Exhibit 10.7

 

To Be Used Named Executive Officers

 

Executive Non-Qualified Stock Option Agreement under
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan

 

THIS AGREEMENT is effective as of the Grant Date, by and between the Participant
and Assured Guaranty Ltd. (the “Company”).

 

WHEREAS, the Company maintains the Assured Guaranty Ltd. 2004 Long-Term
Incentive Plan (the “Plan”), and the Participant has been selected by the
committee administering the Plan (the “Committee”) to receive a Non-Qualified
Stock Option Award under the Plan; and

 

NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as
follows:

 

1.  Terms of Award.   The following words and phrases used in this Agreement
shall have the meanings set forth in this Section 1:

 

(a)                                  The “Participant” is
                                

 

(b)                                 The “Grant Date” is February 9, 2012.

 

(c)                                  The number of “Covered Shares” shall be
                                 shares of Stock.

 

(d)                                 The “Exercise Price” is $
                         per share.

 

(e)                                  The “Performance Determination Date” is the
earlier to occur of (i) December 31, 2014 and (ii) the date of a Change in
Control.

 

(f)                                    The “Performance Period” is January 1,
2012 through the Performance Determination Date.

 

(g)                                 The “Term” of the Option is the period
beginning on the Grant Date and ending on the seven-year anniversary of the
Grant Date.

 

(h)                                 The “Vesting Date” is the earliest to occur
of (i) February 9, 2015, (ii) the date of a Vesting Change in Control, and
(iii) the Participant’s Date of Termination if the Date of Termination is due to
death, Disability or a Qualifying Termination occurring on or after a Change in
Control.

 

Other words and phrases used in this Agreement are defined pursuant to
Section 19, elsewhere in this Agreement or the Plan.

 

2.  Non-Qualified Stock Option.  This Agreement specifies the terms of the
option (the “Option”) granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
Section 1.  The Option is not intended to constitute an “incentive stock option”
as that term is used in Code section 422.  Subject to the terms of Section 4, as
of the Vesting Date, the Option shall become exercisable on and after the
Vesting Date with

 

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respect to the number of Covered Shares determined as of the Vesting Date by
multiplying (a) the number of Covered Shares by (b) the Performance Percentage
determined pursuant to Section 3 below (with such percentage converted to a
number by dividing such percentage by 100).  The portion of the Option with
respect to any Covered Shares which does not become exercisable as of the
Vesting Date pursuant to the previous sentence shall be forfeited as of the
Vesting Date.

 

3.  Performance Percentage.  As of the Performance Determination Date, the
Performance Percentage shall be determined in accordance with the table below
depending on the AGO High Stock Price in the Performance Period.  If the AGO
High Stock Price in the Performance Period is between prices listed on the table
below, the Performance Percentage shall be determined using the straight line
interpolation between the percentages listed on the table below.  For example,
if the AGO High Stock Price determined for the Performance Period is $20, the
Performance Percentage shall be 40%.

 

Performance
Level

 

AGO High Stock Price
in Performance Period

 

% of Options Vesting
(the “Performance
Percentage”)

 

Outstanding

 

$30 or higher

 

100

%

Target

 

$24

 

50

%

Threshold

 

$18

 

35

%

< Threshold

 

less than $18

 

0

%

 

The Performance Percentage shall be determined by the Committee and certified by
the Committee in writing before the Option shall become exercisable on or after
the applicable Vesting Date.

 

4.  Date of Termination Prior to Vesting Date.  Except as otherwise provided in
this Section 4, if the Participant’s Date of Termination occurs for any reason
prior to the Vesting Date, the Option shall be immediately forfeited as of such
Date of Termination.

 

(a)                                  Death or Disability Prior to a Change in
Control.  If the Participant’s Date of Termination occurs prior to the Vesting
Date and prior to a Change in Control due to the Participant’s death or
Disability, then this subparagraph (a) of Section 4 shall apply and Option shall
become exercisable on and after the Vesting Date with respect to the number of
Covered Shares determined as of the Vesting Date by multiplying (a) the number
of Covered Shares by (b) the Performance Percentage (with such percentage
converted to a number by dividing such percentage by 100) by (c) the Pro-Rata
Fraction.  The portion of the Option with respect to any Covered Shares which
does not become exercisable as of the Vesting Date pursuant to the previous
sentence shall be forfeited as of the Vesting Date.

