Exhibit 10.68

 

INVESTMENT AGREEMENT

 

INVESTMENT AGREEMENT, dated as of February 28, 2008 (this “Agreement”), between
Assured Guaranty Ltd., a Bermuda company (the “Company”), and WLR Recovery Fund
IV, L.P., a Delaware limited partnership (the “Investor”).

 

WHEREAS, the Company proposes to issue and sell to the Investor $250,000,000 of
its common shares, par value $0.01 per share (the “Common Shares”), on the terms
and subject to the conditions set forth herein; and

 

WHEREAS, the Investor proposes to grant to the Company an option to cause the
Investor to purchase from time to time additional Common Shares with an
aggregate purchase price of $750,000,000, on the terms and subject to the
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:

 

ARTICLE I

PURCHASE OF INITIAL SHARES

 

1.1           Purchase and Sale of Initial Shares.  On the terms and subject to
the conditions set forth herein, the Investor will purchase from the Company,
and the Company will issue and sell to the Investor or cause Assured Guaranty US
Holdings Inc. (“AGUS”) to sell, a number of Common Shares (the “Initial Shares”)
equal to the quotient of $250,000,000 (the “Initial Investment”) divided by the
Initial Price (defined below).  The “Initial Price” will be 97% of the average
of (A) $22.43 and (B) the average of the closing prices of a Common Share on the
New York Stock Exchange (“NYSE”) on February 29, 2008 and March 3, 2008.  The
Initial Price will in no event be less than $21.76.  For example, if the closing
price of a Common Share on February 29, 2008 were $26.00 and the closing price
of a Common Share on March 3, 2008 were $24.00, the Initial Price would be
calculated as follows:  ($22.43 + (($26+$24)/2))/2 = $23.715 and the Initial
Price would be $23.004 (i.e, 97% of $23.715).

 

1.2           Initial Closing.  Subject to the satisfaction or waiver of the
conditions set forth in Section 1.4 of this Agreement, the closing of the
purchase of the Initial Shares (the “Initial Closing”) shall occur as promptly
as practicable but in no event later than the third business day after the
satisfaction or waiver (by the party entitled to grant such waiver) of the
conditions set forth in Section 1.4 of this Agreement to the Initial Closing
(other than those conditions that by their nature are to be satisfied at the
Initial Closing, but subject to fulfillment of those conditions), at the offices
of Mayer Brown LLP located at 1675 Broadway, New York, New York 10019 or such
other location as agreed by the parties. The date of the Initial Closing is
referred to as the “Initial Closing Date.”

 

1.3           Initial Closing Deliveries.  Subject to the satisfaction or waiver
of the conditions to the Initial Closing in Section 1.4, at the Initial Closing,
the Company will deliver to the Investor (A) certificates representing the
Initial Shares (and, if any Initial Shares are to be sold by by

 

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AGUS, share transfer documents in proper form) against (B) payment therefor by
wire transfer of immediately available United States funds to a bank account
designated by the Company for an aggregate purchase price of $250,000,000.

 

1.4           Conditions to Initial Closing.  (a)      The respective
obligations of each of the Investor and the Company to consummate the Initial
Closing are subject to the fulfillment or written waiver by the Investor and the
Company prior to the Initial Closing of the following conditions:

 

(i)            all approvals and authorizations of, filings and registrations
with, and notifications to, or expiration or termination of any applicable
waiting period, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the “HSR Act”) or competition or merger control laws of other jurisdictions
(collectively, “Competition Approvals”), required to consummate the Initial
Closing shall have been obtained or made and shall be in full force and effect;

 

(ii)           no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the Initial Closing or shall prohibit
or restrict the Investor from owning or voting any Securities (as defined below)
and no lawsuit has been commenced by a governmental or regulatory federal,
state, local or foreign authority, agency, court, commission or other entity,
including a stock exchange and other self-regulatory organization (collectively,
“Governmental Entities”) seeking to effect any of the foregoing;

 

(iii)          all insurance regulatory approvals required to consummate the
Closing (the “Insurance Regulatory Approvals”) shall have been obtained or made
and shall be in full force and effect, or the Investor and the Company shall
have entered into mutually agreed alternative arrangements (such as the delivery
of Securities into a voting trust) permitting the Initial Closing to occur
pending receipt of Insurance Regulatory Approvals; and

 

(iv)          the Common Shares to be issued in the Initial Closing pursuant to
this Agreement shall have been authorized for listing on the NYSE or such other
market on which the Common Shares are then listed or quoted, subject to official
notice of issuance.

 

(b)           The obligation of the Investor to consummate the Initial Closing
is also subject to the fulfillment or written waiver by the Investor prior to
the Initial Closing of the following conditions:

 

(i)            the representations and warranties of the Company set forth in
this Agreement shall have been true and correct on the date of this Agreement
and as of the Initial Closing Date, as though made on and as of the Initial
Closing Date (except to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date), except where the
failure to be true and correct (without giving effect to any limitation as to
“materiality” or “Material Adverse Effect” set

 

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forth therein), individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect (as defined below);
and the Investor shall have received a certificate signed on behalf of the
Company by the chief executive officer or the chief financial officer of the
Company to such effect;

 

(ii)           the Company shall have performed in all material respects all
covenants, agreements and obligations required to be performed by it under this
Agreement on or prior to the Initial Closing Date; and the Investor shall have
received a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect;

 

(iii)          Mr. Wilbur Ross shall have been irrevocably appointed, effective
immediately after the Company’s 2008 annual general meeting, as a director of
the Company for a term expiring at the Company’s 2009 annual general meeting.

