Document:

Exhibit 10.61

 

Terms of Performance Retention Award

Four Year Installment Vesting

Granted on February 14, 2008

 

The Assured Guaranty Ltd. (the “Company”)
Performance Retention Award amounts described in the enclosed letter (the “Award
Letter”) dated February 14, 2008 (the “Grant Date”) will be payable in
accordance with the following Terms of Performance Retention Award (the “Award
Terms”).  Under the following Award
Terms, the Principal Amount is divided into three installments, and a different
Performance Period is established with respect to each Installment, under
paragraph 1 below.  The Performance
Retention Award (sometimes referred to as the “Award” or “Award Payment”) will
be a cash distribution payable with respect to the Installment for each Performance
Period, with the amount determined under paragraph 2 below, subject to the
vesting restrictions under paragraph 3 below. 
Payment of the Award will be due on the Payment Date determined under
paragraph 4 below (subject to paragraph 2(b)). 
Paragraph 6 provides certain definitions that apply to these Award
Terms.

 

1.  Performance
Period and Installments.  The
Principal Amount is divided into three Installments.  The Performance Period for each Installment,
and the Principal Portion of each such Installment, is set forth in the
following schedule:

 

	
  Installment 

  Number:

  	
   

  	
  First
  Day of

  Performance

  Period:

  	
   

  	
  Last
  Day of Performance

  Period:

  	
   

  	
  Portion
  of Principal

  Amount Attributable to

  Installment:

  
	
  1

  	
   

  	
  January 1,
  2008

  	
   

  	
  December 31,
  2009

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  January 1,
  2008

  	
   

  	
  December 31,
  2010

  	
   

  	
  25%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  January 1,
  2008

  	
   

  	
  December 31,
  2011

  	
   

  	
  50%

  	
   

  

 

Notwithstanding the foregoing, if the
Participant’s Date of Termination occurs by reason of the Participant’s death
or if the Participant becomes Permanently Disabled prior to the end of the
Performance Period determined in accordance with the foregoing schedule with
respect to any Installment, the last day of the Performance Period for such
Installment will instead be the last day of the calendar quarter coincident with
or immediately preceding the date of death or Permanent Disability, as
applicable (or, if the death or Permanent Disability occurs during the first
calendar quarter of the Performance Period, the last day of that calendar
quarter).

 

2.  Amount of
Payment.  The Award Payments will be
subject to paragraph 3 and to the following:

 

(a)                                  The
Award Payment for each Installment will equal the sum of the amounts described
in paragraph (i) below and paragraph (ii) below:

 

 

(i)  The
product of (A) 50% of the Portion of the Principal Amount attributable to
that Installment, multiplied by (B) a fraction, converted to an equivalent
percentage, the numerator of which is the Company’s per-share Modified Adjusted
Book Value as of the last day of the applicable Performance Period and the
denominator of which is the Company’s per-share Modified Adjusted Book Value as
of the first day of the applicable Performance Period.

 

(ii)  The
product of (A) 50% of the Portion of the Principal Amount attributable to
that Installment, multiplied by (B) a percentage equal to 100% plus (or
minus if negative) of the Company’s Operating Return on Equity for the
Performance Period attributable to that Installment.

 

(b)                                 U.S.
Internal Revenue Code section 162(m) limits the Company’s tax deduction
for compensation paid to officers (not more than five) listed in the Company’s
proxy statement.  If the Participant’s
compensation would be subject to this limit, the Participant’s Award Payment
will be subject to the requirements of the performance-based compensation
exception to the limit.  Accordingly, if
the Participant’s Award would be subject to the limit for any taxable year of
the Company (determined as if the following limit did apply, and also as if it
did not apply), then, for such Award, the amount determined under both
paragraph (a)(i) above and paragraph (a)(ii) above will be zero if
both of the following are true:

 

(i)  the
percentage described in paragraph (a)(i) for the Performance Period to
which the Award is attributable is less than 100%; and

 

(ii)  the
percentage described in paragraph (a)(ii) above for the Performance Period
to which the Award is attributable is less than the sum of: (A) 100% plus (B) the
product of 3% multiplied by the number of years and fractional years in the applicable
Performance Period.

