Document:

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

1. Employment

 

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

 

1

 

2. Term and Place of Performance

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

(i) deliver lectures and fulfill speaking
engagements; and

 

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

 

4. Salary

 

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

 

3

 

5.  Moving Allowance

 

The Company will reimburse the Executive for
reasonable moving expenses for household goods in relocating to Bermuda.  Subject to termination pursuant to section
10(a), 10(b) and 10(c), the Company will reimburse the Executive for reasonable
moving expenses for household goods returning to the Executive’s original port
of departure or an allowance equal to this sum applied to another destination.

 

6.  Annual
Performance Incentive Plan

 

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

 

7. Long-Term Incentive Awards

 

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

 

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starting one year after the date of the award .  When AGL issues shares of publicly traded
stock, Executive will also be granted an award of an option to purchase at the
IPO price 160,000 shares of AGL stock. 
These shares and options will be subject the terms and conditions that
will be set forth in the AGL Long-Term Incentive Plan (“LTIP”).  The current projected target share value for
the IPO AGL shares is $20.  Upon vesting
or exercise of stock options, the shares will be registered in the United
States with the SEC and appropriate states and will be freely tradable.  If the IPO does not occur on or before
December 31, 2004, then the Company will instead give you cash, restricted
ordinary shares of ACE Limited stock, an option to purchase shares of ACE
Limited stock, or any combination thereof, the aggregate of which equals
$450,000.  The Company will decide the
components of the substitute award.

 

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

 

5

 

Moreover, for as long as the Company remains majority owned subsidiary of ACE
Limited and the Company continues to participate in the ACE Limited Long –Term
Incentive Plan, Executive will be eligible to participate in the ACE Limited
Long-Term Incentive Plan, pursuant to its terms, as may be in effect from time
to time .

 

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

 

(d) Other-  Nothing in this Agreement shall be construed to
require the Company or any other person to take steps or not take steps
(including, without limitation, the giving or withholding of consents) that
would result in a Change in Control or an initial public offering of Company’s
securities.  In addition, restricted
stock grant awards and stock option agreements presented to Executive under the
LTIP shall not be inconsistent with the terms of this agreement and to the
extent that such awards or grants include terms that are not addressed in this
agreement the terms of said awards and grants shall apply in full force and
effect.

 

8.  Employee Benefits 

 

(a) During the term of his employment, the Executive shall be entitled
to participate in the

 

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Company’s
retirement plan, supplemental retirement plan, hospitalization plan, major
medical plan, dental plan, group-term life insurance plan, accidental death and
dismemberment plan, and such other employee benefits programs consistent with
such benefits offered currently to senior executives of ACE , subject to
satisfaction of all eligibility requirements of general applicability and all
other terms and conditions of the plans.

 

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

 

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

 

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

 

9. Business Expense Reimbursement.
Accommodation. Other Perquisites

 

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

 

(b) During the term of the Executive’s employment, the Company will
reimburse the Executive up to a maximum of $10,000 per month in respect of the
cost of suitable living accommodation in Bermuda. In the event that the
Executive chooses to purchase a residence in

 

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Bermuda, the
Company will reimburse him only for the fair market rental value of said
residence to a maximum of $10,000 per month, which amount shall be reviewed
from time to time in accordance with authorization from the Compensation
Committee of the Board of Directors.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

10.
Termination
of Employment

 

(a) Termination
Due to Death.

 

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

 

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

 

(ii) any
rights and benefits available under any employee benefits plans, policies, and
practices of the Company, determined in accordance with the applicable terms
and provisions of such plans, policies, and practices as in effect on the date
of the Executive’s death.

 

(b) Termination
Due to Disability.

 

In the event the Executive’s employment by the Company is terminated
because he is adjudged by the Compensation Committee to be disabled within the
meaning of the Company’s long-term disability plan, the Executive shall be
entitled to:

 

(i) continuation of the annual base salary
provided in Section 4 above through the last day of the month in which the
Executive’s employment with the Company terminates due to disability;

 

(ii)
any rights and benefits available under any employee  benefits plans, policies, and practices of the Company, determined in
accordance with the applicable terms and provisions of such plans, policies, and
practices as in effect on the date of the Executive’s termination of
employment.

 

(c) Termination
by the Company for Cause.

