Document:

Exhibit 10.63

 

ASSURED GUARANTY CORP.

SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

 

(As Amended and Restated
Effective January 1, 2009)

 

 

Mayer Brown LLP

 

 

ADOPTION OF ASSURED GUARANTY CORP.

SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

 

WHEREAS, the Board of
Directors of Assured Guaranty Corp. (the “Company”), by resolutions adopted on November 7,
2008, authorized the General Counsel of the Company (and certain other officers
of the Company) to adopt modifications of the Assured Guaranty Corp.
Supplemental Employee Retirement Plan (the “Plan”) to conform the Plan to the
requirements of Section 409A of the US Internal Revenue Code (“Section 409A”)
and to make certain other changes; and

 

NOW, THEREFORE, the
undersigned, James M. Michener, hereby adopts the Plan in the form attached
hereto, to be effective with respect to all awards granted thereunder.

 

 

	
   

  	
   

  
	
  James M. Michener

  	
   

  
	
  General Counsel of Assured Guaranty Corp.

  	
   

  

 

 

Date: December 10, 2008

 

ii

 

ASSURED GUARANTY CORP.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(As Amended and
Restated Effective January 1, 2009)

 

1.1.  Assured
Guaranty Corp., a Maryland corporation, (the “Company”), previously established
the Assured Guaranty Corp. Non-Qualified Profit Sharing Plan.  Effective January 1, 2006, the Company
adopted the amendment and restatement of the Assured Guaranty Corp.
Non-Qualified Profit Sharing Plan and renamed it as the Assured Guaranty Corp.
Supplemental Executive Retirement Plan (the “Plan”).  The Plan is maintained for the benefit of a
select group of management or highly compensated employees.  The Plan is an unfunded arrangement and is
intended to be exempt from the participation, vesting, funding, and fiduciary
requirements set forth in Title I of the ERISA. 
It is intended to comply with Section 409A of the Code.  The provisions set forth herein constitute an
amendment, restatement and continuation of the Plan as in effect immediately
prior to January 1, 2009 (the “Effective Date”), subject to the following:

 

(a)                                  The
Plan as set forth herein shall apply to distributions under the Plan commencing
on or after the Effective Date (excluding payments made before or made after
the Effective Date that are part of a series of installment payments that
commenced prior to the Effective Date); provided that payments which commenced
prior to the Effective Date will be subject to the applicable provisions of the
Plan as in effect prior to the Effective Date.

 

(b)                                 All
amounts deferred under the Plan will be subject to the provisions of section
409A of the Code and applicable guidance issued thereunder (“Section 409A”),
regardless of whether such amounts were deferred (within the meaning of Section 409A)
on, prior to, or after January 1, 2005.

 

Article 1 - Definitions

 

1.1                               Account.

 

The bookkeeping account established for each
Participant as provided in Section 5.1 hereof.

 

1.2                               Administrator.

 

The Company, and any such committee or persons to whom
the Board of Directors of the Company delegates some or all of the authority to
control and manage the operation and administration of the Plan.

 

1.3                               Board.

 

The Board of Directors of the Company.

 

1.4                               Code.

 

The Internal Revenue Code of 1986, as amended.

 

 

1.5                               Company.

 

Assured Guaranty Corp.

 

1.6                               Compensation.

 

The Participant’s “Compensation” as defined in the
Assured Guaranty Corp. Retirement Plan; provided, however, that “Compensation”
shall exclude any amount paid in the Plan Year but earned for services in a
prior year unless a Deferral Election was timely made with respect to such amount
in accordance with the requirements of the Plan and Code Section 409A.

 

1.7                               Deferrals.

 

The portion of Compensation that a Participant elects
to defer in accordance with Section 3.1 hereof.

 

1.8                               Deferral
Election.

 

The separate written agreement, submitted to the
Administrator, by which an Eligible Employee elects to make Deferrals to the
Plan in accordance with the requirements sections 3.1, 3.2 and 3.4 hereof.

 

1.9                               Disability.

 

A Participant will be considered to be “Disabled” for
purposes of the Plan if he would be treated as “disabled” in accordance with
the provisions of Treas. Reg. §1.409A-3(i)(4).

 

1.10                        Effective
Date.

 

January 1, 2006.

 

1.11                        Eligible
Employee.

 

An Employee shall be considered an Eligible Employee
if such Employee is designated as an Eligible Employee by the Employer.  The designation of an Employee as an Eligible
Employee in any year shall not confer upon such Employee any right to be
designated as an Eligible Employee in any future Plan Year.

 

1.12                        Employee.

 

Any person employed by an Employer.

 

1.13                        Employer.

 

The Company and each Related Company which, with the
consent of the Company, adopts the Plan.

 

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1.14                        Employer
Core Retirement Contribution.

 

A core retirement contribution that may be made by the
Employer in its discretion and that is credited to the Participant’s Account in
accordance with the terms of Section 3.6 hereof.

 

1.15                        Employer
Discretionary Contribution.

 

A discretionary contribution that may be made by the
Employer in its discretion and that is credited to the Participant’s Account in
accordance with the terms of Section 3.7 hereof.

 

1.16                        ERISA.

 

The Employee Retirement Income Security Act of 1974,
as amended.

 

1.17                        Investment Fund or Index.

 

Each investment(s) which serves as a means to
measure value, increases or decreases with respect to a Participant’s Accounts.

 

1.18                        Matching
Contribution.

 

A contribution made by the Employer that is credited
to the Participant’s Account in accordance with the terms of Section 3.5
hereof.

 

1.19                        Participant.

 

An Eligible Employee who is a Participant as provided
in Article 2.

 

1.20                        Plan Year.

 

The 12-consecutive month period from January 1
through December 31.

 

1.21                        Related
Company.

 

The term “Related Company” means any corporation or
trade or business during any period during which it is, along with the Company,
a member of a controlled group of corporations or a controlled group of trades
or businesses, as described in sections 414(b) and 414(c), respectively,
of the Code.

 

1.22                        Retirement
Plan.

 

The term “Retirement Plan” means the Assured Guaranty
Corp. Employee Retirement Plan.