 

Notwithstanding the foregoing provisions of this paragraph 2, if by
reason of the foregoing provisions of this paragraph (b), the Participant
receives no payment with respect to the Installment for either the Performance
Period ending December 31, 2009 or December 31, 2010 (each, a “Prior
Performance Period”), and in a subsequent Performance Period under this
Agreement (the “Subsequent Performance Period”), either or both of paragraph
(b)(i) and (b)(ii) above are satisfied, and either the Participant’s
Date of Termination has not occurred during the Subsequent Performance Period,
or the Date of Termination has occurred by reason of death, Disability, or
Retirement, then, as soon as practicable after the end of the Subsequent Performance
Period (and notwithstanding the provisions of paragraph 4), the Participant
will receive the payment (without interest) he would have received for the
Prior Performance Period if this paragraph (b) above had not been
applicable to him for the Prior Performance Period.

 

3.  Vesting
and Forfeitures.  Vesting of the
Award Payment is subject to the following:

 

(a)                                  If,
in accordance with the following provisions of this paragraph 3, the
Participant is vested in the Award Payment for any Performance Period, the
Award Payment (if any) for that Performance Period will be due on the Payment
Date as described in paragraph 4,

 

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subject to the
terms of the Plan and these Award Terms. 
If the Participant is not vested in the Award for a Performance Period,
the Participant will forfeit that Award.

 

(b)                                 If,
with respect to any Installment, the Participant’s Date of Termination does not
occur before the last day of the Performance Period for that Installment, the
Participant will be vested in the Award Payment.  If the Participant’s Date of Termination
occurs before the last day of the Performance Period for that Installment, the
Participant’s will not be vested in the Award Payment for that Installment.

 

(c)                                  Notwithstanding
the foregoing provisions of this paragraph 3, the Participant will become
vested in the Award Payment attributable to an Installment on the Date of
Termination that occurs before the last day of the applicable Performance
Period if the Date of Termination occurs by reason of the Participant’s death
or Disability, or by reason of the Participant’s Retirement with respect to
that Performance Period; provided that, notwithstanding the foregoing
provisions of this sentence, the Participant will become vested in the Award
Payment with respect to a Performance Period upon becoming Permanently Disabled
if the Permanent Disability occurs before the Date of Termination and before
the last day of the Performance Period.

 

4.  Payment
Date.

 

(a)                                  Except
as otherwise provided in this paragraph 4, and subject to paragraph 2(b), the
Participant’s Award Payment attributable to any Installment will be due on the
last day of the Performance Period with respect to that Installment (the “Payment
Date” with respect to that Installment). 
If the Participant’s Date of Termination occurs by reason of the
Participant’s death or if the Participant becomes Permanently Disabled prior to
the end of the Performance Period with respect to an Installment, the Payment
Date for such Installment will be the date of death or Permanent Disability, as
applicable.

 

(b)                                 The
Award will be paid to the Participant in a cash lump sum in US dollars.  Payment will be due on the Payment Date, and
will be paid no later than the 15th day of the third month following the end of
the Participant’s first taxable year in which the right to the payment is no
longer subject to a substantial risk of forfeiture (as determined in accordance
with Treas. Reg. §1.409A-1(b)(4)).

 

(c)                                  Notwithstanding
the foregoing, except in the case of the Performance Period ending by reason of
the Participant’s death or Permanent Disability, no payment will be made
unless, on or before the date of payment, the Committee has certified that the
performance goals for the Performance Period and any other material provisions
of the Award Terms have in fact been satisfied.

