Document:

Exhibit
10.21

 

ASSURED
GUARANTY LTD. 

REPLACEMENT AWARD PLAN

(April,
2004)

 

SECTION 1

GENERAL

 

1.1.  Purpose.  The Assured Guaranty Ltd. Replacement Award
Plan (the “Plan”) has been established by Assured Guaranty Ltd. (the “Company”)
to award restricted stock units to certain continuing employees of the Company
and its Subsidiaries who, on the date of the initial public offering of Shares
of the Company (the “Offering”), forfeited restricted shares of ACE Limited.

 

1.2.  Participation.  The “Participants” in the Plan are those
employees of the Company designated for the receipt of an Award by the Board,
which designated employees are set forth in Exhibit C to those resolutions of
the Board providing for the adoption of the Plan; provided, however, that the Committee
may designate additional employees of the Company or its Subsidiaries to be
Participants in the Plan, if the Committee determines, in its sole discretion,
that such individuals were intended to be included in the original designation
of Award recipients and otherwise fulfill the requirements under the Plan.  Notwithstanding any provision of Plan to the
contrary, no employee of the Company or its Subsidiaries who has received
notice of termination of employment on or prior to the Effective Date shall be
eligible for an Award under the Plan.

 

1.3.  Operation,
Administration, and Definitions. 
The operation and administration of the Plan, including the Awards made
under the Plan, shall be subject to the provisions of Section 3 (relating
to operation and administration). 
Capitalized terms in the Plan shall be defined as set forth in the Plan
(including the definition provisions of Section 6).

 

SECTION 2

RESTRICTED STOCK UNIT AWARDS

 

2.1.  Definition.  A “Restricted Stock Unit Award” is the grant
of a right to receive one or more Shares at the end of the Deferral
Period.  If the determination of the
number of units to be awarded to a Participant who has forfeited restricted
shares of ACE Limited would result in the delivery of fractional Shares, the
Restricted Stock Unit Award shall be rounded to the nearest whole Share. A
Participant shall be fully vested in the Restricted Stock Unit Award on the
date on which the Award is granted; provided, however, that the delivery of
Shares underlying the Award shall not occur until the end of the Deferral
Period and shall be subject to the Participant not having engaged in any
Detrimental Activity (as defined in Section 2.2 below) at any time during
the Deferral Period.  The “Deferral
Period” is the period beginning on the date the Restricted Stock Unit Award is
granted and ending on the date that is the 18-month anniversary of the date of
grant.  The grant of Restricted Stock
Unit Awards may also be subject to such other conditions, restrictions and
contingencies, as determined by the Committee.

 

 

2.2.  Detrimental Activity.  The term “Detrimental Activity” shall mean
(i) the rendering of services for any of the following organizations: ACA,
AMBAC Financial Group Inc., Channel Re, CIFG, DePfa, Financial Guaranty Insurance
Company, Financial Security Assurance Inc., MBIA, Inc., Radian Group Inc., Ram
Re, SJAG, and XL Capital, or any of their affiliates; (ii) the disclosure to
anyone outside the Company or the Subsidiaries, or the use in other than the
Company’s or its Subsidiaries’ business, without prior written authorization
from the Company or its Subsidiaries, of any confidential information or
material, relating to the business of the Company or its Subsidiaries, acquired
by the Participant either during or after employment with the Company or its
Subsidiaries; (iii) a violation of any rules, policies, procedures or
guidelines of the Company or its Subsidiaries, including but not limited to the
Company’s business conduct guidelines; or (iv) the Participant being convicted
of, or entering a guilty plea with respect to, a crime connected with the
Company.  Notwithstanding the foregoing,
activity occurring after the Date of Termination shall constitute Detrimental
Activity only if it is described in clause (i) (relating to competition) or
(ii) (relating to confidentiality) above. 
“Date of Termination” shall mean, 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 of the
Company 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 of the Company; 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.

 

SECTION 3

OPERATION AND ADMINISTRATION

 

3.1.  Effective Date.  The Plan shall be effective on the date
immediately prior to the consummation of the Offering (the “Effective
Date”).  The Plan shall be unlimited in
duration and, in the event of Plan termination, shall remain in effect as long
as any Awards under it are outstanding.

 

3.2.  Shares and Other
Amounts Subject to Plan.  The Shares
for which Awards may be granted under the Plan shall be subject to the
following:

 

(a)                                  The
Shares with respect to which Awards may be made under the Plan shall be shares
of the Company purchased from ACE Limited under the directed share program or
purchased in the open market.  The
Company may contribute to a trust an amount sufficient to so acquire Shares (as
determined by the Chief Executive Officer or the Chief Financial Officer of the
Company).

