Exhibit 10.73


 


Terms of
Performance Retention Award


Four Year
Installment Vesting


Granted on February 5,
2009


 


The Assured Guaranty Ltd. (the “Company”)
Performance Retention Award amounts described in the enclosed letter (the “Award
Letter”) dated February 5, 2009 (the “Grant Date”) will be payable in
accordance with the following Terms of Performance Retention Award (the “Award
Terms”).  Under the following Award
Terms, the Principal Amount is divided into three installments, and a different
Performance Period is established with respect to each Installment, under
paragraph 1 below.  The Performance
Retention Award (sometimes referred to as the “Award” or “Award Payment”) will
be a cash distribution payable with respect to the Installment for each
Performance Period, with the amount determined under paragraph 2 below, subject
to the vesting restrictions under paragraph 3 below.  Payment of the Award will be due on the
Payment Date determined under paragraph 4 below (subject to paragraph
2(b)).  Paragraph 6 provides certain
definitions that apply to these Award Terms.


 


1.  Performance
Period and Installments.  The
Principal Amount is divided into three Installments.  The Performance Period for each Installment,
and the Principal Portion of each such Installment, is set forth in the
following schedule:


 


	
  Installment 

  Number:

  	
   

  	
  First Day of 

  Performance 

  Period:

  	
   

  	
  Last Day of Performance

  Period:

  	
   

  	
  Portion of Principal

  Amount Attributable to

  Installment:

  	
   

  
	
  1

  	
   

  	
  January 1, 2009

  	
   

  	
  December 31, 2010

  	
   

  	
  25

  	
  %

  
	
  2

  	
   

  	
  January 1, 2009

  	
   

  	
  December 31, 2011

  	
   

  	
  25

  	
  %

  
	
  3

  	
   

  	
  January 1, 2009

  	
   

  	
  December 31, 2012

  	
   

  	
  50

  	
  %

  



 


Notwithstanding the foregoing, if the Participant’s
Date of Termination occurs by reason of the Participant’s death or if the
Participant becomes Permanently Disabled prior to the end of the Performance
Period determined in accordance with the foregoing schedule with respect to any
Installment, the last day of the Performance Period for such Installment will
instead be the last day of the calendar quarter coincident with or immediately
preceding the date of death or Permanent Disability, as applicable (or, if the
death or Permanent Disability occurs during the first calendar quarter of the
Performance Period, the last day of that calendar quarter).


 

















 


2.  Amount of
Payment.  The Award Payments will be
subject to paragraph 3 and to the following:


 


(a)                                  The Award Payment for each Installment
will equal the sum of the amounts described in paragraph (i) below and
paragraph (ii) below:


 


(i)  The
product of (A) 50% of the Portion of the Principal Amount attributable to
that Installment, multiplied by (B) a fraction, converted to an equivalent
percentage, the numerator of which is the Company’s per-share Modified Adjusted
Book Value as of the last day of the applicable Performance Period and the
denominator of which is the Company’s per-share Modified Adjusted Book Value as
of the first day of the applicable Performance Period.


 


(ii)  The
product of (A) 50% of the Portion of the Principal Amount attributable to
that Installment, multiplied by (B) a percentage equal to 100% plus (or minus
if negative) of the Company’s Operating Return on Equity for the Performance
Period attributable to that Installment.


 


(b)                                 U.S. Internal Revenue Code section 162(m) limits
the Company’s tax deduction for compensation paid to officers (not more than
five) listed in the Company’s proxy statement. 
If the Participant’s compensation would be subject to this limit, the
Participant’s Award Payment will be subject to the requirements of the
performance-based compensation exception to the limit.  Accordingly, if the Participant’s Award would
be subject to the limit for any taxable year of the Company (determined as if
the following limit did apply, and also as if it did not apply), then, for such
Award, the amount determined under both paragraph (a)(i) above and
paragraph (a)(ii) above will be zero if both of the following are true:


 


(i)  the
percentage described in paragraph (a)(i) for the Performance Period to
which the Award is attributable is less than 100%; and


 


(ii)  the
percentage described in paragraph (a)(ii) above for the Performance Period
to which the Award is attributable is less than the sum of: (A) 100% plus (B) the
product of 3% multiplied by the number of years and fractional years in the
applicable Performance Period.


