Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made
and entered into as of the 28th day of April, 2004 by and between Assured
Guaranty Ltd., a Bermuda corporation, Assured Guaranty U.S. Holdings, Inc., a
Delaware corporation, Assured Guaranty Corp., a Maryland corporation
(collectively referred to as the “Company”), and Robert   Mills (the “Executive”).

 

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.

 

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2. Term and Place of Performance

 

(a).  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 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.

 

(b).
The obligations of the Company under this Agreement shall be contingent upon
the issuance of a work permit by the Government of Bermuda and any other
permits required by the Government of Bermuda. Failure to obtain said permits
shall void this Agreement, unless the Company decides Executive may perform his
duties at some other location. In the event the agreement is voided under this
section, Executive shall be entitled to the benefits provided for Termination
Without Cause under Section 10(d).

 

Once obtained, 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 maintain the permits, they are terminated or revoked by the
Government of Bermuda through no fault of the Executive, then the Executive
shall be entitled to the benefits provided for Termination Without Cause under Section 10(d).

 

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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 Financial Officer 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 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

 

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 $500,000.  The annual base salary shall be paid on a
monthly basis by the Company.  The
companies which comprise the Company as defined herein 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.

 

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5. Sign-on Bonus and Moving Allowance

 

On or before January 30th, 2004, the Company shall pay to the
Executive the sum of $750,000 (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.

 

The Company will reimburse the Executive for reasonable moving expenses
for household goods in relocating to Bermuda. 
If Executive’s employment terminates pursuant to Sections 10(a), 10(b)
or 10(d) of this Agreement, the Company will reimburse the Executive for
reasonable moving expenses for household goods returning to the Executive’s
original port of departure or an allowance equal to this sum applied to another
destination.

 

6. 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 40% 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 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.  

 

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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 .

 

7. Long-Term Incentive Awards

 

(a) Sign-on Equity Award—  When Assured Guaranty Limited 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”).   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—Executive will participate
in the LTIP.  If the Company determines
that it has made a profit during any year of the Initial Term, the value of any
Long-Term Incentive award made to Executive for that year will be no less than
the amount of his annual base salary. 
The “target award” for the Initial Term will be 40,000 restricted shares
of AGL stock and an option to purchase 80,000 shares of AGL stock.   Subsequent to the Initial Term, the amount
of any award made to Executive under Long-Term Incentive Plan will be based on
the profitability of the AGL and Executive’s performance and will 

 

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be subject to the discretion of the Compensation Committee of the AGL’s
Board of Directors.  All Long-Term
Incentive awards will be subject to the terms and conditions of the LTIP.

 

(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-  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.

 

8. 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 five weeks of vacation in a full
calendar year.  

 

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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 .

 

(d)  The companies
which comprise the Company as defined herein will fund the benefits specified
above in proportion to the percentage of time executive performs work for each
company.

 

9. 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 the Executive’s employment, the Company will
reimburse the Executive up to a maximum of an amount to be established by the
AGL Compensation Committee in respect of the cost of suitable living
accommodation in Bermuda. In the event that the Executive chooses to purchase a
residence in Bermuda, the Company will reimburse him only for the fair market
rental value of said residence to a maximum an amount to be established by the
AGL Compensation Committee, which amount shall be reviewed from time to time in
accordance with authorization from the Compensation Committee of the Board of
Directors.

 

(c) During the term of the Executive’s employment, the Company will
reimburse the Executive and/or his immediate family for up to a total of
sixteen round trip tourist class airfares 

 

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per year between Bermuda and an East Coast port of entry to the United
States of America upon submission of reasonable documentation that the fares
were incurred.

 

(d) The Executive shall be entitled to reimbursement for initiation
fees and annual dues at a club of his selection in Bermuda.

 

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

 

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

 

(g) The Executive shall be entitled to reimbursement for any tax
consequences arising specifically by his relocation to Bermuda for employment
purposes, any travel to and from company offices, and any subsequent relocation
to the U.S. or elsewhere as mentioned in Paragraph 5.

 

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

 

(i)  This agreement includes the
Gross –Up provisions set forth in attachment A hereto which are incorporated
herein by reference.

 

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;

 

(ii)                 any rights and benefits
available under any employee benefits plans, policies, and 

 

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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:

 

(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 11 or 12 of this Agreement; or

 

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(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 10(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 10(c)(i)
above, the Executive shall be entitled only to:

 

(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 10(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 10(a) above, disability
as described in Section 10(b) above, or a Termination For Cause as
described in Section 10(c) above); or (2) a termination due to Good Reason
Resignation as defined as follows:. Good Reason Resignation shall mean
termination of 

 

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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.

 

(ii) In the
event there is a Termination Without Cause of the Executive’s employment, the
Executive shall be entitled to:

 

(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 10(d)(ii)(A)
are subject to the provisions of Section 13 and provided, however, that
any payments made by the Company under paragraphs 4, 6, 7(a) (b), 8(b) herein
after Executive’s termination of employment will reduce by an equal amount any
payments to be made hereunder as salary continuation;

 

(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 Payment Period of under Section 10(d)(ii)(A) above;
provided, however, that (1) except as required by applicable law, any such
continued coverage shall terminate upon the subsequent full-time benefits
eligible 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, the present value of any 

 

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amounts
payable to the Executive in accordance with Section 10(d)(ii)(A) 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 10(d). Any such lump sum
payment by the Company to the Executive shall not affect the obligation of the
Company as otherwise provided in Section 10(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 10(d)(ii)(A).