 

(b)                                 Subject
to the following provisions of this subsection 3.2, the maximum number of
Shares that may be delivered to Participants and their beneficiaries under the
Plan shall

 

2

 

be 438,479.  This maximum the
number of Shares shall be the number of Shares, par value $0.01 per share, of
the Company purchased from ACE Limited under the directed share program or in
the open market, equal to the product of (i) the number of ACE Limited
Forfeited Shares (estimated to be approximately 183,450 shares) multiplied
by the average of the closing price for an ordinary share of ACE Limited on
the three business days immediately prior to the date of the consummation of
the Offering; divided by (ii) the initial public offering price for the
Shares in the Offering of US$18.00 per share. 
For purposes of the preceding sentence, the “ACE Limited Forfeited
Shares” shall be the total number of restricted ordinary shares of ACE Limited
forfeited by persons who performed services for ACE Limited and its
subsidiaries immediately prior to the consummation of the Offering, to the
extent that such forfeiture occurred in connection with their cessation of
employment by ACE Limited and its subsidiaries and performance of services for
the Company and its Subsidiaries immediately after the consummation of the
Offering, excluding, however, the ACE Limited Forfeited Shares of any persons
who received a notice of termination or resigned or gave a notice of
resignation prior to the execution of the underwriting agreement for the
Offering or who had transferred or were expected to transfer to ACE Limited or
its subsidiaries.  The foregoing
determination is solely for determining the number of Shares reserved under the
Plan and does not create a right of any individual to participate in the Plan.

 

(c)                                  While
it is intended that all Awards shall be designated in whole numbers resulting
in the delivery of whole Shares, to the extent provided by the Committee, any
portion of any Award that is nonetheless a fraction of a Share will be settled
in cash rather than Shares.

 

(d)                                 Only
Shares, if any, actually delivered to the Participant or beneficiary on an
unrestricted basis with respect to an Award shall be treated as delivered for
purposes of the determination under paragraph (b) above, regardless of whether
the Award is denominated in Shares or cash. 
Consistent with the foregoing:

 

(i)                                     To
the extent any Shares covered by an Award are not delivered to a Participant or
beneficiary because the Award is forfeited or canceled, or the Shares are not
delivered on an unrestricted basis (including, without limitation, by reason of
the Award being settled in cash or used to satisfy the applicable tax withholding
obligation), such Shares shall not be deemed to have been delivered for
purposes of the determination under paragraph (b) above.

 

(ii)                                  If
the tax withholding obligation with respect to any Award granted under the Plan
is satisfied by tendering Shares to the Company (by either actual delivery or
by attestation), only the number of Shares issued net of the Shares tendered
shall be deemed delivered for purposes of determining the number of Shares
available for delivery under the Plan.

 

(e)                                  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 adjust Awards to preserve the benefits or potential
benefits of the Awards.  Action by the
Committee may

 

3

 

include: (i) adjustment of the number and kind of shares which may be
delivered under the Plan; (ii) adjustment of the number and kind of shares
subject to outstanding Awards;  and
(iii) any other adjustments that the Committee determines to be equitable
(which may include, without limitation, (A) replacement of Awards with other
Awards which the Committee determines have comparable value and which are based
on shares of a company resulting from the transaction, and (B) cancellation of
the Award in return for cash payment of the current value of the Award,
determined as though the Award is fully vested at the time of payment).

 

3.3.  General Restrictions.  Delivery of Shares or other amounts under
the Plan shall be subject to the following:

 

(a)                                  Notwithstanding
any other provision of the Plan, the Company shall have no obligation to
deliver any Shares or make any other distribution of benefits under the Plan
unless such exercise, delivery or distribution complies with all applicable
laws (including, without limitation, the requirements of the United States
Securities Act of 1933), and the applicable requirements of any securities
exchange or similar entity or other regulatory authority with respect to the
issue of shares and securities by the Company.

 

(b)                                 To
the extent that the Plan provides for issuance of share certificates to reflect
the issuance of Shares, the issuance may be effected on a non-certificated
basis, to the extent not prohibited by or may be made in compliance with
applicable law, the Bye-laws of the Company, or the applicable rules of any
stock exchange.

 

3.4.  Tax Withholding.  All distributions under the Plan are subject
to withholding of all applicable taxes, and the Committee may condition the
delivery of any Shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. 
Except as otherwise provided by the Committee and subject to applicable
law, such withholding obligations may be satisfied (i) through cash payment by
the Participant; (ii) through the surrender of Shares which the Participant
already owns (provided, however, that to the extent Shares described in this
clause (ii) are used to satisfy more than the minimum statutory withholding
obligation, as described below, then, except as otherwise provided by the
Committee, payments made with Shares in accordance with this clause (ii) shall
be limited to Shares held by the Participant for not less than six months prior
to the payment date); or (iii) through the surrender of Shares to which the
Participant is otherwise entitled under the Plan; provided, however, that such
Shares under this clause (iii) 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).

 

3.5.  Grant and Use of Awards.  Subject to section 3.2(e), no awards
other then Restricted Stock Unit Awards may be granted under the Plan.

