Document:

Exhibit
10.65

 

For Use Without
Employment Agreement

 

Restricted Stock Unit
Agreement under

Assured Guaranty Ltd.
2004 Long-Term Incentive Plan

 

THIS AGREEMENT is effective as of the Grant Date, by and between the
Participant and Assured Guaranty Ltd. (the “Company”).

 

WHEREAS, the Company maintains the Assured Guaranty Ltd. 2004 Long-Term
Incentive Plan (the “Plan”), and the Participant has been selected by the
committee administering the Plan (the “Committee”) to receive a Restricted
Stock Unit Award under the Plan; and

 

NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

 

1.  Terms of Award. 
The following words and phrases used in this Agreement shall have the
meanings set forth in this paragraph 1:

 

(a)                                  The “Participant” is
                                                                          .

 

(b)                                 The “Grant Date” is  February 14,
2008.

 

(c)                                  The number of “Covered Units” granted
under this Agreement is
           Units.  Each “Unit” represents the right to receive
one share of Stock on the Delivery Date, to the extent that the Participant is
vested in such Units as of the Delivery Date, subject to the terms of this
Agreement and the Plan.

 

(d)                                 The “Delivery Date” with respect to each
Installment shall be the earliest to occur of:

 

(i)  The date
on which the Participant vests in that Installment in accordance with the
schedule set forth in paragraph 3 (determined without regard to paragraphs
3(a), 3(b), 3(c), or 3(d)).

 

(ii)  The
Participant’s Date of Termination that occurs by reason of the Participant’s
death.

 

(iii)  The
date on which the Participant becomes Permanently Disabled on or before the
Participant’s Date of Termination.

 

(iv)  The
date of a Change in Control on or before the Participant’s Date of Termination,
but only if the Change in Control also satisfies the definition of “change in
control event” as set forth in Treas. Reg. 1.409A-3(i)(5).

 

Other words and phrases used in this Agreement are defined pursuant to
paragraph 17, elsewhere in this Agreement,  or the Plan.

 

2.  Restricted Stock Unit Award.  This Agreement specifies the terms of the
“Restricted Stock Unit Award” granted to the Participant.

 

 

 

 

 

3.  Restricted Period.  If the Date of Termination does not occur
during the Restricted Period with respect to any Installment of the Covered
Units, then the Participant shall become vested in such Installment at the end
of such Restricted Period.  With respect
to all Covered Units, the “Restricted Period” for each Installment of Covered
Units shall begin on the Grant Date.  The
Restricted Period with respect to each Installment shall end as described in
the following schedule (but only if the Date of Termination has not occurred
before the end of the Restricted Period):

 

	
  INSTALLMENT

  	
   

  	
  RESTRICTED
  PERIOD WILL END ON:

  
	
  1⁄4 of Covered
  Units

  	
   

  	
  One year
  anniversary of the Grant Date

  
	
  1⁄4 of Covered
  Units

  	
   

  	
  Two year
  anniversary of the Grant Date

  
	
  1⁄4 of Covered
  Units

  	
   

  	
  Three year
  anniversary of the Grant Date

  
	
  1⁄4 of Covered
  Units

  	
   

  	
  Four year
  anniversary of the Grant Date

  

 

The Restricted Period shall end prior to the date specified in the
foregoing schedule to the extent set forth below:

 

(a)                                  For Installments as to which the
Restricted Period has not otherwise ended prior to the Date of Termination, the
Restricted Period for such Installments shall end upon the Participant’s Date
of Termination, if the Date of Termination occurs by reason of the
Participant’s Disability or death.

 

(b)                                 For Installments as to which the
Restricted Period has not otherwise ended prior to the date of a Change in
Control, the Restricted Period for such Installments shall end upon a Change in
Control, provided that such Change in Control occurs on or before the Date of
Termination.

 

(c)                                  If the Participant’s Date of Termination
occurs because of Retirement, then for Installments as to which the Restricted
Period has not otherwise ended prior to the Date of Termination, the
Participant shall be vested on the Date of Termination (and the Restricted
Period shall end) with respect to the Installment (if any) that would vest on
or before the one-year anniversary of the Date of Termination, determined as
though the Participant had remained employed through the one-year anniversary
of the Date of Termination, but subject to paragraph 17(g) (relating to
the definition of Retirement).