 


Notwithstanding
the foregoing provisions of this paragraph 2, if by reason of the foregoing
provisions of this paragraph (b), the Participant receives no payment with
respect to the Installment for either the Performance Period ending December 31,
2010 or December 31, 2011 (each, a “Prior Performance Period”), and in a
subsequent Performance Period under this Agreement (the “Subsequent Performance
Period”), either or both of paragraph (b)(i) and (b)(ii) above are
satisfied, and either the Participant’s Date of Termination has not occurred
during the Subsequent Performance Period, or the Date of Termination has
occurred by reason of death, Disability, or Retirement, then, as soon as
practicable after the end of the 


 


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Subsequent
Performance Period (and notwithstanding the provisions of paragraph 4), the
Participant will receive the payment (without interest) he would have received
for the Prior Performance Period if this paragraph (b) above had not been
applicable to him for the Prior Performance Period.


 


3.  Vesting
and Forfeitures.  Vesting of the
Award Payment is subject to the following:


 


(a)                                  If, in accordance with the following
provisions of this paragraph 3, the Participant is vested in the Award Payment
for any Performance Period, the Award Payment (if any) for that Performance
Period will be due on the Payment Date as described in paragraph 4, subject to
the terms of the Plan and these Award Terms. 
If the Participant is not vested in the Award for a Performance Period,
the Participant will forfeit that Award.


 


(b)                                 If, with respect to any Installment, the
Participant’s Date of Termination does not occur before the last day of the
Performance Period for that Installment, the Participant will be vested in the
Award Payment.  If the Participant’s Date
of Termination occurs before the last day of the Performance Period for that
Installment, the Participant’s will not be vested in the Award Payment for that
Installment.


 


(c)                                  Notwithstanding the foregoing provisions
of this paragraph 3, the Participant will become vested in the Award Payment
attributable to an Installment on the Date of Termination that occurs before
the last day of the applicable Performance Period if the Date of Termination
occurs by reason of the Participant’s death or Disability, or by reason of the
Participant’s Retirement with respect to that Performance Period; provided
that, notwithstanding the foregoing provisions of this sentence, the
Participant will become vested in the Award Payment with respect to a
Performance Period upon becoming Permanently Disabled if the Permanent
Disability occurs before the Date of Termination and before the last day of the
Performance Period.


 


4.  Payment
Date.


 


(a)                                  Except as otherwise provided in this
paragraph 4, and subject to paragraph 2(b), the Participant’s Award Payment
attributable to any Installment will be due on the last day of the Performance
Period with respect to that Installment (the “Payment Date” with respect to
that Installment).  If the Participant’s
Date of Termination occurs by reason of the Participant’s death or if the
Participant becomes Permanently Disabled prior to the end of the Performance
Period with respect to an Installment, the Payment Date for such Installment
will be the date of death or Permanent Disability, as applicable.


 


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(b)                                 The Award will be paid to the Participant
in a cash lump sum in US dollars. 
Payment will be due on the Payment Date, and will be paid no later than
the 15th day of the third month following the end of the Participant’s first
taxable year in which the right to the payment is no longer subject to a
substantial risk of forfeiture (as determined in accordance with Treas. Reg. §1.409A-1(b)(4)).


 


(c)                                  Notwithstanding the foregoing, except in
the case of the Performance Period ending by reason of the Participant’s death
or Permanent Disability, no payment will be made unless, on or before the date
of payment, the Committee has certified that the performance goals for the
Performance Period and any other material provisions of the Award Terms have in
fact been satisfied.