 

5.  Applicable
Plans.  The Award Payments described
in the Award Letter are granted under and pursuant to the terms of the Plan and
Section 4 (relating to Cash Incentive Awards) of the Assured Guaranty Ltd.
2004 Long-Term Incentive Plan (the “LTIP”) and are intended to constitute
performance-based compensation as that term is used in the LTIP and section 162(m) of
the Code.  In no event may the amount
payable under these Award Terms, when added to any other amounts payable under Section 4
of the LTIP to the Participant that are intended to constitute “performance-based
compensation” as that term is used in the LTIP and section 162(m) of the
Code, exceed the limit imposed by Section 5.2(e)(v) of the LTIP for
the applicable

 

3

 

performance period. 
The terms of this Agreement shall be subject to the terms of the LTIP
and the Plan, and this Agreement is subject to all interpretations, amendments,
rules and regulations promulgated by the Committee from time to time
pursuant to the LTIP and the Plan.

 

6.  Definitions.  For purposes of these Award Terms, the
definitions set forth in this paragraph 6 or elsewhere in these Award Terms
shall apply.  Except where the context
clearly implies or indicates the contrary, a word, term, or phrase used in the
Plan or LTIP is similarly used in these Award Terms.

 

(a)                                  Date
of Termination.  A Participant’s “Date
of Termination” means the first day on which the Participant is not employed by
the Company or any Subsidiary, regardless of the reason for the termination of
employment; provided that a termination of employment shall not be deemed to
occur by reason of a transfer of the Participant between the Company and a
Subsidiary or between two Subsidiaries, 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 continues to be or
becomes a Director; and further provided that the 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.  If, as a result of a sale or
other transaction, the Participant’s employer ceases to be a Subsidiary (and
the Participant’s employer is or becomes an entity that is separate from the
Company), and the Participant is not, at the end of the 30-day period following
the transaction, employed by the Company or an entity that is then a
Subsidiary, then the occurrence of such transaction shall be treated as the
Date of Termination.

 

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

 

(c)                                  Disabled.  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 180
days.  The Participant shall be
considered to be Permanently Disabled if he would be treated as “disabled” in
accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).

 

(d)                                 Modified
Adjusted Book Value.  The “Modified
Adjusted Book Value” of the Company as of any date shall equal the book value
of the Company, derived by determining shareholders’ equity, and by then adding
the after-tax value of the financial guaranty and mortgage guaranty net
unearned premium reserves less deferred acquisition costs, plus the present
value of estimated net future installment premiums (as reported in the Company’s
quarterly Financial Supplement), excluding the effects of Accumulated Other
Comprehensive Income (AOCI) and the effects of unrealized gains and losses on
derivative financial instruments (FAS 133). 
In the event of a corporate transaction involving the Company
(including, without limitation, any share dividend, share split, extraordinary
cash dividend, recapitalization, reorganization, merger, amalgamation,
consolidation, split-up, spin-off, sale of assets or subsidiaries, combination
or exchange of shares), the Committee may further adjust the calculation of the
Company’s Modified Adjusted Book Value as the Committee deems necessary or
desirable in order to preserve the benefits or potential benefits of the
Performance Retention Awards granted under the

 

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Plan, provided
that such adjustment may not adversely affect the treatment of the Award as
performance-based compensation exempt from Code section 162(m).

 

(e)                                 Operating
Return on Equity.  The “Operating
Return on Equity” of the Company as of any date shall equal the Company’s
operating income as a percentage of average shareholders’ equity, excluding
accumulated other comprehensive income and after-tax unrealized gains (losses)
on derivative financial instruments. 
Operating income is defined as net income (loss) excluding after-tax
realized gains (losses) on investments and after-tax unrealized gains (losses)
on derivative financial instruments.  In
the event of a corporate transaction involving the Company (including, without
limitation, any share dividend, share split, extraordinary cash dividend,
recapitalization, reorganization, merger, amalgamation, consolidation,
split-up, spin-off, sale of assets or subsidiaries, combination or exchange of
shares), the Committee may further adjust the calculation of the Company’s
Operating Return on Equity as the Committee deems necessary or desirable in
order to preserve the benefits or potential benefits of the Performance
Retention Awards granted under the Plan, provided that such adjustment may not
adversely affect the treatment of the Award as performance-based compensation
exempt from Code section 162(m).

 

(f)                                    Performance
Period.  The “Performance Period”
will be determined in accordance with paragraph 1.

 

(g)                                 Plan.  “Plan” means the Assured Guaranty Ltd.
Performance Retention Plan.