 

1.23                        Separation
from Service.

 

A separation from service with an Employer within the
meaning of Code Section 409A(a)(2)(A)(i) and regulations thereunder.

 

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1.24                        Specified
Employee.

 

For purposes of the Plan, 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
delegate from time to time.

 

1.25                        Years of
Service.

 

A Participant’s “Years of Service” shall be measured
by employment during a twelve (12) month period commencing with the Participant’s
date of hire and anniversaries thereof.

 

Article 2 - Participation

 

2.1                               Commencement
of Participation.

 

Each Eligible Employee shall become a Participant at
the earlier of the date on which his or her Deferral Election first becomes
effective or the date on which an Employer Core Retirement Contribution or
Employer Discretionary Contribution is first credited to his or her Account.

 

2.2                               Loss
of Eligible Employee Status.

 

A Participant who is no longer an Eligible Employee
shall not be permitted to submit a Deferral Election and all Deferrals for such
Participant shall cease immediately when such Participant is no longer an
Eligible Employee.  Amounts credited to
the Account of a Participant who is no longer an Eligible Employee shall
continue to be held pursuant to the terms of the Plan and shall be distributed
as provided in Article 6.

 

Article 3 - Contributions

 

3.1                               Deferral
Elections – General.

 

A Participant may make a Deferral Election for a Plan
Year providing that, if the Participant’s before-tax elective deferral
contributions to the Retirement Plan are limited by the provisions of section
401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable, then his
Compensation for that period of the Plan Year after his or her before-tax
elective deferral contributions to the Retirement Plan are so limited will
continue to be reduced by, and the Participant’s Account under the Plan
credited with, an amount equal to the amount of before-tax elective deferral
contributions that would have been made under the Retirement Plan had the
provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code,
as applicable, not applied to him; provided, however, that such continuing
before-tax elective deferral contributions to this Plan shall be made pursuant
to the Deferral Election made by the Participant prior to the beginning of the
Plan Year (or with respect to a newly-eligible Participant, within 30 days of
first becoming eligible to participate), as described in Section 3.2, and
such Deferral Election shall indicate the percentage of Compensation to be
contributed to this Plan after before-tax elective deferral contributions to
the Retirement Plan have been limited under sections 401(a)(17), 401(k)(3), 402(g) or
415 of the Code.  The Participant’s
Deferral Election with respect to the Plan is irrevocable for that Plan Year in
accordance with Section 3.2 hereto; 

 

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provided, however, that a
cessation of Deferrals shall be allowed if required by the terms of the
Retirement Plan (or by any other tax-qualified retirement maintained by an
Employer which includes a cash or deferred feature under Code section 401(k) plan)
in order for the Participant to obtain a hardship withdrawal from the
Retirement Plan or such other tax-qualified 401(k) plan, or if required
under Section 6.4 (Unforeseeable Emergency) of this Plan.  Deferrals under the Plan shall not be made
available to such Participant, except as provided in Article 6, and shall
reduce such Participant’s Compensation from the Employer in accordance with the
provisions of the applicable Deferral Election.

 

3.2                             Time
of Election.

 

A Deferral Election shall be void if
it is not made in a timely manner as follows:

 

(a)                                  A Deferral Election with respect to any Compensation
must be submitted to the Administrator before the beginning of the calendar
year during which the amount to be deferred will be earned.  As of December 31 immediately preceding
the first day of each calendar year, said Deferral Election is irrevocable for
the calendar year.

 

(b)                                 Notwithstanding the foregoing, in a year in which an
Employee first becomes an Eligible Employee, and provided that such Employee is
not eligible to participate in any other account balance arrangement maintained
by the Company or a Related Company which is subject to Code Section 409A,
such Deferral Election shall be filed within thirty (30) days after the date on
which an Employee first becomes an Eligible Employee, with respect to
Compensation to be earned during the remainder of the calendar year after such
election is made.

 

3.3                             Distribution
Elections.

 

To the extent provided in Section 6.3,
a Participant may elect the time and form of the distribution.

 

3.4                             Additional Requirements.

 

The Deferral Election, subject to
the limitations set forth in Sections 3.1 and 3.2 hereof, shall comply with the
following additional requirements:

 

(a)                                  Deferrals may be made in whole percentages or stated
dollar amounts with such limitations as determined by the Administrator.

 

(b)                                 The maximum amount that a Participant may elect
pursuant to a Deferral Election is six percent (6%) of the Participant’s
Compensation that is payable after the Participant’s before-tax elective
deferral contributions to the Retirement Plan have reached the limits under
that plan, as described in Section 3.1.

 

(c)                                  Notwithstanding
the provisions of section 3.1, a Participant’s Deferral Election under the Plan
shall be effective and an amount shall be credited to the Participant’s Account
in accordance with Section 3.1 (and Matching Contributions shall be credited
to the Participant’s Account in accordance with section 3.5) for a Plan Year
only if the Participant’s before-tax elective deferral contributions to the
Retirement Plan have reached the maximum 

 

5

 

amount permitted under
Code Section 402(g) or the maximum elective contributions permitted
under the Plan, in accordance with Treas. Reg. section 1.401(k)(1)(e)(6)(iii);
and the Administrator shall establish such other administrative procedures as
are necessary to comply with such regulations.

 

3.5                             Matching
Contribution.

 

Subject to the requirements of Section 3.1, for
any Plan Year, a Participant’s Account shall be credited with an amount equal
to the difference, if any, between (a) the matching contributions that
would have been contributed on behalf of the Participant to the Retirement Plan
for that Plan Year, in accordance with the terms thereof, and based on the
Participant’s before-tax elective deferral contributions under the Retirement
Plan (and this Plan), determined without regard to the limitations of sections
401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b) the
amount of matching contributions actually made to the Retirement Plan on behalf
of the Participant; provided, however, that in no event shall the Matching
Contribution amount credited to a Participant’s Account under this Plan exceed
100% of the first six percent (6%) of the Participant’s aggregate Deferral of
Compensation to this Plan.

