Exhibit 10.68

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT was initially made and entered into as of October 5, 2006 (the
“Original Effective Date”) by and between Assured Guaranty Ltd. (“AGL”), a
Bermuda company, Assured Guaranty Corp. (“AGC”), a Maryland corporation
(collectively referred to as the “Company”), and Robert Bailenson (the
“Executive”); and the provisions set forth herein constitute an amendment,
restatement, and continuation of this Agreement as in effect immediately prior
to January 1, 2009 (the “Amendment Effective Date”).

 

WHEREAS, the Company desires to employ the Executive under the terms and
conditions set forth below; and

 

WHEREAS, the Executive wishes to accept such employment under such terms and
conditions.

 

NOW, THEREFORE, in consideration of the promises and mutual covenants contained
herein and for other good and valuable consideration, the Company and the
Executive (the “Parties”) hereby agree as follows:

 

1.         Employment

 

The Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, for the term of this Agreement as set forth in
Section 2 below, in the position and with the duties and responsibilities set
forth in Section 3 below, and upon such other terms and conditions as are
hereinafter stated.

 

2.         Term and Place of Performance

 

(a)       The term of Executive’s employment under this Agreement shall commence
as of the date of this Agreement (the “Commencement Date”) and shall continue,
subject to the terms and conditions of this Agreement, until terminated by any
party on written notice to the other parties.

 

(b)       Executive shall perform his duties for AGL primarily at AGL’s offices
in Bermuda.  Executive shall perform his duties for AGC primarily at AGC’s
offices in the New York City metropolitan area.

 

(c)       The obligations of the Company under this Agreement shall be
contingent upon the maintenance of a work permit by the Government of Bermuda
and any other permits required by the Government of Bermuda. The maintenance of
such permits throughout the term of this Agreement shall be a continuing
condition to the Company’s obligations under this Agreement.   However, if
despite the Executive’s best efforts to

 

1

--------------------------------------------------------------------------------

 

maintain the permits, they are terminated or revoked by the Government of
Bermuda through no fault of the Executive, then (i) the Company may terminate
the employment of the Executive, and in the event of such termination, the
Executive shall be entitled to the benefits provided for Termination Without
Cause under Section 10(e), and (ii) if, as a result of failure to maintain such
permits, and the Company decides Executive may perform his duties at some other
location, and the Executive promptly provides notice that he will not comply
with a request for relocation, and resigns within six months of the Company’s
relocation request, such resignation shall be treated as a Good Reason
Resignation.

 

3.         Positions, Duties. and Time Devoted to the Company & Its Affiliates

 

(a)        During the term of the Agreement, the Executive shall be employed as
the Chief Accounting Officer of AGL and Chief Accounting Officer of AGC, or such
other senior financial position as designated by the chief executive officer of
AGL, with such powers and duties normally attendant to such offices and such
other duties as may be assigned to the Executive.  Executive shall answer to and
be subject to the direction of the chief financial officer or the chief
executive officer of AGL.

 

(b)      The Executive agrees to remain in the employ of the Company during the
term of this Agreement, to devote his full business time exclusively to the
business affairs of the Company, and to perform his duties faithfully.  Subject
to the demands of his position with the Company, the Executive shall be
permitted to:

 

(i)       deliver lectures and fulfill speaking engagements; and

 

(ii)      engage in industry, charitable and community activities; provided,
however, that any expenses, such as for travel, incurred by the Executive in
connection with such activities shall be for the personal account of the
Executive and shall not be reimbursed by the Company, unless based on
managements’ view it is done for the overall benefit of the Company in
forwarding its image, business abilities or quality of staff.

 

(c)       AGL and AGC will fund the salary and other compensation and benefits
under this Agreement specified above in proportion to the percentage of time
executive performs work for each company.

 

4.         Salary

 

For services rendered by the Executive to the Company during the term of this
Agreement while he is employed by the Company, the Executive shall be paid a
minimum annual base salary equal to Executive’s current annual salary.

 

5.          Reserved

 

2

--------------------------------------------------------------------------------

 

6.          Annual Performance Incentive Plan

 

Executive shall be eligible to participate in the Company’s annual incentive
program.

 

7.          Long-Term Incentive Awards

 

Annual Long-Term Incentive Awards—Executive will be eligible to participate in
the AGL Long Term Incentive Plan or similar future plans (“LTIP”).  The amount
of any award made to Executive under LTIP will be based on the profitability of
the Company and Executive’s performance and will be subject to the discretion of
the Compensation Committee of AGL’s Board of Directors.  All Long-Term Incentive
awards will be subject to the terms and conditions of the LTIP.

 

8.          Employee Benefits

 

(a)     During the term of his employment, the Executive shall be entitled to
participate in AGC’s employee benefits programs consistent with such benefits
offered to its employees generally, subject to satisfaction of all eligibility
requirements of general applicability and all other terms and conditions of the
plans.