 

4.  Transfer of Shares and Forfeiture of Units.  On the Delivery Date, the Participant shall
receive one share of Stock for each Unit in which the Participant is then
vested, and such shares shall be free of restrictions otherwise imposed by this
Agreement, subject to the terms of this Agreement applicable after such
Delivery Date (including, without limitation, paragraph 9) and the Plan.  If any vested Units attributable to any
Installment are allocated to the Participant after the date otherwise specified
as the Delivery Date for that Installment (by reason of payment of dividends or
otherwise), then, as soon as practicable after the date of allocation of such
Units, the

 

 

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Participant will receive one share of Stock with
respect to each such Unit.  As of the
date of distribution of Shares with respect to any Units, such Units shall be
canceled.  If the Restricted Period with
respect to any Installments does not end on or before the Participant’s Date of
Termination, then as of the Participant’s Date of Termination, the Participant
shall forfeit such Installments. 
However, the Committee, in its sole discretion, may accelerate the end
of the Restricted Period or provide for the vesting of the Covered Units under
circumstances that such vesting would not otherwise occur in its sole
discretion, based on such factors as the Committee deems appropriate.

 

5.  Withholding. 
All deliveries and distributions under this Agreement are subject to
withholding of all applicable taxes.  At
the election of the Participant, and subject to such rules and limitations
as may be established by the Committee from time to time, such withholding
obligations may be satisfied through the surrender of shares of Stock which the
Participant already owns, or to which the Participant is otherwise entitled
under the Plan; provided, however, that such shares may be used to satisfy not
more than the Company’s minimum statutory withholding obligation (based on minimum
statutory withholding rates for Federal and state tax purposes, including
payroll taxes, that are applicable to such taxable income).

 

6.  Transferability. 
Except as otherwise provided by the Committee, the Restricted Stock Unit
Award may not be sold, assigned, transferred, pledged or otherwise encumbered
during the Restricted Period.

 

7.  Dividends.  The Participant will be credited with
additional Units to reflect dividends payable with respect to Stock during the
period between the Grant Date and the Delivery Date, with the increase in the
number of Units equal to the number of shares of Stock which could be purchased
with the dividends (assuming each Unit was a share of Stock), based on the
value of such Stock at the time such dividends are paid.  The Units credited on account of the
preceding sentence shall be vested and distributed in accordance with the same
schedule as the Units to which such dividends are attributable.  No dividends shall be credited to or for the
benefit of the Participant for Units with respect to record dates occurring
prior to the Grant Date, or with respect to record dates occurring on or after
the date, if any, on which the Participant has forfeited those Units.

 

8.  Voting.  The Participant shall not be a shareholder of
record with respect to the Units and shall have no voting rights with respect
to the Units during the Restricted Period or prior to the Delivery Date.

 

9.  Cancellation and Rescission of Restricted
Stock Unit Award.

 

(a)                                  The Committee may cancel, rescind, suspend,
withhold or otherwise limit or restrict the Restricted Stock Unit Award at any
time if the Participant engages in any “Detrimental Activity.”

 

(b)                                 At the Delivery Date with respect to an
Installment and prior to the transfer of the shares of Stock to the
Participant, the Participant shall certify, to the extent required by the
Committee, in a manner acceptable to the Committee, that the Participant is not
engaging and has not engaged in any Detrimental Activity.  In the event a Participant has engaged

 

 

3

 

 

in any Detrimental
Activity prior to, or during the twelve months after, the Delivery Date with
respect to such Installment of Covered Units, the right to delivery of shares
with respect to such Installment may be rescinded by the Committee within two
years thereafter.  In the event of any
such rescission, the Participant shall pay to the Company the amount of any
gain realized as a result of the prior delivery of shares applicable to the
rescinded Installment(s), in such manner and on such terms and conditions as
may be required by the Company, and the Company shall be entitled to set-off
against the amount of any such gain any amount owed to the Participant by the
Company and/or Subsidiary.

 

10.  Heirs and Successors.  This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.  If any benefits deliverable to the
Participant under this Agreement have not been delivered at the time of the
Participant’s death, such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the
Plan.  The “Designated Beneficiary” shall
be the beneficiary or beneficiaries designated by the Participant in a writing
filed with the Committee in such form and at such time as the Committee shall
require.  If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be distributed to the legal
representative of the estate of the Participant.  If a deceased Participant designates a
beneficiary and the Designated Beneficiary survives the Participant but dies
before the complete distribution of benefits to the Designated Beneficiary
under this Agreement, then any benefits distributable to the Designated
Beneficiary shall be distributed to the legal representative of the estate of
the Designated Beneficiary.

