Document:

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

1. Employment

 

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

 

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2. Term and Place of Performance

 

(a) The term of the Agreement
shall commence as of the date of the closing of the initial public offering of
Assured Guaranty Ltd. common shares registered under the Securities Act of
1933, as amended (the “Commencement Date”) and shall continue through the close
of business on third anniversary of the Commencement Date, subject to the terms
and conditions of this Agreement (“Initial Term”).  This Agreement shall automatically renew for
a one-year term after the Initial Term, and each succeeding twelve months
thereafter, unless either party gives notice in writing at least 30 days prior
to the expiration of the Initial Term or succeeding one year term of its
intention not to renew the Agreement.  
If non-renewal is at the option of Executive, it shall be treated as a
Voluntary Termination.  If non-renewal is
at the option of Company, it shall be treated as a Termination Without Cause as
that term is defined in Section 10(d) herein.

 

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

 

Once obtained, the
maintenance of such permits throughout the term of this Agreement shall be a
continuing condition to the Company’s obligations under this Agreement.
However, if despite the Executive’s best efforts to maintain the permits, they
are terminated or revoked by the Government of Bermuda through no fault of the
Executive, then the Executive shall be entitled to the benefits provided for
Termination Without Cause under Section 10(d).

 

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

 

(a) During the term of the
Agreement, the Executive shall be employed as the General Counsel of the
Company, with such powers and duties normally attendant to such offices and
such other duties as may be assigned to the Executive.  Executive shall answer to and be subject to
the direction of the Chief Executive Officer.

 

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

 

(i) deliver lectures and
fulfill speaking engagements; and

 

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

 

4. Salary

 

For services rendered by the
Executive to the Company during the term of this Agreement while he is employed
by the Company, the Executive shall be paid a minimum annual base salary at a
rate of $350,000.  The annual base salary
shall be paid on a monthly basis by the Company.  The companies which comprise the Company as
defined herein will fund the salary and other compensation and benefits under
this Agreement specified above in proportion to the percentage of time
executive performs work for each company.

 

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5. Moving Allowance

 

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

 

6. Annual Performance Incentive Plan

 

Subject to the terms and conditions of this Agreement, once a year during the
Initial Term, Executive shall receive an annual performance incentive bonus
award equal to no less than 100% of his annual base salary, plus up to an
additional 50% of his annual base salary (the amount of which shall be the “Target
Amount”), such amount to be determined by Company based upon Company results
and performance of Executive. After the Initial Term, annual performance incentive
bonus awards will be in an amount determined by the Compensation Committee of
the Board of Directors and based on the performance of the Company and the
Executive.  Notwithstanding the
foregoing, for as long as the Company continues to participate in the ACE Group
short-term incentive program, Executive will be eligible to participate in such
plan, pursuant to its terms, as may be in effect from time to time .

 

7. Long-Term Incentive Awards

 

(a) Sign-on
Equity Award—  When Assured Guaranty Limited (“AGL”) issues
shares of publicly traded stock, Executive will be granted an award of 80,000
restricted ordinary shares of AGL stock that will vest 25% annually over a four
year period with the first quarter vesting 

 

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starting one
year after the date of the award .  When
AGL issues shares of publicly traded stock, Executive will also be granted an
award of an option to purchase at the IPO price 160,000 shares of AGL stock.  These shares and options will be subject the
terms and conditions that will be set forth in the AGL Long-Term Incentive Plan
(“LTIP”).   Upon vesting or exercise of
stock options, the shares will be registered in the United States with the SEC
and appropriate states and will be freely tradable.

 

(b) Annual Long-Term
Incentive Awards—Executive will participate in the LTIP.  If AGL Company determines that it has made a
profit during any year of the Initial Term, the value of any Long-Term
Incentive award made to Executive for that year will be no less than the amount
of his annual base salary.  The initial “target
award” for the Initial Term will be 20,000 restricted shares of AGL stock and
40,000 options to purchase shares of AGL stock.   Subsequent to the Initial Term, the amount
of any award made to Executive under Long-Term Incentive Plan will be based on
the profitability of the Company and Executive’s performance and will be
subject to the discretion of the Compensation Committee of the AGL’s Company’s
Board of Directors.  All Long-Term Incentive
awards will be subject to the terms and conditions of the LTIP.