 

(b)     The Executive shall be entitled to vacation as generally provided to
AGC’s officers and employees.

 

9.          Business Expense Reimbursement and Perquisites

 

(a)     During the term his employment, the Executive shall be entitled to be
reimbursed by Company for all reasonable out-of-pocket travel and entertainment
expenses incurred by him in performing services under this Agreement, provided
that the Executive submits reasonable documentation with respect to such
expenses.

 

(b)     During the term of his employment, Executive shall be entitled to
reimbursement for the reasonable cost of tax preparation and financial planning
services.

 

(c)     The Executive shall be entitled to reimbursement for reasonable
initiation and annual dues at a club of his selection in the New York City
metropolitan area, as approved by the Chief Executive Officer.

 

(d)     The Executive shall be entitled to other perquisites as generally made
available to senior officers of AGC.

 

(e)     The Executive shall be indemnified by the Company in accordance with
AGL’s and AGC’s By-laws, Articles of Incorporation and other governing
documents.

 

3

--------------------------------------------------------------------------------

 

(f)      This Agreement includes the Gross —Up provisions set forth in Exhibit A
hereto, which is incorporated herein by reference.

 

(g)     Payment of reimbursement amounts (including, without limitation,
payments under paragraph (e) above (relating to indemnification) and the
provision of in-kind benefits by the Company under this Agreement that
constitute Deferred Compensation shall be subject to the following:

 

(i)            Such reimbursements shall be made promptly after the Executive
submits reasonable evidence of having incurred the amounts subject to
reimbursement, provided that the Executive is required to provide such evidence
no later than October 31 of the calendar year following the year in which such
expenses are incurred (or such earlier date that is generally applicable, or
such later date, established by the Company that is not later than the end of
the calendar year following the year in which such expenses are incurred), and
shall be paid by the Company not later than the last day of the calendar year
following the year in which such expenses are incurred.

 

(ii)           To the extent required to avoid accelerated recognition of
taxable income or imposition of additional tax under Code section 409A, the
amount of expenses eligible for reimbursement, or in-kind benefits provided,
during the Executive’s taxable year may not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

(iii)          To the extent that the Executive is eligible for reimbursement of
tax liability with respect to taxes paid by the Executive, such reimbursement
shall be made no later than the end of the calendar year following the calendar
year in which the taxes are remitted to the taxing authority.

 

(iv)          The Executive’s right to reimbursement or in-kind benefits is not
subject to liquidation or exchange for another benefit.

 

10.        Termination of Employment

 

(a)     Termination Due to Death

 

In the event of the Executive’s death during the term of his employment
hereunder, the estate or other legal representative of the Executive shall be
entitled to.

 

(i)                continuation of the Executive’s annual base salary provided
in Section 4 above through the last day of the month in which the Executive
dies; and

 

(ii)               any rights and benefits available under any employee benefits
plans, policies, and practices of the Company, determined in accordance with the

 

4

--------------------------------------------------------------------------------

 

applicable terms and provisions of such plans, policies, and practices as in
effect on the date of the Executive’s death.

 

(b)     Termination Due to Disability

 

In the event the Executive’s employment by the Company is terminated because he
is adjudged by the Compensation Committee to be disabled within the meaning of
the Company’s long-term disability plan, the Executive shall be entitled to:

 

(i)            continuation of the annual base salary provided in Section 4
above through the last day of the month in which the Executive’s employment with
the Company terminates due to disability; and

 

(ii)           any rights and benefits available under any employee benefits
plans, policies, and practices of the Company, determined in accordance with the
applicable terms and provisions of such plans, policies, and practices as in
effect on the date of the Executive’s termination of employment.

 

(c)     Termination Due to Retirement

 

The Executive may terminate his employment with the Company by retirement by
giving written notice to the Company any time after he is at least 55 years old
and has five or more years of service with the Company. In the event the
Executive’s employment by the Company is terminated because of retirement, the
Executive shall be entitled to:

 

(i)            continuation of the annual base salary provided in Section 4
above through the date the Executive’s employment with the Company terminates
due to retirement; and

 

(ii)           any rights and benefits available under any employee benefits
plans, policies, and practices of the Company, determined in accordance with the
applicable terms and provisions of such plans, policies, and practices as in
effect on the date of the Executive’s termination of employment; and

 

(iii)          in the discretion of the Compensation Committee of AGL’s Board of
Directors (Compensation Committee approval is not required if Executive retires
after age 60 with at least ten (10) years of service), any AGL restricted shares
and stock options held by Executive upon retirement will continue to vest in
accordance with the schedules set forth in the award grants, and stock options
to purchase shares of AGL stock will be exercisable until the expiration of
their original term.  Such restricted stock and stock options will otherwise be
subject to the provisions of the LTIP.