 

11.  Administration. 
The authority to manage and control the operation and administration of
this Agreement shall be vested in the Committee, and the Committee shall have
all powers with respect to this Agreement as it has with respect to the
Plan.  Any interpretation of this
Agreement by the Committee and any decision made by it with respect to this
Agreement is final and binding on all persons. 
The Committee shall have the authority to obtain such information from
the Participant (including tax return information) as it determines may be
necessary to confirm that the Participant is in compliance with the
requirements applicable to Detrimental Activity, and if the Participant fails
to provide such information, the Committee may conclude that the Participant is
not in compliance with such requirements.

 

12.  Plan Governs. 
Notwithstanding anything in this Agreement to the contrary, this
Agreement shall be subject to the terms of the Plan, a copy of which may be
obtained by the Participant from the office of the Secretary of the Company;
and this Agreement is subject to all interpretations, amendments,
rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

 

13.  Not an Employment Contract.  The Restricted Stock Unit Award will not
confer on the Participant any right with respect to continuance of employment or
other service with the Company

 

 

 

4

 

or any Related Company, nor will it interfere in any
way with any right the Company or any Related Company would otherwise have to
terminate or modify the terms of such Participant’s employment or other service
at any time.

 

14.  Notices. 
Any written notices provided for in this Agreement or the Plan shall be
in writing and shall be deemed sufficiently given if either hand delivered or
if sent by fax or overnight courier, or by postage paid first class mail.  Notices sent by mail shall be deemed received
three business days after mailing but in no event later than the date of actual
receipt.  Notices shall be directed, if
to the Participant, at the Participant’s address indicated by the Company’s
records, or if to the Company, at the Company’s principal executive office.

 

15.  Fractional Shares.  In lieu of issuing a fraction of a share,
resulting from an adjustment of the Restricted Stock Unit Award pursuant to the
Plan or otherwise, the Company will be entitled to pay to the Participant an
amount equal to the fair market value of such fractional share.

 

16.  Amendment. 
This Agreement may be amended in accordance with the provisions of the
Plan, and may otherwise be amended by written agreement of the Participant and
the Company without the consent of any other person.

 

17.  Definitions.  For purposes of this Agreement, words and
phrases shall be defined as follows:

 

(a)                                  Change in Control. 
The term “Change in Control” shall be defined as set forth in the Plan.

 

(b)                                 Date of Termination. 
A Participant’s “Date of Termination” means, with respect to an
employee, the date on which the Participant’s employment with the Company and
Subsidiaries terminates for any reason, and with respect to a Director, the
date immediately following the last day on which the Participant serves as a
Director; provided that a Date of Termination shall not be deemed to occur by
reason of a Participant’s transfer of employment between the Company and a
Subsidiary or between two Subsidiaries; further provided that a Date of
Termination shall not be deemed to occur by reason of a Participant’s cessation
of service as a Director if immediately following such cessation of service the
Participant becomes or continues to be employed by the Company or a Subsidiary,
nor by reason of a Participant’s termination of employment with the Company or
a Subsidiary if immediately following such termination of employment the
Participant becomes or continues to be a Director; and further provided that a
Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.

 

(c)                                  Detrimental Activity. 
The term “Detrimental Activity” shall mean (i) the rendering of
services for any organization or engaging directly or indirectly in any
business which is or becomes competitive with the Company or the Subsidiaries
(including, without limitation, AMBAC Financial Group Inc., Berkshire Hathaway
Financial Guaranty, CIFG Group, Financial Guaranty Insurance Company, Financial
Security Assurance Inc., MBIA, Inc. and Radian Group Inc. or Security
Capital Assurance Ltd.), or which

 

 

5

 

 

organization or
business, or the rendering of services to such organization or business, is or
becomes otherwise prejudicial to or in conflict with the interests of the
Company or the Subsidiaries; (ii) the disclosure to anyone outside the
Company or the Subsidiaries, or the use in other than the Company’s or the
Subsidiaries’ business, without prior written authorization from the Company or
the Subsidiaries, of any confidential information or material, relating to the
business of the Company or the Subsidiaries, acquired by the Participant either
during or after employment with the Company or the Subsidiaries; (iii) a
violation of any rules, policies, procedures or guidelines of the Company or
the Subsidiaries, including but not limited to the Company’s Code of Conduct,
Policy on Trading in Assured Guaranty Ltd. Securities, Management Stock
Ownership Guidelines and other business conduct guidelines; (iv) any
attempt directly or indirectly to induce any employee of the Company to be
employed or perform services elsewhere or any attempt directly or indirectly to
solicit the trade or business of any current or prospective customer, supplier
or partner of the Company; (v) the Participant being convicted of, or
entering a guilty plea with respect to, a crime, whether or not connected with
the Company; or (vi) any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company.