 

3.6                             Employer
Core Retirement Contribution.

 

For any Plan Year, a Participant’s Account shall be
credited with an amount equal to the difference, if any, between (a) the
Employer core contribution (referred to in the Retirement Plan as a
discretionary profit sharing contribution) that would have been contributed on
behalf of the Participant to the Retirement Plan for that Plan Year, in
accordance with the terms thereof determined without regard to the limitations
of Code Sections 401(a)(17) or 415 and (b) the amount of the Employer core
contributions actually made to the Retirement Plan on behalf of the
Participant. The maximum amount of the Employer core contribution shall be in
an amount equal to six percent (6%) of Participant’s Compensation in excess of
the compensation limits under Code Section 401(a)(17).

 

3.7                             Employer
Discretionary Contributions.

 

For any Plan Year, a Participant’s Account may be
credited with an additional amount, as determined by the Employer in its sole
discretion, which amount, if any, shall be allocated to the accounts of that
group of Participants designated by the Employer it its sole discretion.  Such discretionary contribution shall be
allocated to the accounts of such designated Participants in an amount equal to
a percentage of each such Participant’s Compensation for the Plan Year.

 

3.8                             Crediting
of Contributions.

 

(a)                                  Deferrals shall be credited to a Participant’s
Account pursuant to Section 3.1 at the same time that before-tax
elective deferral contributions would otherwise have been credited to his
accounts under the Retirement Plan.

 

(b)                                 Matching Contributions shall be credited to a
Participant’s Account pursuant to Section 3.5 at the same time that
matching contributions would otherwise have been credited to his accounts under
the Retirement Plan.

 

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(c)                                  Employer Core Retirement Contributions shall be
credited to a Participant’s Account pursuant to Section 3.6 at the
same time that Employer Core Contributions would otherwise have been credited
to his accounts under the Retirement Plan.

 

(d)                                 Employer Discretionary Contributions, if any, shall
be credited to a Participant’s Account pursuant to the Section 3.7
at soon as practicable following the Employer’s determination to credit such
contribution to Participant Accounts.

 

Article 4 - Vesting

 

4.1                             Vesting
of Deferrals.

 

A Participant shall be one hundred percent (100%)
vested in that portion his or her Account attributable to Deferrals.

 

4.2                             Vesting
of Matching Contributions.

 

Except as otherwise provided herein, a Participant
shall have a vested right to the portion of his or her Account attributable to
Matching Contribution(s) upon the earlier of the Participant’s attainment
of sixty-five (65) years of age or the Participant’s completion of one (1) Year
of Service.

 

4.3                             Vesting
of Employer Core Retirement Contributions.

 

Except as otherwise provided herein, a Participant
shall have a vested right to the portion of his or her Account attributable to
Employer Core Retirement Contributions upon the earlier of the Participant’s
attainment of sixty-five (65) years of age or the Participant’s completion of
one (1) Year of Service.

 

4.4                             Vesting
of Employer Discretionary Contributions.

 

A Participant shall have a vested right to the portion
of his or her Account attributable to Employer Discretionary Contributions upon
the earlier of the Participant’s attainment of sixty-five (65) years of age or
the Participant’s completion of one (1) Year of Service.

 

4.5                             Vesting
in Event of Death.

 

A Participant who incurs
a Separation from Service due to death shall be fully vested in the amounts
credited to his or her Account as of the date of death.

 

4.6                             Forfeiture
of Accounts.

 

Any amounts credited to a Participant’s Account that
are not vested at the time of his or her Separation from Service shall be
forfeited.

 

7

 

Article 5 - Accounts

 

5.1                             Accounts.

 

The Administrator shall establish and maintain a
bookkeeping “Account” in the name of each Participant.  Each Participant’s Account shall be credited
with Deferrals, Matching Contributions, Employer Core Retirement Contribution,
and Employer Discretionary Contributions, if any, allocable thereto, and the
Participant’s allocable share of any earnings or losses credited to the
Participant’s Account in accordance with Section 5.2, and the
Administrator may establish bookkeeping subaccounts as it deems desirable to
reflect such Deferrals, Matching Contributions, Employer Core Retirement
Contribution, and Employer Discretionary Contributions, and earnings and losses
allocable thereto.  A Participant’s
Account shall also be credited with amounts (and in the Administrator’s
discretion, a subaccount established) reflecting amounts, if any credited to
the Participant under the Plan as in effect immediately prior to the amendment
and restatement of the Plan on the Effective Date; and on and after the
Effective Date, such amounts shall be subject to the terms of the Plan as
amended and restated (and to the extent required to comply with Code Section 409A,
any provision of the Plan as amended and restated shall be effective and apply to
such amounts prior to the Effective Date). 
Each Participant’s Account shall be reduced by any distributions made
plus any federal and state tax withholding, and any social security withholding
tax as may be required by law. 
Distributions from an Account to a Specified Employee, as defined in Section 1.24
shall be subject to the requirements of Section 6.1(c).

 

5.2                             Investments,
Gains and Losses.

 

(a)                                  A
Participant may direct that his or her Account established pursuant to Section 5.1
may be credited with earnings and losses as if they were invested in one or
more Investment Funds as made available by the Company in one percent (1%)
increments of the balance in an Account. 
The Company may from time to time change
the Investment Indexes for purposes of this Plan

 

(b)                                 The
Administrator shall adjust the amounts credited to each Participant’s Account
to reflect Deferrals, Matching Contributions, Employer Core Retirement
Contributions, Employer Discretionary Contributions, investment experience,
distributions and any other appropriate adjustments.  Such adjustments shall be made as frequently
as is administratively feasible (and to the extent permitted under Code section
409A).

 

(c)                                  A
Participant may change his or her selection of Investment Funds no more than six
(6) times each Plan Year with respect to
his or her Account by filing a new election in accordance with procedures
established by the Administrator. 
An election shall be effective as soon as administratively feasible
following the date of the change as indicated in writing by the Participant.

 

(d)                                 Notwithstanding the Participant’s ability to
designate the Investment Index in which his or her Account shall be deemed
invested, neither the Company, any Employer, nor the Administrator shall have
no obligation to invest any funds in accordance with the Participant’s
election.  Participants’ Account shall
merely be bookkeeping entries on the 

 

8

 

applicable
Employer’s books, and no Participant shall obtain any property right or
interest in any Investment Index or Investment Fund.

