participant nor any other person
shall, by reason of participation in the Plan, acquire any right in or title to
any assets, funds or property of the Company or any Subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other property
which the Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan.  A Participant shall have only a
contractual right

 

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 to the Shares or amounts, if any, payable under the Plan, unsecured by any
assets of the Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.

 

(b)                                 The Plan does not constitute a contract of
employment, and selection as a Participant will not give any participating
employee or other individual the right to be retained in the employ of the
Company or any Subsidiary or the right to continue to provide services to the
Company or any Subsidiary, nor any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of the
Plan.  Except as otherwise provided in the Plan, no Award under the Plan shall
confer upon the holder thereof any rights as a shareholder of the Company prior
to the date on which the individual fulfills all conditions for receipt of such
rights and is registered in the Company’s Register of Shareholders.

 

(c)                                  All Stock and Shares issued under any Award
or otherwise are to be held subject to the provisions of the Company’s Bye-laws
and each Participant is deemed to agree to be bound by the terms of the
Company’s Bye-laws as they stand at the time of issue of any Shares under the
Plan.

 

3.14.  Evidence.  Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

 

SECTION 4
COMMITTEE

 

4.1.  Administration.  The authority to control and manage the operation and
administration of the Plan shall be vested in the compensation committee of the
Board (the “Committee”).  As a committee of the Board, the Committee is subject
to the overview of the Board.  If the Committee does not exist, or for any other
reason determined by the Board, and to the extent not prohibited by applicable
law or the applicable rules of any stock exchange, the Board may take any action
under the Plan that would otherwise be the responsibility of the Committee.

 

4.2.  Powers of Committee.  The Committee’s administration of the Plan shall be
subject to the following:

 

(a)                                  Subject to the provisions of the Plan, the
Committee will have the authority to designate certain additional employees of
the Company or its Subsidiaries to be Participants in the Plan, as provided in
section 1.2 of the Plan, to determine the time or times of receipt, to determine
the number of Shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of such Awards, and
(subject to the restrictions imposed by Section 5) to cancel or suspend Awards.

 

(b)                                 To the extent that the Committee determines
that the restrictions imposed by the Plan preclude the achievement of the
material purposes of the Awards in jurisdictions outside the United States and
Bermuda, the Committee will have the authority and discretion to

 

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modify those restrictions as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of jurisdictions
outside of the United States and Bermuda.

 

(c)                                  The Committee will have the authority and
discretion to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, to determine the terms and provisions of any
Award Agreement made pursuant to the Plan, and to make all other determinations
that may be necessary or advisable for the administration of the Plan.

 

(d)                                 Any interpretation of the Plan by the
Committee and any decision made by it under the Plan is final and binding on all
persons.

 

(e)                                  In controlling and managing the operation
and administration of the Plan, the Committee shall take action in a manner that
conforms to applicable corporate law.

 

4.3.  Delegation by Committee.  Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it.  Any such allocation or delegation may be
revoked by the Committee at any time.

 

4.4.  Information to be Furnished to Committee.  The Company and Subsidiaries
shall furnish the Committee with such data and information as it determines may
be required for it to discharge its duties.  The records of the Company and
Subsidiaries as to an employee’s or Participant’s employment (or other provision
of services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect.  Participants and other
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry out
the terms of the Plan.

 

SECTION 5
AMENDMENT AND TERMINATION

 

The Board may, at any time, amend or terminate the Plan, and may amend any Award
Agreement, provided that no amendment or termination may, in the absence of
written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely affect the
rights of any Participant or beneficiary under any Award granted under the Plan
prior to the date such amendment is adopted by the Board; and further provided
that adjustments pursuant to paragraph 3.2(e) shall not be subject to the
foregoing limitations of this Section 5.

 

SECTION 6
DEFINED TERMS

 

In addition to the other definitions contained herein, the following definitions
shall apply:

 

(a)                                  Award.  The term “Award” means the award of
Restricted Stock Unit Awards under the Plan.

 

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(b)                                 Board.  The term “Board” means the Board of
Directors of the Company.

 

(c)                                  Code.  The term “Code” means the United
States Internal Revenue Code of 1986, as amended.  A reference to any provision
of the Code shall include reference to any successor provision of the Code.

 

(d)                                 Shares.  The term “Shares” means common
shares of the Company.

 

(e)                                  Subsidiaries.  For purposes of the Plan,
the term “Subsidiary” means any corporation, partnership, joint venture or other
entity during any period in which at least a fifty percent voting or profits
interest is owned, directly or indirectly, by the Company (or by any entity that
is a successor to the Company), and any other business venture designated by the
Committee in which the Company (or any entity that is a successor to the
Company) has a significant interest, as determined in the discretion of the
Committee.

 

(f)                                    Stock.  The term “Stock” is sometimes
used to refer to common shares of the Company.

 

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