 

(iv)          the subsidiaries of the Company identified below having the
following financial strength ratings, with a minimum of a stable outlook:

 

 

 

Moody’s

 

S&P

 

Fitch

Assured Guaranty Corp.

 

Aaa

 

AAA

 

AAA

Assured Guaranty Re Ltd.

 

Aa2

 

AA

 

AA

 

(v)           since the date of this Agreement, no “person” (as that term is
used in Section 13(d)(3) of the U.S. Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) shall have acquired, or announced its intention to
acquire, “beneficial ownership” (as determined pursuant to Rule 13d-3 under the
Exchange Act) of more than 50% of the Company’s Common Shares (determined on a
fully diluted basis) (a “Change of Control”); and

 

(vi)          certification by the Company’s Chief Executive Officer and Chief
Financial Officer that since the Company’s most recent Quarterly Report on
Form 10-Q or Annual Report on Form 10-K there has not occurred a material
adverse change in the credit quality of the Company’s insurance and reinsurance
financial guarantee portfolio or investment portfolio.

 

(c)           The obligation of the Company to consummate the Initial Closing is
also subject to the fulfillment or written waiver by the Company prior to the
Initial Closing of the following conditions:

 

(i)            the representations and warranties of the Investor set forth in
this Agreement shall have been true and correct on the date of this Agreement
and as of the Initial Closing Date as though made on and as of the Initial
Closing Date (except to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date), except where the
failure to be true and correct (without

 

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giving effect to any limitation as to “materiality” or “Material Adverse Effect”
set forth therein), individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect; and the Company shall
have received a certificate signed on behalf of the Investor to such effect; and

 

(ii)           the Investor shall have performed in all material respects all
covenants, agreements and obligations required to be performed by it under this
Agreement on or prior to the Initial Closing Date; and the Company shall have
received a certificate signed on behalf of the Investor to such effect.

 

1.5           Designations of Investors.  Prior to the Initial Closing, WL
Ross & Co. LLC (“WLR”) may designate by written notice to the Company one of the
entities listed on Exhibit A hereto (the “WLR Funds”) to act as the Investor for
purposes of the Initial Closing.  Such notice will state the portion of the
Initial Shares to be purchased at the Initial Closing by each such WLR Fund.  To
the extent one or more WLR Funds is designated as the Investor for purposes of
the Intial Closing, all references to the “Investor” shall include such Funds. 
Any such designation shall not relieve WLR Recovery Fund IV, L.P. of its
obligations hereunder.

 

ARTICLE II

PURCHASE OF SUBSEQUENT SHARES

 

2.1           Option to Sell Subsequent Shares.  On the terms and subject to the
conditions set forth herein, the Investor hereby grants the Company the option
to cause the Investor to purchase from the Company or AGUS from time to time, a
number of Common Shares (the “Subsequent Shares” and, together with the Initial
Shares, the “Securities”) having an aggregate purchase price up to
$750,000,000.  The number of Common Shares to be purchased pursuant to any
Drawdown Notice (as defined below) shall be equal to the quotient of (A) the
aggregate dollar amount specified in such Drawdown Notice (a “Subsequent
Investment”) divided by (B) 97% of the volume weighted average price of a Common
Share on the NYSE for the fifteen (15) NYSE trading days prior to any Drawdown
Notice (such 15-day period is referred to herein as the “Pricing Period” and
will include the date of the Drawdown Notice if notice is provided after the
close of trading on the NYSE) (97% of such average being referred to herein as
the “Drawdown Price”).  Until and subject to receipt of the Shareholder Approval
(as defined below), notwithstanding the foregoing, the number of Common Shares
with respect to which a Drawdown Notice may be delivered, taken together with
the Initial Shares, any Subsequent Shares theretofore issued, any Reset Shares
(as defined below) theretofore issued and any Pre-Emptive Shares (as defined
below) theretofore issued, may not exceed the number of Common Shares that may
be issued without approval of the Company’s shareholders pursuant to
Rule 312.03(c) of the NYSE Listed Company Manual.  In the event the Company
would otherwise be required under Section 5.5(a) to offer to sell Pre-Emptive
Shares to the Investor but for Section 5.5(e), the option in this Section 2.1
shall terminate.