 

(i) The employment of the
Executive under this Agreement may be terminated by the

 

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Company for
Cause.  For purposes of this Agreement,
“Cause” shall mean;

 

(A) conviction or admission of
guilt by the Executive of a felony involving moral turpitude;

 

(B) violations of Section 11 or
12 of this Agreement; or

 

(C) the Executive, in carrying out his duties, has been guilty of (1) a
willful, serious, and continued failure to perform his duties,  (2) willful and serious misconduct or (3) a
willful and material breach of the Company Code of Conduct; provided, however,
that any act, or failure to act, by the Executive shall not constitute Cause for
purposes of this Section 10(c)(i)(c) if such act or failure to act, was
committed, or omitted, by the Executive in good faith and in a manner he
reasonably believed to be in the best interests of the Company.

 

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

 

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

 

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

 

(d) Termination
Without Cause

 

(i) Anything in this Agreement
to the contrary notwithstanding, the Executive’s employment may be Terminated
Without Cause as provided in this Section 10(d).

 

10

 

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

 

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

 

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

 

(B) continuation of coverage
under the employee benefit plans of the Company in which the Executive was
participating at the time of his termination of employment for the period of
salary continuation under Section 10(d)(A) above; provided, however, that (1)
except as required by applicable law, any such continued coverage shall
terminate upon the subsequent full-time

 

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employment
of the Executive, and (2) if the company is unable to continue such coverage,
then they shall provide the Executive with economically equivalent employee
benefits to the extent such benefits are reasonably available.

 

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

 

(iv) During the Payment Period, Executive
shall make a good faith effort to seek other employment.  If Executive attains other employment during
the Payment Period, he shall so notify Company and any earnings of Executive from
his new employer (including salary and bonus, (deferred or otherwise) and any
other income reported on a W-2  and/or
1099 income tax forms with his new employer) 
shall reduce by an equivalent amount the payments required to be made
under Section 10(d)(ii)(A).

 

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

 

(vi) If there is a Termination Without Cause
during the first year of the

 

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Initial Term,
the subject to the provisions of this agreement, Executive will receive the
amounts payable under Section 10(d)(ii)(A) and (B) plus any remaining but
unpaid salary or contract benefits due him for the first year of the Initial
Term.

 

(vii) 
Any shares of restricted Company stock and options to purchase ordinary shares
of Company stock held by Executive will continue to vest in accordance with the
terms of the awards for the period of time which includes the completion of
this Contract and any subsequent Payment Period, as set forth in Section
10(d)(ii)(A).

 

(e) Voluntary Termination by the Executive

 

The Executive
may voluntarily terminate his employment with the Company at any time prior to
the expiration of the term of this Agreement. Such termination shall constitute
a voluntary termination and, in such event, the Executive shall be limited to
the same rights and benefits as applicable to the termination for Cause, as
described in Section 10(c) above.

 

(f) Change in Control

 

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

 

13

 

Section 7 of this Agreement: 
(i) an initial public offering of the Company’s securities pursuant to an
effectively filed registration statement, nor (ii) the first acquisition of the
voting securities of the Company, which occurs prior to an IPO of the Company’s
securities and which, absent this provision, would constitute a Change in
Control pursuant to the Company’s Long-term incentive plan (defining a Change
in Control with respect to the acquisition of voting securities of the Company)
(a “Sale”).

 

(g) Resignation Upon Termination

 

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

 

11. Noncompetition

 

During the term of the Executive’s employment
and for a period of 12 months following the termination of his employment for
any reason other than a Termination Without Cause, the Executive shall not,
directly or indirectly, whether as an employee, consultant, partner, principal,
agent, distributor, representative, stockholder (except as a less than one
percent stockholder of a publicly traded company or a less than five percent
stockholder of a privately held company) or otherwise, engage, within the
United States, Bermuda, or the Cayman Islands, if such activities involve
insurance or reinsurance of United States based entities or risks that are
competitive with the financial guaranty insurance business then being conducted
by the Company and which, during the period covered by the Executive’s
employment, were either (1) conducted by the

 

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Company, by
the Company. For as long as the above described restrictions on competition
apply, the Executive shall not hire any employee or former employee of the
Company or any present or former affiliate company of the Company nor encourage
any employee of the Company to leave the employ of the Company.  This section will not be in effect after the
Executive’s termination of employment, unless, at the option of Company,
Company continues to pay Executive’s base salary during the 12 month period after
Executive’s termination or resignation from employment for any reason.