 

3.6.  Dividends and Dividend
Equivalents.  An Award will provide
the Participant with the right to receive dividend or dividend equivalent
payments with respect to Shares subject to the Award, which payments may be
either made currently or credited to an account for the Participant, and will
be settled in cash unless otherwise determined by the Committee.  Any such settlements, and any such crediting
of dividends or dividend equivalents, will be subject to the

 

4

 

Company’s Bye-laws as well as
applicable law and further may be subject to such conditions, restrictions and
contingencies as the Committee shall establish.

 

3.7.  Settlement of Awards.  The obligation to make payments and
distributions with respect to Awards shall be satisfied through the delivery of
Shares, subject to such conditions, restrictions and contingencies as the
Committee shall determine.  Any
obligation to make a payment pursuant to a portion of any Award that is a
fraction of a Share shall be made in cash. 
Each Subsidiary shall be liable for payment due under the Plan with
respect to any Participant to the extent that such benefits are attributable to
the services rendered for that Subsidiary by the Participant.  Any disputes relating to liability of a
Subsidiary for payments shall be resolved by the Committee.

 

3.8.  Transferability.  Except as otherwise provided by the
Committee, Awards under the Plan are not transferable except as designated by
the Participant by will or by the laws of descent and distribution.

 

3.9.  Form and Time of
Elections.  Unless otherwise
specified herein, each election required or permitted to be made by any
Participant or other person entitled to benefits under the Plan, if any, and
any permitted modification, or revocation thereof, if any, shall be in writing
filed with the Committee at such times, in such form, and subject to such
restrictions and limitations, not inconsistent with the terms of the Plan, as
the Committee shall require.

 

3.10.  Agreement With Company.  An Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. 
The terms and conditions of any Award to any Participant shall be
reflected in such form of written (including electronic) document as is
determined by the Committee.  A copy of
such document shall be provided to the Participant, and the Committee may, but
need not require that the Participant sign a copy of such document.  Such document is referred to in the Plan as
an “Award Agreement” regardless of whether any Participant signature is
required.

 

3.11.  Action by Company or
Subsidiary.  Any action required or
permitted to be taken by the Company or any Subsidiary shall be by resolution
of its board of directors, or by action of one or more members of the board
(including a committee of the board) who are duly authorized to act for the
board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of such company.

 

3.12.  Gender and Number.  Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.

 

3.13.  Limitation of Implied
Rights.

 

(a)                                  Neither
a Participant nor any other person shall, by reason of participation in the
Plan, acquire any right in or title to any assets, funds or property of the
Company or any Subsidiary whatsoever, including, without limitation, any
specific funds, assets, or other property which the Company or any Subsidiary,
in its sole discretion, may set aside in anticipation of a liability under the
Plan.  A Participant shall have only a
contractual right

 

5

 

 to the Shares or amounts, if any,
payable under the Plan, unsecured by any assets of the Company or any
Subsidiary, and nothing contained in the Plan shall constitute a guarantee that
the assets of the Company or any Subsidiary shall be sufficient to pay any
benefits to any person.

 

(b)                                 The
Plan does not constitute a contract of employment, and selection as a
Participant will not give any participating employee or other individual the
right to be retained in the employ of the Company or any Subsidiary or the
right to continue to provide services to the Company or any Subsidiary, nor any
right or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.  Except as otherwise provided in the Plan, no Award under the Plan
shall confer upon the holder thereof any rights as a shareholder of the Company
prior to the date on which the individual fulfills all conditions for receipt
of such rights and is registered in the Company’s Register of Shareholders.

 

(c)                                  All
Stock and Shares issued under any Award or otherwise are to be held subject to
the provisions of the Company’s Bye-laws and each Participant is deemed to
agree to be bound by the terms of the Company’s Bye-laws as they stand at the
time of issue of any Shares under the Plan.

 

3.14.  Evidence.  Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information which the
person acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.

 

SECTION 4

COMMITTEE

 

4.1.  Administration.  The authority to control and manage the
operation and administration of the Plan shall be vested in the compensation
committee of the Board (the “Committee”). 
As a committee of the Board, the Committee is subject to the overview of
the Board.  If the Committee does not
exist, or for any other reason determined by the Board, and to the extent not
prohibited by applicable law or the applicable rules of any stock exchange, the
Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.

 

4.2.  Powers of Committee.  The Committee’s administration of the Plan
shall be subject to the following:

 

(a)                                  Subject
to the provisions of the Plan, the Committee will have the authority to designate
certain additional employees of the Company or its Subsidiaries to be
Participants in the Plan, as provided in section 1.2 of the Plan, to
determine the time or times of receipt, to determine the number of Shares
covered by the Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards, and (subject to
the restrictions imposed by Section 5) to cancel or suspend Awards.

 

(b)                                 To
the extent that the Committee determines that the restrictions imposed by the
Plan preclude the achievement of the material purposes of the Awards in
jurisdictions outside the United States and Bermuda, the Committee will have
the authority and discretion to

 

6

 

modify those restrictions as the Committee determines to be necessary
or appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States and Bermuda.