 

2.2           Drawdown Notices.  The option granted hereunder may be exercised
at any time and from time to time upon written notice (each a “Drawdown Notice”)
by the Company to the Investor, which notice may be given at any time up to and
including the one year anniversary of the

 

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Initial Closing (the “Drawdown Notice Period”); provided that the Drawdown Price
is (i) not greater than 17.5% above the Initial Price, or (ii) not less than
17.5% below the Initial Price.  For purposes of the foregoing sentence, the
volume weighted average price of a Common Share used in calculating the Drawdown
Price will be measured independently with respect to each Drawdown Notice and
shall be irrespective of the fact that the volume weighted average price of the
Common Shares may have exceeded these limitations at any point during the
Drawdown Notice Period.  Each Drawdown Notice shall set forth (i) the aggregate
dollar amount, which shall not be less than $50 million, as to which the Company
is exercising the option, (ii) the Subsequent Closing Date (as defined below),
if determinable at the time of the Drawdown Notice which may be after the
expiration of the Drawdown Notice Period and which shall not, in any event, be
earlier than the Initial Closing Date and (iii) a representation by the Company
that (A) during the applicable Pricing Period and for the two NYSE trading days
prior thereto there was no material non-public information regarding the Company
and (B) during the applicable Pricing Period the Company had not repurchased any
Common Shares (except pursuant to employee benefit plans of the Company).

 

2.3           Subsequent Closings.  Subject to the satisfaction or waiver of the
conditions set forth in Section 2.5 of this Agreement, each closing of the
purchase of Subsequent Shares (each, a “Subsequent Closing”) shall occur as
promptly as practicable but in no event later than the third business day after
satisfaction or waiver (by the party entitled to grant such waiver) of the
conditions set forth in Section 2.5 of this Agreement to each Subsequent Initial
Closing (other than those conditions that by their nature are to be satisfied at
the Initial Closing, but subject to fulfillment of those conditions), at the
offices of Mayer Brown LLP located at 1675 Broadway, New York, New York 10019 or
such other location as agreed by the parties.  The date of a Subsequent Closing
is referred to as a “Subsequent Closing Date.”

 

2.4           Subsequent Closing Deliveries.  Subject to the satisfaction or
waiver of the conditions to a Subsequent Closing in Section 2.5, at each
Subsequent Closing, the Company will deliver to the Investor (A) certificates
representing the Subsequent Shares to be delivered in respect of such Subsequent
Closing (and, if any Subsequent Shares are to be sold by by AGUS, share transfer
documents in proper form) against (B) payment therefor by wire transfer of
immediately available United States funds to a bank account designated by the
Company of the aggregate purchase price set forth in the related Drawdown
Notice.

 

2.5           Conditions to Subsequent Closings.  (a)         The respective
obligations of each of the Investor and the Company to consummate a Subsequent
Closing are subject to the fulfillment or written waiver by the Investor and the
Company prior to such Subsequent Closing of the following conditions:

 

(i)            all approvals and authorizations of, filings and registrations
with, and notifications to, or expiration or termination of any applicable
waiting period, under the HSR Act or competition or merger control laws of other
jurisdictions, required to consummate such Subsequent Closing shall have been
obtained or made and shall be in full force and effect;

 

(ii)           no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit such Subsequent Closing or shall
prohibit

 

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or restrict the Investor from owning or voting any Securities and no lawsuit has
been commenced by a Governmental Entity seeking to effect any of the foregoing;

 

(iii)          all Insurance Regulatory Approvals shall have been obtained or
made and shall be in full force and effect, or the Investor and the Company
shall have entered into mutually agreed alternative arrangements (such as the
delivery of Securities into a voting trust) permitting such Subsequent Closing
to occur pending receipt of Insurance Regulatory Approvals; and

 

(iv)          the Common Shares to be issued in such Subsequent Closing pursuant
to this Agreement and any Reset Shares, following the approval of the
shareholders pursuant to Section 4.2 (“Shareholder Approval”), if required in
connection with such Subsequent Closing, shall have been authorized for listing
on the NYSE or such other market on which the Common Shares are then listed or
quoted, subject to official notice of issuance.

 

(b)           The obligation of the Investor to consummate a Subsequent Closing
is also subject to the fulfillment or written waiver prior to such Subsequent
Closing of each of the following conditions:

 

(i)            the representations and warranties of the Company set forth in
this Agreement shall have been true and correct on the date of the Drawdown
Notice and as of the Subsequent Closing Date, as though made on and as of the
Subsequent Closing Date (except to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date),
except where the failure to be true and correct (without giving effect to any
limitation as to “materiality” or “Material Adverse Effect” set forth therein),
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect; and the Investor shall have
received a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect;

 

(ii)           the Company shall have performed in all material respects all
covenants, agreements and obligations required to be performed by it under this
Agreement on or prior to the Subsequent Closing Date; and the Investor shall
have received a certificate signed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company to such effect;

 

(iii)          the Registration Statement (as defined below) shall have become
effective under the U.S. Securities Act of 1933, as amended (the “Securities
Act”) and no stop order suspending the effectiveness of the Registration
Statement shall be in effect under the Securities Act and no proceedings for
that purpose shall have be pending or, to the knowledge of the Company,
contemplated or threatened by the U.S. Securities and Exchange Commission (the
“Commission”);

 

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(iv)          the subsidiaries of the Company identified below having the
following financial strength ratings, with a minimum of a stable outlook:

 

 

 

Moody’s

 

S&P

 

Fitch

Assured Guaranty Corp.

 

Aaa

 

AAA

 

AAA

Assured Guaranty Re Ltd.