 

12. Confidential Information

 

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

 

13. Remedy for Violation of Noncompetition
or Confidential Information Provisions

 

Without intending to limit the remedies
available to the Company for the breach of any of the Executive’s covenants in
Sections 11 and 12, the Executive acknowledges and agrees that damages at law
are an insufficient remedy for the Company and that, accordingly, the Company
shall be entitled to apply for and obtain injunctive relief in any court of
competent jurisdiction to restrain the breach or threatened breach, or
otherwise specifically enforce, any or all of said

 

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

 

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

 

14. Withholding

 

Anything in
this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive shall be subject to withholding
of such amounts relating to taxes as the Company may reasonably determine they
are required to withhold pursuant to any applicable law or regulation. In lieu
of withholding such amounts, in whole or in part, the Company may, in their
sole discretion, accept other provision for payment of taxes as required by
law, provided they are satisfied that all requirements of law affecting their
responsibilities to withholding such taxes have been satisfied.

 

16

 

15. Arbitration of All Disputes

 

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

 

16. Entire Agreement

 

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

 

17. Assignability; Binding Nature

 

This Agreement
shall be binding upon and inure to the benefit of the Parties and their

 

17

 

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

 

18. Amendment or Waiver

 

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

 

19. Notices

 

Any notice
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the

 

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address
indicated below to such changed address of which such party may subsequently by
similar process give notice:

 

 

	
  If to the
  Company:

  	
   

  	
  Attention
  CEO

  
	
   

  	
   

  	
  Assured
  Guaranty Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  30
  Woodbourne Ave

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hamilton,
  Bermuda

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Executive:

  	
   

  	
  Mr. James
  Michener

  
	
   

  	
   

  	
  11 Whitman
  Pond Road

  
	
   

  	
   

  	
  Simsbury, CT
  06070

  

 

20. Severability

 

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

 

21. Survivorship

 

The respective
rights and obligations of the parties shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.

 

22. References

 

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

 

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Agreement
shall mean lawful money of the United States of America.

 

23. Governing-Law

 

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

 

24. Headings

 

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

 

25. Counterparts

 

This Agreement may be executed in one or more counterparts.

 

 

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

 

 

	
   

  	
  Assured Guaranty Ltd., Assured Guaranty Corp.,

  
	
   

  	
   

  
	
  Assured Guaranty U.S. Holdings, Inc,

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Dominic J. Frederico

  
	
   

  	
   

  
	
   

  	
  Their President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  James Michener

  

 

20

 

EXHIBIT A

Gross-Up Provisions

 

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

 

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

 

21

 

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

 

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

 

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

 

(ii)           take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

 

(iii)          cooperate
with the Company in good faith in order effectively to contest such claim, and

 

22

 

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

 

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

 

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

 

(f)  If, pursuant to regulations issued under
Section 280G or 4999 of the Code, the Company and the Executive were required
to make a preliminary determination of the amount of an excess parachute
payment and thereafter a redetermination of the Excise Tax is required under
the applicable regulations, the parties shall request the Accounting Firm to
make such redetermination.  If as a
result of such redetermination an additional Gross-Up Payment is required, the
amount thereof shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm’s determination.  If the redetermination of the Excise Tax
results in a reduction of the Excise Tax, the Executive shall take such steps
as the Company may reasonably direct in order to obtain a refund of

 

23

 

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

 

24Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

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

 

1. Employment

 

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

 

1

 

2. Term and Place of Performance

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

(i) deliver lectures and fulfill speaking engagements; and

 

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

 

4. Salary

 

For services rendered by the Executive to the
Company during the term of this Agreement while he is employed by the Company,
the Executive shall be paid a minimum annual base salary at a rate of
$500,000.  The annual base salary shall
be paid on a monthly basis by the Company. 
The companies which comprise the Company as defined herein will fund the
salary specified above in proportion to the percentage of time executive
performs work for each company.

 

3

 

5.  Sign-on Bonus and Moving Allowance

 

On or before January 30th, 2004, the Company
shall pay to the Executive the sum of $750,000 (less applicable withholding) in
a lump sum payment by way of sign-on bonus which shall be made only once during
the term of this Agreement. If during the first 12 months of this Agreement
Executive’s employment terminates either for Cause, as defined herein, or
voluntarily by Executive, Executive must refund a portion of the bonus by
offset of last check and direct payment of remaining balance.  The amount of bonus refund by Executive
shall be in an amount prorated to the portion of the first 12 months of this
Agreement that Executive does not serve the Company.