 

(c)                                  The
Committee will have the authority and discretion to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan,
to determine the terms and provisions of any Award Agreement made pursuant to
the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan.

 

(d)                                 Any
interpretation of the Plan by the Committee and any decision made by it under
the Plan is final and binding on all persons.

 

(e)                                  In
controlling and managing the operation and administration of the Plan, the
Committee shall take action in a manner that conforms to applicable corporate
law.

 

4.3.  Delegation by Committee.  Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities
and powers to any person or persons selected by it.  Any such allocation or delegation may be revoked by the Committee
at any time.

 

4.4.  Information to be
Furnished to Committee.  The Company
and Subsidiaries shall furnish the Committee with such data and information as
it determines may be required for it to discharge its duties.  The records of the Company and Subsidiaries
as to an employee’s or Participant’s employment (or other provision of
services), termination of employment (or cessation of the provision of
services), leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect.  Participants and other persons entitled to benefits under the
Plan must furnish the Committee such evidence, data or information as the
Committee considers desirable to carry out the terms of the Plan.

 

SECTION 5

AMENDMENT AND TERMINATION

 

The Board may, at any
time, amend or terminate the Plan, and may amend any Award Agreement, provided
that no amendment or termination may, in the absence of written consent to the
change by the affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; and further provided that adjustments
pursuant to paragraph 3.2(e) shall not be subject to the foregoing limitations
of this Section 5.

 

SECTION 6

DEFINED TERMS

 

In addition to the other
definitions contained herein, the following definitions shall apply:

 

(a)                                  Award.  The term “Award” means the award of
Restricted Stock Unit Awards under the Plan.

 

7

 

(b)                                 Board.  The term “Board” means the Board of
Directors of the Company.

 

(c)                                  Code.  The term “Code” means the United States
Internal Revenue Code of 1986, as amended. 
A reference to any provision of the Code shall include reference to any
successor provision of the Code.

 

(d)                                 Shares.  The term “Shares” means common shares of the
Company.

 

(e)                                  Subsidiaries.  For purposes of the Plan, the term
“Subsidiary” means any corporation, partnership, joint venture or other entity
during any period in which at least a fifty percent voting or profits interest
is owned, directly or indirectly, by the Company (or by any entity that is a
successor to the Company), and any other business venture designated by the
Committee in which the Company (or any entity that is a successor to the
Company) has a significant interest, as determined in the discretion of the
Committee.

 

(f)                                    Stock.  The term “Stock” is sometimes used to refer
to common shares of the Company.

 

8Exhibit 10.22

 

ASSURED GUARANTY LTD. REPLACEMENT AWARD PLAN
TRUST

(Effective 
April 21, 2004)

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  THE TRUST AND THE PLAN

  	
   

  
	
   

  	
   

  
	
  I-1.

  	
   

  	
  Name

  	
   

  
	
   

  	
   

  
	
  I-2.

  	
   

  	
  Plan

  	
   

  
	
   

  	
   

  
	
  I-3.

  	
   

  	
  Grantor

  	
   

  
	
   

  	
   

  
	
  I-4.

  	
   

  	
  Administrator

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
  MANAGEMENT AND CONTROL OF TRUST FUND ASSETS

  	
   

  
	
   

  	
   

  
	
  II-1.

  	
   

  	
  The
  Trust Fund

  	
   

  
	
   

  	
   

  
	
  II-2.

  	
   

  	
  Trust Contributions

  	
   

  
	
   

  	
   

  
	
  II-3.

  	
   

  	
  Investment Guidelines

  	
   

  
	
   

  	
   

  
	
  II-4.

  	
   

  	
  General
  Powers

  	
   

  
	
   

  	
   

  
	
  II-5.

  	
   

  	
  Common
  Fund

  	
   

  
	
   

  	
   

  
	
  II-6.

  	
   

  	
  Relating to Trustees

  	
   

  
	
   

  	
   

  
	
  II-7.

  	
   

  	
  Trustee Who is a Participant

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  	
  ACCOUNTING AND DISTRIBUTION OF TRUST ASSETS

  	
   

  
	
   

  	
   

  
	
  III-1.

  	
   

  	
  Statement of Account

  	
   

  
	
   

  	
   

  
	
  III-2.

  	
   

  	
  Benefit Payments

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  	
  COMPENSATION, EXPENSES AND LIABILITY

  	
   

  
	
   

  	
   

  
	
  IV-1.

  	
   

  	
  Compensation and Expenses

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
  TRUST FUND ASSETS

  	
   

  
	
   

  	
   

  
	
  V-1.

  	
   

  	
  Use of Trust Assets

  	
   

  
	
   

  	
   

  
	
  V-2.

  	
   

  	
  Claims of Creditors

  	
   

  
	
   

  	
   

  
	
  V-3.