 

(b)                                 Qualifying Termination Prior to a Change in
Control.  If the Participant’s Date of Termination occurs prior to the Vesting
Date and prior to a Change in Control due to a Qualifying Termination, then this
subparagraph (b) of Section 4 shall apply and the Option shall become
exercisable on and after the Vesting Date with respect to the number of Covered
Shares determined as of the Vesting Date by multiplying (a) the number of
Covered Shares by (b) the Performance Percentage (with such percentage converted
to a

 

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number by dividing such percentage by 100) by (c) the Pro-Rata Fraction subject
to the following: the Option shall not become exercisable following a Qualifying
Termination if the Participant engages in any Competitive Activity prior to the
Vesting Date or if the Participant fails to sign (and not revoke) a general
release and waiver of all claims against the Company as required by Section 7.1
of the Severance Plan.  The portion of the Option with respect to any Covered
Shares which does not become exercisable as of the Vesting Date pursuant to the
previous sentence shall be forfeited as of the Vesting Date.  If the release is
not effective within the sixty-day period required by Section 7.1 of the
Severance Plan or in the event that the Participant engages in a Competitive
Activity prior to the Vesting Date, the Participant shall immediately forfeit
the Option with respect to all Covered Shares.

 

(c)                                  Death or Disability On or After a Change in
Control.  If the Participant’s Date of Termination occurs prior to the Vesting
Date but on or after the date of a Change in Control that is not a Vesting
Change in Control due to the Participant’s death or Disability, then this
subparagraph (c) of Section 4 shall apply, such Date of Termination shall be
treated as the Vesting Date and the Option shall become exercisable on and after
the Vesting Date with respect to the number of Covered Shares determined as of
the Vesting Date by multiplying (a) the number of Covered Shares by (b) the
Performance Percentage (with such percentage converted to a number by dividing
such percentage by 100).  The portion of the Option with respect to any Covered
Shares which does not become exercisable as of the Vesting Date pursuant to the
previous sentence shall be forfeited as of the Vesting Date.

 

(d)                                 Qualifying Termination On or After a Change
in Control.  If the Participant’s Date of Termination occurs prior to the
Vesting Date but on or after the date of a Change in Control that is not a
Vesting Change in Control due to a Qualifying Termination, then this
subparagraph (d) of Section 4 shall apply, such Date of Termination shall be
treated as the Vesting Date and the Option shall become exercisable on and after
the Vesting Date with respect to the number of Covered Shares determined as of
the Vesting Date by multiplying (a) the number of Covered Shares by (b) the
Performance Percentage (with such percentage converted to a number by dividing
such percentage by 100), subject to the following: the Option shall not become
exercisable on or after a Qualifying Termination if the Participant fails to
sign (and not revoke) a general release and waiver of all claims against the
Company as required by Section 7.1 of the Severance Plan.  The portion of the
Option with respect to any Covered Shares which does not become exercisable as
of the Vesting Date pursuant to the previous sentence shall be forfeited as of
the Vesting Date.  If the release is not effective within the sixty-day period
required by Section 7.1 of the Severance Plan, the Participant shall immediately
forfeit the Option with respect to all Covered Shares.

 

5.  Expiration.  Notwithstanding anything herein to the contrary, the Option
shall not be exercisable after the Company’s close of business on the last
business day that occurs prior to the earlier to occur of the last day of the
Term or the Expiration Date.  The “Expiration Date” shall be defined as follows:

 

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(a)                                  if the Participant’s Date of Termination
occurs by reason of death or Disability, the Expiration Date shall be the later
to occur of (i) the one-year anniversary of the Date of Termination and (ii) the
ninety-day anniversary of the Vesting Date;

 

(b)                                 if the Participant’s Date of Termination
occurs for Cause, the Expiration Date shall be the Date of Termination;

 

(c)                                  if the Participant’s Date of Termination
occurs because of a Qualifying Termination, the Expiration Date shall be the
later to occur of (i) the ninety-day anniversary of the Date of Termination and
(ii) the ninety-day anniversary of the Vesting Date;

 

(d)                                 if the Participant’s Date of Termination
occurs for any reason other than those listed in subparagraph (a), (b), or
(c) of this Section 5, the Expiration Date shall be the ninety-day anniversary
of such Date of Termination.

 

6.  Method of Option Exercise.  Subject to this Agreement and the Plan, on and
after the Vesting Date, the Option may be exercised in whole or in part with
respect to the number of Covered Shares which become vested pursuant to Sections
2 or 4 above as of the Vesting Date by filing a written notice with the
Secretary of the Company at its corporate headquarters prior to the Company’s
close of business on the last business day that occurs prior to the earlier to
occur of the last day of the Term or the Expiration Date.  Such notice shall
specify the number of shares of Stock which the Participant elects to purchase,
and shall be accompanied by payment of the Exercise Price for such shares of
Stock indicated by the Participant’s election.  Payment shall be by cash or by
check payable to the Company.  Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price may
be paid by the Participant by delivery of shares of Stock owned by the
Participant and acceptable to the Committee having an aggregate Fair Market
Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Participant may pay the Exercise
Price by authorizing a third party to sell shares of Stock (or a sufficient
portion of the shares) acquired upon exercise of the Option and remit to the
Company a sufficient portion of the sale proceeds to pay the entire Exercise
Price and any tax withholding resulting from such exercise.  The Option shall
not be exercisable if and to the extent the Company determines that such
exercise would violate applicable state or Federal securities laws or the
rules and regulations of any securities exchange on which the Stock is traded. 
If the Company makes such a determination, it shall use all reasonable efforts
to obtain compliance with such laws, rules and regulations.  In making any
determination hereunder, the Company may rely on the opinion of counsel for the
Company.