 

(v) The
obligation of the Company to make or provide the payments and benefits set
forth in this Section 10(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.

 

(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 10(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 

 

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subsequent
Payment Period as set forth in Section 10(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 10(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 10(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.

 

(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.

 

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11. 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
in any activities 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. 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 the Company.  
This section will not be in effect after the Executive’s
termination of employment, unless, at the option of Company, Company continues
to pay Executive’s base salary during the 12 months after Executive’s
termination or resignation from employment for any reason.

 

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 

 

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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. 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 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. The Parties
acknowledge 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 (as defined in Section 10(d)(i)) and the Court
determines that the Executive has violated Section 11 or 12 of this
Agreement, then the Companies shall be entitled to discontinue any payments or
benefits that would otherwise be provided under Section 10(d) and the
Executive shall forfeit his rights to the same.

 

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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
Arbitration Act, 1986, as amended, except with respect to the 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.

 

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16. Entire Agreement

 

This Agreement 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.

 

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. No waiver by any party hereto of any breach by any other party of any

 

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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.

 

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:

  	
  Attention CEO

  
	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  
	
   

  	
   30 Woodbourne Ave

  
	
   

  	
   

  
	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  
	
   

  	
   

  
	
  If to the Executive:

  	
  Mr. Robert Mills

  
	
   

  	
  17 Great Hills Road

  
	
   

  	
  New Hope, Pa 18930

  

 

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.

 

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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.

 

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 undersigned have
executed this Agreement as of the date first written above.

 

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  Assured Guaranty Ltd., Assured Guaranty Corp., 

  
	
   

  	
   

  
	
   

  	
   

  	
  Assured Guaranty U.S. Holdings, Inc,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Dominic J. Frederico

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Their President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Robert Mills

  
								

 

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 Executive shall be entitled to
select the order in which payments are to be reduced in 

 

20

 

accordance
with the foregoing provisions of this paragraph (b).  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 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.

 

21

 

(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 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.

 

22

 

(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 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.

 

23Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

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

 

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.

 

1

 

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 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 

 

2

 

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.

 

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 

 

3

 

Company results and
performance of Executive. After the Initial Term, annual performance 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”).   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—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 

 

4

 

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 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.

 

(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-  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.

 

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 

 

5

 

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.

 

(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.

 

(i)
This agreement includes the Gross –Up provisions set forth in attachment A
hereto which 

 

6

 

are incorporated herein by
reference.

 

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:

 

(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 

 

7

 

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:

 

(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.

 

8

 

(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.

 

(ii)
In the event there is a Termination Without Cause of the Executive’s
employment, the Executive shall be entitled to:

 

(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 by the Company under paragraphs
4, 5, 6(a)(b), 7(b) herein after Executive’s termination of employment will
reduce by an equal amount any payments to be made hereunder as salary
continuation;

 

(B)
continuation of coverage under the employee benefit plans of the Company 

 

9

 

in which the Executive was
participating at the time of his termination of employment for the Payment
Period of salary continuation under Section 9(d)(ii)(A) above; provided,
however, that (1) except as required by applicable law, any such continued
coverage shall terminate upon the subsequent full-time benefits eligible
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, the present value of any
amounts payable to the Executive in accordance with Section 9(d) (ii) (A)
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 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.

 

10

 

(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.

 

11

 

(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.

 

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  in any activities 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. 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 the Company.   This section will not be in effect
after the Executive’s termination of employment, unless, at the option of
Company, Company continues to pay Executive’s base salary during the 12 months
after Executive’s termination or resignation from employment for any reason.

 

12

 

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 

 

13

 

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 (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.

 

14

 

15. Entire Agreement

 

This
Agreement 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.

 

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.

 

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 

 

15

 

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:

  	
  Assured Guaranty Corp.

  	 

	 
	
   

  	
  1325 Avenue of the
  Americas

  
	 
	
   

  	
   

  
	 
	
   

  	
  New York, NY 10019

  
	 
	
   

  	
   

  
	 
	
   

  	
  Attn: Chief Executive Officer

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	 
	
  If to the Executive:

  	
  Mr. Michael J. Schozer

  
	 
	
   

  	
  52 Garden Road

  
	 
	
   

  	
  Scarsdale, N.Y. 10583

  
				

 

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.

 

16

 

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.

 

17

 

24. Counterparts

 

This
Agreement may be executed in one or more counterparts.

 

IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.

 

 

	
   

  	
  Assured
  Guaranty Corp.,

  	 

	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  	 

	
   

  	
  Dominic
  J. Frederico

  	 

	 
	
   

  	
   

  
	 
	
   

  	
  Its
  President and Chief Executive Officer

  
	 
	
   

  	
   

  
	 
	
   

  	
   

  
	
    Date: 

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  Michael
  J. Schozer

  	 

											

 

18

 

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 Executive shall be entitled to
select the order in which payments are to be reduced in accordance with the foregoing
provisions of this paragraph (b).  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 

 

19

 

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
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,

 

20

 

(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 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 

 

21

 

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.

 

22

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