Document:

Exhibit 10.3

 

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 25, 2010.

 

(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.  Recoupment and Plan Provisions Govern.

 

(a)                                 Notwithstanding anything in this Agreement to the contrary, the
Participant’s rights with respect to the Option shall be subject to the Assured
Guaranty Ltd. Executive Officer Recoupment Policy as in effect on the Grant
Date, a copy of which policy is set forth in the Company’s Code of Conduct.

 

(b)                                 Notwithstanding
anything in this Agreement to the contrary, but subject to paragraph (a) above,
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.

 

5

 

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) 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 as
amended and restated as of [January 1, 2009] [July 1, 2009 for SMcC]
or any successor agreement thereto.

 

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

 

6

 

(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. (1)

 

(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

 

(1)                                 “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.

 

7

 

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 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

 

8Exhibit 10.4

 

For Use Without 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 25, 2010.

 

(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 one-year anniversary of the Date of Termination.

 

Subject to paragraph (c) 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.

 

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 the Participant’s
Retirement, the two-year anniversary of the Date of Termination, subject to
paragraph 17(g); or

 

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

 

2

 

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
earlier of the two-year anniversary of the Change in Control or the ten-year
anniversary of the Grant Date (without regard to whether the Participant’s Date
of Termination occurs after the Change in Control).

 

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 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

 

3

 

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.

 

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 Cause or 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.  Recoupment and Plan Provisions Govern.

 

(a)                                  Notwithstanding anything in this Agreement to the contrary, the
Participant’s rights with respect to the Option shall be subject to the Assured
Guaranty Ltd. Executive Officer Recoupment Policy as in effect on the Grant
Date, a copy of which policy is set forth in the Company’s Code of Conduct.

 

4

 

(b)                                 Notwithstanding
anything in this Agreement to the contrary, but subject to paragraph (a) above,
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)                                  Cause.  The term “Cause” 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,  MBIA, Inc., Radian Group
Inc. and Syncora Holdings Ltd.), or which 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

 

5

 

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.

 

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

 

(c)                                  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.

 

(d)                                 Detrimental
Activity.  The term “Detrimental
Activity” shall mean the occurrence of actions as set forth under the
definition of “Cause” above.

 

(e)                                  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.

 

(f)                                    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.

 

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

 

6

 

(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
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

 

7

 

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 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.

 

 

	
  Agreed
  Upon:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Assured
  Guaranty Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Participant:

  	
   

  

 

8

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