Document:

Exhibit 10.67

 

EMPLOYMENT AGREEMENT

 

THIS
AGREEMENT was
initially  made and entered
into as of the 28th day of April, 2004 (the “Original Effective Date”) by and
between Assured Guaranty 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 James Michener
(the “Executive”); and the provisions set forth herein constitute an amendment,
restatement and continuation of this Agreement as in effect immediately prior
to January 1, 2009 (the “Amendment Effective Date”).

 

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

 

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

 

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

 

1.   Employment

 

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

 

2.
Term 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 (i) the
Company may terminate the employment of the Executive, and in the event of such
termination, the Executive shall be entitled to the benefits provided for
Termination Without Cause under Section 10(d), and (ii) if, as a
result of failure to maintain such permits, and the Company decides Executive
may perform his duties at some other location, and the Executive promptly
provides notice that he will not 

 

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comply
with a request for relocation, and resigns within six months of the Company’s
relocation request, such resignation shall be treated as a Good Reason
Resignation.

 

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

 

(a) During the term of the
Agreement, the Executive shall be employed as the General Counsel 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 $350,000.  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 

 

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specified above in proportion to the
percentage of time executive performs work for each company.

 

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 actually incurred to move the
Executive’s household goods to the Executive’s original port of departure, or
to another destination (provided that the amount reimbursed for moving to
another destination will not exceed the amount required to be reimbursed if the
Executive returned to the Executive’s original port of departure), provided
that such reimbursement rights apply only during the period ending on the last
day of the second taxable year of the Executive following the year in which the
Executive’s termination of employment occurs. 
If the
Executive has a taxable year that is other than the calendar year, then, to the
extent required by Code section 409A, the term “calendar year” (when used in
this Agreement) shall instead mean the Participant’s taxable year.

 

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 50% 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 (“AGL”) issues
shares of publicly traded stock, Executive will be granted an award of 80,000
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 160,000 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.  If the IPO does not occur on or before December 31,
2004, then the Company will instead give you cash, restricted ordinary shares
of ACE Limited stock, an option to purchase shares of ACE Limited stock, or any
combination thereof, the aggregate of which equals $450,000.  The Company will decide the components of the
substitute award.

 

(b) Annual Long-Term
Incentive Awards—After AGL issues shares of publicly traded stock,
Executive will participate in the LTIP. 
If AGL 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 initial “target award” for the Initial
Term will be 20,000 restricted shares of AGL stock and 40,000 options to
purchase shares of AGL stock.  Subsequent
to the Initial Term, the amount of any 

 

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award made to Executive under Long-Term
Incentive Plan will be based on the profitability of the Company and Executive’s
performance and will be subject to the discretion of the Compensation Committee
of the AGL’s Company’s Board of Directors. 
All Long-Term Incentive awards will be subject to the terms and
conditions of the LTIP.

 

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

 

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

 

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

 

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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 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 $10,000 per month in respect of the cost of suitable living 

 

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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 $10,000 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
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.

 

(j)  Payment of reimbursement amounts (including, without
limitation, payments under paragraph (f) above (relating to
indemnification) and the provision of in-kind benefits by the 

 

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Company under this Agreement that constitute Deferred Compensation
shall be subject to the following:

 

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

 

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

 

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

 

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

 

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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;

 

(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

 

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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, 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 

 

11

 

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

 

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

 

(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 with respect to any month 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 for that
month;

 

(B) continuation of coverage under the
employee benefit plans of the Company in which the Executive was participating
at the time of his termination of employment for the period of salary continuation
under Section 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.

 

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(iii) At the discretion of
the Compensation Committee, to the extent that amounts payable under Section 10(d)(ii)(A) are
not Deferred Compensation, the present value of any amounts payable under Section 10(d)(ii)(A) to
the Executive above may be paid to the Executive in a lump sum.  The interest rate used in
determining the present value shall be the interest rate on one-year United
States Treasury Bills at the auction of such instruments nearest in time to the
date of the Executive’s termination of employment under this Section 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 earnings of Executive
from his new employer (including salary and bonus, (deferred or otherwise) and
any other income reported on a W-2 and/or 1099 income tax forms with 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, and on such release being returned and becoming
irrevocable not later than the 15th day of the third calendar month following the
Executive’s termination of employment (or such later time as may be permitted
by the Company); provided that to the extent benefits provided pursuant to this
Section 10(d) would constitute Deferred Compensation, such benefits
shall be paid to the Executive only if the release is returned within 60 days
after the 

 

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

 

(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

 

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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, 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.  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.

 

(h)  Termination
of Employment.

 

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

 

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

 

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

 

(iii)  The determination
of the Executive’s termination of employment by reason of a sale of assets,
sale of stock, spin-off, or other similar transaction of the Company or an
Affiliate will be made in accordance with Treas. Reg. §1.409A-1(h).

 

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

 

(i)  Deferred
Compensation Restrictions.

 

If the Executive is a Specified
Employee at the time of termination of employment, payments of benefits under
this Agreement that constitute Deferred Compensation may not be paid before the
date that is six months after the date of termination of employment or, if
earlier, the date of death of the Executive. 
At the end of the six-month period described in the preceding sentence, 

 

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

 

11. Noncompetition

 

During the term of the
Executive’s employment and for a period of 12 months following the termination
of his employment for any reason other than a Termination Without Cause, the
Executive shall not, directly or indirectly, whether as an employee,
consultant, partner, principal, agent, distributor, representative, stockholder
(except as a less than one percent stockholder of a publicly traded company or
a less than five percent stockholder of a privately held company) or otherwise,
engage, within the United States, Bermuda, or the Cayman Islands, if such
activities involve insurance or reinsurance of United States based entities or
risks that are competitive with the financial guaranty insurance business then
being conducted by the Company and which, during the period covered by the
Executive’s employment, were  conducted
by the Company,  by the Company. For as
long as the above described restrictions on competition apply, the Executive
shall not hire any employee or former employee of the Company or any present or

 

17

 

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, subject to the following:

 

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

 

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

 

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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 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.  