 

Article 6 - Distributions

 

6.1                             Commencement
of Distribution.

 

Payment of the Participant’s Account balances shall be
made (or, if payment is made in installments, shall commence) within 60 days of
the Participant’s Separation from Service, subject to the following:

 

(a)                                  If
the Participant becomes Disabled prior to his Separation from Service  (regardless of whether the Participant
remains employed for a period after becoming Disabled), the Participant’s
Account balances will be paid in a lump sum within 60 days of becoming
Disabled, without regard to any election made by the Participant to receive
installments.  A Participant will be
considered to be “Disabled” for purposes of the Plan if he would be treated as “disabled”
in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).

 

(b)                                 If
the Participant’s Separation from Service is his date of death, the Participant’s
Account balances will be paid in a lump sum within 60 days of death.

 

(c)                                  If
a Participant is a Specified Employee at the time of his Separation from
Service, and payment of benefits under the Plan is by reason of the Participant’s
Separation from Service, payments of benefits under the Plan may not be paid
before the date that is six months after the Participant’s Separation from
Service or, if earlier, the date of death of the Participant.  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 (c) shall be paid on the first day of the
seventh month following the Separation from Service.

 

6.2                             Lump
Sum Distribution.

 

Except to the extent provided in Section 6.3, a
Participant’s Account balances will be paid in a lump sum in an amount equal to
the Participant’s Account balances determined as of the Valuation Date next
prior to the Benefit Commencement Date.

 

6.3                             Installments.

 

A Participant may elect to have his Account balances
paid in annual installments over a period elected by the Participant not
exceeding five years, subject to the following:

 

(a)                                  Payment
will be made in installments rather than a lump sum only if, at the time of the
Participant’s Separation from Service, (i) the Participant has attained at
least age 55, (ii) the Participant has completed at least five Years of
Service, and (iii) the amount of the Participant’s Account balances is
equal to or greater than $50,000 as of the Valuation Date coincident with or
immediately prior to the Participant’s Separation from Service.

 

(b)                                 Payment
will be made in installments rather than a lump sum only if the Participant’s
election to receive such installments is filed with the Committee no later than
the 

 

9

 

30th day following the date on which the
Participant first becomes eligible to participate in the Plan in accordance
with Section 2.1.

 

(c)                                  If
the Participant dies while receiving installments, the Participant’s remaining
Account balances will be paid in a lump sum within 60 days of death.

 

(d)                                 The
amount of each installment paid under this Section 6.3 will equal the
result of dividing the Participant’s Account balances (determined as of the
most recent Valuation Date occurring before the date on which such payment is
made) by the number of installments remaining immediately before the payment.

 

(e)                                  The
second, third, fourth, and fifth annual installments (as applicable) will be
paid during the first, second, third, and fourth calendar years, respectively,
after the calendar year in which the Participant’s Separation from Service
occurs; provided that (i) the time of payment within the calendar year
will be determined by the Committee, except that the installment payable in
each such calendar year will be paid not more than 30 days after the
anniversary of the Separation from Service that occurs in that calendar year;
and (ii) the payment of the first and second installments will be subject
to paragraph A-1(c) hereof (relating to the six-month delay for Specified
Employees).

 

6.4                             Unforeseeable
Emergency.

 

The Committee may permit the distribution of all or a
portion of a Participant’s Account if the Committee, in its sole discretion,
determines that the Participant has experienced an unforeseeable emergency, but
only to the extent, if any, that such distribution would satisfy the
requirements of Treas. Reg. §1.409A-3(i)(3). 
Upon a distribution to a Participant under this Section 6.4, the
Participant’s deferrals shall cease and no further deferrals shall be made for
such Participant for the remainder of the Plan Year.

 

6.5                             Adjustments
Prior to Commencement Date and During Installments.

 

Prior to payment of a Participant’s Account balances
in a lump sum, and during the period installments are being paid under Section 6.3,
the remaining balances in the Participant’s Accounts shall continue to be
invested at the direction of the Participant and credited with earnings or
losses in accordance with the provisions of the Plan.

 

6.6                             Separation
from Service for Cause.

 

Notwithstanding anything to the
contrary contained herein, in the event the Participant has an involuntary
Separation from Service for Cause, the Participant shall only receive the
return of his or her Deferrals including the Participant’s allocable
share of any earnings or losses credited on
those Deferrals pursuant to Section 5.2, above, and subject to Section 6.1(c) (distributions
to Specified Employees) above.  Upon a
Participant’s Separation from Service for Cause, all amounts credited to
Participant’s Account amounts relating to Employer Matching Contribution(s),
Employer Core Retirement Contributions, and Employer Discretionary
Contribution(s), including the Participant’s allocable share of any
earnings or losses credited on the foregoing
pursuant to Section 5.2, hereinabove, shall be forfeited. For purposes of
this Plan, “Cause” shall mean (i) engaging in misconduct that may
be materially injurious to the Company, 

 

10

 

an Employer, or a Related
Company, (ii) embezzlement or misappropriation of funds or property of the
Company, an Employer, or a Related Company, (iii) conviction of a felony
or the entrance of a plea of guilty or nolo contendere to a felony, (iv) conviction
of any crime involving fraud, dishonesty or breach of trust or the entrance of
a plea of guilty or nolo contendere to such a crime, (v) the violation of
any rules, policies, procedures or guidelines, including but not limited to the
business code of conduct guidelines, of the Company, an Employer, or a Related
Company, or (vi) failure or refusal by the Participant to devote full
business time and attention to the performance of his or her duties and
responsibilities if such breach has not been cured within five (5) days
after notice is given to the Participant.