 

5

--------------------------------------------------------------------------------

 

(d)     Termination by the Company for Cause

 

(i)            The employment of the Executive under this Agreement may be
terminated by the Company for Cause (“Termination For Cause”).  For purposes of
this Agreement, “Cause” shall mean;

 

(A)       conviction or admission of guilt by the Executive of a felony
involving moral turpitude;

 

(B)        violations of Section 11 or 12 of this Agreement; or

 

(C)        the Executive, in carrying out his duties, has committed  (1) a
willful, serious, and continued failure to perform his duties,  (2) willful and
serious misconduct or (3) a willful and material breach of the Company Code of
Conduct; provided, however, that any act, or failure to act, by the Executive
shall not constitute Cause for purposes of this Section 10(d)(i)(C) if such act
or failure to act, was committed, or omitted, by the Executive in good faith and
in a manner he reasonably believed to be in the best interests of the Company.

 

(ii)           In the event of a Termination For Cause all grants under the
LTIP, the Performance Retention Plan or other similar incentive plans to
Executive, before or after the date of this agreement, shall terminate and be
forfeited as of the date of the Termination For Cause and the Company shall have
no further obligation to Executive with respect to such grants. The Executive
shall be entitled only to:

 

(a)         continuation of the annual base salary provided in Section 4 above
through the date of the Termination For Cause; and

(b)        any other rights and benefits, if any, available to employees
terminated for cause under employee benefit plans, policies, and practices of
the Company, determined in accordance with the applicable terms and provisions
of such plans, policies, and practices, as in effect on the date of his
termination of employment.

 

(e)     Termination Without Cause

 

(i)            Anything in this Agreement to the contrary notwithstanding, the
Executive’s employment may be terminated without Cause as provided in this
Section 10(e) (“Termination Without Cause”).  Termination Without Cause shall
mean either (1) a termination by the Company of the Executive’s employment,
(other than a Termination For Cause); or (2) a termination by

 

6

--------------------------------------------------------------------------------

 

the Executive due to a Good Reason Resignation.  A Good Reason Resignation shall
mean termination of employment that is voluntary on the part of the Executive
but is due to:  (i) a significant reduction of the Executive’s responsibilities,
title or status resulting from a change in such title or status, or from the
assignment to the Executive of any duties inconsistent with this Agreement; or
(ii) a reduction in the Executive’s salary, bonus potential, or a material
reduction of benefits; but only if the conditions described in clause (i) or
(ii) constitute a material negative change to the Executive in the service
relationship, as that phrase is used in Treas. Reg. §1.409A-1(n)(2)(i).

 

(ii)           In the event there is a Termination Without Cause, the Executive
shall be entitled to the following:

 

(A)       continuation of Executive’s then current annual base salary until the
date which is twenty-four months after the last day of the month in which such
termination occurs (“Payment Period”); provided, however, that payments pursuant
to this Section 10(e) are subject to the provisions of Section 13 and further
provided, that any payments made with respect to any month by the Company under
paragraphs 4, 6, 7, 8(b) herein after Executive’s termination of employment will
reduce by an equal amount any payments to be made hereunder as salary
continuation for that month;

 

(B)        Base Bonus for the year of Termination Without Cause, subject to a
pro rata reduction to reflect the portion of the performance period after the
termination occurs, payable within 30 days of the Termination Without Cause, and
a Base Bonus for each 12 month period of the Payment Period, payable within 5
days of the end of each such 12 month period.  The Base Bonus shall equal the
average of the Executive’s annual cash bonus for the three (3) years proceeding
the year of Termination Without Cause.

 

(C)        during the Payment Period continuation of coverage under the employee
benefit plans of the Company in which the Executive was participating at the
time of his termination of employment; provided, however, that (1) except as
required by applicable law, any such continued coverage shall terminate upon the
subsequent full-time employment of the Executive, and (2) if the Company is
unable to continue such coverage, then they shall provide the Executive with
economically equivalent employee benefits to the extent such benefits are
reasonably available.

 

7

--------------------------------------------------------------------------------

 

(D)        Any awards of restricted Company stock and options to purchase
ordinary shares of Company stock held by Executive will continue to vest and
stock options shall be exercisable in accordance with the terms of the awards
until the end of the Payment Period.

 

(ii)           At the discretion of the Compensation Committee, to the extent
that amounts payable under Sections 10(e)(ii)(A) and (B) are not Deferred
Compensation, the present value of any amounts payable to the Executive under
Sections 10(e)(ii)(A) and (B) may be paid to the Executive in a lump sum.  The
interest rate used in determining the present value shall be the interest rate
on one-year United States Treasury Bills at the auction of such instruments
nearest in time to the date of the Executive’s termination of employment under
this Section 10(e). Any such lump sum payment by the Company to the Executive
shall not affect the obligations of the Company to provide the other benefits
described in Section 10(e).