 


5.  Recoupment
and Applicable Plans.


 


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


 


(b)                                 The Award Payments described in the Award
Letter are granted under and pursuant to the terms of the Plan and Section 4
(relating to Cash Incentive Awards) of the Assured Guaranty Ltd. 2004 Long-Term
Incentive Plan (the “LTIP”) and are intended to constitute performance-based
compensation as that term is used in the LTIP and section 162(m) of the
Code.  In no event may the amount payable
under these Award Terms, when added to any other amounts payable under Section 4
of the LTIP to the Participant that are intended to constitute “performance-based
compensation” as that term is used in the LTIP and section 162(m) of the
Code, exceed the limit imposed by Section 5.2(e)(v) of the LTIP for
the applicable performance period. 
Subject to paragraph (a) above, the terms of this Agreement shall
be subject to the terms of the LTIP and the Plan, and this Agreement is subject
to all interpretations, amendments, rules and regulations promulgated by
the Committee from time to time pursuant to the LTIP and the Plan.


 


6.  Definitions.  For purposes of these Award Terms, the
definitions set forth in this paragraph 6 or elsewhere in these Award Terms
shall apply.  Except where the context
clearly implies or indicates the contrary, a word, term, or phrase used in the
Plan or LTIP is similarly used in these Award Terms.


 


(a)                                  Date of Termination. 
A Participant’s “Date of Termination” means the first day on which the
Participant is not employed by the Company or any Subsidiary, regardless of the
reason for the termination of employment; provided that a termination of employment
shall not be deemed to occur by reason of a transfer of the Participant between
the Company and a 


 


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Subsidiary or
between two Subsidiaries, nor by reason of a Participant’s termination of
employment with the Company or a Subsidiary if immediately following such
termination of employment the Participant continues to be or becomes a
Director; and further provided that the Participant’s employment shall not be
considered terminated while the Participant is on a leave of absence from the
Company or a Subsidiary approved by the Participant’s employer.  If, as a result of a sale or other
transaction, the Participant’s employer ceases to be a Subsidiary (and the
Participant’s employer is or becomes an entity that is separate from the
Company), and the Participant is not, at the end of the 30-day period following
the transaction, employed by the Company or an entity that is then a
Subsidiary, then the occurrence of such transaction shall be treated as the Date
of Termination.


 


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


 


(c)                                  Disabled.  The
Participant shall be considered to have a “Disability” during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 180 days. 
The Participant shall be considered to be Permanently Disabled if he
would be treated as “disabled” in accordance with the provisions of Treas. Reg.
§1.409A-3(i)(4).


 


(d)                                 Modified Adjusted Book Value. 
The “Modified Adjusted Book Value” of the Company as of any date shall
equal the book value of the Company, derived by determining shareholders’
equity, and by then adding the after-tax value of the financial guaranty and
mortgage guaranty net unearned premium reserves less deferred acquisition
costs, plus the present value of estimated net future installment premiums (as
reported in the Company’s quarterly Financial Supplement), excluding the
effects of Accumulated Other Comprehensive Income (AOCI) and the effects of
unrealized gains and losses on derivative financial instruments (FAS 133).  In the event of a corporate transaction
involving the Company (including, without limitation, any share dividend, share
split, extraordinary cash dividend, recapitalization, reorganization, merger,
amalgamation, consolidation, split-up, spin-off, sale of assets or
subsidiaries, combination or exchange of shares), the Committee may further
adjust the calculation of the Company’s Modified Adjusted Book Value as the
Committee deems necessary or desirable in order to preserve the benefits or
potential benefits of the Performance Retention Awards granted under the Plan,
provided that such adjustment may not adversely affect the treatment of the
Award as performance-based compensation exempt from Code section 162(m).


 


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(e)                                  Operating Return on Equity. 
The “Operating Return on Equity” of the Company as of any date shall
equal the Company’s operating income as a percentage of average shareholders’
equity, excluding accumulated other comprehensive income and after-tax
unrealized gains (losses) on derivative financial instruments.  Operating income is defined as net income
(loss) excluding after-tax realized gains (losses) on investments and after-tax
unrealized gains (losses) on derivative financial instruments.  In the event of a corporate transaction
involving the Company (including, without limitation, any share dividend, share
split, extraordinary cash dividend, recapitalization, reorganization, merger,
amalgamation, consolidation, split-up, spin-off, sale of assets or
subsidiaries, combination or exchange of shares), the Committee may further
adjust the calculation of the Company’s Operating Return on Equity as the
Committee deems necessary or desirable in order to preserve the benefits or
potential benefits of the Performance Retention Awards granted under the Plan,
provided that such adjustment may not adversely affect the treatment of the
Award as performance-based compensation exempt from Code section 162(m).