 

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

 

(e)                                  Disability.  The
Participant shall be considered to have a “Disability” during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 120 days. 
The Participant shall be considered to be Permanently Disabled if he
would be treated as “disabled” in accordance with the provisions of Treas. Reg.
§1.409A-3(i)(4).

 

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

 

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

 

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

 

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

 

 

 

6

 

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

 

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

 

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

 

(vi)  If, prior
to the Delivery Date applicable to any Installment, a Participant engages in
one or more activities that the Committee determines to be inconsistent with
Retirement, as set forth in paragraph (iii) above, the right to a
distribution of Shares with respect to the Installment (including the right to
distribution of Shares attributable to dividends) may be canceled by the
Committee.

 

(g)                                 Plan Definitions. 
Except where the context clearly implies or indicates the contrary, a
word, term, or phrase used in the Plan is similarly used in this Agreement.

 

 

	
  Agreed
  Upon:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Assured Guaranty Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Participant

  	
   

  

 

 

7Exhibit
10.66

 

To Be Used With
Employment Agreement

 

Non-Qualified Stock
Option Agreement under

Assured Guaranty Ltd. 2004
Long-Term Incentive Plan

 

THIS AGREEMENT is effective as of the Grant Date, by and between the
Participant and Assured Guaranty Ltd. (the “Company”).

 

WHEREAS, the Company maintains the Assured Guaranty Ltd. 2004 Long-Term
Incentive Plan (the “Plan”), and the Participant has been selected by the
committee administering the Plan (the “Committee”) to receive a Non-Qualified
Stock Option Award under the Plan; and

 

NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

 

1.  Terms of Award.  
The following words and phrases used in this Agreement shall have the
meanings set forth in this paragraph 1:

 

(a)                                  The “Participant” is

 

(b)                                 The “Grant Date” is February 14,
2008.

 

(c)                                  The number of “Covered Shares” shall be                        shares
of Stock.

 

(d)                                 The “Exercise Price” is $              per
share.

 

Other words and phrases used in this Agreement are defined pursuant to
paragraph 17, elsewhere in this Agreement or the Plan.

 

2.  Non-Qualified Stock Option.  This Agreement specifies the terms of the
option (the “Option”) granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1.  The Option is not intended
to constitute an “incentive stock option” as that term is used in Code section
422.

 

3.  Date of Exercise. 
Subject to the limitations of this Agreement, each Installment of
Covered Shares of the Option shall be exercisable on and after the Vesting Date
for such Installment as described in the following schedule (but only if the
Date of Termination has not occurred before the Vesting Date):

 

 

 

 

 

 

	
  INSTALLMENT

  	
   

  	
  VESTING
  DATE APPLICABLE TO INSTALLMENT

  
	
  1/3 of Covered
  Shares

  	
   

  	
  One year
  anniversary of the Grant Date

  
	
  1/3 of Covered
  Shares

  	
   

  	
  Two year
  anniversary of the Grant Date

  
	
  1/3 of Covered
  Shares

  	
   

  	
  Three year
  anniversary of the Grant Date

  

 

Notwithstanding the foregoing provisions of this paragraph 3, the
Option shall become vested and exercisable as follows:

 

(a)                                  The Option shall become fully exercisable
upon the Date of Termination, if the Date of Termination occurs by reason of
the Participant’s death or Disability.

 

(b)                                 The Option shall become fully exercisable
upon a Change in Control that occurs on or before the Date of Termination.

 

(c)                                  If the Option is not fully exercisable
upon the Participant’s Date of Termination, and the Participant’s Date of
Termination occurs because of Retirement, then, for purposes of this paragraph
3 and subject to paragraph 17(g), the Participant shall be treated as though
employed by the Company and Subsidiaries after the Participant’s actual Date of
Termination until the Vesting Date has occurred with respect to all of the
Covered Shares.