 

(iii)          The obligation of the Company to make or provide the payments and
benefits set forth in this Section 10(e) shall be strictly conditioned on the
Executive executing and returning to the Company a general release and waiver of
all claims against the Company in the form as submitted by the Company, and on
such release being returned and becoming irrevocable not later than the 15th day
of the third calendar month following the Executive’s termination of employment
(or such later time as may be permitted by the Company); provided that to the
extent benefits provided pursuant to this Section 10(e) would constitute
Deferred Compensation, such benefits shall be paid to the Executive only if the
release is returned within 60 days after the Executive’s termination of
employment; and further provided that with respect to amounts payable under
Sections 10(e)(ii)(A) and (B) that are Deferred Compensation, any such payment
shall be made on the later of (I) the 15th day of the third calendar month
following the Executive’s termination of employment, and (II) the date payment
of such amounts that would otherwise have been due absent the provisions of
clause (I) above; and further provided that amounts delayed pursuant to clause
(I) shall be accumulated without interest paid on the date determined in
accordance with such clause (I).

 

(iv)          During the Payment Period the Executive shall make a good faith
effort to seek other employment consistent with Executive’s professional
qualifications and experience in Executive’s most recent position with the
Company.  If Executive attains other employment during the Payment Period he
shall promptly so notify the Company.  As a condition of the Executive’s
continuing benefits under this Section 10(e), the Company may require the
Executive to certify, from time to time, that he has not been employed by a new
employer.  The Company shall reduce any amounts

 

8

--------------------------------------------------------------------------------

 

payable to Executive under this Section 10(e) by the amount of any income
received by the Executive from the new employer, as reported on Executive’s W-2
or equivalent form, issued by the new employer with respect to the Payment
Period.  Executive shall cooperate fully with the Company in calculating the
amount of any reduction, including providing the Company copies of pay stubs and
W-2’s from the new employer.

 

(f)      Voluntary Termination by the Executive

 

The Executive may voluntarily terminate his employment with the Company at any
time. Such termination shall constitute a voluntary termination and, in such
event, the Executive shall be limited to the same rights and benefits as
applicable to Termination For Cause.

 

(g)     Change in Control

 

(i)            The term Change in Control shall be as defined in the Company’s
Long-Term Incentive Plan as of the date hereof.  In the event of a Change in
Control, all stock based awards in which the Executive is not yet vested shall
become fully vested and stock options shall be exercisable for their original
term.  Following a Change of Control the Company may not reduce Executive’s
eligibility for retiree health benefits or for 15 months following a Change of
Control reduce the level of employer contributions to the Company’s retirement
plans on behalf of the Executive below the rate in effect on December 31st of
the year preceding the Change of Control; in each case such benefit may be
provided through the Company’s non-qualified plans in accordance with the terms
of such plans.

 

(ii)           If Executive is terminated by the Company for any reason
following a Change of Control or the Executive resigns for any reason during the
twelve month period beginning three (3) months following a Change in Control
(“COC Termination”), Executive shall be entitled to the following:

 

(A)      continuation of Executive’s then current annual base salary until the
date which is thirty-six (36) months after the last day of the month in which
the COC Termination  occurs (“COC Payment Period”); provided, however, that
payments pursuant to this Section 10(g) are subject to the provisions of
Section 13 and provided, however, that any payments made with respect to any
month by the Company under paragraphs 4, 6, 7, 8(b) herein after Executive’s
termination of employment will reduce by an equal amount any payments to be made
hereunder as salary continuation for that month;

 

9

--------------------------------------------------------------------------------

 

(B)           COC Base Bonus for the year of termination, subject to a pro rata
reduction to reflect the portion of the performance period after the termination
occurs, payable within 30 days of the COC Termination, and a COC Base Bonus for
each 12 month period of the COC Payment Period, payable within 5 days of the end
of each such 12 month period.  The COC Base Bonus shall equal 150% of the
average of the Executive’s annual cash bonus for the three (3) years proceeding
the year of COC Termination.

 

(C)           a lump-sum payment equal to the amount of employer contributions
to the Company’s retirement plans on behalf of the Executive for the year
preceding the Change of Control multiplied by 125%; provided that such payment
shall be made within 30 days of the COC Termination.

 

(D)          monthly payments for each of the thirty-six (36) months following
the COC Termination, with each such payment equal to one-twelfth (1/12) of the
annual level of employer contributions to the Company’s retirement plans that
would be made on behalf of the Executive with respect to salary continuation and
bonus payments, as described in this Section 10(g), with the annual level of
employer contributions to equal the level in effect on December 31st of the year
preceding the Change of Control.