 

Aa2

 

AA

 

AA

 

(v)           since the date of this Agreement, a Change of Control shall not
have occurred; and

 

(vi)          certification by the Company’s Chief Executive Officer and Chief
Financial Officer that since the Company’s most recent Quarterly Report on
Form 10-Q or Annual Report on Form 10-K there has not occurred a material
adverse change in the credit quality of the Company’s insurance and reinsurance
financial guarantee portfolio or investment portfolio.

 

(c)           The obligation of the Company to consummate a Subsequent Closing
is also subject to the fulfillment or written waiver by the Company prior to
such Subsequent Closing of the following conditions:

 

(i)            the representations and warranties of the Investor set forth in
this Agreement shall have been true and correct on the date of the Drawdown
Notice and as of the Subsequent Closing Date as though made on and as of the
Subsequent Closing Date (except to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date); and
the Company shall have received a certificate signed on behalf of the Investor
to such effect; and

 

(ii)           the Investor shall have performed in all material respects all
covenants, agreements and obligations required to be performed by it under this
Agreement on or prior to the Subsequent Closing Date; and the Company shall have
received a certificate signed on behalf of the Investor to such effect.

 

2.6           Designations of Investors.  Prior to each Subsequent Closing, WLR
may designate by written notice to the Company one or more WLR Funds to act as
the Investor for purposes of such Subsequent Closing.  Such notice will state
the portion of the Subsequent Shares to be purchased at such Subsequent Closing
by each such WLR Fund.  To the extent one or more WLR Funds is designated as the
Investor for purposes of a Susequent Closing, all references to the “Investor”
shall include such Funds.  Any such designation shall not relieve WLR Recovery
Fund IV, L.P. of its obligations hereunder.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1           Disclosure.

 

(a)           “Material Adverse Effect” means, with respect to the Company, any
circumstance, event, change, development or effect that, individually or in the
aggregate (1) is or would reasonably be expected to be material and adverse to
the business, results of operations or financial condition of the Company and
its subsidiaries taken as a whole, or (2) would or would reasonably be expected
to materially impair the ability of the Company to perform its obligations under
this Agreement or otherwise materially threaten or materially impede the
consummation of the Initial Closing (or, if being measured following the Initial
Closing, a Subsequent Closing) and the other transactions contemplated by this
Agreement.  “Material Adverse Effect” means, with respect to the Investor, any
circumstance, event, change, development or effect that, individually or in the
aggregate, would or would reasonably be expected to materially impair the
ability of the Investor to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Initial Closing (or, if being measured following the Initial Closing, a
Subsequent Closing) and the other transactions contemplated by this Agreement.

 

(b)           “Previously Disclosed” means information publicly disclosed by the
Company in the Commission Reports (as defined below) filed by it with, or
furnished to, the Commission and publicly available prior to the date hereof
(excluding any risk factor disclosures contained in such documents under the
heading “Risk Factors” and any disclosure of risks included in any
“forward-looking statements” disclaimer or other statements that are similarly
non-specific and are predictive or forward-looking in nature).

 

3.2           Representation and Warranties of the Company.  Except as
Previously Disclosed, the Company represents and warrants to the Investor as
follows:

 

(a)           The Company has been duly incorporated and is validly existing as
an exempted company in good standing under the laws of the Islands of Bermuda,
with corporate power and authority to own its properties and conduct its
business as currently conducted and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any such
jurisdiction.

 

(b)           Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to own its
properties and conduct its business as currently conducted and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
or is subject to no material liability or disability by reason of the failure to
be so qualified in any such jurisdiction.

 

(c)           The authorized share capital of the Company consists of
500,000,000 Common Shares, of which 80,106,317 were outstanding as of
February 15, 2008. As of December 31, 2007, there are outstanding options (each,
a “Company Stock Option”) to purchase an aggregate of 3,703,231 Common Shares
under benefit plans of the Company

 

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existing on the date hereof (the “Benefit Plans”).  All of the outstanding
Common Shares of the Company have been, and all of the securities to be issued
hereunder will be, upon issuance hereunder, duly and validly authorized and
issued and are, or will be upon issuance, fully paid and non-assessable. Except
(1) as Previously Disclosed or (2) under or pursuant to the Benefit Plans, as of
the date of this Agreement there are no outstanding options, warrants or other
rights obligating the Company or any subsidiary to issue, sell or otherwise
dispose of, or to purchase, redeem or otherwise acquire, any shares of the
Company or any such subsidiary.

 

(d)           The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the board of directors of the Company (the “Board of Directors”).
Subject to receipt of the Competition Approvals, Insurance Regulatory Approvals
and the Shareholder Approval, this Agreement is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganizations or similar laws affecting creditors generally or by
general equitable principles (whether applied in equity or at law). Except with
respect to the shareholder approval referred to in Section 4.2, no shareholder
vote of the Company is required to consummate the transactions contemplated
hereby.