 

The Company will reimburse the Executive for
reasonable moving expenses for household goods in relocating to Bermuda.  Subject to termination pursuant to section
10(a), 10(b) and 10(c), the Company will reimburse the Executive for reasonable
moving expenses for household goods returning to the Executive’s original port
of departure or an allowance equal to this sum applied to another destination.

 

6. Annual Performance Incentive Plan

 

Subject to the terms and
conditions of this Agreement, once a year during the Initial Term, Executive
shall receive an annual performance incentive bonus award equal to no less than
100% of his annual base salary, plus up to an additional 40% of his annual base
salary (the amount of which shall be the “Target Amount”), such amount to be
determined by Company based upon Company results and performance of Executive.
After the Initial Term, annual performance incentive bonus awards will be in an
amount determined by the Compensation Committee of the Board of Directors and
based on the performance of the Company and the Executive.

 

4

 

Notwithstanding
the foregoing, for as long as the Company continues to participate in the ACE
Group short-term incentive program, Executive will be eligible to participate
in such plan, pursuant to its terms, as may be in effect from time to time .

 

7. Long-Term Incentive Awards

 

(a) Sign-on Equity Award—  When Assured Guaranty Limited issues shares of publicly traded
stock, Executive will be granted an award of 120,000 restricted ordinary shares
of AGL stock that will vest 25% annually over a four year period with the first
quarter vesting starting one year after the date of the award .  When AGL issues shares of publicly traded
stock, Executive will also be granted an award of an option to purchase at the
IPO price 240,000 shares of AGL stock. 
These shares and options will be subject the terms and conditions that
will be set forth in the AGL Long-Term Incentive Plan (“LTIP”).  The current projected target share value for
the IPO AGL shares is $20.  Upon vesting
or exercise of stock options, the shares will be registered in the United
States with the SEC and appropriate states and will be freely tradable.

 

(b) Annual Long-Term Incentive Awards—After AGL issues shares of
publicly traded stock, Executive will participate in the LTIP.  If the Company determines that it has made a
profit during any year of the Initial Term, the value of any Long-Term
Incentive award made to Executive for that year will be no less than the amount
of his annual base salary.  The “target
award” for the first year of the Initial Term will be 40,000 restricted shares
of AGL stock and an option to purchase 80,000 shares of AGL stock.  Subsequent to the Initial Term, the amount
of any award made to Executive under Long-Term Incentive Plan will be based on
the profitability of the AGL and Executive’s performance and will be subject to
the discretion of the

 

5

 

Compensation Committee of the AGL’s Board of Directors.  All Long-Term Incentive awards will be
subject to the terms and conditions of the LTIP.

 

If the AGL IPO does not occur or is delayed, and as a result the AGL
cannot make the Annual Long-Term Incentive Awards referenced in this subsection
(b),  then the Company will instead give
the Executive cash, restricted ordinary shares of ACE Limited stock, a
restricted option to purchase shares of ACE Limited stock, or any combination
thereof, the aggregate of which equals Executive’s annual base salary as of the
time the award is to be made.  The
Company will decide the components of the substitute award.

 

Moreover, for as long as the Company remains majority owned subsidiary of ACE
Limited and the Company continues to participate in the ACE Limited Long –Term
Incentive Plan, Executive will be eligible to participate in the ACE Limited
Long-Term Incentive Plan, pursuant to its terms, as may be in effect from time
to time .

 

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

 

6

 

(d) Other-  Nothing in this Agreement shall be construed to
require the Company or any other person to take steps or not take steps
(including, without limitation, the giving or withholding of consents) that
would result in a Change in Control or an initial public offering of Company’s
securities.  In addition, restricted
stock grant awards and stock option agreements presented to Executive under the
LTIP shall not be inconsistent with the terms of this agreement and to the
extent that such awards or grants include terms that are not addressed in this
agreement the terms of said awards and grants shall apply in full force and
effect.

 

8.  Employee Benefits 

 

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

 

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

 

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

 

(d)  The companies
which comprise the Company as defined herein will fund the benefits

 

7

 

specified above
in proportion to the percentage of time executive performs work for each
company.

 

9. Business Expense Reimbursement.
Accommodation. Other Perquisites

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

10. Termination of Employment

 

(a) Termination
Due to Death.

 

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

 

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

 

(ii) any
rights and benefits available under any employee benefits plans, policies, and
practices of the Company, determined in accordance with the applicable terms
and provisions of such plans, policies, and practices as in effect on the date
of the Executive’s death.