 

(iii)          At the discretion of the Compensation Committee, to the extent
that amounts payable under Sections 10(g)(ii)(A) and (B), the present value of
any amounts payable to the Executive under Sections 10(g)(ii)(A) and (B) may be
paid to the Executive in a lump sum.  The interest rate used in determining the
present value shall be the interest rate on one-year United States Treasury
Bills at the auction of such instruments nearest in time to the date of the
Executive’s termination of employment under this Section 10(g).  Any such lump
sum payment by the Company to the Executive shall not affect the obligations of
the Company to provide the other benefits described in Section 10(g).

 

(iv)          The obligation of the Company to make or provide the payments and
benefits set forth in this Section 10(g) shall be strictly conditioned on the
Executive executing and returning to the Company a general release and waiver of
all claims against the Company in the form as submitted by the Company, and on
such release being returned and becoming irrevocable not later than the 15th day
of the third calendar month following the Executive’s termination of employment
(or such later time as may be permitted by the Company); provided that to the
extent benefits provided pursuant to this Section 10(e) would constitute
Deferred Compensation, such benefits shall be paid to the Executive only if the
release is returned within 60 days after

 

10

--------------------------------------------------------------------------------

 

the Executive’s termination of employment; and further provided that with
respect to amounts payable under Sections 10(g)(ii)(A) and (B) that are Deferred
Compensation, any such payment shall be made on the later of (I) the 15th day of
the third calendar month following the Executive’s termination of employment,
and (II) the date payment of such amounts that would otherwise have been due
absent the provisions of clause (I) above; and further provided that amounts
delayed pursuant to clause (I) shall be accumulated without interest paid on the
date determined in accordance with such clause (I).

 

(h)          Resignation Upon Termination

 

At the time of termination of employment for any reason, the Executive agrees at
the request of the Company to resign from any position he holds as a Director
(or other similar position) of the Company and any Affiliates, unless other
explicit arrangements are agreed upon between the Executive and the Company.

 

(i)           Termination of Employment

 

References in this Agreement to the Executive’s termination of employment
(including references to the Executive’s employment termination, and to the
Executive terminating employment) shall mean the Executive ceasing to be
employed by the Company and the Affiliates, subject to the following:

 

(i)         The employment relationship will be deemed to have ended at the time
the Executive and his or her employer reasonably anticipate that a level of bona
fide services the Executive would perform for the Company and the Affiliates
after such date (whether as an employee or independent contractor, but not as a
director) would permanently decrease to no more than 20% of the average level of
bona fide services performed over the immediately preceding 36 month period (or
the full period of service to the Company and the Affiliates if the Executive
has performed services for the Company and the Affiliates for less than 36
months).  In the absence of an expectation that the Executive will perform at
the above-described level, the date of termination of employment will not be
delayed solely by reason of the Executive continuing to be on the Company’s and
the Affiliates’ payroll after such date.

 

(ii)        The employment relationship will be treated as continuing intact
while the Executive is on a bona fide leave of absence (determined in accordance
with Treas. Reg. §1.409A-1(h)).

 

(iii)       The determination of the Executive’s termination of employment by
reason of a sale of assets, sale of stock, spin-off, or other similar
transaction of the

 

11

--------------------------------------------------------------------------------

 

Company or an Affiliate will be made in accordance with Treas. Reg.
§1.409A-1(h).

 

(iv)       The term “Affiliates” means all persons with whom the Company is
considered to be a single employer under section 414 (b) of the Code and all
persons with whom the Company would be considered a single employer under
section 414 (c) of the Code.

 

(i)          Deferred Compensation Restrictions

 

If the Executive is a Specified Employee at the time of termination of
employment, payments of benefits under this Agreement that constitute Deferred
Compensation may not be paid before the date that is six months after the date
of termination of employment or, if earlier, the date of death of the
Executive.  At the end of the six-month period described in the preceding
sentence, amounts that could not be paid by reason of the limitation in this
paragraph (i) shall be paid on the first day of the seventh month following the
date of termination of employment.  For purposes of this Agreement, the term
“Specified Employee” shall be defined in accordance with Treas. Reg.
§1.409A-1(i) and such rules as may be established by the Chief Executive Officer
of the Company or his or her delegate from time to time.  For purposes of this
Agreement, the term “Deferred Compensation” means payments or benefits that
would be considered to be provided under a nonqualified deferred compensation
plan as that term is defined in Treas. Reg. §1.409A-1 (and excludes, among other
things, certain amounts not treated as providing for the deferral of
compensation pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), which provides for
the exclusion of certain separation payments which are less than $450,000,
subject to certain other provisions and restrictions).