 

(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 

 

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until the expiration of their original term,
and will otherwise be subject to the provisions of the applicable Company
long-term incentive plan.

 

(d) Other-  Restricted stock
grant awards and stock option agreements presented to Executive under the LTIP
shall not be inconsistent with the terms of this agreement and to the extent
that such awards or grants include terms that are not addressed in this
agreement the terms of said awards and grants shall apply in full force and
effect.

 

8.  Employee
Benefits 

 

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

 

(b) The Executive shall be
entitled to five weeks of vacation in a full calendar year.  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 

 

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company.

 

9. Business Expense Reimbursement. Accommodation. Other
Perquisites

 

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

 

(b) During the term of the
Executive’s employment, the Company will reimburse the Executive up to a
maximum of $10,000 per month in respect of the cost of suitable living
accommodation in Bermuda. In the event that the Executive chooses to purchase a
residence in Bermuda, the Company will reimburse him only for the fair market
rental value of said residence to a maximum of $10,000 per month, which amount shall
be reviewed from time to time in accordance with authorization from the
Compensation Committee of the Board of Directors.

 

(c) During the term of the
Executive’s employment, the Company will reimburse the Executive and/or his
immediate family for up to a total of sixteen round trip tourist class airfares
per year between Bermuda and an East Coast port of entry to the United States
of America upon submission of reasonable documentation that the fares were
incurred.

 

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

 

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

 

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

 

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

 

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

 

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

 

10. Termination of Employment

 

(a) Termination Due to Death.

 

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

 

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

 

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

 

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(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

 

(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:

 

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(a) continuation of the annual base salary provided in Section 4
above through the date on which termination for Cause occurs; and

 

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

 

(d) Termination Without Cause

 

(i) Anything in this Agreement to the contrary notwithstanding, the
Executive’s employment may be Terminated Without Cause as provided in this Section 10(d).  Termination Without Cause shall mean either
(1) a termination of the Executive’s employment by the Company, (other than a
termination due to death as described in Section 10(a) above, disability
as described in Section 10(b) above, or a Termination For Cause as
described in Section 10(c) above); or (2) a termination due to Good Reason
Resignation as defined as follows:. Good Reason Resignation shall mean
termination of employment that is voluntary on the part of the Executive but is
due to:  (i) a significant reduction of
the Executive’s responsibilities, title or status resulting from a change in
such title or status, or from the assignment to the Executive of any duties
inconsistent with his title, duties, or responsibilities; or  (ii) a reduction in the Executive’s salary,
bonus potential, or a material reduction of benefits.

 

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

 

(A)
continuation of the annual base salary provided in Section 4 above until
the 

 

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

 

(B) continuation of coverage under the
employee benefit plans of the Company in which the Executive was participating
at the time of his termination of employment for the Payment Period of salary
continuation under Section 10(d)(ii)(A) above; provided, however, that (1)
except as required by applicable law, any such continued coverage shall
terminate upon the subsequent full-time benefits eligible employment of the
Executive, and (2) if the company is unable to continue such coverage, then
they shall provide the Executive with economically equivalent employee benefits
to the extent such benefits are reasonably available.

 

(iii) At the discretion of the Compensation Committee, the present
value of any amounts payable to the Executive in accordance with Section 10(d)(ii)(A)
above may be paid to the Executive in a lump sum.  The interest rate used in
determining the present value shall be the interest rate on one-year United
States Treasury Bills at the auction of such instruments nearest in time to the
date of the Executive’s termination of employment under this Section 10(d).
Any such lump sum payment by the Company to the Executive shall not affect the
obligation of the Company as otherwise provided in Section 10(d)(ii)(B)
above to provide continuation coverage under the employee benefit plans.

