Exhibit
10.65


 


EMPLOYMENT
AGREEMENT


 


THIS
AGREEMENT was
initially made and entered into as of the 28th day of April, 2004 (the
“Original Effective Date”) by and between, Assured Guaranty Corp., a Maryland
corporation (referred to as the “Company”), and Michael J. Schozer (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 offer employment to
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


 


The term of the Agreement
shall commence as of the date of the closing of the initial public offering of
Assured Guaranty Ltd. common shares registered under the Securities Act of
1933, as 


 


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amended (the “Commencement Date”) and shall
continue through the close of business on third anniversary of the Commencement
Date, subject to the terms and conditions of this Agreement (“Initial
Term”).  This Agreement shall
automatically renew for a one-year term after the Initial Term, and each succeeding
twelve months thereafter, unless either party gives notice in writing at least
30 days prior to the expiration of the Initial Term or succeeding one year term
of its intention not to renew the Agreement.  
If non-renewal is at the option of Executive, it shall be treated as a
Voluntary Termination.  If non-renewal is
at the option of Company, it shall be treated as a Termination Without Cause as
that term is defined in Section 10(d) herein.


 


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 President of the Company,
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
Executive Officer.


 


(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 


 


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based on managements’ view it is done for the
overall benefit of the Company in forwarding its image, business abilities or
quality of staff.


 


4. Salary
and Sign-on Bonus


 


(a) 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 at a rate of
$350,000.  The annual base salary shall
be paid on a bi-weekly basis by the Company.


 


(b) Sign-on
Bonus— On or before January 30th, 2004,
the Company shall pay to the Executive the sum of $500,000 (less applicable
withholding) in a lump sum payment by way of sign-on bonus which shall be made
only once during the term of this Agreement. If during the first 12 months of
this Agreement Executive’s employment terminates either for Cause, as defined
herein, or voluntarily by Executive, Executive must refund a portion of the
bonus by offset of last check and direct payment of remaining balance.  The amount of bonus refund by Executive shall
be in an amount prorated to the portion of the first 12 months of this
Agreement that Executive does not serve the Company.


 


5. Annual Performance Incentive Plan


 


Subject to the
terms and conditions of this Agreement, once a year during the Initial Term,
Executive shall receive an annual performance incentive bonus award equal to no
less than 100% of his annual base salary, plus up to an additional 100% of his
annual base salary (the amount of which shall be the “Target Amount”), such amount
to be determined by Company based upon Company results and performance of
Executive. After the Initial Term, annual performance 


 


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incentive bonus awards will be in an amount
determined by the Compensation Committee of the Board of Directors and based on
the performance of the Company and the Executive.  Notwithstanding the foregoing, for as long as
the Company continues to participate in the ACE Group short-term incentive
program, Executive will be eligible to participate in such plan, pursuant to
its terms, as may be in effect from time to time .


 


6. Long-Term
Incentive Awards


 


(a) Sign-on Equity Award— 
When Assured Guaranty Limited (“AGL”) issues shares of publicly traded
stock, Executive will be granted an award of 120,000 restricted ordinary shares
of AGL stock that will vest 25% annually over a four year period with the first
quarter vesting starting one year after the date of the award .  When AGL issues shares of publicly traded
stock, Executive will also be granted an award of an option to purchase at the
IPO price 240,000 shares of AGL stock. 
These shares and options will be subject the terms and conditions that
will be set forth in the AGL Long-Term Incentive Plan (“LTIP”).   The current projected target share value for
the IPO AGL shares is $20.   Upon vesting
or exercise of stock options, the shares will be registered in the United
States with the SEC and appropriate states and will be freely tradable.


 


(b) Annual Long-Term Incentive Awards—After AGL issues
shares of publicly traded stock, Executive will participate in the LTIP.  If AGL determines that it has made a profit
during any year of the Initial Term, the value of any LTIP award made to
Executive for that year will be no less than the amount of his annual base
salary. The initial “target award” for the Initial Term will be 40,000
restricted shares of AGL stock and 80,000 options to purchase shares of AGL
stock, but the amount of any such LTIP award beyond the amount of Executive’s
annual base salary will be will be based on the profitability of AGL and
Executive’s performance and will be 


 


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subject to the discretion of the Compensation Committee of AGL’s Board
of Directors.   Subsequent to the Initial
Term, the entire amount of any award made to Executive under Long-Term
Incentive Plan will be based on the profitability of AGL 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.