 

11.          Noncompetition

 

(a)         During the term of the Executive’s employment and for the  period of
12 months following the termination of Executive’s  employment for any reason
other than a Termination Without Cause, the Executive shall not, 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, engage, 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
and which, during the period covered by the Executive’s employment, were 
conducted by the Company.  This section will not be in effect after the
Executive’s termination of employment, subject to the following:

 

12

--------------------------------------------------------------------------------

 

(i)            The Company may, at its option, by notice to the Executive
provided to the Executive not later than 10 days after the termination of
employment, agree to continue to pay the Executive’s base salary for the period
that ends at the earlier of (A) the one year anniversary of the Executive’s
termination or resignation from employment for any reason or (B) the last date
on which amounts could be paid and satisfy the short-term deferral exception to
treatment of such payments as Deferred Compensation (as provided in Treas. Reg.
§1.409A-1(b)(4)), and the restrictions of this Section shall remain in effect
during the period as to which those payments are made.  The Company’s election
to make the payments under this paragraph (i) shall apply to not less than the
entire period set forth in the preceding sentence, except with the consent of
the Executive.

 

(ii)           If the Company elects to make payments in accordance with
paragraph (i) above, and such period ends earlier than one-year anniversary of
the date of termination, then the Company may, by notice to the Executive during
the first 15 days of the taxable year following the taxable year in which the
Executive’s termination of employment occurs, elect to continue to make such
payments for the remainder of the period ending on the one-year anniversary of
the termination date, and the restrictions of this Section shall remain in
effect during the remainder of such one-year period.  The Company’s election to
make the payments under this paragraph (ii) shall apply to not less than the
entire period set forth in the preceding sentence, except with the consent of
the Executive.

 

(b)       For the period of 12 months following the termination of Executive’s
employment for any reason, the Executive shall not, directly or indirectly, hire
or solicit to hire any employee or former employee of the Company or its
affiliates nor encourage any employee of the Company or its affiliates to leave
the employ of the Company or its affiliates

 

12.          Confidential Information

 

The Executive covenants that he shall not, without the prior written consent of
the Chief Executive Officer use, or disclose to any person (other than an
employee of either of the Company, or other person to whom disclosure is
necessary to the performance by the Executive of his duties in the employ of the
Company) any confidential or proprietary information about the Company or their
business, unless and until such information has become known to the public
generally (other than as a result of unauthorized disclosure by the Executive).
The foregoing covenants by the Executive shall be without limitation as to time
and geographic applications.

 

13

--------------------------------------------------------------------------------

 

13.          Remedy for Violation of Non-competition or Confidential Information
Provisions

 

Without intending to limit the remedies available to the Company for the breach
of any of the Executive’s covenants in Sections 11 and 12, the Executive
acknowledges and agrees that damages at law are an insufficient remedy for the
Company and that, accordingly, the Company shall be entitled to apply for and
obtain injunctive relief in any court of competent jurisdiction to restrain the
breach or threatened breach, or otherwise specifically enforce, any or all of
said covenants. Executive acknowledges that each of the covenants contained in
Sections 11 and 12 is an essential element of this Agreement. If any covenant or
term of Section 11 or 12 or any portion thereof of this Section 13, is
determined to be invalid or unenforceable in any instance, such determination
shall not prevent the reassertion thereof with respect of any other breach or
violation. If, in any proceeding, a court (or other tribunal) refuses to enforce
the covenants contained in Section 11 or 12 or this Section 13 because such
covenants cover too extensive a geographic area or too long a period of time,
any such covenant shall be deemed amended to the extent (but only to the extent)
required by law to permit its enforceability hereunder. Notwithstanding anything
contained in this Agreement to the contrary, in the event that the Executive’s
employment is Terminated Without Cause or by a COC Termination and the Court
determines by a final, non-appealable order that the Executive has violated
applicable provisions of Section 11 or 12 of this Agreement, then the Company
shall be entitled to discontinue any payments or benefits that would otherwise
be provided under Section 10 and the Executive shall forfeit his rights to the
same.

 

14.          Withholding

 

Anything in this Agreement to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive shall be subject
to withholding of such amounts relating to taxes as the Company may reasonably
determine they are required to withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in their sole discretion, accept other provision for payment of
taxes as required by law, provided they are satisfied that all requirements of
law affecting their responsibilities to withholding such taxes have been
satisfied.

 

15.          Arbitration of All Disputes

 

Subject to the provisions of Section 15, any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Hamilton in accordance with the law of Bermuda by
three arbitrators appointed by the parties. If the parties cannot agree on the
appointment of the arbitrators, one shall be appointed by the Company and one by
the Executive and the third shall be appointed by the first two arbitrators. If
the first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the Chief Justice of the Supreme
Court of Bermuda. The arbitration shall be conducted in accordance with the
rules of the Bermuda Arbitration Act, 1986, as amended, except with respect to
the

 

14

--------------------------------------------------------------------------------

 

selection of the arbitrators which shall be as provided in this Section 15.
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The arbitrators’ fees and any expenses relating to
the arbitration (other than the Parties’ own legal fees and expenses) shall be
shared equally by the parties.