 

(iv)
During the Payment Period, Executive shall make a good faith effort to seek
other employment.  If Executive attains
other employment during the Payment Period, he 

 

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shall
so notify Company and any earnings of Executive from his new employer
(including salary and bonus, (deferred or otherwise) and any other income
reported on a W-2  and/or 1099 income tax
forms with his new employer)  shall
reduce by an equivalent amount the payments required to be made under Section 10(d)(ii)(A).

 

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

 

(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.

 

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(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, eligibility and benefits as if the Executive were
Terminated Without Cause pursuant to Section 10(d) of this Agreement.   The term Change in Control shall be as
defined in the Company’s long-term incentive plan as of the date hereof, a copy
of which is attached hereto as Exhibit A.

 

(g) Resignation Upon Termination

 

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

 

11. Noncompetition

 

During the term
of the Executive’s employment and for a period of 12 months following the
termination of his employment for any reason other than a Termination Without
Cause, the Executive shall not, directly or indirectly, whether as an employee,
consultant, partner, principal, agent, distributor, representative, stockholder
(except as a less than one percent stockholder of a publicly traded company or
a less than five percent stockholder of a privately held company) or otherwise,
engage, within the United States, Bermuda, or the Cayman Islands, if such
activities involve insurance or reinsurance of United States based entities or
risks in any activities that are 

 

13

 

competitive
with the financial guaranty insurance business then being conducted by the
Company and which, during the period covered by the Executive’s employment,
were conducted by the Company. For as long as the above described restrictions
on competition apply, the Executive shall not hire any employee or former
employee of the Company or any present or former affiliate company of the
Company nor encourage any employee of the Company to leave the employ of the
Company.   This section will not be
in effect after the Executive’s termination of employment, unless, at the
option of Company, Company continues to pay Executive’s base salary during the
12 months after Executive’s termination or resignation from employment for any
reason.

 

12. Confidential Information

 

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

 

13. Remedy for Violation of Noncompetition or Confidential Information
Provisions

 

Without
intending to limit the remedies available to the Company for the breach of any
of the Executive’s covenants in Sections 11 and 12, the Executive acknowledges
and agrees that damages at law are an insufficient remedy for the Company and
that, accordingly, the Company 

 

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shall be
entitled to apply for and obtain injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach, or otherwise
specifically enforce, any or all of said covenants. The Parties acknowledge
that each of the covenants contained in Sections 11 and 12 is an essential
element of this Agreement. If any covenant or term of Section 11 or 12 or
any portion thereof of this Section 13, is determined to be invalid or
unenforceable in any instance, such determination shall not prevent the
reassertion thereof with respect of any other breach or violation. If, in any
proceeding, a court (or other tribunal) refuses to enforce the covenants
contained in Section 11 or 12 or this Section 13 because such
covenants cover too extensive a geographic area or too long a period of time,
any such covenant shall be deemed amended to the extent (but only to the
extent) required by law to permit its enforceability hereunder.

 

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

 

14. Withholding

 

Anything in
this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive shall be subject to withholding
of such amounts relating to taxes as the Company may reasonably determine they
are required to withhold pursuant to any applicable law or regulation. In lieu
of withholding such amounts, in whole or in 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 

 

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responsibilities
to withholding such taxes have been satisfied.

 

15. Arbitration of All Disputes

 

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

 

16. Entire Agreement

 

This Agreement
contains the entire agreement between the Parties concerning the subject matter
hereof and supercedes all prior agreements, undertakings, discussions,
negotiations, and undertakings, whether written or oral, between the Company
and the Executive with respect thereto.

 

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17. Assignability; Binding Nature

 

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

 

18. Amendment or Waiver

 

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

 

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 

 

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mail, postage
prepaid, return receipt requested, duly addressed to the party concerned at the
address indicated below to such changed address of which such party may
subsequently by similar process give notice:

 

	
  If to the Company:

  	
  Attention CEO

  
	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  
	
   

  	
  30 Woodbourne Ave

  
	
   

  	
   

  
	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  
	
   

  	
   

  
	
  If to the Executive:

  	
  Mr. James Michener

  
	
   

  	
  11 Whitman Pond Road

  
	
   

  	
  Simsbury, CT 06070

  

 

20. Severability

 

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

 

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 

 

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estate or
other legal representative. All statements of or references to dollar amounts
in this Agreement shall mean lawful money of the United States of America.

