Document:

Exhibit
10.1

 

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 Dominic J.
Frederico (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 Executive
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 Assured Guaranty Limited Board of Directors.

 

(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 $700,000.  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 specified above in proportion to the
percentage of time executive performs work for each company.

 

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5.    
Moving
Allowance

 

The Company
will reimburse the Executive for reasonable moving expenses for household goods
in relocating to Bermuda.  Subject to
termination pursuant to section 10(a), 10(b) and 10(c), 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 which will range from 0 to 200% of his
annual base salary, such amount to be determined by the Compensation Committee
of the Board of Directors and to be 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.

 

7.    
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
250,000 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 500,000 shares of AGL stock.  These shares and options will be subject the
terms and conditions that will be set

 

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forth in the AGL Long-Term Incentive Plan (“LTIP”).  The current projected target share value for
the IPO AGL shares is $20.  Upon vesting
or exercise of stock options, the shares will be registered in the United
States with the SEC and appropriate states and will be freely tradable.

 

(b) Annual
Long-Term Incentive Awards—After AGL issues shares of publicly traded
stock, Executive will participate in the LTIP. 
The "target award" for the first year of the Initial Term will
be 83,333 restricted shares of AGL stock and an option to purchase 166,667
shares of AGL stock, however the amount of any award made to Executive under
LTIP will be based on the profitability of the AGL and Executive’s performance
and will 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-  Nothing in this Agreement shall be
construed to require the Company or any other person to take steps or not take
steps (including, without limitation, the giving or withholding of consents)
that would result in a Change in Control or an initial public offering of
Company’s securities.  In addition,
restricted stock grant awards and stock option agreements

 

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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.  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

 

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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 $ 18,000 per month 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 of $18,000 per month, 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 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

 

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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 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;

 

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(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

 

(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,

 

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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
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

 

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Company under paragraphs 4, 6,
7, 8 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 period of salary continuation under Section 10(d)(A)
above; provided, however, that (1) except as required by applicable law, any
such continued coverage shall terminate upon the subsequent full-time employment
of the Executive, and (2) if the 
company is unable to continue such coverage, then they shall provide the
Executive with economically equivalent employee benefits to the extent such
benefits are reasonably available.

 

(iii) At the discretion of the Compensation
Committee, the present value of any 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

 

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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 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

 

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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.  The following shall not constitute a Change in Control for
purposes of the equity awards provided for under Section 7 of this
Agreement:  (i) an initial public offering of the Company’s securities
pursuant to an effectively filed registration statement, nor (ii) the first
acquisition of the voting securities of the Company, which occurs prior to an
IPO of the Company’s securities and which, absent this provision, would
constitute a Change in Control pursuant to the Company’s Long-term incentive
plan (defining a Change in Control with respect to the acquisition of voting
securities of the Company) (a “Sale”).

 

(g) Resignation Upon Termination

 

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

 

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

 

13

 

otherwise, engage, within the
United States, Bermuda, or the Cayman Islands, if such activities involve
insurance or reinsurance of United States based entities or risks that are competitive
with the financial guaranty insurance business then being conducted by the
Company and which, during the period covered by the Executive’s employment,
were either (1) conducted by the Company, 
by the Company. For as long as the above described restrictions on
competition apply, the Executive shall not hire any employee or former employee
of the Company or any present or former affiliate company of the Company nor
encourage any employee of the Company to leave the employ of 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 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 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

 

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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.

 

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

 

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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.

 

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

 

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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 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.

 

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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 Chairman of the Board

  
	
   

  	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  	
  30 Woodbourne Ave

  
	
   

  	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. Dominic J. Frederico

  

 

20.  Severability

 

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

 

21.  Survivorship

 

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

 

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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.