 


Moreover, for as long as the
Company remains majority owned subsidiary of 
ACE Limited  and the Company
continues to participate in the ACE Limited Long —Term Incentive Plan,
Executive will be eligible to participate in the ACE Limited Long-Term
Incentive Plan, pursuant to its terms, as may be in effect from time to time .


 


(c) Retirement—If
Executive retires at age 55 or older from Company and has at least three years
of service with the Company, any restricted shares of Company ordinary stock
and options to purchase shares of Company stock held by Executive upon
retirement will continue to vest in accordance with the schedules set forth in
the award grants, will be exercisable until the expiration of their original
term, and will otherwise be subject to the provisions of the applicable Company
long-term incentive plan.


 


(d) Other-  Nothing in this Agreement shall be construed to require the Company or
any other person to take steps or not take steps (including, without
limitation, the giving or withholding of consents) that would result in a
Change in Control or an initial public offering of Company’s securities.  In addition, restricted stock grant awards
and stock option agreements presented to Executive under the LTIP shall not be
inconsistent with the terms of this Agreement and to the extent that such
awards or grants include terms that are not addressed in this Agreement the
terms of said awards and grants shall apply in full force and effect.


 


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7.  Employee Benefits


 


(a) During the term of his employment,
the Executive shall be entitled to participate in the Company’s retirement
plan, supplemental retirement plan, hospitalization plan, major medical plan,
dental plan, group-term life insurance plan, accidental death and dismemberment
plan, and such other employee benefits programs consistent with such benefits
offered currently to senior executives of ACE , 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
four weeks of vacation in a full calendar year. 
Unused vacation days shall expire as of the last day of each one year
period and may not be accumulated, carried forward or redeemed for other
compensation.


 


(c)  Notwithstanding the foregoing, for as long as the Company continues to
participate in the existing employee benefit plans,  Executive shall continue to be able to
participate in such plans, pursuant to their terms, as may be in effect from
time to time .


 


8. Business Expense
Reimbursement. Accommodation. Other 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 any tax
preparation service and financial planning.


 


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(c) The
Executive shall be indemnified by the Company in accordance with its Articles
of Incorporation,


 


(d)  Executive will be eligible to
participate in the Executive automobile program.


 


(e)  This Agreement includes the Gross
—Up provisions set forth in attachment A hereto which are incorporated herein
by reference.


 


(f) 
Payment of reimbursement amounts (including, without limitation, payments under
paragraph (c) 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.


 


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(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.


 


9. 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;


 


(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 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:


 


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(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;


 


(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 by the Company for Cause.


 


(i) The employment of the
Executive under this Agreement may be terminated by the Company 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 10
or 11 of this Agreement; or


 


(C) the Executive, in
carrying out his duties, has been guilty of (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 9(c)(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 of the Executive’s employment for Cause under Section 9(c)(i) above,
the Executive shall be entitled only to:


 


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(a) continuation
of the annual base salary provided in Section 4 above through the date on
which termination for Cause occurs; and


 


(b) any other rights and benefits, if
any, available 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.


 


(d) 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 9(d).  Termination Without Cause shall mean either (1) a
termination of the Executive’s employment by the Company, (other than a
termination due to death as described in Section 9(a) above,
disability as described in Section 9(b) above, or a Termination For
Cause as described in Section 9(c) above); or (2) a termination
due to Good Reason Resignation as defined as follows:. 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
his title, duties, or responsibilities; 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 of the Executive’s employment, the Executive shall
be entitled to:


 


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(A) continuation of the
annual base salary provided in Section 4 above 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 9(d)(ii)(A) are
subject to the provisions of Section 12 and provided, however, that any
payments made with respect to any month by the Company under paragraphs 4, 5,
6, 7(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) 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 for the period of salary
continuation under Section 9(d)(A) above; 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.


 


(iii) At the discretion of
the Compensation Committee, to the extent that amounts payable under Section 9(d)(ii)(A) are
not Deferred Compensation, the present value of any amounts payable under Section 9(d)(ii)(A) to
the Executive above 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 9(d).
Any such lump sum payment by the Company to the Executive shall not affect the
obligation of the Company as 


 


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otherwise provided in Section 9(d)(ii)(B) above
to provide continuation coverage under the employee benefit plans.


 


(iv) During the Payment
Period, Executive shall make a good faith effort to seek other employment.  If Executive attains other employment during
the Payment Period, he shall so notify Company and any compensation paid to Executive
by his new employer shall reduce, by an equivalent amount, the  payments required to be made under Section 9(d)(ii)(A).