 

(e)           Neither the execution, delivery and performance by the Company of
this Agreement, nor the consummation of the transactions contemplated hereby,
nor compliance by the Company with any of the provisions thereof, will
(i) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of, any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
subsidiary under any of the material terms, conditions or provisions of (A) its
certificate of incorporation, memorandum of association or bye-laws or similar
organizational documents or (B) any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Company or any subsidiary is a party or by which it may be bound, or to which
the Company or any subsidiary or any of the properties or assets of the Company
or any subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in paragraph (f) below, violate any
statute, rule or regulation or any judgment, ruling, order, writ, injunction or
decree applicable to the Company or any subsidiary or any of their respective
properties or assets except in the case of clauses (i)(B) and (ii) for such
violations, conflicts and breaches as would not reasonably be expected to have a
Material Adverse Effect on the Company.

 

(f)            Other than Competition Approvals, Insurance Regulatory Approvals
and the Shareholder Approval, and the securities or blue sky laws of the various
states, no material notice to, filing with, exemption or review by, or
authorization, consent or approval of, any Governmental Entity, nor expiration
nor termination of any statutory

 

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waiting periods, is necessary for the consummation by the Company of the
transactions contemplated by this Agreement.

 

(g)           As of the date of this Agreement, the Company knows of no reason
why any regulatory approvals and, to the extent necessary, any other approvals,
authorizations, filings, registrations, and notices required or otherwise a
condition to the consummation of the transactions contemplated by this Agreement
cannot, or should not, be obtained.

 

(h)           (i)            The financial statements, together with the related
notes and schedules, of the Company included in the Commission Reports (defined
below) comply as to form in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission and all
other applicable rules and regulations with respect thereto.  Such financial
statements, together with the related notes and schedules, have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial condition of the Company and its consolidated
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

 

(ii)           The audited balance sheets of Assured Guaranty Corp. as of the
latest fiscal year end and the related statements of income, shareholders’
equity and cash flows for the year then ended, and their respective annual
statements for the fiscal year then most recently ended (the “Insurance
Subsidiary Annual Statements”), as filed with the Maryland Insurance
Administration, have been prepared in accordance with SAP (as defined below)
applied on a consistent basis and present fairly in all material respects their
respective statutory financial conditions as of such date and the results of
their respective operations and cash flows for the year then ended. As used
herein, “SAP” means the accounting procedures and practices prescribed or
permitted from time to time by the National Association of Insurance
Commissioners and adopted, permitted or promulgated by the Maryland Insurance
Administration and applied in a consistent manner throughout the periods
involved.

 

(i)            Since December 31, 2004, the Company timely has filed all
reports, proxy statements and other information required to be filed by it
pursuant to Section 13(a) of the Exchange Act (the “Commission Reports”).  The
Commission Reports, when filed, declared effective, or mailed, as applicable,
did not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made in it, in light of
the circumstances under which they were made, not misleading and complied as to
form in all material respects with the applicable requirements of the Exchange
Act. As of the date of this Agreement, there are no outstanding comments from
the Commission with respect to any Commission Report.

 

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(j)            The Company maintains a system of internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act)
designed by, or under the supervision of, the Company’s principal executive
officer and principal financial officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. The Company’s internal control over financial
reporting was effective as of September 30, 2007, and there have been no changes
in the Company’s internal control over financial reporting since such time and
the Company is not aware of any material weaknesses in its internal control over
financial reporting.  The Company has implemented the “disclosure controls and
procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
required in order for the Chief Executive Officer and Chief Financial Officer of
the Company to engage in the review and evaluation process mandated by the
Exchange Act, and is in compliance with such disclosure controls and
procedures.  Except as set forth in the Commission Reports, there is and has
been no failure on the part of the Company, or to its knowledge after due
inquiry, any of the Company’s directors or officers, in their capacities as
such, to comply with any applicable provisions of the Sarbanes-Oxley Act of 2002
and the rules and regulations promulgated therewith (the “Sarbanes-Oxley Act”). 
Each of the Chief Executive Officer and the Chief Financial Officer of the
Company (or each former Chief Executive Officer of the Company and each former
Chief Financial Officer of the Company, as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC.

 

(k)           Neither the Company nor any of its subsidiaries has sustained
since September 30, 2007 any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as Previously Disclosed; and, since September 30, 2007,
there has not been any material decrease in the share capital or capital stock,
as the case may be, or material increase in long-term debt of the Company or any
of its subsidiaries or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the business, financial
condition, shareholders’ equity, or results of operations of the Company and its
subsidiaries, taken as a whole, other than as Previously Disclosed, other than
as a result of (A) changes, after the date of this Agreement, in generally
accepted accounting principles, (B) changes, after the date of this Agreement,
in laws of general applicability or (C) general changes in the economy or the
industries in which the Company and its subsidiaries operate (other than changes
in the home equity line of credit and “closed-end second” markets), in each case
to the extent that such circumstances, events, changes, developments or effects
described in the foregoing clauses (A) through (C) do not have a
disproportionate effect on the Company and its subsidiaries, taken as a whole
(relative to other industry participants) (a “Material Adverse Change”);
provided that a Material Adverse Change shall not be deemed to have occurred as
a result of (i) after-tax losses of not greater than $100,000,000 on the
Company’s home equity line of credit and “closed-end second” exposures or
(ii) the effects of mark-to-market adjustments on the Company’s credit default
swap contracts.