 

(d)                                 If the Option is not fully exercisable
upon the Participant’s Date of Termination, and the Participant’s Date of
Termination occurs by virtue of a Termination Without Cause, then for purposes
of applying the foregoing vesting schedule, the Participant shall be treated as
though employed by the Company and Subsidiaries after the Participant’s actual
Date of Termination until the two-year anniversary of the Date of Termination.  The terms “Cause” and “Terminated Without
Cause” shall be defined as set forth in the Employment Agreement.  Notwithstanding the foregoing, if the
Executive’s employment is Terminated without Cause, the provisions of this
paragraph (d) shall apply, and the provisions of paragraph 4(e) with
respect to Retirement shall apply only if the Executive executes and returns to
the Company a general release and waiver of all claims against the Company as
required under the Employment Agreement.

 

Subject to paragraphs (c) and (d) above, the Option may be
exercised on or after the Date of Termination only as to that portion of the
Covered Shares for which it was exercisable immediately prior to (or became
exercisable on) the Date of Termination. 
Notwithstanding the foregoing provisions of this paragraph 3, as of the
Participant’s Date of Termination for Cause, the Option shall be canceled as to
any Covered Shares as to which it has not previously been exercised.

 

 

2

 

 

4.  Expiration. 
The Option shall not be exercisable after the Company’s close of
business on the last business day that occurs prior to the Expiration
Date.  The “Expiration Date” shall be the
earliest to occur of:

 

(a)                                  the ten-year anniversary of the Grant
Date;

 

(b)                                 if the Participant’s Date of Termination
occurs by reason of death or Disability, the two-year anniversary of such Date
of Termination;

 

(c)                                  if the Participant’s Date of Termination
occurs for Cause, the Date of Termination;

 

(d)                                 if the Participant’s Date of Termination
occurs because of a Termination Without Cause, the two-year anniversary of the
Date of Termination;

 

(e)                                  if the Participant’s Date of Termination
occurs because of Retirement, the ten-year anniversary of the Grant Date,
subject to paragraph 17(g); or

 

(f)                                    if the Participant’s Date of Termination
occurs for any reason other than those listed in subparagraph (b), (c), (d), or
(e) of this paragraph 4, the 90 day anniversary of such Date of
Termination.

 

Notwithstanding the foregoing provisions of this paragraph 4, if a
Change in Control occurs on or before the Participant’s Date of Termination,
the Expiration Date shall be the ten-year anniversary of the Grant Date.

 

5.  Method of Option Exercise.  Subject to this Agreement and the Plan, the
Option may be exercised in whole or in part by filing a written notice with the
Secretary of the Company at its corporate headquarters prior to the Company’s
close of business on the last business day that occurs prior to the Expiration
Date.  Such notice shall specify the number
of shares of Stock which the Participant elects to purchase, and shall be
accompanied by payment of the Exercise Price for such shares of Stock indicated
by the Participant’s election.  Payment
shall be by cash or by check payable to the Company.  Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price
may be paid by the Participant by delivery of shares of Stock owned by the
Participant and acceptable to the Committee having an aggregate Fair Market
Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Participant may pay the
Exercise Price by authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such
exercise.  The Option shall not be
exercisable if and to the extent the Company determines that such exercise
would violate applicable state or Federal securities laws or the rules and
regulations of any securities exchange on which the Stock is traded.  If the Company makes such a determination, it
shall use all reasonable efforts to obtain compliance with such laws, rules and
regulations.  In making any determination
hereunder, the Company may rely on the opinion of counsel for the Company.

 

6.  Withholding. 
All deliveries and distributions under this Agreement are subject to
withholding of all applicable taxes.  At
the election of the Participant, and subject to such rules and limitations
as may be established by the Committee from time to time, such withholding

 

 

3

 

obligations may be satisfied through the surrender of
shares of Stock which the Participant already owns, or to which the Participant
is otherwise entitled under the Plan; provided, however, that such shares may
be used to satisfy not more than the Company’s minimum statutory withholding
obligation (based on minimum statutory withholding rates for Federal and state
tax purposes, including payroll taxes, that are applicable to such supplemental
taxable income).

 

7.  Transferability. 
Except as otherwise provided by the Committee, the Option is not
transferable other than as designated by the Participant by will or by the laws
of descent and distribution, and during the Participant’s life, may be
exercised only by the Participant.