  	
   

  	
  Claims of Participants

  	
   

  
	
   

  	
   

  
	
  V-4.

  	
   

  	
  Assets Contributed by the Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  	
  TAX
  MATTERS

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  VII-1.

  	
   

  	
  Disagreement as to Acts

  	
   

  
	
   

  	
   

  
	
  VII-2.

  	
   

  	
  Person Dealing with Trustees

  	
   

  
	
   

  	
   

  
	
  VII-3.

  	
   

  	
  Evidence

  	
   

  
	
   

  	
   

  
	
  VII-4.

  	
   

  	
  Waiver of Notice

  	
   

  
	
   

  	
   

  
	
  VII-5.

  	
   

  	
  Counterparts

  	
   

  
	
   

  	
   

  
	
  VII-6.

  	
   

  	
  Governing
  Laws

  	
   

  
	
   

  	
   

  
	
  VII-7.

  	
   

  	
  Successors,
  Etc.

  	
   

  
					

 

i

 

	
  VII-8.

  	
   

  	
  Service of Legal Process

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
  CHANGES OF TRUSTEES

  	
   

  
	
   

  	
   

  
	
  VIII-1.

  	
   

  	
  Resignation

  	
   

  
	
   

  	
   

  
	
  VIII-2.

  	
   

  	
  Removal of Trustee

  	
   

  
	
   

  	
   

  
	
  VIII-3.

  	
   

  	
  Powers Pending Appointment of Successor
  Trustee

  	
   

  
	
   

  	
   

  
	
  VIII-4.

  	
   

  	
  Duties of Resigned or Removed Trustees and
  of Successor Trustee

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX

  	
  AMENDMENT,
  REVOCATION AND TERMINATION

  	
   

  
	
   

  	
   

  
	
  IX-1.

  	
   

  	
  Amendment and Revocation

  	
   

  
	
   

  	
   

  
	
  IX-2.

  	
   

  	
  Distribution of Assets Upon Revocation or
  Termination

  	
   

  
					

 

ii

 

ASSURED GUARANTY LTD. REPLACEMENT AWARD PLAN
TRUST

 

THIS TRUST AGREEMENT, made and entered into this 21st day of April,
2004, by and among Assured Guaranty Ltd., a corporation organized and existing
under the laws of Bermuda, having its principal place of business in Hamilton,
Bermuda (the “Company”), and James Michener, Pierre Samson, and Robert Mills,
as trustees (the “Trustees”),

 

WITNESSETH THAT:

 

WHEREAS, the Company has established the Assured Guaranty Ltd.
Replacement Award Plan  (the “Plan”) to
provide certain employees and other persons providing services to the Company
and to subsidiaries of the Company (individually, “Employer” and collectively,
“Employers”) with benefits (the “Participants”); and

 

WHEREAS, it is intended that the Trust will provide a vehicle for the
accumulation of assets for the purpose of making payments under the Plan and
for such other corporate purposes as are consistent with the terms of the Trust
and that the Trust will constitute a grantor trust as described in
section 671 of the United States Internal Revenue Code of 1986, as amended
(the “Code”);

 

NOW, THEREFORE, in consideration of the
premises and mutual covenants herein contained, IT IS AGREED that the Trustees,
and each of them, do hereby accept their appointment as such under this Trust
Agreement, effective as of the day and year first above written;

 

IT IS FURTHER AGREED, by and among the parties hereto, as follows:

 

ARTICLE I

 

The Trust and the Plan

 

I-1.                               Name.  The Trust Agreement and Trust hereby
evidenced shall be known as the Assured Guaranty Ltd. Replacement Award Plan
Trust.

 

I-2.                               Plan.  The Secretary of the Company shall deliver
to the Trustees a certified copy of each of the Plan and a copy of any
amendments thereto for convenience of reference, but the rights, powers and
duties of the Trustees shall be governed solely by the terms of this Agreement
without reference to the provisions of the Plan.

 

I-3.                               Grantor.  The Company shall be the grantor (within the
meaning of Section 677(a) of the Code) of the Trust.

 

I-4.                               Administrator.  The Company is the Administrator of the Plan
and the Trust and the Secretary of the Company will certify to the Trustees the
names of the employees of the Company who are, from time to time, authorized to
act on behalf of the Administrator under the

 

1

 

terms of this Agreement and to receive notices which the Trustees are
required under the terms of this Agreement to provide to the Administrator.

 

ARTICLE II

 

Management and Control of Trust Fund Assets

 

II-1.                           The
Trust Fund.  The term “Trust
Fund” means all property of every kind held by the Trustees.

 

II-2.                           Trust
Contributions.  The Company
shall contribute to the Trustees on or before today’s date the sum of US
$100.00 and may, from time to time, contribute further amounts to the Trustees
to be held, invested and distributed in accordance with the provisions of this
Agreement.