 

19

 

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 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 

 

20

 

upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. The arbitrators’ fees
and any expenses relating to the arbitration (other than the Parties’ own legal
fees and expenses) shall be shared equally by the parties.

 

16. Entire
Agreement

 

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

 

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.

 

21

 

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.

 

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. James Michener

11 Whitman Pond Road

Simsbury, CT 06070

 

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.

 

22

 

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.

 

[signature
page follows]

 

23

 

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

 

	
   

  	
   

  	
  Assured Guaranty Ltd., Assured Guaranty 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Corp., Assured Guaranty U.S. Holdings, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:                   ,
  2008

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Robert Mills

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Their Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  Date:                   ,
  2008

  	
   

  	
   

  
	
   

  	
   

  	
  James Michener

  

 

24

 

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

 

25

 

under this Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company) shall be reduced so that the
value of all Payments, in the aggregate, equals the Safe Harbor Amount.  The “Safe Harbor Amount” means 2.99 times the
Executive’s “base amount,” within the meaning of Section 280G of the
Code.  The reduction in accordance with
this paragraph (b) shall be made in the following order:

 

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

 

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

 

As a result of uncertainty in the application
of Section 280G of the Code at the time of any initial determination by
the Accounting Firm (as described in paragraph (c) below), it is possible
that Payments will have been paid or distributed by the Company which should
not be so paid or 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 

 

26

 

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 

 

27

 

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 

 

28

 

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 

 

29

 

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 

 

30

 

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 

 

31

 

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.

 

32Exhibit 10.68

 

EMPLOYMENT
AGREEMENT

 

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

 

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

 

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

 

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

 

1.         Employment

 

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

 

2.          Term and Place of
Performance

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

(i)       deliver lectures and fulfill speaking
engagements; and

 

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

 

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

 

4.         Salary

 

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

 

5.          Reserved

 

2

 

6.          Annual Performance
Incentive Plan

 

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

 

7.           Long-Term Incentive
Awards

 

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

 

8.           Employee Benefits

 

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

 

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

 

9.          Business Expense
Reimbursement and Perquisites

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

10.         Termination of
Employment

 

(a)     Termination Due to Death

 

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

 

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

 

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

 

4

 

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

 

(b)     Termination Due to Disability

 

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

 

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

 

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

 

(c)     Termination Due to Retirement

 

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

 

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

 

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

 

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

 

5

 

(d)     Termination by the Company for Cause

 

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

 

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

 

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

 

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

 

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

 

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

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

 

(e)     Termination Without Cause

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

(f)      Voluntary Termination by the Executive

 

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

 

(g)     Change in Control

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

(h)          Resignation Upon Termination

 

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

 

(i)           Termination of Employment

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

(i)          Deferred Compensation
Restrictions

 

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

 

11.           Noncompetition

 

(a)         During the term of the
Executive’s employment and for the 
period of 12 months following the termination of Executive’s  employment for any reason other than a
Termination Without Cause, the Executive shall not, directly or indirectly,
whether as an employee, consultant, partner, principal, agent, distributor,
representative, stockholder (except as a less than one percent stockholder of a
publicly traded company or a less than five percent stockholder of a privately
held company) or otherwise, engage, within the United States, Bermuda, or the
Cayman Islands, if such activities involve insurance or reinsurance of United
States based entities or risks   that are
competitive with the financial guaranty insurance business then being conducted
by the Company and which, during the period covered by the Executive’s
employment, were  conducted by the
Company.  This section will not be in
effect after the Executive’s termination of employment, subject to the
following:

 

12

 

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

 

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

 

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

 

12.          Confidential
Information

 

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

 

13

 

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

 

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

 

14.          Withholding

 

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

 

15.          Arbitration
of All Disputes

 

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

 

14

 

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

 

16.          Entire
Agreement

 

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

 

17.          Assignability;
Binding Nature

 

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

 

18.          Amendment
or Waiver

 

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

 

15

 

19.                                 Notices

 

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

 

	
  If to the
  Company:

  	
   

  	
  Assured
  Guaranty Ltd.

  
	
   

  	
   

  	
  30
  Woodbourne Ave

  
	
   

  	
   

  	
  Hamilton,
  Bermuda

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. Robert Bailenson

  
	
   

  	
   

  	
  8 Halyard Court, Cold Spring Harbor

  
	
   

  	
   

  	
  New York, 11724

  

 

20.                                Severability

 

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

 

21.                                Survivorship

 

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

 

22.                                References

 

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

 

23.                                Governing-Law

 

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

 

16

 

24.                                Headings

 

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

 

25.                                Counterparts

 

This Agreement may be executed in one or more
counterparts.

 

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

 

 

	
   

  	
  Assured Guaranty Ltd., Assured Guaranty
  Corp.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:             ,
  2008

  	
  By: 

  	
   

  
	
   

  	
  James Michener

  
	
   

  	
   

  
	
   

  	
  Their General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:             ,
  2008

  	
   

  
	
   

  	
  Robert Bailenson

  
	
  Date:

  	
   

  

 

17

 

EXHIBIT A

Gross-Up Provisions

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

21

 

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

 

22

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