 

8.  Cancellation and Rescission of Options.

 

(a)                                  The Committee may cancel, rescind,
suspend, withhold or otherwise limit or restrict the Option at any time if the
Participant engages in any “Detrimental Activity.”

 

(b)                                 Upon exercise of the Option, the
Participant shall certify, to the extent provided by the Committee, in a manner
acceptable to the Committee, that the Participant is not engaging and has not
engaged in any Detrimental Activity.  In
the event a Participant has engaged in any Detrimental Activity prior to, or
during the twelve months after, any exercise of the Option, such exercise may
be rescinded by the Committee within two years thereafter.  In the event of any such rescission, the
Participant shall pay to the Company the amount of any gain realized as a
result of the rescinded exercise, in such manner and on such terms and
conditions as may be required, and the Company shall be entitled to set-off
against the amount of any such gain any amount owed to the Participant by the
Company and/or Subsidiary.

 

9.  Heirs and Successors.  This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.  If any rights exercisable by the Participant
or benefits deliverable to the Participant under this Agreement have not been
exercised or delivered, respectively, at the time of the Participant’s death,
such rights shall be exercisable by the Designated Beneficiary, and such
benefits shall be delivered to the Designated Beneficiary, in accordance with
the provisions of this Agreement and the Plan. 
The “Designated Beneficiary” shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such
form and at such time as the Committee shall require.  If a deceased Participant fails to designate
a beneficiary, or if the Designated Beneficiary does not survive the
Participant, any rights that would have been exercisable by the Participant and
any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant.  If a deceased Participant designates a
beneficiary and the Designated Beneficiary survives the Participant but dies
before the Designated Beneficiary’s exercise of all rights under this Agreement
or before the complete distribution of benefits to the Designated Beneficiary
under this Agreement, then any rights that would have been exercisable by the
Designated Beneficiary shall be exercised by the legal representative of the
estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of the
estate of the Designated Beneficiary.

 

 

4

 

 

10.  Administration. 
The authority to manage and control the operation and administration of
this Agreement shall be vested in the Committee, and the Committee shall have
all powers with respect to this Agreement as it has with respect to the
Plan.  Any interpretation of this
Agreement by the Committee and any decision made by it with respect to this
Agreement is final and binding on all persons. 
The Committee shall have the authority to obtain such information from
the Participant (including tax return information) as it determines may be
necessary to confirm that the Participant is in compliance with the
requirements applicable to Detrimental Activity, and if the Participant fails
to provide such information, the Committee may conclude that the Participant is
not in compliance with such requirements.

 

11.  Plan Governs. 
Notwithstanding anything in this Agreement to the contrary, this
Agreement shall be subject to the terms of the Plan, a copy of which may be
obtained by the Participant from the office of the Secretary of the Company;
and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time
to time pursuant to the Plan.

 

12.  Not an Employment Contract.  The Option will not confer on the Participant
any right with respect to continuance of employment or other service with the
Company or any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate or modify the terms
of such Participant’s employment or other service at any time.

 

13.  Notices. 
Any written notices provided for in this Agreement or the Plan shall be
in writing and shall be deemed sufficiently given if either hand delivered or
if sent by fax or overnight courier, or by postage paid first class mail.  Notices sent by mail shall be deemed received
three business days after mailing but in no event later than the date of actual
receipt.  Notices shall be directed, if
to the Participant, at the Participant’s address indicated by the Company’s
records, or if to the Company, at the Company’s principal executive office.

 

14.  Fractional Shares.  In lieu of issuing a fraction of a share upon
any exercise of the Option, resulting from an adjustment of the Option pursuant
to the Plan or otherwise, the Company will be entitled to pay to the
Participant an amount equal to the fair market value of such fractional share.

 

15.  No Rights As Shareholder.  The Participant shall not have any rights of
a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

 

16.  Amendment. 
This Agreement may be amended in accordance with the provisions of the
Plan, and may otherwise be amended by written agreement of the Participant and
the Company without the consent of any other person.

 

17.  Definitions. 
For purposes of this Agreement, words and phrases
shall be defined as follows:

 

 

(a)                                  Change in Control. 
The term “Change in Control” shall be defined as set forth in the Plan.