 

7.  Change in Control. In the event of a Change in Control, the Company, or the
entity that is the surviving entity or successor to the Company following such
transaction, may elect to (a) to continue this Non-Qualified Stock Option
subject to the terms of this Agreement and the Plan and subject to such
adjustments, if any, by the Committee as permitted by Section 5.2(f) of the
Plan; or (b) to terminate this Non-Qualified Stock Option in exchange for a cash
payment or distribution as determined in the following sentence.  In the event
that the Company or its successor chooses to terminate this option upon a Change
in Control (in which case the Change in Control is a Vesting Change in Control),
the Participant shall be entitled to a payment or distribution equal to the
excess of the value of one Share at the time of the transaction over the

 

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Exercise Price multiplied by (i) the number of Covered Shares by (ii) the
Performance Percentage (with such percentage converted to a number by dividing
such percentage by 100); provided, however, that if the Participant’s Date of
Termination occurred prior to the Change in Control due to (x) death,
(y) Disability or (z) a Qualifying Termination, then the product of determined
pursuant to this sentence shall additionally be multiplied by the Pro-Rata
Fraction.

 

8.  Withholding.  All deliveries and distributions under this Agreement are
subject to withholding of all applicable taxes.  At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan; provided,
however, that such shares 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).

 

9.  Transferability.  Except as otherwise provided by the Committee, the Option
is not transferable other than as designated by the Participant by will or by
the laws of descent and distribution, and during the Participant’s life, may be
exercised only by the Participant.

 

10.  Cancellation and Rescission of Options.

 

(a)                                 The Committee may cancel, rescind, suspend,
withhold or otherwise limit or restrict the Option at any time if the
Participant engages in any “Competitive Activity.”

 

(b)                                 Upon exercise of the Option, the Participant
shall certify, to the extent provided by the Committee, in a manner acceptable
to the Committee, that the Participant is not engaging and has not engaged in
any Competitive Activity.  In the event a Participant has engaged in any
Competitive Activity prior to, or during the twelve months after, any exercise
of the Option (the “Restrictive Covenant Period”), such exercise may be
rescinded by the Committee within two years after the end of the Restrictive
Covenant Period.  In the event of any such rescission, the Participant shall pay
to the Company the amount of any gain realized as a result of the rescinded
exercise, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain
any amount owed to the Participant by the Company and/or Subsidiary.

 

11.  Heirs and Successors.  Subject to Section 7, this Agreement shall be
binding upon, and inure to the benefit of, the Company and its successors and
assigns, and upon any person acquiring, whether by merger, consolidation,
purchase of assets or otherwise, all or substantially all of the Company’s
assets and business.  If any rights exercisable by the Participant or benefits
deliverable to the Participant under this Agreement have not been exercised or
delivered, respectively, at the time of the Participant’s death, such rights
shall be exercisable by the Designated Beneficiary, and such benefits shall be
delivered to the Designated Beneficiary, in accordance with the provisions of
this Agreement and the Plan.  The “Designated Beneficiary” shall be the
beneficiary or beneficiaries designated by the Participant in a writing filed
with the Committee in such form and at such time as the Committee shall
require.  If a deceased

 

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Participant fails to designate a beneficiary, or if the Designated Beneficiary
does not survive the Participant, any rights that would have been exercisable by
the Participant and any benefits distributable to the Participant shall be
exercised by or distributed to the legal representative of the estate of the
Participant.  If a deceased Participant designates a beneficiary and the
Designated Beneficiary survives the Participant but dies before the Designated
Beneficiary’s exercise of all rights under this Agreement or before the complete
distribution of benefits to the Designated Beneficiary under this Agreement,
then any rights that would have been exercisable by the Designated Beneficiary
shall be exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.

 

12.  Administration.  The authority to manage and control the operation and
administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan.  Any interpretation of this Agreement by the Committee and
any decision made by it with respect to this Agreement is final and binding on
all persons.  The Committee shall have the authority to obtain such information
from the Participant (including tax return information) as it determines may be
necessary to confirm that the Participant is in compliance with the requirements
applicable to Competitive Activity, and if the Participant fails to provide such
information, the Committee may conclude that the Participant is not in
compliance with such requirements.