 

16.          Entire Agreement

 

This Agreement as in effect as of the Amendment Effective Date contains the
entire agreement between the Parties concerning the subject matter hereof and
supercedes and replaces all prior agreements, undertakings, discussions,
negotiations, and undertakings, whether written or oral, between the Company and
the Executive with respect thereto, including, but not limited to, the letter
dated August 23, 2004 to Executive  from Dominic Frederico, and the version of
this Agreement entered into as of the Original Effective Date and as in effect
immediately prior to the Amendment Effective Date.

 

17.          Assignability; Binding Nature

 

This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, heirs, and assigns. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive,
other than his rights to receive salary and bonuses hereunder which may be
transferred by will or operation of law subject to the limitations of this
Agreement. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that that assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations,
and duties of the Company as contained in this Agreement, either contractually
or as a matter of law.

 

18.          Amendment or Waiver

 

No provision in this Agreement may be amended or waived unless such amendment or
waiver is (1) agreed to in writing, and (2) the agreement is signed by the
Executive and by authorized officers of AGC and AGL. No waiver by any party
hereto of any breach by any other party of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time.

 

15

--------------------------------------------------------------------------------

 

19.                                 Notices

 

Any notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below to such changed
address of which such party may subsequently by similar process give notice:

 

If to the Company:

 

Assured Guaranty Ltd.

 

 

30 Woodbourne Ave

 

 

Hamilton, Bermuda

 

 

Attention: General Counsel

 

 

 

If to the Executive:

 

Mr. Robert Bailenson

 

 

8 Halyard Court, Cold Spring Harbor

 

 

New York, 11724

 

20.                               Severability

 

In the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

 

21.                               Survivorship

 

The respective rights and obligations of the parties shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.

 

22.                               References

 

In the event of the Executive’s death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his estate or other legal representative. All
statements of or references to dollar amounts in this Agreement shall mean
lawful money of the United States of America.

 

23.                               Governing-Law

 

This Agreement shall be governed by and construed and interpreted in accordance
with the laws of Bermuda, without reference to the principles of conflict of
laws of any jurisdiction.

 

16

--------------------------------------------------------------------------------

 

24.                               Headings

 

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

 

25.                               Counterparts

 

This Agreement may be executed in one or more counterparts.

 

IN WITNESS WHEREOF, the Executive has signed this Agreement on the date set
forth below and, on behalf of the Company, the undersigned officer of the
Company has executed this Agreement pursuant to the authority delegated to him
by resolutions of the Compensation Committee of the Board of Directors on
August 8, 2007.

 

 

 

Assured Guaranty Ltd., Assured Guaranty Corp.

 

 

 

 

Date:             , 2008

By:

 

 

James Michener

 

 

 

Their General Counsel

 

 

 

 

Date:             , 2008

 

 

Robert Bailenson

Date:

 

 

17

--------------------------------------------------------------------------------

 

EXHIBIT A
Gross-Up Provisions

 

(a)  Anything in this Agreement to the contrary notwithstanding, except for
paragraph (b) below, in the event it shall be determined that the Executive
shall become entitled to payments and/or benefits provided by this Agreement or
any other amounts in the “nature of compensation” (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the Company
or any affiliate, any person whose actions result in a change of ownership or
effective control of the Company covered by Section 280G of the Code or any
person affiliated with the Company or such person) as a result of such change in
ownership or effective control of the Company (a “Payment”) would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

 

(b)  Notwithstanding the provisions of paragraph (a) above, if it shall be
determined that the Executive would otherwise be entitled to the Gross-Up
Payment, but the value of all Payments do not exceed 310% of the Executive’s
“base amount,” within the meaning of Section 280G of the Code, then no Gross-Up
Payment shall be made to the Executive and the amounts payable under this
Agreement or any other amounts in the “nature of compensation” (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company) shall be reduced so that the value of all Payments, in the
aggregate, equals the Safe Harbor Amount.  The “Safe Harbor Amount” means 2.99
times the Executive’s “base amount,” within the meaning of Section 280G of the
Code.  The reduction in accordance with this paragraph (b) shall be made in the
following order:

 

(i)  First, by reducing the cash amounts of Payments (excluding coverage under a
hospitalization plan, major medical plan, dental plan, group-term life insurance
plan, accidental death and dismemberment plan (“welfare benefits”) that would
not constitute Deferred Compensation (with the Payments subject to such
reduction to be determined by the Company), to the extent necessary to decrease
the Payments to the Base Amount.

 

(ii)  Next, if after the reduction to zero of the amounts described in paragraph
(i) above, the remaining scheduled Payments are greater than the Base Amount,
then by reducing the cash amounts of Payments (excluding welfare benefits) that
constitute Deferred Compensation, with the reductions to be applied first to the
Payments scheduled for the latest distribution date, and then applied to

 

18

--------------------------------------------------------------------------------

 

distributions scheduled for progressively earlier distribution dates, to the
extent necessary to decrease the Payments to the Base Amount.