 

	
   

  	
  Assured Guaranty Ltd., Assured Guaranty
  Corp.,

  
	
   

  	
   

  
	
   

  	
  Assured Guaranty U.S. Holdings, Inc,

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  April 28, 2004

  	
   

  	
  By:

  	
  /s/ Donald J. Kramer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Donald J. Kramer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Their Chairman of the Board

  

 

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  Date:

  	
  April 28, 2004

  	
   

  	
  /s/ Dominic J. Frederico

  	
   

  
	
   

  	
  Dominic J. Frederico

  

 

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

 

20

 

shall
repay to the Company promptly upon receiving notice of such Overpayment
together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company (or if paid by the Executive to the
Company shall be returned to the Executive) if and to the extent such payment
would not reduce the amount which is nondeductible under Section 280G of
the Code or which is subject to taxation under Section 4999 of the Code.  In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.

 

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

 

(d)  The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
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

 

21

 

respect
to such claim is due).  If the Company
notifies the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:

 

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

 

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

 

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

 

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

 

Without
limitation on the foregoing provisions of this paragraph (d), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided the Executive shall not be required by the Company to agree to any
extension of the statute of limitations relating to the payment of taxes for
the taxable year of the Executive with respect to which such contested amount is
claimed to be due unless such extension is limited solely to such contested
amount.  Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

 

(e)  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to paragraph (d) above, the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of
paragraph (d) above) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto).  If, after the receipt by the
Executive of an amount 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

 

22

 

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 10.2

 

EMPLOYMENT AGREEMENT

 

THIS
AGREEMENT, made and
entered into as of the 28 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 goodand  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”).  The current projected target
share value for the IPO AGL shares is $20. 
Upon vesting or exercise of stock options, the shares will be registered
in the United States with the SEC and appropriate states and will be freely
tradable.

 

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

 

4

 

but the amount of any such
LTIP award beyond the amount of Executive’s annual base salary will be will be
based on the profitability of AGL and Executive’s performance and will be
subject to the discretion of the Compensation Committee of AGL’s Board of
Directors.  Subsequent to the Initial
Term, the entire amount of any award made to Executive under Long-Term
Incentive Plan will be based on the profitability of AGL and Executive’s
performance and will be subject to the discretion of the Compensation Committee
of AGL’s Board of Directors.  All
Long-Term Incentive awards will be subject to the terms and conditions of the
LTIP.

 

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

 

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

 

(d) Other-  Nothing in this Agreement shall be construed
to require the Company or any other person to take steps or not take steps
(including, without limitation, the giving or withholding of consents) that
would result in a Change in Control or an initial public offering of

 

5

 

Company’s securities.  In addition, restricted stock grant awards
and stock option agreements presented to Executive under the LTIP shall not be
inconsistent with the terms of this agreement and to the extent that such awards
or grants include terms that are not addressed in this agreement the terms of
said awards and grants shall apply in full force and effect.

 

7.            Employee Benefits 

 

(a) During the term of his
employment, the Executive shall be entitled to participate in the Company’s
retirement plan, supplemental retirement plan, hospitalization plan, major
medical plan, dental plan, group-term life insurance plan, accidental death and
dismemberment plan, and such other employee benefits programs consistent with
such benefits offered currently to senior executives of ACE , subject to
satisfaction of all eligibility requirements of general applicability and all
other terms and conditions of the plans.

 

(b) The Executive shall be
entitled to four weeks of vacation in a full calendar year.  Unused vacation days shall expire as of the
last day of each one year period and may not be accumulated, carried forward or
redeemed for other compensation.

 

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

 

8.         Business Expense
Reimbursement. Accommodation. Other Perquisites

 

(a) During the term his
employment, the Executive shall be entitled to be reimbursed by Company for all
reasonable out-of-pocket travel and entertainment expenses incurred by him

 

6

 

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 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

 

7

 

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 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.

 

8

 

(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.

 

(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

 

9

 

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, 7 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 period of
salary continuation under Section 9(d)(A) above; provided, however, that
(1) except as required by applicable law, any such continued coverage shall
terminate upon the subsequent full-time employment of the Executive, and (2) if
the  company is unable to continue such
coverage, then they shall provide the Executive with economically equivalent
employee benefits to the extent such benefits are reasonably available.

 

(iii)
At the discretion of the Compensation Committee, 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.

 

10

 

(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.

 

(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.