 

13.  Recoupment and Plan Provisions Govern.

 

(a)                                  Notwithstanding anything in this Agreement
to the contrary, the Participant’s rights with respect to the Option shall be
subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as in
effect on the Grant Date, a copy of which policy is set forth in the Company’s
Code of Conduct.

 

(b)                                 Notwithstanding anything in this Agreement
to the contrary, but subject to subparagraph (a) of this Section 13 above, this
Agreement shall be subject to the terms of the Plan, a copy of which may be
obtained by the Participant from the office of the Secretary of the Company; and
this Agreement is subject to all interpretations, amendments, rules and
regulations promulgated by the Committee from time to time pursuant to the Plan.

 

14.  Not an Employment Contract.  The Option will not confer on the Participant
any right with respect to continuance of employment or other service with the
Company or any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate or modify the terms
of such Participant’s employment or other service at any time.

 

15.  Notices.  Any written notices provided for in this Agreement or the Plan
shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail.  Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt.  Notices shall be
directed, if to the Participant, at the Participant’s address indicated by the
Company’s records, or if to the Company, at the Company’s principal executive
office.

 

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16.  Fractional Shares.  In lieu of issuing a fraction of a share upon any
exercise of the Option, resulting from an adjustment of the Option pursuant to
the Plan or otherwise, the Company will be entitled to pay to the Participant an
amount equal to the fair market value of such fractional share.

 

17.  No Rights As Shareholder.  The Participant shall not have any rights of a
shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

 

18.  Amendment.  This Agreement may be amended in accordance with the provisions
of the Plan, and may otherwise be amended by written agreement of the
Participant and the Company without the consent of any other person.

 

19.  Definitions.  For purposes of this Agreement, words and phrases shall be
defined as follows:

 

(a)                                  AGO High Stock Price.  The term “AGO High
Stock Price” shall mean the highest forty-trading day average stock price of a
share of Stock as traded on the New York Stock Exchange during the Performance
Period.

 

(b)                                 Change in Control.  The term “Change in
Control” shall be defined as set forth in the Plan.

 

(c)                                  Competitive Activity.  The term
“Competitive Activity” shall mean (i) the Participant’s engaging in an activity,
directly or indirectly, whether as an employee, consultant, partner, principal,
agent, distributor, representative, stockholder (except as a less than one
percent stockholder of a publicly traded company or a less than five percent
stockholder of a privately held company) or otherwise, within the United States,
Bermuda, or the Cayman Islands, if such activities involve insurance or
reinsurance of United States based entities or risks that are competitive with
the financial guaranty insurance business then being conducted by the Company or
any affiliate and which, during the period covered by the Participant’s
employment, were conducted by the Company or any affiliate; or (ii) the
Participant’s engaging in any activity, directly or indirectly, whether on
behalf of himself or herself or any other person or entity (x) to solicit any
client and/or customer of the Company or any affiliate or (y) to hire any
employee or former employee of the Company or any present or former affiliate of
the Company or encourage any employee of the Company or affiliate to leave the
employ of the Company or affiliate; or (iii) the Participant’s violation of
Section 7.3 of the Severance Plan (relating to confidentiality).

 

(d)                                 Date of Termination.  A Participant’s “Date
of Termination” means, 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 if immediately

 

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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; 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.

 

(e)                                  Director.  The term “Director” means a
member of the Board of Directors of Assured Guaranty Ltd., who may or may not be
an employee of the Company or a Subsidiary.

 

(f)                                    Disability.  The Participant shall be
considered to have a “Disability” during the period in which the Participant is
unable, by reason of a medically determinable physical or mental impairment, to
engage in any substantial gainful activity, which condition, in the opinion of a
physician selected by the Committee, is expected to have a duration of not less
than 120 days.

 

(g)                                 Pro-Rata Fraction.  The term “Pro-Rata
Fraction” shall mean a fraction, the numerator of which shall be equal to the
number of days between the Grant Date and the Participant’s Date of Termination
and the denominator of which shall be 1095.

 

(h)                                 Qualifying Termination.  The term
“Qualifying Termination” is defined in Section 1 of the Severance Plan.

 

(i)                                     Severance Plan.  The term “Severance
Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.

 

(j)                                     Vesting Change in Control.  The term
“Vesting Change in Control” shall mean the date of a Change in Control where
this Non-Qualified Stock Option is terminated pursuant to Section 7(b) of this
Agreement.

 

IN WITNESS WHEREOF, the Participant has executed the Agreement, and the Company
has caused these presents to be executed in its name and on its behalf, all as
of the Grant Date.

 

Assured Guaranty Ltd.

 

 

By:

James Michener

 

Its:

General Counsel

 

 

 

 

Participant

 

 

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