 

Article 7 - Beneficiaries

 

7.1                               Beneficiaries.

 

In the event of a Participant’s death, the amount
which would otherwise be payable to the Participant shall be paid to one or
more beneficiaries determined in accordance with this Section 7.  Each Participant may from time to time
designate one or more persons (who may be any one or more members of such
person’s family or other persons, administrators, trusts, foundations or other
entities) as his or her beneficiary under the Plan.  Such designation shall be made in a form
prescribed by the Administrator.  Each
Participant may at any time and from time to time, change any previous
beneficiary designation, without notice to or consent of any previously
designated beneficiary, by amending his or her previous designation in a form
prescribed by the Administrator.  If the
beneficiary does not survive the Participant (or is otherwise unavailable to
receive payment) or if no beneficiary is validly designated, then the amounts
payable under this Plan shall be paid to the Participant’s estate.  If more than one person is the beneficiary of
a deceased Participant, each such person shall receive a pro rata share of any
death benefit payable unless otherwise designated in the applicable form.  If a beneficiary who is receiving benefits
dies, all benefits that were payable to such beneficiary shall then be payable
to the estate of that beneficiary.

 

7.2                               Lost
Beneficiary.

 

All Participants and beneficiaries shall have the
obligation to keep the Administrator informed of their current address until
such time as all benefits due have been paid. 
If a Participant or beneficiary cannot be located by the Administrator
exercising due diligence, then, in its sole discretion, the Administrator may
presume that the Participant or beneficiary is deceased for purposes of the
Plan and all unpaid amounts (net of due diligence expenses) owed to the
Participant or beneficiary shall be paid accordingly or, if a beneficiary
cannot be so located, then such amounts may be forfeited.  Any such presumption of death shall be final,
conclusive and binding on all parties.

 

Article 8 - Funding

 

8.1                               Liability
for Benefit Payments.

 

The amount of any benefit payable under the Plan shall
be paid from the general revenues of the Employer of the Participant with
respect to whom the benefit is payable; provided, however, that if a
Participant has been employed by more than one Employer, the portion of his 

 

11

 

Plan benefits payable by
any such Employer shall be that portion accrued while the Participant was
employed by that Employer, and earnings on such portion, as determined by the
Company.  An Employer’s obligation under
the Plan shall be reduced to the extent that any amounts due under the Plan are
paid from one or more trusts, the assets of which are subject to the claims of
general creditors of the Employer or any affiliate thereof; provided, however,
that nothing in the Plan shall require the Company or any Employer to establish
any trust to provide benefits under the Plan.. It is the intention of the
parties hereto that this arrangement shall be unfunded for tax purposes and for
purposes of ERISA.

 

8.2                               No
Guarantee.

 

Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to any assets, funds or
property of the Employers whatsoever, including, without limitation, any
specific funds, assets, or other property which the Employers, in their sole
discretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractual
right to the amounts, if any, payable under the Plan, unsecured by any assets
of the Employers.  Nothing contained in
the Plan shall constitute a guarantee by any of the Employers that the assets
of the Employers shall be sufficient to pay any benefits to any person.

 

8.3                               Withholding
of Employee Contributions.

 

The Administrator is authorized to make any and all
necessary arrangements with the Employer in order to withhold the Participant’s
Deferrals under Section 3.1 hereof from his or her Compensation.  The Administrator shall determine the amount
and timing of such withholding.

 

Article 9 - Claims Administration

 

9.1                               General.

 

The Administrator shall, in its sole discretion,
determine if a Participant is entitled to receive payment of a benefit under
the Plan.  If a Participant, beneficiary
or his or her representative is denied all or a portion of an expected Plan
benefit for any reason and the Participant, beneficiary or his or her
representative desires to dispute the decision of the Administrator, he or she
must file a written notification of his or her claim with the Administrator.

 

9.2                               Claims
Procedure.

 

Upon receipt of any written claim for benefits, the
Administrator shall be notified and shall give due consideration to the claim
presented.  If any Participant or
beneficiary claims to be entitled to benefits under the Plan and the
Administrator determines that the claim should be denied in whole or in part,
the Administrator shall, in writing, notify such claimant within ninety (90)
days of receipt of the claim that the claim has been denied.  The Administrator may extend the period of
time for making a determination with respect to any claim for a period of up to
ninety (90) days, provided that the Administrator determines that such an
extension is necessary because of special circumstances and notifies the
claimant, prior to the expiration of the initial ninety (90) day period, of the
circumstances requiring the extension of time and the date by 

 

12

 

which the Plan expects to
render a decision.  If the claim is
denied to any extent by the Administrator, the Administrator shall furnish the
claimant with a written notice setting forth:

 

(a)                                  the
specific reason or reasons for denial of the claim;

 

(b)                                 a
specific reference to the Plan provisions on which the denial is based;

 

(c)                                  a
description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and

 

(d)                                 an
explanation of the provisions of this Article.

 

9.3                             Right
of Appeal.

 

A claimant who has a claim denied wholly or partially
under Section 9.2 may appeal to the Administrator for reconsideration of
that claim.  A request for
reconsideration under this Section must be filed by written notice within
sixty (60) days after receipt by the claimant of the notice of denial under Section 9.2.

 

9.4                             Review
of Appeal.

 

Upon receipt of an appeal the Administrator shall
promptly take action to give due consideration to the appeal.  Such consideration may include a hearing of
the parties involved, if the Administrator feels such a hearing is necessary.  In preparing for this appeal the claimant
shall be given the right to review pertinent documents and the right to submit
in writing a statement of issues and comments. 
After consideration of the merits of the appeal the Administrator shall
issue a written decision which shall be binding on all parties.  The decision shall specifically state its
reasons and pertinent Plan provisions on which it relies.  The Administrator’s decision shall be issued
within sixty (60) days after the appeal is filed, except that the Administrator
may extend the period of time for making a determination with respect to any
claim for a period of up to sixty (60) days, provided that the Administrator
determines that such an extension is necessary because of special circumstances
and notifies the claimant, prior to the expiration of the initial sixty (60)
day period, of the circumstances requiring the extension of time and the date
by which the Plan expects to render a decision.

 

9.5                             Designation.

 

The Administrator may designate any other person of
its choosing to make any determination otherwise required under this
Article.  Any person so designated shall
have the same authority and discretion granted to the Administrator hereunder.

 

Article 10 - General Provisions

 

10.1                      Administrator.

 

(a)                                  The
Administrator is expressly empowered to limit the amount of Compensation that
may be deferred; to interpret the Plan and to determine all questions arising
in 

 

13

 

the administration,
interpretation and application of the Plan; to employ actuaries, accountants,
counsel, and other persons it deems necessary in connection with the
administration of the Plan; to request any information from any Employer it
deems necessary to determine whether the Employer would be considered insolvent
or subject to a proceeding in bankruptcy; and to take all other necessary and
proper actions to fulfill its duties as Administrator.