 

23. Governing-Law

 

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

 

24. Headings

 

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

 

25. Counterparts

 

This Agreement may be executed in one or more counterparts.

 

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

 

 

	
   

  	
   

  	
  Assured Guaranty Ltd., Assured Guaranty Corp., 

  
	
   

  	
   

  	
   

  
	
   

  	
  Assured Guaranty U.S. Holdings, Inc,

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Dominic J. Frederico

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Their President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  James Michener

  
	
   

  	
   

  	
   

  
								

 

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EXHIBIT
A

Gross-Up Provisions

 

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

 

(b)  Notwithstanding the provisions of paragraph
(a) above, if it shall be determined that the Executive would otherwise be
entitled to the Gross-Up Payment, but the value of all Payments do not exceed
310% of the Executive’s “base amount,” within the meaning of Section 280G
of the Code, then no Gross-Up Payment shall be made to the Executive and the
amounts payable under this Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company) shall be reduced so that the
value of all Payments, in the aggregate, equals the Safe Harbor Amount.  The “Safe Harbor Amount” means 2.99 times the
Executive’s “base amount,” within the meaning of Section 280G of the
Code.  The Executive shall be entitled to
select the order in which payments are to be reduced in accordance with the
foregoing provisions of this paragraph (b). 
As a result of uncertainty in the application of Section 280G of
the Code at the time of any initial determination by the Accounting Firm (as
described in paragraph (c) below), it is possible that Payments will have been
paid or distributed by the Company which should not be so paid or distributed (“Overpayment”)
or that additional Payments which were not paid or distributed by the Company
could have been so paid or distributed (“Underpayment”), in each case,
consistent with the calculation of the amount due hereunder.  In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company promptly upon receiving notice of such Overpayment
together with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the
Executive to the Company (or if paid by the Executive to the Company shall be
returned to the Executive) if and to the extent such payment would not reduce
the amount which is nondeductible under Section 280G of the Code or which
is subject to taxation under Section 4999 of the Code.  In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive together
with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code.

 

20

 

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

 

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

 

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

 

(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

 

21

 

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

 

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

 

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

 

(f)  If, pursuant to regulations issued under Section 280G
or 4999 of the Code, the Company and the Executive were required to make a
preliminary determination of the amount of an excess 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 

 

22

 

the
excess Excise Tax paid.  If the Company
determines that any suit or proceeding is necessary or advisable in order to
obtain such refund, the provisions of paragraph (d) above relating to the
contesting of a claim shall apply to the claim for such refund, including,
without limitation, the provisions concerning legal representation, cooperation
by the Executive, participation by the Company in the proceedings and
indemnification by the Company.  Upon
receipt of any such refund, the Executive shall promptly pay the amount of such
refund to the Company.  If the amount of
the income taxes otherwise payable by the Executive in respect of the year in
which the Executive makes such payment to the Company is reduced as a result of
such payment, the Executive shall, no later than the filing of his income tax
return in respect of such year, pay the amount of such tax benefit to the
Company.  In the event there is a
subsequent redetermination of the Executive’s income taxes resulting in a
reduction of such tax benefit, the Company shall, promptly after receipt of
notice of such reduction, pay to the Executive the amount of such
reduction.  If the Company objects to the
calculation or recalculation of the tax benefit, as described in the preceding
two sentences, the Accounting Firm shall make the final determination of the
appropriate amount.  The Executive shall
not be obligated to pay to the Company the amount of any further tax benefits
that may be realized by him or her as a result of paying to the Company the
amount of the initial tax benefit.

 

23Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made
and entered into as of the 28th day of April, 2004 by and between Assured
Guaranty Ltd., a Bermuda corporation, Assured Guaranty Re International Ltd. a
Bermuda corporation,  (collectively
referred to as the “Company”), and Pierre Samson (the “Executive”).