 

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(l)            Neither the Company nor any of its subsidiaries is (i) in
violation of its Memorandum of Association or Bye-laws or comparable
organizational documents or (ii) in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound.  The business of the Company and its subsidiaries has been and is being
conducted in compliance with all applicable federal, state, local and foreign
governmental laws, rules, regulations and ordinances, except as Previously
Disclosed and except for such non-compliance which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.

 

(m)          Each of the Company and its subsidiaries possesses all consents,
authorizations, approvals, orders, licenses, certificates, or permits issued by
any regulatory agencies or bodies (collectively, “Permits”) which are necessary
to conduct the business now conducted by it, except where the failure to possess
such Permits would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect; all of such Permits are valid and in full
force and effect, except where the invalidity of such Permits or the failure to
be in full force and effect would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. There is no pending,
or to the Company’s knowledge, threatened action, suit, proceeding or
investigation against or involving the Company and its subsidiaries, and the
Company does not know of any reasonable basis for any such action, suit,
proceeding or investigation, that individually or in the aggregate would
reasonably be expected to lead to the revocation, modification, termination,
suspension or any other material impairment of the rights of the holder of any
such Permit, except for such revocation, modification, termination, suspension
or other material impairment that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(n)           Except as Previously Disclosed, each of the Company and its
insurance subsidiaries is duly registered, licensed or admitted as an insurer or
reinsurer or as an insurance holding company, as the case may be, under
applicable insurance holding company statutes or other insurance laws (including
laws that relate to companies that control insurance companies) and the rules,
regulations and interpretations of the insurance regulatory authorities
thereunder (collectively, “Insurance Laws”) in each jurisdiction where it is
required to be so licensed or admitted to conduct its business as presently
conducted, except where the failure to be so registered, licensed or admitted
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as Previously Disclosed, each of the Company and
its insurance subsidiaries has all other necessary authorizations, approvals,
orders, consents, certificates, permits, registrations and qualifications of and
from, and has made all declarations and filings with, all insurance regulatory
authorities necessary to conduct their respective businesses as presently
conducted, and all of the foregoing are in full force and effect, except where
the failure to have such authorizations, approvals, orders, consents,
certificates, permits, registrations or qualifications, the failure to make such
declarations and filings, or the failure to be in full force and effect would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as otherwise Previously Disclosed, none of the Company
nor any of its insurance subsidiaries has received any notification

 

 

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from any insurance regulatory authority to the effect that any additional
authorization, approval, order, consent, certificate, permit, registration or
qualification is needed to be obtained by either the Company or any of its
insurance subsidiaries to conduct its business as currently conducted, except
where the failure to have such additional authorization, approval, order,
consent, certificate, permit, registration or qualification would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as otherwise Previously Disclosed, no insurance
regulatory authority has issued to the Company or any subsidiary any order
impairing, restricting or prohibiting (A) the payment of dividends by any of the
Company’s subsidiaries, (B) the making of a distribution on any subsidiary’s
share capital or from any subsidiary’s contributed surplus, (C) the repayment to
the Company of any loans or advances to any of its subsidiaries from the
Company, (D) the repayment to the Company of any loans or advances to any of its
subsidiaries from the Company, or (E) the transfer of any of the Company’s
subsidiary’s property or assets to the Company or any other subsidiary of the
Company. Each of the Company, Assured Guaranty US Holdings Inc., Assured
Guaranty Re Ltd., Assured Guaranty Re Overseas Ltd., Assured Guaranty Mortgage
Insurance Company, Assured Guaranty Corp. and Assured Guaranty (UK) Ltd.
maintains its books and records in accordance with all applicable Insurance
Laws, except where the failure to so maintain its books and records would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(o)           Each of the Company, Assured Guaranty Corp., Assured Guaranty Re
Ltd. and Assured Guaranty Re Overseas Ltd. has received from the Bermuda
Minister of Finance an assurance under The Exempted Undertakings Tax Protection
Act, 1966 of Bermuda to the effect that, in the event of there being enacted in
Bermuda any legislation imposing tax computed on profits or income or computed
on any capital asset, gain or appreciation, or any tax of the nature of estate
duty or inheritance tax, then the imposition of any such tax shall not be
applicable to the Company, Assured Guaranty Corp., Assured Guaranty Re Ltd. or
Assured Guaranty Re Overseas Ltd. or any of their operations or their shares,
debentures or other obligations, until 28 March 2016 (subject to certain
provisos expressed in such assurance), and the Company has not received any
notification to the effect (and is not otherwise aware) that such assurances may
be revoked or otherwise not honored by the Bermuda government.