 

(b)                                 The
Administrator, including any person or committee member to whom the Board has
delegated the authority to act on behalf of the Administrator, shall not be
liable for any actions by it, unless due to its own negligence, willful
misconduct or lack of good faith.

 

(c)                                  The
Administrator, including any person or committee member to whom the Board has
delegated the authority to act on behalf of the Administrator, shall be
indemnified and saved harmless by the Employers from and against all personal
liability to which it may be subject by reason of any act done or omitted to be
done in its official capacity as Administrator in good faith in the administration
of the Plan, including all expenses reasonably incurred in its defense in the
event the Employers fail to provide such defense upon the request of the
Administrator.  Any person or committee
member acting on behalf of the Administrator is relieved of all personal
responsibility in connection with its duties hereunder to the fullest extent
permitted by law, short of breach of duty to the beneficiaries.

 

10.2                      No
Assignment.

 

Benefits or payments under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or the Participant’s beneficiary, whether voluntary or involuntary, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
attach or garnish the same shall not be valid, nor shall any such benefit or
payment be in any way liable for or subject to the debts, contracts,
liabilities, engagement or torts of any Participant or beneficiary, or any
other person entitled to such benefit or payment pursuant to the terms of this
Plan, except to such extent as may be required by law.  If any Participant or beneficiary or any
other person entitled to a benefit or payment pursuant to the terms of this
Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer,
assign, pledge, encumber, attach or garnish any benefit or payment under this
Plan, in whole or in part, or if any attempt is made to subject any such
benefit or payment, in whole or in part, to the debts, contracts, liabilities,
engagements or torts of the Participant or beneficiary or any other person
entitled to any such benefit or payment pursuant to the terms of this Plan,
then such benefit or payment, in the discretion of the Administrator, shall
cease and terminate with respect to such Participant or beneficiary, or any
other such person.

 

10.3                      No
Employment Rights.

 

Participation in this Plan shall not be construed to
confer upon any Participant the legal right to be retained in the employ of the
Employer, or give a Participant or beneficiary, or any other person, any right
to any payment whatsoever, except to the extent of the benefits provided for
hereunder.  Each Participant shall remain
subject to discharge to the same extent as if this Plan had never been adopted.

 

14

 

10.4                        Incompetence.

 

If the Administrator determines that any person to
whom a benefit is payable under this Plan is incompetent by reason of physical
or mental disability, the Administrator shall have the power to cause the
payments becoming due to such person to be made to another for his or her
benefit without responsibility of the Administrator or the Employer to see to
the application of such payments.  Any
payment made pursuant to such power shall, as to such payment, operate as a
complete discharge of the Company, the Employers, and the Administrator.

 

10.5                        Identity.

 

If, at any time, any doubt exists as to the identity
of any person entitled to any payment hereunder or the amount or time of such
payment, the Administrator shall be entitled to hold such sum until such
identity or amount or time is determined or until an order of a court of
competent jurisdiction is obtained.  The
Administrator shall also be entitled to pay such sum into court in accordance
with the appropriate rules of law. 
Any expenses incurred by the Company, Employers, and Administrator
incident to such proceeding or litigation shall be charged against the Account
of the affected Participant.

 

10.6                        Other
Benefits.

 

The benefits of each Participant or beneficiary
hereunder shall be in addition to any benefits paid or payable to or on account
of the Participant or beneficiary under any other pension, disability, annuity
or retirement plan or policy whatsoever.

 

10.7                        Right of
Setoff.

 

The Employer may, to the extent permitted by
applicable law, deduct from and setoff against any amounts payable to a
Participant from this Plan such amounts as may be owed by a Participant to the
Employer, although the Participant shall remain liable for any part of the
Participant’s payment obligation not satisfied through such deduction and
setoff; provided, however, that this setoff may occur only at the date on which
the amount would otherwise be distributed to the Participant as required by
Code Section 409A.  By electing to
participate in the Plan and deferring compensation hereunder, the Participant
agrees to any deduction or setoff under this Section 10.7.

 

10.8                        Expenses.

 

All expenses incurred in the administration of the
Plan, whether incurred by the Employers or the Plan, shall be paid by the
Employers.

 

10.9                        Insolvency.

 

If an Employer establishes a trust to pay benefits
hereunder, as described in Section 8.1, should the Employer be considered
insolvent (as defined by such trust), the Employer, through its Board and chief
executive officer, shall give immediate written notice of such to the
Administrator of the Plan and the trustee of such trust.  Upon receipt of such notice, the
Administrator or trustee shall cease to make any payments to Participants who
were Employees 

 

15

 

of the Employer or their
beneficiaries and shall hold any and all assets attributable to the Employer
for the benefit of the general creditors of the Employer.

 

10.10                 Amendment,
Modification, Suspension or Termination.

 

The Company may, at any time, in its
sole discretion, amend, modify, suspend or terminate the Plan in whole or in
part, except that no such amendment, modification, suspension or termination
shall have any retroactive effect to reduce any amounts allocated to a
Participant’s Accounts.  In the event
that this Plan is terminated, to the extent required under Code Section 409A,
the distribution of the amounts credited to a Participant’s Accounts shall not
be accelerated but shall be paid at such time and in such manner as determined
under the terms of the Plan immediately prior to termination as if the Plan had
not been terminated; and notwithstanding anything to the contrary contained herein,
the Company, in its sole discretion, may distribute all Participants’ Accounts
no earlier than twelve (12) calendar months from the date of the Plan
termination and no later than twenty-four (24) calendar months from the date of
the Plan termination, provided that the Company also satisfies any additional
requirements as may be imposed by Code Section 409A and regulations
thereunder.