 

As a result of uncertainty in the application of Section 280G of the Code at the
time of any initial determination by the Accounting Firm (as described in
paragraph (c) below), it is possible that Payments will have been paid or
distributed by the Company which should not be so paid or distributed
(“Overpayment”) or that additional Payments which were not paid or distributed
by the Company could have been so paid or distributed (“Underpayment”), in each
case, consistent with the calculation of the amount due hereunder.  In the event
that the Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company promptly upon receiving notice of such
Overpayment together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company (or if paid by the Executive to the
Company shall be returned to the Executive) if and to the extent such payment
would not reduce the amount which is nondeductible under Section 280G of the
Code or which is subject to taxation under Section 4999 of the Code.  In the
event that the Accounting Firm determines that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code.

 

(c)  Subject to the provisions of paragraph (d) below, all determinations
required to be made under this Exhibit A, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment, or whether a
reduction in Payments is required under paragraph (b) above is required, and the
assumptions to be utilized in arriving at such determination, shall be made by a
nationally recognized accounting firm (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the Company.  The
Accounting Firm shall be jointly selected by the Company and the Executive and
shall not, during the two years preceding the date of its selection, have acted
in any way on behalf of the Company or its affiliated companies.  If the Company
and the Executive cannot agree on the firm to serve as the Accounting Firm, then
the Company and the Executive shall each select a nationally recognized
accounting firm and those two firms shall jointly select a nationally recognized
accounting firm to serve as the Accounting Firm.  All fees and expenses of the
Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as
determined pursuant to this Exhibit A, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm’s
determination.  If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive’s applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty.  Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.  As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments

 

19

--------------------------------------------------------------------------------

 

which will not have been made by the Company should have been made (a “Gross-Up
Underpayment”), consistent with the calculations required to be made hereunder. 
In the event that the Company exhausts its remedies pursuant to paragraph
(d) below and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Gross-Up
Underpayment that has occurred and any such Gross-Up Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.

 

(d)  The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.  The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he or she gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due).  If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

 

(i)                                   give the Company any information
reasonably requested by the Company relating to such claim,

 

(ii)                                take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,

 

(iii)                             cooperate with the Company in good faith in
order effectively to contest such claim, and

 

(iv)                            permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.

 

Without limitation on the foregoing provisions of this paragraph (d), the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company

 

20

--------------------------------------------------------------------------------

 

shall advance the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided the Executive
shall not be required by the Company to agree to any extension of the statute of
limitations relating to the payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
unless such extension is limited solely to such contested amount.  Furthermore,
the Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

 

(e)  If, after the receipt by the Executive of an amount advanced by the Company
pursuant to paragraph (d) above, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of paragraph (d) above) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto).  If, after the receipt by the Executive
of an amount advanced by the Company pursuant to paragraph (d) above, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

 

(f)  If, pursuant to regulations issued under Section 280G or 4999 of the Code,
the Company and the Executive were required to make a preliminary determination
of the amount of an excess parachute payment and thereafter a redetermination of
the Excise Tax is required under the applicable regulations, the parties shall
request the Accounting Firm to make such redetermination.  If as a result of
such redetermination an additional Gross-Up Payment is required, the amount
thereof shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm’s determination.  If the redetermination of the
Excise Tax results in a reduction of the Excise Tax, the Executive shall take
such steps as the Company may reasonably direct in order to obtain a refund of
the excess Excise Tax paid.  If the Company determines that any suit or
proceeding is necessary or advisable in order to obtain such refund, the
provisions of paragraph (d) above relating to the contesting of a claim shall
apply to the claim for such refund, including, without limitation, the
provisions concerning legal representation, cooperation by the Executive,
participation by the Company in the proceedings and indemnification by the
Company.  Upon receipt of any such refund, the Executive shall promptly pay the
amount of such refund to the Company.  If the amount of the income taxes
otherwise payable by the Executive in respect of the year in which the Executive
makes such payment to the Company is reduced as a result of such payment, the
Executive shall, no later than the filing of his income tax return in respect of
such year, pay the amount of such tax benefit to the Company.  In the event
there is a subsequent redetermination of the Executive’s income taxes resulting
in a reduction of such tax benefit, the Company

 

21

--------------------------------------------------------------------------------

 

shall, promptly after receipt of notice of such reduction, pay to the Executive
the amount of such reduction.  If the Company objects to the calculation or
recalculation of the tax benefit, as described in the preceding two sentences,
the Accounting Firm shall make the final determination of the appropriate
amount.  The Executive shall not be obligated to pay to the Company the amount
of any further tax benefits that may be realized by him or her as a result of
paying to the Company the amount of the initial tax benefit.

 

22

--------------------------------------------------------------------------------