 

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

 

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

 

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

 

1. Employment

 

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

 

1

 

2. Term and Place of Performance

 

(a) The term of the Agreement
shall commence as of the date of the closing of the initial public offering of
Assured Guaranty Ltd. common shares registered under the Securities Act of
1933, as amended (the “Commencement Date”) and shall continue through the close
of business on third anniversary of the Commencement Date, subject to the terms
and conditions of this Agreement (“Initial Term”).  This Agreement shall automatically renew for
a one-year term after the Initial Term, and each succeeding twelve months
thereafter, unless either party gives notice in writing at least 30 days prior
to the expiration of the Initial Term or succeeding one year term of its
intention not to renew the Agreement.  
If non-renewal is at the option of Executive, it shall be treated as a
Voluntary Termination.  If non-renewal is
at the option of Company, it shall be treated as a Termination Without Cause as
that term is defined in Section 10(d) herein.

 

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

 

Once obtained, the maintenance of such
permits throughout the term of this Agreement shall be a continuing condition
to the Company’s obligations under this Agreement. However, if despite the
Executive’s best efforts to maintain the permits, they are terminated or
revoked by the Government of Bermuda through no fault of the Executive, then
the Executive shall be entitled to the benefits provided for Termination
Without Cause under Section 10(d).

 

2

 

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

 

(a) During the term of the Agreement, the Executive shall be employed
as the President and Chief Operating Officer of Assured Guaranty Re International
Ltd. and such other positions as assigned to Executive by the Chief Executive
Officer of Assured Guaranty Ltd., with such powers and duties normally
attendant to such offices and such other duties as may be assigned to the
Executive.  Executive shall answer to and
be subject to the direction of the Chief Executive Officer.

 

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

 

(i) deliver lectures and
fulfill speaking engagements; and

 

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

 

4. Salary

 

For services rendered by the
Executive to the Company during the term of this Agreement while he is employed
by the Company, the Executive shall be paid a minimum annual base salary at a
rate of $350,000.  The annual base salary
shall be paid on a monthly basis by the Company.  The companies which comprise the Company as
defined herein will fund the salary and other 

 

3

 

compensation
and benefits under this Agreement specified above in proportion to the
percentage of time executive performs work for each company.

 

5 RESERVED

 

6. Annual Performance Incentive Plan

 

Subject to the terms and conditions of this
Agreement, once a year during the Initial Term, Executive shall receive an
annual performance incentive bonus award which will range from 0 to 200% of his
annual base salary, such amount to be determined by the Compensation Committee
of the Board of Directors and to be based on the performance of the Company and
the Executive.  Notwithstanding the
foregoing, for as long as the Company continues to participate in the ACE Group
short-term incentive program, Executive will be eligible to participate in such
plan, pursuant to its terms, as may be in effect from time to time .

 

7. Long-Term Incentive Awards

 

(a) Sign-on
Equity Award—  When Assured Guaranty Limited (“AGL”) issues
shares of publicly traded stock, Executive will be granted an award of 50,000
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 100,000 shares of AGL stock.  These shares and options will be subject the
terms and conditions that will be set forth in the Company Long-Term Incentive
Plan (“LTIP”).  Upon vesting or exercise
of stock options, the shares will be registered in the United States with the
SEC and appropriate states and will be freely tradable.

 

4

 

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

 

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

 

(d) Other-  Restricted stock
grant awards and stock option agreements presented to Executive under the LTIP
shall not be inconsistent with the terms of this agreement and to the extent
that such awards or grants include terms that are not addressed in this
agreement the terms of said awards and grants shall apply in full force and
effect.

 

8.  Employee Benefits 

 

(a)  During the term of his employment, the
Executive shall be entitled to participate in the Company’s retirement plan,
supplemental retirement plan, hospitalization plan, major medical plan, dental
plan, group-term life insurance plan, accidental death and dismemberment plan,
and 

 

5

 

such other
employee benefits programs consistent with such benefits offered currently to
senior executives of ACE , subject to satisfaction of all eligibility
requirements of general applicability and all other terms and conditions of the
plans.