 

II-3.                           Investment Guidelines.  The Administrator may, from time to time,
establish investment guidelines for the Trustees with respect to the
investment, retention, disposition and reinvestment of the assets of the Trust
Fund by writing filed with the Trustees.

 

II-4.                           General
Powers.  Subject to the
provisions of paragraph II-3, with respect to the Trust Fund, the Trustees
shall have the following powers, rights and duties in addition to those provided
elsewhere in this Trust Agreement or by law:

 

(a)                                  to receive and hold
all contributions paid to the Trustees by the Company; provided, however, that
the Trustees shall have no duty to require any contributions to be made, or to
determine that any of the contributions received comply with the conditions and
limitations of the Plan;

 

(b)                                 to deposit any part or
all of the cash and other property of this Trust in any common trust fund,
pooled fund or other commingled investment fund maintained by the Trustees for
trust investment purposes;

 

(c)                                  to invest and
reinvest the Trust Fund in property of any kind, real or personal;

 

(d)                                 to manage, operate,
sell, contract to sell, convey, exchange, partition, transfer, abandon, and
otherwise deal with all property, real or personal, in such manner, for such
consideration, and on such terms and conditions as the Trustees shall decide;

 

(e)                                  to retain in cash
(pending investment, reinvestment or payment of benefits) any reasonable
portion of the Trust Fund and to deposit cash in any depository selected by
them;

 

(f)                                    to make payments
from the Trust Fund in accordance with paragraph III-2;

 

(g)                                 to compromise,
contest, arbitrate, settle or abandon claims and demands;

 

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(h)                                 to begin, maintain or
defend any litigation necessary in connection with the investment, reinvestment
and administration of the Trust;

 

(i)                                     to have all rights
of an individual owner, including the power to give proxies, to vote stocks, to
join in or oppose (alone or jointly with others) voting trusts, mergers,
consolidations, foreclosures, reorganizations, recapitalizations or
liquidations, and to exercise or sell stock subscription or conversion rights;

 

(j)                                     to hold securities
or other property in the name of the Trustees or their nominee or nominees, or
in such other form as the Trustees shall determine, with or without disclosing
the Trust relationship, provided that the records of the Trustees shall
indicate the actual ownership of such securities or other property;

 

(k)                                  to deposit securities
with a clearing corporation, central depository or similar organization, in
which event, the certificates representing securities, including those in
bearer form, may be held in bulk form with, and may be merged into,
certificates of the same class of the same issuer which constitute assets of
other accounts or owners, without certification as to the ownership attached
and to participate in and use a book-entry system for the transfer or pledge of
securities held by the Trustees or by a corporate depository; provided,
however, that the Trustees shall at all times maintain a separate and distinct
record of the securities owned by the Trust Fund;

 

(l)                                     to retain any
funds or property subject to any dispute without liability for the payment of
interest, or to decline to make payment or delivery thereof until final
adjudication is made by a court of competent jurisdiction;

 

(m)                               to employ agents,
attorneys, investment counsel, accountants or other persons (who also may be employed
by or represent the Company) for such purposes as the Trustees consider
desirable;

 

(n)                                 to furnish the
Administrator with such information in the Trustees’ possession as the Company
may need for tax or other purposes; and

 

(o)                                 to perform any and all
other acts which are, in the Trustees’ judgment, necessary or appropriate for
the proper and advantageous management, investment and distribution of the
Trust Fund.

 

II-5.                           Common
Fund.  Subject to the provisions
of paragraph V-2, the Trustees may administer and invest all contributions made
to it as one Trust Fund.  The Trustees
shall not be required to make any separate investment of the Trust Fund for the
account of any creditor of the Company prior to receipt of directions to make
payments of such creditor in accordance with paragraph V-2.

 

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II-6.                           Relating
to Trustees.  During any period
in which two or more Trustees are acting, the following provisions shall apply
where the context admits:

 

(a)                                  A majority of the
Trustees qualified to act may act on behalf of all Trustees by meeting, or by
writing signed without meeting, and may execute any document relating to the
Trust Fund by signing one document or concurrent documents.

 

(b)                                 The certificate of a
majority of the Trustees that they have taken or authorized any action shall be
conclusive in favor of any person relying on the certificate.

 

(c)                                  By their unanimous
written consent the Trustees may allocate any of their rights, duties or
obligations under this Trust Agreement or the Plan to any other Trustee
then acting.

 

II-7.                           Trustee Who is a Participant.  If a Trustee is a participant in a Plan, he
may not decide any matter concerning distribution of any kind to be made to him
unless such decision could be made by him under such Plan if he were not a
Trustee.

 

ARTICLE III

 

Accounting and Distribution of Trust Assets

 

III-1.                       Statement
of Account.  Within 60 days
after the last day of each fiscal year, the Trustees shall furnish to the
Administrator a written report showing the fair market value of the Trust Fund
as of that date, and all investments of the Trust Fund, and receipts and
disbursements and other transactions made by the Trustees during that fiscal
year, with respect to the Trust Fund. 
The records of the Trust may be audited at any time and from time to
time by the Administrator.