 

11

 

(f) Change in Control

 

In the event of a Change in
Control (as defined below) all stock based awards in which the Executive is not
yet vested shall become fully vested and stock options shall be exercisable for
their term.  In addition, the Executive
may resign for any reason at any time during the twelve month period following
a Change in Control (as defined below) and receive the same salary
continuation, bonus eligibility and benefits as if the Executive were
Terminated Without Cause pursuant to Section 9(d) of this Agreement.  The term Change in Control shall be as
defined in the Company’s long-term incentive plan as of the date hereof, a copy
of which is attached hereto as Exhibit A. 
The following shall not constitute a Change in Control for purposes of
the equity awards provided for under Section 6 of this Agreement:  (i) an initial public offering of the
Company’s securities pursuant to an effectively filed registration statement,
nor (ii) the first acquisition of the voting securities of the Company, which
occurs prior to an IPO of the Company’s securities and which, absent this provision,
would constitute a Change in Control pursuant to the Company’s Long-term
incentive plan (defining a Change in Control with respect to the acquisition of
voting securities of the Company) (a “Sale”).

 

(g) Resignation Upon Termination

 

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

 

12

 

10.  Noncompetition

 

During the term of the
Executive’s employment and for a period of 12 months following the termination
of his employment for any reason other than a Termination Without Cause, the
Executive shall not, directly or indirectly, whether as an employee,
consultant, partner, principal, agent, distributor, representative, stockholder
(except as a less than one percent stockholder of a publicly traded company or
a less than five percent stockholder of a privately held company) or otherwise,
engage, within the United States, Bermuda, or the Cayman Islands, if such
activities involve insurance or reinsurance of United States based entities or
risks that are competitive with the financial guaranty insurance business then
being conducted by the Company and which, during the period covered by the
Executive’s employment, were either (1) conducted by the Company,  by the Company. For as long as the above
described restrictions on competition apply, the Executive shall not hire any
employee or former employee of the Company or any present or former affiliate
company of the Company nor encourage any employee of the Company to leave the
employ of 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 after
Executive’s termination or resignation from employment for any reason.

 

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

 

13

 

covenants by the Executive
shall be without limitation as to time and geographic applications.

 

12.  Remedy for Violation of
Noncompetition or Confidential Information Provisions

 

Without intending to limit
the remedies available to the Company for the breach of any of the Executive’s
covenants in Sections 10 and 11, the Executive acknowledges and agrees that
damages at law are an insufficient remedy for the Company and that,
accordingly, the Company shall be entitled to apply for and obtain injunctive
relief in any court of competent jurisdiction to restrain the breach or
threatened breach, or otherwise specifically enforce, any or all of said covenants.
The Parties acknowledge that each of the covenants contained in Sections 10 and
11 is an essential element of this Agreement. If any covenant or term of
Section 10 or 11 or any portion thereof of this Section 12, is
determined to be invalid or unenforceable in any instance, such determination
shall not prevent the reassertion thereof with respect of any other breach or
violation. If, in any proceeding, a court (or other tribunal) refuses to
enforce the covenants contained in Section 11 or 12 or this
Section 12 because such covenants cover too extensive a geographic area or
too long a period of time, any such covenant shall be deemed amended to the
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.

 

14

 

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.

 

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

 

15

 

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 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

 

16

 

similar process give notice:

 

	
  If to the Company:

  	
   

  	
  Attention CEO

  
	
   

  	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  30 Woodbourne Ave

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. Michael J. Schozer

  
	
   

  	
   

  	
  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.

 

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.

 

17

 

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.

 

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:

  	
  April 28, 2004

  	
   

  	
  By:

  	
  /s/ Dominic J. Frederico

  	
   

  
	
   

  	
  Dominic
  J. Frederico

  
	
   

  	
   

  
	
   

  	
  Its
  President and Chief Executive Officer

  
	
   

  	
   

  
	
    Date:

  	
  April 28, 2004

  	
   

  	
   

  
	
   

  	
  /s/ Michael J. Schozer

  	
   

  
	
   

  	
  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

 

 

23

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