 

(b) Termination
Due to Disability.

 

In the event the Executive’s employment by
the Company is terminated because he is

 

9

 

adjudged by
the Compensation Committee to be disabled within the meaning of the Company’s
long-term disability plan, the Executive shall be entitled to:

 

(i) continuation of the annual base salary
provided in Section 4 above through the last day of the month in which the
Executive’s employment with the Company terminates due to disability;

 

(ii) any rights and benefits
available under any employee  benefits plans, policies, and practices of the Company, determined in
accordance with the applicable terms and provisions of such plans, policies, and
practices as in effect on the date of the Executive’s termination of
employment.

 

(c) Termination
by the Company for Cause.

 

(i) The employment of the Executive under this Agreement may be
terminated by the Company for Cause. 
For purposes of this Agreement, “Cause” shall mean;

 

(A) conviction or admission of guilt by the Executive of a felony
involving moral

 

turpitude;

 

(B) violations of Section 11 or 12 of this Agreement; or

 

(C) the Executive, in carrying out his duties, has been guilty of (1) a
willful, serious, and continued failure to perform his duties,  (2) willful and serious misconduct or (3) a
willful and material breach of the Company Code of Conduct; provided, however,
that any act, or failure to act, by the Executive shall not constitute Cause
for purposes of this Section 10(c)(i)(c) if such act or failure to act, was
committed, or omitted, by the Executive in good faith and in a manner he
reasonably believed to be in the best interests of the Company.

 

10

 

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

 

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

 

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

 

(d) Termination
Without Cause

 

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

 

(ii) In the event there is a Termination Without Cause of the
Executive’s

 

11

 

employment,
the Executive shall be entitled to:

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

(vii)  Any shares of restricted
Company stock and options to purchase ordinary shares of Company stock held by
Executive will continue to vest in accordance with the terms of the awards for
the period of time which includes the completion of this Contract and any
subsequent Payment Period as set forth in Section 10(d)(ii)(A).

 

(e) Voluntary Termination by the Executive

 

The Executive
may voluntarily terminate his employment with the Company at any time prior to
the expiration of the term of this Agreement. Such termination shall constitute
a voluntary termination and, in such event, the Executive shall be limited to
the same rights and benefits as applicable to the termination for Cause, as
described in Section 10(c) above.

 

13

 

(f) Change in Control

 

In the event of a Change in
Control (as defined below) all stock based awards in which the Executive is not
yet vested shall become fully vested and stock options shall be exercisable for
their term.  In addition, the Executive
may resign for any reason at any time during the twelve month period following
a Change in Control (as defined below) and receive the same salary
continuation, bonus eligibility and benefits as if the Executive were
Terminated Without Cause pursuant to Section 10(d) of this Agreement.  The term Change in Control shall be as
defined in the Company’s long-term incentive plan as of the date hereof, a copy
of which is attached hereto as Exhibit A.  The following shall not
constitute a Change in Control for purposes of the equity awards provided for
under Section 7 of this Agreement:  (i) an initial public offering of the
Company’s securities pursuant to an effectively filed registration statement,
nor (ii) the first acquisition of the voting securities of the Company, which
occurs prior to an IPO of the Company’s securities and which, absent this
provision, would constitute a Change in Control pursuant to the Company’s
Long-term incentive plan (defining a Change in Control with respect to the
acquisition of voting securities of the Company) (a “Sale”).

 

(g) Resignation Upon Termination

 

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

 

14

 

11. Noncompetition

 

During the term of the Executive’s employment
and for a period of 12 months following the termination of his employment for
any reason other than a Termination Without Cause, the Executive shall not,
directly or indirectly, whether as an employee, consultant, partner, principal,
agent, distributor, representative, stockholder (except as a less than one
percent stockholder of a publicly traded company or a less than five percent
stockholder of a privately held company) or otherwise, engage, within the
United States, Bermuda, or the Cayman Islands, if such activities involve
insurance or reinsurance of United States based entities or risks that are
competitive with the financial guaranty insurance business then being conducted
by the Company and which, during the period covered by the Executive’s
employment, were either (1) conducted by the Company,  by the Company. For as long as the above described restrictions
on competition apply, the Executive shall not hire any employee or former
employee of the Company or any present or former affiliate company of the
Company nor encourage any employee of the Company to leave the employ of the
Company.  This section will not be in
effect after the Executive’s termination of employment, unless, at the option
of Company, Company continues to pay Executive’s base salary during the 12
month period after Executive’s termination or resignation from employment for
any reason.