 

(p)           The Company does not believe that (1) either the Company or any of
its subsidiaries currently should be, or upon the sale of the Securities herein
contemplated should be, (A) treated as a “passive foreign investment company” as
defined in Section 1297(a) of the Internal Revenue Code of 1986, as amended (the
“Code”), (B) characterized as a “personal holding company” as defined in
Section 542 of the Code, (C) except for Assured Guaranty US Holdings Inc., AG
Financial Products Inc., Assured Guaranty Corp., Assured Guaranty Overseas US
Holdings Inc., Assured Guaranty Re Overseas Ltd., AG Intermediary Inc. and
Assured Guaranty Mortgage Insurance Company, considered to be engaged in a trade
or business within the United States for purposes of Section 864(b) of the Code
or (D) except for Assured Guaranty Finance Overseas Ltd. , Assured Guaranty (UK)
Services Ltd. and Assured Guaranty (UK) Ltd., characterized as resident, managed
or controlled or carrying on a trade through a branch or agency in the United
Kingdom or (2) any U.S. person who owns shares of the Company directly or
indirectly through foreign

 

 

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entities should be treated as owning (directly, indirectly through foreign
entities or by attribution pursuant to Section 958(b) of the Code) 10 percent or
more of the total voting power of the Company or any of its non-U.S.
subsidiaries; provided that the Company makes no representation or warranty as
to whether the Investor or any of its affiliates would be treated as owning
(directly, indirectly or by attribution pursuant to Section 958(b) of the Code)
10 percent or more of the total voting power of the Company or any of its
non-U.S. subsidiaries.

 

(q)           Except as Previously Disclosed, Assured Guaranty Re Ltd. intends
to operate in a manner that is intended to ensure that either (i) the related
person insurance income of such company does not equal or exceed 20% of such
company’s gross insurance income for any taxable year in the foreseeable future
or (ii) at all times during each taxable year for the foreseeable future less
than 20% of the voting power and less than 20% of the value of the shares of
Assured Guaranty Re Ltd. is owned (directly or indirectly) by persons who are
(directly or indirectly) insured (each, an “insured”) under any policy of
insurance or reinsurance issued by Assured Guaranty Re Ltd. or related persons
to any such insured.

 

(r)            Other than as Previously Disclosed, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and, to the best of the Company’s knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others.

 

(s)           The Company is not and, after giving effect to the offering and
sale of the Securities, will not be required to register as an “investment
company” under the U.S. Investment Company Act of 1940, as amended.

 

(t)            There are no currency exchange control laws or withholding taxes,
in each case of Bermuda, that would be applicable to (1) the payment of
dividends on the Securities by the Company (other than as may apply to residents
of Bermuda for Bermuda exchange control purposes) or (2) the payment of
dividends, interest or principal by any of the Company’s subsidiaries to such
subsidiary’s parent company. The Bermuda Monetary Authority has designated the
Company, Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd. (Assured
Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd. are collectively referred
to as the “Bermuda Subsidiaries”) as non-resident for exchange control purposes.
Each of the Company and the Bermuda Subsidiaries are “exempted companies” under
Bermuda law and have not (A) acquired and do not hold any land for its business
in Bermuda, other than that held by way of lease or tenancy for terms of not
more than 50 years, without the express authorization of the Bermuda Minister of
Finance, (B) acquired and do not hold land by way of lease or tenancy which is
acquired for its business and held for terms of not more than 21 years in order
to provide accommodation or recreational facilities for its officers and
employees, without the express authorization of the Minister of Finance of
Bermuda, (C) taken mortgages on land in Bermuda to secure an amount in excess of
$50,000, without the consent of the Bermuda Minister of Finance, (D) 

 

 

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acquired any bonds or debentures secured by any land in Bermuda, except bonds or
debentures issued by the government of Bermuda or a public authority of Bermuda,
or (E) conducted their business in a manner that is prohibited for “exempted
companies” under Bermuda law. None of the Company or any of the Bermuda
Subsidiaries has received notification from the Bermuda Monetary Authority or
any other Bermuda governmental authority of proceedings relating to the
modification or revocation of its designation as non-resident for exchange
control purposes, its permission to issue and transfer the Securities, or its
status as an “exempted company” under Bermuda law.

 

(u)           Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company or any of its subsidiaries , acting in such capacities, has taken
any action, directly or indirectly, that would result in a material violation by
such persons of the FCPA (as defined below), including, without limitation,
making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as
such term is defined in the FCPA) or any foreign political party or official
thereof or any candidate for foreign political office, in contravention of the
FCPA in any material respect, and the Company, its subsidiaries and, to the
knowledge of the Company, its affiliates have conducted their businesses in
compliance with the FCPA in all material respects and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.  “FCPA” means
the Foreign Corrupt Practices Act of 1977, as amended, and the rules and
regulations thereunder.

 

(v)           The operations of the Company and its subsidiaries are and have
been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all applicable jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines issued, administered
or enforced by any governmental agency (collectively, the “Money Laundering
Laws”) and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened.

 

(w)          Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company or any of its subsidiaries is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not knowingly directly or
indirectly use the proceeds of the offering, or knowingly lend, contribute or
otherwise make available such proceeds, to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by OFAC.

 

 

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(x)            Neither the Company nor any person acting on its behalf has taken
any action (including any offering of any securities of the Company under
circumstances which would require the integration of such offering with the
offering of any of the Securities to be issued pursuant to this Agreement under
the Securities Act and the rules and regulations of the Commission thereunder)
which might subject the offering, issuance or sale of any of such Securities to
the registration requirements of the Securities Act.