 


(v) The obligation of the
Company to make or provide the payments and benefits set forth in this Section 9(d) 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 9(d) 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 Section 9(d)(ii)(A) 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).


 


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(vi) If there is a Termination
Without Cause during the first year of the Initial Term, the subject to the
provisions of this Agreement, Executive will receive the amounts payable under Section 9(d)(ii)(A) and
(B) plus  any remaining but unpaid
salary or contract benefits due him for the first year of the Initial Term.


 


(vii)  Any shares of
restricted Company stock and options to purchase ordinary shares of Company
stock held by Executive will continue to vest in accordance with the terms of
the awards for the period of time which includes the completion of this
Contract and any subsequent Payment Period as set forth in Section 9(d)(ii)(A).


 


(e) Voluntary Termination by the Executive


 


The Executive may voluntarily
terminate his employment with the Company at any time prior to the expiration
of the term of this Agreement. 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 the termination for Cause, as described in
Section 9(c) above.


 


(f)  Change in Control


 


In the event of a Change in Control (as
defined below) all stock based awards in which the Executive is not yet vested
shall become fully vested and stock options shall be exercisable for their
term.  In addition, the Executive may
resign for any reason at any time during the twelve month period following a
Change in Control (as defined below) and receive the same salary continuation,
bonus eligibility and benefits as if the Executive were Terminated Without
Cause pursuant to Section 9(d) of this Agreement.   The term Change in Control shall be as
defined in the Company’s long-term incentive plan as of the date hereof, a copy
of which is attached hereto as Exhibit A.  The following shall not
constitute a Change in Control for purposes of the equity 


 


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awards provided for under Section 6 of this Agreement:  (i) an
initial public offering of the Company’s securities pursuant to an effectively
filed registration statement, nor (ii) the first acquisition of the voting
securities of the Company, which occurs prior to an IPO of the Company’s
securities and which, absent this provision, would constitute a Change in
Control pursuant to the Company’s Long-term incentive plan (defining a Change
in Control with respect to the acquisition of voting securities of the Company)
(a “Sale”).


 


(g) 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.


 


(h)  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 


 


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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
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 


 


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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).


 


10.
Noncompetition


 


During the term of the
Executive’s employment and for a period of 12 months following the termination
of his 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,  by the Company. For as
long as the above described restrictions on competition apply, the Executive
shall not hire any employee or former employee of the Company or any present or
former affiliate company of the Company nor encourage any employee of the
Company to leave the employ of 


 


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the Company.  
This section will not be in effect after the Executive’s termination of
employment, subject to the following:


 


(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.


 


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11. 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.


 


12.
Remedy for Violation of Noncompetition 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 10 and 11, 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. The Parties acknowledge that each of the
covenants contained in Sections 10 and 11 is an essential element of this
Agreement. If any covenant or term of Section 10 or 11 or any portion
thereof of this Section 12, 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 12 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 


 


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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 (as
defined in Section 9(d)(i)) and the Court determines that the Executive
has violated Section 10 or 11 of this Agreement, then the Companies shall
be entitled to discontinue any payments or benefits that would otherwise be
provided under Section 9(d) and the Executive shall forfeit his
rights to the same.


 


13.
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.


 


14.
Arbitration of All Disputes


 


Subject to the provisions of Section 14,
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 New York in
accordance with American Arbitration Association’s National Rules for
Resolution of Employment Disputes.


 


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15. 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 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 version of this Agreement entered
into as of the Original Effective Date and as in effect immediately prior to
the Amendment Effective Date.


 


16.
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.


 


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17. 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. 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.


 


18.
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:

  	
   

  	
  Attention CEO

  
	
   

  	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  	
  30 Woodbourne Ave

  
	
   

  	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. Michael J. Schozer

  
	
   

  	
   

  	
  25 East 86th Street, Apt. 7A

  
	
   

  	
   

  	
  New York, NY 10028

  
	
   

  	
   

  	
  Tel:  212-369-2681

  



 


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19. 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.


 


20.
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.


 


21. 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.


 


22.
Governing-Law


 


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


 


23.
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.


 


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24.
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 Corp.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:            ,
  2008

  	
  By:

  	
   

  
	
   

  	
  James Michener

  
	
   

  	
  Its General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:            ,
  2008

  	
   

  
	
   

  	
  Michael J. Schozer

  



 


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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 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 


 


24

















 


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 B,
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 B,
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 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 


 


25

















 


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 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 


 


26

















 


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 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.


 


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