 

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

 

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

 

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

 

9. Business Expense Reimbursement. Accommodation. Other
Perquisites

 

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

 

(b)  Through the end of 2004, the Company will
reimburse the Executive up to a maximum of the current amount of monthly
housing allowance now provided to him by ACE Limited in respect of the cost of
suitable living accommodation in Bermuda.

 

(c)  RESERVED

 

(d)  The Executive shall be entitled to
reimbursement for initiation fees and annual dues at a 

 

6

 

club of his selection in Bermuda.

 

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

 

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

 

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

 

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

 

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

 

10. Termination of Employment

 

(a) Termination Due to Death.

 

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

 

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

 

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

 

7

 

(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

 

(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 

 

8

 

failure to
act, by the Executive shall not constitute Cause for purposes of this Section 10(c)(i)(c)
if such act or failure to act, was committed, or omitted, by the Executive in
good faith and in a manner he reasonably believed to be in the best interests
of the Company.

 

(ii) In the event of a termination of the Executive’s employment for
Cause under Section 10(c)(i) above, the Executive shall be entitled only
to:

 

(a)
continuation of the annual base salary provided in Section 4 above through
the date on which termination for Cause occurs; and

 

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

 

(d) Termination Without Cause

 

(i) Anything in this Agreement to the contrary notwithstanding, the
Executive’s employment may be Terminated Without Cause as provided in this Section 10(d).  Termination Without Cause shall mean either
(1) a termination of the Executive’s employment by the Company, (other than a
termination due to death as described in Section 10(a) above, disability
as described in Section 10(b) above, or a Termination For Cause as
described in Section 10(c) above); or (2) a termination due to Good Reason
Resignation as defined as follows:. Good Reason Resignation shall mean
termination of employment that is voluntary on the part of the Executive but is
due 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 

 

9

 

title, duties, or responsibilities; or (ii) a reduction in the
Executive’s salary, bonus potential, or a material reduction of benefits.

 

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

 

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

 

(B)
continuation of coverage under the employee benefit plans of the Company in
which the Executive was participating at the time of his termination of employment
for the Payment Period of salary continuation under Section 10(d)(ii)(A)
above; provided, however, that (1) except as required by applicable law, any
such continued coverage shall terminate upon the subsequent full-time benefits
eligible employment of the Executive, and (2) if the company is unable to
continue such coverage, then they shall provide the Executive with economically
equivalent employee benefits to the extent such benefits are reasonably
available.

 

(iii) At the discretion of the Compensation Committee, the present
value of any amounts payable to the Executive in accordance with Section 10(d)(ii)(A)
above may be paid to the Executive in a lump sum.  The interest rate used in
determining the present value shall be the interest rate on one-year United
States Treasury Bills at the auction of such instruments nearest in time to the
date of the Executive’s termination of employment under this Section 10(d).
Any such 

 

10

 

lump
sum payment by the Company to the Executive shall not affect the obligation of
the Company as otherwise provided in Section 10(d)(ii)(B) above to provide
continuation coverage under the employee benefit plans.

 

(iv) During the Payment Period, Executive shall make a good faith effort
to seek other employment.  If Executive
attains other employment during the Payment Period, he shall so notify Company
and any compensation paid to Executive by his new employer shall reduce, by an
equivalent amount, the payments required to be made under Section 10(d)(ii)(A).

 

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

 

(vi) If there is a Termination Without Cause during the first year of
the Initial Term, the subject to the provisions of this agreement, Executive
will receive the amounts payable under Section 10(d)(ii)(A) and (B) plus
any remaining but unpaid salary or contract benefits due him for the first year
of the Initial Term.

 

(vii)  Any shares of restricted
Company stock and options to purchase ordinary shares of Company stock held by
Executive will continue to vest in accordance with the terms of the awards for
the period of time which includes the completion of this Contract and any
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 

 

11

 

voluntary
termination and, in such event, the Executive shall be limited to the same
rights and benefits as applicable to the termination for Cause, as described in
Section 10(c) above.