 

12. Confidential Information

 

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

 

15

 

generally
(other than as a result of unauthorized disclosure by the Executive). The
foregoing covenants by the Executive shall be without limitation as to time and
geographic applications.

 

13. Remedy for Violation of Noncompetition
or Confidential Information Provisions

 

Without intending to limit the remedies
available to the Company for the breach of any of the Executive’s covenants in
Sections 11 and 12, the Executive acknowledges and agrees that damages at law
are an insufficient remedy for the Company and that, accordingly, the Company
shall be entitled to apply for and obtain injunctive relief in any court of
competent jurisdiction to restrain the breach or threatened breach, or
otherwise specifically enforce, any or all of said covenants. The Parties
acknowledge that each of the covenants contained in Sections 11 and 12 is an
essential element of this Agreement. If any covenant or term of Section 11 or
12 or any portion thereof of this Section 13, is determined to be invalid or
unenforceable in any instance, such determination shall not prevent the
reassertion thereof with respect of any other breach or violation. If, in any
proceeding, a court (or other tribunal) refuses to enforce the covenants
contained in Section 11 or 12 or this Section 13 because such covenants cover
too extensive a geographic area or too long a period of time, any such covenant
shall be deemed amended to the extent (but only to the extent) required by law
to permit its enforceability hereunder.

 

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

 

16

 

14. Withholding

 

Anything in this Agreement to the contrary
notwithstanding, all payments required to be made by the Company hereunder to
the Executive shall be subject to withholding of such amounts relating to taxes
as the Company may reasonably determine they are required to withhold pursuant
to any applicable law or regulation. In lieu of withholding such amounts, in
whole or in part, the Company may, in their sole discretion, accept other
provision for payment of taxes as required by law, provided they are satisfied
that all requirements of law affecting their responsibilities to withholding
such taxes have been satisfied.

 

15. Arbitration of All Disputes

 

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

 

17

 

16. Entire Agreement

 

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

 

17. Assignability; Binding Nature

 

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

 

18. Amendment or Waiver

 

No provision in this Agreement may be amended
or waived unless such amendment or waiver is (1) agreed to in writing, and (2)
the agreement is signed by the Executive and by

 

18

 

authorized
officers. No waiver by any party hereto of any breach by any other party of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time.

 

19. Notices

 

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

 

 

	
  If to the
  Company:

  	
   

  	
  Attention
  CEO

  
	
   

  	
   

  	
  Assured
  Guaranty Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  30
  Woodbourne Ave

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hamilton,
  Bermuda

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the
  Executive:

  	
   

  	
  Mr. Robert
  Mills

  
	
   

  	
   

  	
  17 Great
  Hills Road

  
	
   

  	
   

  	
  New Hope,
  Pa  18930

  

 

20. Severability

 

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

 

19

 

extent
permitted by law.

 

21. Survivorship

 

The respective rights and obligations of the
parties shall survive any termination of this Agreement to the extent necessary
to the intended preservation of such rights and obligations.

 

22. References

 

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

 

23. Governing-Law

 

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

 

24. Headings

 

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

 

25. Counterparts

 

This Agreement may be executed in one or more
counterparts.

 

IN WITNESS WHEREOF, the undersigned have
executed this Agreement as of the date

 

20

 

first written above.

 

	
   

  	
  Assured Guaranty Ltd., Assured Guaranty Corp.,

  
	
   

  	
   

  
	
   

  	
  Assured Guaranty U.S. Holdings, Inc,

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Dominic J. Frederico

  
	
   

  	
   

  
	
   

  	
  Their President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Robert Mills

  

 

 

EXHIBIT A

Gross-Up Provisions

 

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

 

(b)  Notwithstanding the provisions of paragraph
(a) above, if it shall be determined that the Executive would otherwise be
entitled to the Gross-Up Payment, but the value of all Payments do not exceed
310% of the Executive’s “base amount,” within the meaning of Section 280G of
the Code, then no Gross-Up Payment shall be made to the Executive and the
amounts payable under this Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this

 

21

 

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

 

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

 

22

 

Company exhausts its remedies pursuant to paragraph (d) below and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross-Up Underpayment that
has occurred and any such Gross-Up Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

 

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

 

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

 

(ii)                                  take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company,

 

(iii)                               cooperate with
the Company in good faith in order effectively to contest such claim, and

 

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

 

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

 

23

 

Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

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

 

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

 

24

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