 

10.11                 Termination Due
to Change-in-Control.

 

The Employer may decide in its discretion to terminate
the Plan in the event of a change-in-control, within the meaning of Code Section 409A
and regulations thereunder, and distribute all Participants Accounts within
twelve (12) months of the effective date of the change-in-control as allowed by
applicable law.  Any corporation or other
business organization that is a successor to the Employer by reason of a
change-in-control shall have the right to become a party to the Plan by
adopting the same by resolution of the entity’s board of directors or other
appropriate governing body.  If within
thirty (30) days from the effective date of the change-in-control such new
entity does not become a party hereto, as above provided, the full amount of
the Participant’s Account shall become immediately distributable to the
Participant.

 

10.12                 Construction.

 

All questions of interpretation, construction or
application arising under or concerning the terms of this Plan shall be decided
by the Administrator, in its sole and final discretion, whose decision shall be
final, binding and conclusive upon all persons.

 

10.13                 Governing Law.

 

This Plan shall be governed by, construed and
administered in accordance with the applicable provisions of ERISA, Code Section 409A,
and any other applicable federal law, provided, however, that to the extent not
preempted by federal law this Plan shall be governed by, construed and
administered under the laws of the New York, other than its laws respecting
choice of law.

 

10.14                 Severability.

 

If any provision of this Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provision of this Plan and this Plan shall be construed 

 

16

 

and enforced as if such
provision had not been included therein. 
If the inclusion of any Employee (or Employees) as a Participant under
this Plan would cause the Plan to fail to comply with the requirements of
sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or Code Section 409A,
then the Plan shall be severed with respect to such Employee or Employees, who
shall be considered to be participating in a separate arrangement.

 

10.15                 Headings.

 

The Article headings contained herein are
inserted only as a matter of convenience and for reference and in no way
define, limit, enlarge or describe the scope or intent of this Plan nor in any
way shall they affect this Plan or the construction of any provision thereof.

 

10.16                 Terms.

 

Capitalized terms shall have meanings as defined
herein.  Singular nouns shall be read as
plural, masculine pronouns shall be read as feminine, and vice versa, as
appropriate.

 

10.17                 409A Compliance.

 

It is intended that this Plan comply with Code Section 409A
in accordance with Internal Revenue Service Notice 2005-1 (and any subsequent
IRS notices or guidance), and this Plan will be interpreted, administered and
operated in good faith accordingly.  In
the event that any provision of this Plan is inconsistent with Code Section 409A
or such guidance, then the applicable provisions of Code Section 409A
shall supersede such provision.  Nothing
herein shall be construed as an entitlement to or guarantee of any particular
tax treatment to a Participant.

 

17Exhibit 10.64

 

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 Dominic
J. Frederico (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.

 

1

 

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 

 

2

 

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 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
Executive Officer of the Company, with such powers and duties normally
attendant to such offices and such other duties as may be assigned to the
Executive.  Executive shall answer to and
be subject to the direction of the Assured Guaranty  Ltd. Board of Directors.

 

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

 

(i) deliver lectures and
fulfill speaking engagements; and

 

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

 

3

 

4. Salary

 

For services
rendered by the Executive to the Company during the term of this Agreement
while he is employed by the Company, the Executive shall be paid a minimum
annual base salary at a rate of $700,000. 
The annual base salary shall be paid on a monthly basis by the
Company.  The companies which comprise
the Company as defined herein will fund the salary specified above in
proportion to the percentage of time executive performs work for each company.

 

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 which will range from 0 to 

 

4

 

200%
of his annual base salary, such amount to be determined by the Compensation
Committee of the Board of Directors and to be based on the performance of the
Company and the Executive. 
Notwithstanding the foregoing, for as long as the Company continues to
participate in the ACE Group short-term incentive program, Executive will be
eligible to participate in such plan, pursuant to its terms, as may be in
effect from time to time .

 

7. Long-Term
Incentive Awards

 

(a) Sign-on Equity Award—  When Assured Guaranty Limited (“AGL”) issues
shares of publicly traded stock, Executive will be granted an award of 250,000
restricted ordinary shares of AGL stock that will vest 25% annually over a four
year period with the first quarter vesting starting one year after the date of
the award .  When AGL issues shares of
publicly traded stock, Executive will also be granted an award of an option to
purchase at the IPO price 500,000 shares of AGL stock.  These shares and options will be subject the
terms and conditions that will be set forth in the AGL Long-Term Incentive Plan
(“LTIP”).   The current projected target
share value for the IPO AGL shares is $20.  
Upon vesting or exercise of stock options, the shares will be registered
in the United States with the SEC and appropriate states and will be freely
tradable.

 

(b) Annual Long-Term Incentive Awards—After AGL issues
shares of publicly traded stock, Executive will participate in the LTIP.  The “target award” for the Initial Term will
be 83,333 restricted shares of AGL stock and an option to purchase 166,667
shares of AGL stock, however the amount of any award made to Executive under
LTIP will be based on the profitability of the AGL and Executive’s performance
and will be subject to the discretion of the Compensation Committee of the AGL’s
Board of Directors.  All Long-Term
Incentive awards will be subject to the terms and conditions of the LTIP.

 

5

 

(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.

 

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.

 

6

 

(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 $ 18,000 per month in respect of the cost of suitable living
accommodation in Bermuda. In the event that the Executive chooses to purchase a
residence in Bermuda, the Company will reimburse him only for the fair market
rental value of said residence to a maximum of $18,000 per month, which amount
shall be reviewed from time to time in accordance with authorization from the
Compensation Committee of the Board of Directors.

 

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

 

7

 

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
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 

 

8

 

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;

 

9

 

(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 turpitude;

 

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

 

10

 

(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 

 

11

 

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

 

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

 

(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, 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, 

 

12

 

then
they shall provide the Executive with economically equivalent employee benefits
to the extent such benefits are reasonably available.

 

(iii) At
the discretion of the Compensation Committee, to the extent that amounts
payable under Section 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
compensation paid to Executive by his new employer shall reduce, by an
equivalent amount, the  payments required
to be made under Section 10(d)(ii)(A).

 

(v) The
obligation of the Company to make or provide the payments and benefits set
forth in this Section 10(d) shall be strictly conditioned on the
Executive executing and returning to the Company a general release and waiver
of all claims against the Company in the form as submitted by the Company, 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 

 

13

 

benefits shall be paid to the
Executive only if the release is returned within 60 days after the Executive’s
termination of employment; and further provided that with respect to amounts
payable under Section 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.