 

III-2.                       Benefit
Payments.  Subject to the
provisions of paragraph V-2, the Trustees shall make payments to Participants
in such amounts and at such times as the Administrator may certify to the
Trustees, subject to the following:

 

(a)                                  The Trustees shall
have no responsibility to inquire as to whether a payee is entitled to the
payment, or as to whether a payment is proper, and shall have no liability for
a payment made in good faith without actual notice or knowledge of the changed
condition or status of the payee.

 

(b)                                 If any check for any
payment directed to be made from the Trust Fund has been mailed by the Trustees
to the last address of the payee furnished to the Trustees and is returned
unclaimed, the Trustee shall notify the Administrator.

 

(c)                                  The Trustees may
reserve such reasonable amount from any payment as it shall deem necessary to
pay any estate, inheritance, income or other tax, charge or assessment
attributable to any payment or may require such releases or other document from
any taxing authority and such indemnity from the intended payee as the Trustee
shall deem necessary for its protection.

 

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ARTICLE IV

 

Compensation, Expenses and Liability

 

IV-1.                       Compensation
and Expenses.  No compensation
shall be paid to the Trustees as such. 
The Trustees are authorized to pay from the Trust Fund (unless otherwise
paid by the Company) all of the Trustees’ reasonable expenses, taxes and
charges (including reasonable fees of persons employed by it in accordance with
subparagraph II-4(m)) incurred in connection with the collection,
administration, management, investment, protection and distribution of the
Trust Fund.

 

IV-2.                       Liability
of Trustees.  The Trustees shall not
be liable for any act or failure to act in the performance of duties under this
Agreement, unless such action or failure to act is dishonest, constitutes
negligence or is in willful violation of the law.  The Trustees shall not be liable for following in good faith any
direction of the Administrator given in accordance with the terms of this
Agreement.

 

ARTICLE V

 

Trust Fund Assets

 

V-1.                           Use
of Trust Assets.  Subject to the
provisions of paragraph V-2 and the provisions of paragraphs X-1 and X-2, the
assets of the Trust shall be used for the purpose of providing benefits under
the Plan.

 

V-2.                           Claims
of Creditors.  Notwithstanding
any provision of this Trust Agreement, the assets in the Trust Fund shall be
subject to the claims of the general creditors of the Company if such claims
are not satisfied by payment from the other general assets of the Company,
because of the Company’s insolvency (as described below).  The Chairman of the Board of Directors and
the Chief Executive Officer of the Company shall notify the Trustees of the
Insolvency of the Company within three days of receipt of knowledge of such
Insolvency.  Upon receipt of such notice
or an applicable court order, the Trustees shall hold assets of the Trust Fund
for the benefit of its general creditors, and shall suspend payment of benefits
under the Plan which would be charged to the Trust until the Trustee has
determined that the Company is no longer Insolvent or pursuant to a court
order.  The Trustees shall have no duty
to inquire whether the Company is Insolvent. 
The Trustees may rely on such evidence concerning the Company’s
insolvency as may be furnished to the Trustees by the Company.  The Company shall be considered as
“Insolvent” for purposes of this Trust agreement if it is (i) unable to pay its
debts generally as they become due or (ii) engaged as a debtor in a proceeding
under the Bankruptcy Code of the United States (11 U.S.C. - 101 et. seq.) or
any other law of any jurisdiction for the relief, liquidation or rehabilitation
of debtors.

 

V-3.                           Claims of Participants.  The principal of the Trust, and any earnings
thereon shall be held separate and apart from other funds of Company and shall
be used exclusively in accordance with and in furtherance of the goals of the
Plan, subject to the provision paragraph V-2 hereto.  Neither the Participants in the Plan nor the Plan shall have any
preferred claim on, or

 

5

 

any beneficial ownership in, any assets of the Trust, or be entitled to
any payment from the Trust, and all rights of a Participant created under any
of the Plan shall constitute unsecured contractual rights of the
participant.  It is intended that
neither the Plan nor the Trust shall be subject to the provisions of part 4 of
title I of the Employee Retirement Income Security Act of 1974, an amended, and
neither the Participants nor the Plan shall have any right to require the
Company to make any contribution to the Trust.

 

V-4.                           Assets Contributed by the Company.
Notwithstanding any provision of the Trust to the contrary, any ordinary shares
of the Company (“Assured Shares”), contributed to the Trust by the Company and
held in a fund intended to be invested primarily in Assured Shares, which
Assured Shares or fund is held in the Trust for the benefit of the employees or
service providers of any Employer, shall be subject to the claims of the
general creditors of such Employer as well as to the claims of the general
creditors of the Company.  With respect
to Assured Shares and to any fund intended to be invested primarily in Assured
Shares which is held in the Trust, references to the “Company” in paragraphs
V-1, V-2 and V-3 of this Article V shall be interpreted to also refer to
such Employer.  Upon the termination of
the Trust, any such Assured Shares remaining in the Trust shall revert to the
Company.