 

(h)                                 Principal
Amount.  The “Principal Amount” with
respect to the Participant will be the Principal Amount as stated in the Award
Letter.

 

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

 

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

 

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

 

(iii)  Notwithstanding
that the Participant’s Date of Termination satisfies the requirements of
paragraph (i) above, the Participant will not be considered to have
retired (or have terminated by reason of Retirement) with respect to any
Installment if the Committee determines that the Participant has provided
significant commercial or business services to any one or more persons or
entities on or before the last day of the Performance Period applicable to that
Installment, regardless of whether such entity is owned or controlled by the
Participant; provided that the Participant may devote reasonable time to the
supervision of his personal investments, and activities involving 

 

5

 

professional,
charitable, community, educational, religious and similar types of
organizations, speaking engagements, membership on the boards of directors of
other organizations, and similar types of activities, to the extent that the
Committee, in its discretion, determines that such activities are consistent
with the Participant’s Retirement.

 

(iv)  At the
request of the Committee, and as a condition of receiving the Award Payment
with respect to a Performance Period, the Participant shall be required to
provide a listing of the activities engaged in by the Participant following the
Participant’s Date of Termination and prior to the end of the Performance
Period 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,
with respect to any Performance Period, 
a Participant engages in one or more activities that the Committee
determines to be inconsistent with Retirement, as set forth in paragraph (iii) above,
the right to the Award Payment with respect to that Performance Period may be
canceled by the Committee.

 

(vii)  If,
after the Participant’s Date of Termination, an Award is otherwise payable in
accordance with paragraph 2(b): (A) the determination of whether the
Participant has Retired and is entitled to such payment shall be contingent on
the Participant having satisfied the requirements of paragraph (iii) above
through the last day of the Subsequent Performance Period in which the
performance occurs which gives rise to the payment under paragraph 2(b); and (B) the
requirement to provide information pursuant to paragraph (iv) above shall
apply for periods through the last day of such Subsequent Performance Period.

 

6Exhibit 10.62

 

Installment Vesting

 

[on company letterhead]

[date]

 

Dear [employee name]:

 

We would like to inform you that, on February 14,
2008 (the “Grant Date”), the Company granted you the right to receive Performance
Retention Award payments (sometimes referred to as “Awards” or “Award Payments”)
under the Assured Guaranty Ltd. Performance Retention Plan (the “Plan”).  You have been granted this Award in order to
reward you for your contributions to the Company and to provide you with an
incentive to work for and share in the Company’s continued growth in the
future.  This letter provides only a
summary of the Award program, and your rights to the Award will be subject to
the enclosed Award Terms and the Plan.

 

Your
right to receive the Award Payments, and the amount of the Award Payments, will
be based on (i) the performance (positive or negative) of the Company’s Modified
Adjusted Book Value and Operating Return on Equity for each of three
Performance Periods, (ii) the portion of the total Principal Amount of $                    
that is allocated to each of the three Performance Periods, and (iii) whether
you remain employed by the Company during the entire Performance Period.  Each of the three Performance Periods begins
on January 1, 2008, and the Performance Periods end on the last day of
2009, 2010, and 2011, respectively.

 

You
will be entitled to an Award for a Performance Period only if you remain
employed through the end of the Performance Period.  If you are not employed through the end of
the Performance Period, then, except as described below, you will forfeit the Award
for the Performance Period.  However, you
will be vested and entitled to an Award for a Performance Period if you retire,
die or become disabled while employed before the end of the Performance Period.  You will not be considered as terminating
employment as a result of disability or retirement unless you fulfill certain
criteria specified in the Award Terms, and the Committee administering the Plan
will make the final determination of whether you have fulfilled those criteria.

 

Upon your death, any remaining Award Payments that
may be due to you will be paid to your estate. 
However, payment will instead be made to your beneficiary if you
complete the attached Beneficiary Designation Form and return it to              .

 

The Committee that administers the Plan has the
authority to interpret the terms of the Plan and the Award Terms and make the
final determination of whether you are vested and entitled to payment of an
Award.

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