 

14

 

(f) Change in Control

 

In the event
of a Change in Control (as defined below) all stock based awards in which the
Executive is not yet vested shall become fully vested and stock options shall
be exercisable for their term.  In
addition, the Executive may resign for any reason at any time during the twelve
month period following a Change in Control (as defined below) and receive the
same salary continuation, bonus eligibility and benefits as if the Executive
were Terminated Without Cause pursuant to Section 10(d) of this
Agreement.   The term Change in Control
shall be as defined in the Company’s long-term incentive plan as of the date
hereof, a copy of which is attached hereto as Exhibit A.  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.

 

15

 

(h)  Termination of Employment

 

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

 

(i)  The
employment relationship will be deemed to have ended at the time the Executive
and his or her employer reasonably anticipate that a level of bona fide
services the Executive would perform for the Company and the Affiliates after
such date (whether as an employee or independent contractor, but not as a
director) would permanently decrease to no more than 20% of the average level
of bona fide services performed over the immediately preceding 36 month period
(or the full period of service to the Company 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).

 

16

 

(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).

 

17

 

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 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 

 

18

 

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.

 

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.

 

19

 

13. Remedy for
Violation of Noncompetition or Confidential Information Provisions

 

Without
intending to limit the remedies available to the Company for the breach of any
of the Executive’s covenants in Sections 11 and 12, the Executive acknowledges
and agrees that damages at law are an insufficient remedy for the Company and
that, accordingly, the Company shall be entitled to apply for and obtain
injunctive relief in any court of competent jurisdiction to restrain the breach
or threatened breach, or otherwise specifically enforce, any or all of said
covenants. The Parties acknowledge that each of the covenants contained in
Sections 11 and 12 is an essential element of this Agreement. If any covenant
or term of Section 11 or 12 or any portion thereof of this Section 13,
is determined to be invalid or unenforceable in any instance, such
determination shall not prevent the reassertion thereof with respect of any
other breach or violation. If, in any proceeding, a court (or other tribunal)
refuses to enforce the covenants contained in Section 11 or 12 or this Section 13
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed amended to the extent (but
only to the extent) required by law to permit its enforceability hereunder.

 

Notwithstanding
anything contained in this Agreement to the contrary, in the event that the
Executive’s employment is terminated without Cause (as defined in Section 10(d)(i))
and the Court determines that the Executive has violated Section 11 or 12
of this Agreement, then the Companies shall be entitled to discontinue any
payments or benefits that would otherwise be provided under Section 10(d) and
the Executive shall forfeit his rights to the same.

 

20

 

14. Withholding

 

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

 

15. Arbitration
of All Disputes

 

Subject to the
provisions of Section 15, any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Hamilton in accordance with the law of Bermuda by
three arbitrators appointed by the Parties. If the Parties cannot agree on the
appointment of the arbitrators, one shall be appointed by the Company and one by the Executive and the third shall be
appointed by the first two arbitrators. If the first two arbitrators cannot
agree on the appointment of a third arbitrator, then the third
arbitrator shall be appointed by the Chief Justice of the Supreme Court of
Bermuda. The arbitration shall be conducted in accordance with the rules of
the Arbitration Act, 1986, as amended, except with respect to the selection of the arbitrators which shall be as provided
in this Section 15. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. The arbitrators’ fees
and any expenses relating to the arbitration (other than the Parties’ own legal
fees and expenses) shall be shared equally by the parties.

 

21

 

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.

 

22

 

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 Chairman of the Board

  
	
   

  	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  	
  30 Woodbourne Ave

  
	
   

  	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. Dominic J. Frederico

  
	
   

  	
   

  	
  Ship’s Hill, #11

  
	
   

  	
   

  	
  Tucker’s Point

  
	
   

  	
   

  	
  Bermuda HS02

  

 

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 

 

23

 

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.

 

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 

 

24

 

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:

  	
   

  
	
   

  	
   

  	
  James Michener

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Their General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:                   ,
  2008

  	
   

  	
   

  
	
   

  	
   

  	
  Dominic J. Frederico

  

 

25

 

EXHIBIT A

Gross-Up Provisions

 

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

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

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

 

27

 

claim and the date on which
such claim is requested to be paid.  The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he or she gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due).  If the Company
notifies the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

advanced by the Company
pursuant to paragraph (d) above, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

(f)  If, pursuant to regulations issued
under Section 280G or 4999 of the Code, the Company and the Executive were
required to make a preliminary determination of the amount of an excess
parachute payment and thereafter a redetermination of the Excise Tax is
required under the applicable regulations, the parties shall request the
Accounting Firm to make such redetermination. 
If as a result of such redetermination an additional Gross-Up Payment is
required, the amount thereof shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm’s determination.  If the redetermination of the Excise Tax
results in a reduction of the Excise Tax, the Executive shall take such steps
as the Company may reasonably direct in order to obtain a refund of the excess
Excise Tax paid.  If the Company
determines that any suit or proceeding is necessary or advisable in order to
obtain such refund, the provisions of paragraph (d) above relating to the
contesting of a claim shall apply to the claim for such refund, including,
without limitation, the provisions concerning legal representation, cooperation
by the Executive, participation by the Company in the proceedings and
indemnification by the Company.  Upon
receipt of any such refund, the Executive shall promptly pay the amount of such
refund to the Company.  If the amount of
the income taxes otherwise payable by the Executive in respect of the year in
which the Executive makes such payment to the Company is reduced as a result of
such payment, the Executive shall, no later than the filing of his income tax
return in respect of such year, pay the amount of such tax benefit to the
Company.  In the event there is a
subsequent redetermination of the Executive’s income taxes resulting in a
reduction of such tax benefit, the Company shall, promptly after receipt of
notice of such reduction, pay to the Executive the amount of such
reduction.  If the Company objects to the
calculation or recalculation of the tax benefit, as described in the preceding
two sentences, the Accounting Firm shall make the final determination of the
appropriate amount.  The Executive shall
not be obligated to pay to the Company the amount of any further tax benefits
that may be realized by him or her as a result of paying to the Company the
amount of the initial tax benefit.

 

29

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