 

(f) Change in Control  

 

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

 

(g) Resignation Upon Termination

 

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

 

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 

 

12

 

publicly
traded company or a less than five percent stockholder of a privately held
company) or otherwise, engage, within the United States, Bermuda, or the Cayman
Islands, if such activities involve insurance or reinsurance of United States
based entities or risks in any activities that are competitive with the
financial guaranty insurance business then being conducted by the Company and
which, during the period covered by the Executive’s employment, were conducted
by the Company. For as long as the above described restrictions on competition
apply, the Executive shall not hire any employee or former employee of the
Company or any present or former affiliate company of the Company nor encourage
any employee of the Company to leave the employ of the Company.   This section will not be in effect
after the Executive’s termination of employment, unless, at the option of
Company, Company continues to pay Executive’s base salary during the 12 months
after Executive’s termination or resignation from employment for any reason.

 

12. Confidential Information

 

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

 

13

 

13. Remedy for Violation of 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.

 

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 

 

14

 

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.

 

16. Entire Agreement

 

This Agreement
contains the entire agreement between the Parties concerning the subject

 

15

 

matter hereof
and supercedes all prior agreements, undertakings, discussions, negotiations,
and undertakings, whether written or oral, between the Company and the
Executive with respect thereto.

 

17. Assignability; Binding Nature

 

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

 

18. Amendment or Waiver

 

No provision
in this Agreement may be amended or waived unless such amendment or waiver is
(1) agreed to in writing, and (2) the agreement is signed by the Executive and
by authorized officers. No waiver by any party hereto of any breach by any
other party of any 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.

 

16

 

19. Notices

 

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

 

 

	
  If to the Company:

  	
  Attention CEO

  
	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
  30 Woodbourne Ave

  
	
   

  	
  Hamilton, Bermuda

  
	
   

  	
   

  
	
   

  	
   

  
	
  If to the Executive:

  	
  Mr. Pierre Samson

  
	
   

  	
  Ship’s Hill, #5

  
	
   

  	
  Tucker’s Point

  
	
   

  	
  St. Georges HS02

  
	
   

  	
  Bermuda

  

 

20. Severability

 

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

 

21. Survivorship

 

The respective
rights and obligations of the parties shall survive any termination of this 

 

17

 

Agreement to
the extent necessary to the intended preservation of such rights and
obligations.

 

22. References

 

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

 

23. Governing-Law

 

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

 

24. Headings

 

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

 

25. Counterparts

 

This Agreement may be executed in one or more counterparts.

 

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

 

18

 

	
   

  	
  Assured Guaranty Ltd

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Dominic Frederico, its President

  
	
   

  	
   

  
	
   

  	
  Assured Guaranty Re International Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Pierre Samson

  
									

 

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 

 

19

 

exceed
310% of the Executive’s “base amount,” within the meaning of Section 280G
of the Code, then no Gross-Up Payment shall be made to the Executive and the
amounts payable under this Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company) shall be reduced so that the
value of all Payments, in the aggregate, equals the Safe Harbor Amount.  The “Safe Harbor Amount” means 2.99 times the
Executive’s “base amount,” within the meaning of Section 280G of the
Code.  The Executive shall be entitled to
select the order in which payments are to be reduced in accordance with the
foregoing provisions of this paragraph (b). 
As a result of uncertainty in the application of Section 280G of
the Code at the time of any initial determination by the Accounting Firm (as
described in paragraph (c) below), it is possible that Payments will have been
paid or distributed by the Company which should not be so paid or distributed (“Overpayment”)
or that additional Payments which were not paid or distributed by the Company
could have been so paid or distributed (“Underpayment”), in each case,
consistent with the calculation of the amount due hereunder.  In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company promptly upon receiving notice of such Overpayment
together with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the
Executive to the Company (or if paid by the Executive to the Company shall be
returned to the Executive) if and to the extent such payment would not reduce
the amount which is nondeductible under Section 280G of the Code or which
is subject to taxation under Section 4999 of the Code.  In the event that the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or 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 

 

20

 

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

 

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

 

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

 

(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 

 

21

 

required by the Company to
agree to any extension of the statute of limitations relating to the payment of
taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due unless such extension is limited solely
to such contested amount.  Furthermore,
the Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.

 

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

 

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

 

22

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