 


(f)                                    Performance Period. 
The “Performance Period” will be determined in accordance with paragraph
1.


 


(g)                                 Plan.  “Plan” means
the Assured Guaranty Ltd. Performance Retention Plan.


 


(h)                                 Principal Amount. 
The “Principal Amount” with respect to the Participant will be the
Principal Amount as stated in the Award Letter.


 


(i)                                     Retirement.  “Retirement”
of a Participant will be determined in accordance with the following:


 


(i)  Retirement
shall mean the occurrence of a Participant’s Date of Termination with the consent
of the Participant’s employer after the Participant has completed five years of
service and attained age 55.


 


(ii)  For
purposes of defining “Retirement,” years of service shall be determined in
accordance with rules which may be established by the Committee, and shall
take into account service with the Company and the Subsidiaries.  If, on or before the date of the initial
public offering of stock of the Company, the Participant was employed by the
Company or its Subsidiaries, years of service shall also include service with
ACE Limited and its subsidiaries occurring prior to such the initial public
offering.


 


(iii)  Notwithstanding
that the Participant’s Date of Termination satisfies the requirements of
paragraph (i) above, the Participant will not be considered to have
retired (or have terminated by reason of Retirement) with respect to any
Installment if the Committee determines that the Participant has provided
significant commercial or business services to 


 


6

















 


any one or more
persons or entities on or before the last day of the Performance Period
applicable to that Installment, regardless of whether such entity is owned or
controlled by the Participant; provided that the Participant may devote
reasonable time to the supervision of his personal investments, and activities
involving professional, charitable, community, educational, religious and
similar types of organizations, speaking engagements, membership on the boards
of directors of other organizations, and similar types of activities, to the
extent that the Committee, in its discretion, determines that such activities
are consistent with the Participant’s Retirement.


 


(iv)  At the
request of the Committee, and as a condition of receiving the Award Payment
with respect to a Performance Period, the Participant shall be required to
provide a listing of the activities engaged in by the Participant following the
Participant’s Date of Termination and prior to the end of the Performance
Period and such other information that the Committee determines may be
necessary from time to time to establish whether the Participant has acted in a
manner that is consistent with the requirements of paragraph (iii).  Such listing and information shall be
provided promptly by the Participant, but in no event more than 10 days after
written request is delivered to the Participant.


 


(v)  At the
request of the Participant, the Committee shall determine whether a proposed
activity of the Participant will be consistent with the requirements of
paragraph (iii).  Such request shall be
accompanied by a description of the proposed activities, and the Participant
shall provide such additional information as the Committee may determine is
necessary to make the determination. 
Such a determination shall be made promptly, but in no event more than
30 days after the written request, together with any additional information
requested of the Participant, is delivered to the Committee.


 


(vi)  If,
with respect to any Performance Period, 
a Participant engages in one or more activities that the Committee
determines to be inconsistent with Retirement, as set forth in paragraph (iii) above,
the right to the Award Payment with respect to that Performance Period may be
canceled by the Committee.


 


(vii)  If,
after the Participant’s Date of Termination, an Award is otherwise payable in
accordance with paragraph 2(b): (A) the determination of whether the
Participant has Retired and is entitled to such payment shall be contingent on
the Participant having satisfied the requirements of paragraph (iii) above
through the last day of the Subsequent Performance Period in which the
performance occurs which gives rise to the payment under paragraph 2(b); and (B) the
requirement to provide information pursuant to paragraph (iv) above shall
apply for periods through the last day of such Subsequent Performance Period.


 


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