 

ARTICLE VI

 

Tax Matters

 

This Trust Agreement is intended to
constitute a grantor trust, as described in section 671 of the Code.  The Company acknowledges that all income of
the Trust is attributable to it as owner of the Trust assets for income tax
purposes and will be income to the Company.

 

ARTICLE VII

 

Miscellaneous

 

VII-1.                   Disagreement
as to Acts.  If there is a
disagreement between the Trustees and anyone as to any act or transaction
reported in any accounting, the Trustees shall have the right to have its
account settled by a court of competent jurisdiction.

 

VII-2.                   Person
Dealing with Trustees.  No
person dealing with the Trustees shall be required to see to the application of
all money paid or property delivered to the Trustees, or to determine whether
or not the Trustees are acting pursuant to any authority granted under this
Trust Agreement.

 

VII-3.                   Evidence.  Evidence required of anyone under this Trust
Agreement may be by certificate, affidavit, document or other instrument which
the person acting in reliance thereon considers pertinent and reliable, and
signed, made or presented by the proper party.

 

VII-4.                   Waiver of
Notice.  Any notice required
under this Trust Agreement may be waived by the person entitled thereto.

 

6

 

VII-5.                   Counterparts.  This Trust Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and no other
counterpart need be produced.

 

VII-6.                   Governing
Laws.  This Trust Agreement
shall be construed and administered according to the laws of Bermuda.

 

VII-7.                   Successors,
Etc.  The provisions of this
Trust Agreement shall be binding on the Company and the Trustees and their
successors and the Participants and their respective heirs and legal
representatives.

 

VII-8.                   Service
of Legal Process.  If the
Trustees receive service of summons, subpoena or other legal process of any
court with respect to any action relating to the Plan or this Trust Agreement,
it shall, as soon as practicable, inform the Administrator of such service and
the Trustees shall promptly provide the Administrator with a copy of the
document served.

 

ARTICLE VIII

 

Changes of Trustees

 

VIII-1.               Resignation.  A Trustee may resign at any time by giving
90 days’ advance written notice to the Company, and to any other Trustee or
Trustees then acting.

 

VIII-2.               Removal of
Trustee.  The Company may remove
a Trustee by giving 30 days’ advance written notice to that Trustee and to any
other Trustee or Trustees then acting. 
The Company shall fill a vacancy in the office of the Trustees as soon
as practicable by writing filed with the person or entity appointed to fill the
vacancy and with any other Trustee or Trustees then acting; provided, however,
that there must always be at least one Trustee acting.

 

VIII-3.               Powers Pending Appointment of
Successor Trustee.  If a vacancy
in the office of Trustee exists, the remaining Trustee or Trustees may exercise
all of the Trustees’ powers until the vacancy is filled.

 

VIII-4.               Duties of Resigned or Removed
Trustees and of Successor Trustee. 
If all the Trustees resign or are removed, they shall promptly transfer
and deliver the assets of the Trust Fund to the successor Trustee or Trustees,
after reserving such reasonable amount as it shall deem necessary to provide
for expenses and any sums chargeable against the Trust Fund for which it may be
liable.  Within 120 days, the resigned
or removed Trustees shall furnish to the Company and the successor Trustee or
Trustees an account of the administration of the Trust from the date of their
last account.  Each successor Trustee
shall succeed to the title to the Trust Fund vested in his predecessor without
the signing or filing of any further instrument, but any resigned or removed
Trustee shall execute all documents and do all acts necessary to vest such
title of record in any successor Trustee. 
Each successor Trustee shall have all the powers, rights and duties
conferred by this agreement as if originally named as Trustee.  No successor Trustee shall be personally
liable for any act or failure to act of a predecessor Trustee.

 

7

 

ARTICLE IX

 

Amendment, Revocation and Termination

 

IX-1.                      Amendment
and Revocation.  This Trust
Agreement and the Trust created hereby may be amended, revoked or terminated by
the Company at any time, provided that no amendment shall materially change the
rights, duties and responsibilities of the Trustees without their consent.

 

IX-2.                      Distribution of Assets Upon
Revocation or Termination.  Upon
revocation or termination of this Trust by the Company, the Trustees shall,
subject to the provisions of paragraph V-2 and to the Trustees’ reserving such
reasonable amount as they shall deem necessary to provide for expenses and any
sums chargeable against the Trust Fund, distribute the assets of the Trust to
the Company.

 

IN WITNESS WHEREOF, the Company has caused these presents to be signed
by its duly authorized officer and the Trustees have set forth their hands and
seals as of the day and year first above written.

 

	
   

  	
  Assured Guaranty Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By  James M. Michener

  
	
   

  	
  Its  General Counsel &
  Secretary

  
	
   

  	
   

  
	
   

  	
  /s/ James M. Michener

  	
   

  

 

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