 

 

5

 

(b)                                 Date of
Termination.  A Participant’s “Date of Termination” means,
with respect to an employee, the date on which the Participant’s employment
with the Company and Subsidiaries terminates for any reason, and with respect
to a Director, the date immediately following the last day on which the
Participant serves as a Director; provided that a Date of Termination shall not
be deemed to occur by reason of a Participant’s transfer of employment between
the Company and a Subsidiary or between two Subsidiaries; further provided that
a Date of Termination shall not be deemed to occur by reason of a Participant’s
cessation of service as a Director if immediately following such cessation of
service the Participant becomes or continues to be employed by the Company or a
Subsidiary, nor by reason of a Participant’s termination of employment with the
Company or a Subsidiary if immediately following such termination of employment
the Participant becomes or continues to be a Director; and further provided
that a Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.

 

(c)                                  Detrimental Activity. 
The term “Detrimental Activity” shall mean (i) a violation of
paragraph 11 of the Employment Agreement (relating to competition) during the
period in which such activity is prohibited under the Employment Agreement; or (ii) a
violation of paragraph 12 of the Employment Agreement (relating to
confidentiality).

 

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

 

(e)                                  Disability. 
The Participant shall be considered to have a “Disability” during the
period in which the Participant is unable, by reason of a medically
determinable physical or mental impairment, to engage in any substantial
gainful activity, which condition, in the opinion of a physician selected by
the Committee, is expected to have a duration of not less than 120 days.

 

(f)         Employment Agreement.  “Employment Agreement” shall mean the
agreement between the Participant and the Company dated April 28, 2004 or
any successor agreement thereto.(1)

 

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

 

(i) 
Retirement shall mean the occurrence of a Participant’s Date of Termination
with the consent of the Participant’s employer after the Participant has
completed three years of service and attained age 55. (2)

(1)                                  Employment agreement for Bailenson dated October 5,
2006.

 

(2)                                  “Retirement” for Mr. Bailenson, 55
years of age with 5 years of service and the consent of the Compensation
Committee or 60 years of age with 5 years of service.

 

 

6

 

 

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

 

(iii) 
Notwithstanding that the Participant’s Date of Termination satisfies the
requirements of paragraph (i) above, the Participant will not be
considered to have retired (or have terminated by reason of Retirement) with
respect to any unexercised portion of the Option if the Committee determines
that the Participant has provided significant commercial or business services
to any one or more persons or entities on or before the Option exercise,
regardless of whether such entity is owned or controlled by the Participant;
provided that the Participant may devote reasonable time to the supervision of
his personal investments, and activities involving professional, charitable,
community, educational, religious and similar types of organizations, speaking
engagements, membership on the boards of directors of other organizations, and
similar types of activities, to the extent that the Committee, in its
discretion, determines that such activities are consistent with the
Participant’s Retirement.

 

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

 

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

 

(vi)  If,
prior to the exercise of the Option with respect to a portion of the Covered
Shares (including the exercise with respect to all the Covered Shares), the
Participant engages in one or more activities that the Committee determines to
be inconsistent with Retirement, as set forth in paragraph (iii) above,
the right to exercise the Option with respect to a portion of the Covered
Shares (including the exercise with respect to all the Covered Shares) as of or
after the date the Participant first engages in such activities may be canceled
by the Committee.  If, after the Option has
been exercised with respect to all or any portion of the Covered Shares, the
Committee determines that the Participant engaged in activities prior to such
exercise that are inconsistent with Retirement, as set forth in paragraph (iii) above,
such exercise may be rescinded by the Committee within

 

 

7

 

 

two years after
the exercise.  In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain
realized as a result of the rescinded exercise, in such manner and on such
terms and conditions as may be required by the Committee, and the Company shall
be entitled to set-off against the amount of any such gain any amount owed to
the Participant by the Company and/or Subsidiary.  For the avoidance of doubt, it is recited
that the cancellation of the right to exercise the Option shall include
cancellation of the right to vest in the Option.

 

(h)                                 Plan Definitions. 
Except where the context clearly implies or indicates the contrary, a
word, term, or phrase used in the Plan is similarly used in this Agreement.

 

IN WITNESS WHEREOF, the Participant has executed the
Agreement, and the Company has caused these presents to be executed in its name
and on its behalf, all as of the Grant Date.

 

Assured Guaranty Ltd.

 

 

By:          James Michener

Its:          General
Counsel

 

Participant

 

 

8

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