 

(y)           Except for Merrill Lynch, Pierce, Fenner & Smith Incorporated,
neither the Company nor any subsidiary nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder’s fees, and no broker or finder has acted directly or indirectly for the
Company or any subsidiary, in connection with this Agreement or the transactions
contemplated hereby and thereby.

 

3.3           Representations and Warranties of the Investor.  Except as
Previously Disclosed, the Investor hereby represents and warrants to the Company
as follows:

 

(a)           The Investor is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a Material Adverse Effect on the Investor and has power and authority to
own its properties and assets and to carry on its business as it is now being
conducted.

 

(b)           The Investor has the partnership power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by the Investor and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Investor and no further approval or
authorization by any of the managers, members or partners of the Investor is
required.  Subject to such approvals of Governmental Entities as may be required
by statute or regulation, this Agreement is a valid and binding obligation of
the Investor enforceable against the Investor in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganizations or similar laws affecting creditors generally or by
general equitable principles (whether applied in equity or at law).

 

(c)           Neither the execution, delivery and performance by the Investor of
this Agreement, nor the consummation of the transactions contemplated hereby,
nor compliance by it with any of the provisions thereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Investor under any of the material
terms, conditions or provisions of (A) its organizational document or (B) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the

 

 

16

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Investor is a party or by which it may be bound, or to which any of the Investor
or any of their properties or assets may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
violate any statute, rule or regulation or, to the knowledge of the Investor,
any judgment, ruling, order, writ, injunction or decree applicable to the
Investor or any of their respective properties or assets except in the case of
clauses (i)(B) and (ii) for such violations, conflicts and breaches as would not
reasonably be expected to have a Material Adverse Effect on the Investor.

 

(d)           Other than Competition Approvals and Insurance Regulatory
Approvals, and the securities or blue sky laws of the various states, no
material notice to, filing with, exemption or review by, or authorization,
consent or approval of, any Governmental Entity, nor expiration nor termination
of any statutory waiting period is necessary for the consummation by the
Investor of the transactions contemplated by this Agreement.

 

(e)           The Investor acknowledges that the Securities have not been
registered under the Securities Act or under any state securities laws. The
Investor (1) are acquiring the Securities pursuant to an exemption from
registration under the Securities Act solely for investment with no present
intention to distribute any of the Securities to any person, (2) will not sell
or otherwise dispose of any of the Securities, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws, (3) has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the merits and risks of its investment in the Securities
and of making an informed investment decision and (4) are each “accredited
investors” (as that term is defined by Rule 501 of the Securities Act).

 

(f)            The Investor will have available funds necessary to consummate
the Initial Closing and any Subsequent Closing on the terms and conditions
contemplated by this Agreement.

 

(g)           As of the date of this Agreement, the Investor knows of no reason
why any regulatory approvals and, to the extent necessary, any other approvals,
authorizations, filings, registrations, and notices required or otherwise a
condition to the consummation of the transactions contemplated by this Agreement
cannot, or should not, be obtained.

 

(h)           Neither the Investor nor its affiliates or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder’s fees, and no broker or finder has acted directly or indirectly for the
WLR Parties, in connection with this Agreement or the transactions contemplated
hereby.

 

ARTICLE IV

 

COVENANTS

 

4.1           Filings; Other Actions.  Each of the Investor and the Company will
cooperate and consult with the other and use its reasonable best efforts to
prepare and file all necessary

 

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documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to obtain all necessary permits, consents, orders,
approvals and authorizations of, or any exemption by, all third parties and
Governmental Entities, and expiration or termination of any applicable waiting
periods, necessary or advisable to consummate the transactions contemplated by
this Agreement, to perform covenants contemplated by this Agreement.  Each party
shall execute and deliver both before and after the Initial Closing or
Subsequent Closing, as the case may be, such further certificates, agreements
and other documents and take such other actions as the other party may
reasonably request to consummate or implement such transactions or to evidence
such events or matters.  In particular, the Investor and the Company will each
use its reasonable best efforts to promptly obtain or submit, as the case may
be, the approvals and authorizations of, filings and registrations with, and
notifications to, or expiration or termination of any applicable waiting period,
under the HSR Act or competition or merger control laws of other jurisdictions,
all notices to and, to the extent required by any Governmental Entity or by
applicable law or regulation, consents, approvals or exemptions from the
Governmental Entity, including the Insurance Regulatory Approvals and any
post-closing regulatory approvals for the transactions contemplated by this
Agreement, including, (1) prior to the Initial Closing, any approvals or
expiration or termination of any applicable waiting period under the HSR Act or
competition or merger control laws of other jurisdictions and Insurance
Regulatory Approvals (other than post-closing regulatory approvals) or other
approvals required prior to the Initial Closing, and (2) after the Initial
Closing, the post-closing regulatory approvals.  Notwithstanding anything to the
contrary in this Agreement, neither Investor nor its affiliates shall be
obligated to make, or offer to make any divestiture of, or otherwise limit
Investor’s or its affiliates’ freedom of action with respect to, Investor’s or
its affiliates’ other assets or businesses presently owned or hereafter
acquired.  Each of the Investor and the Company will have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all the information relating to the other party, and any of their
respective subsidiaries, which appears in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees to keep the other party
apprised of the status of matters relating to completion of the transactions
contemplated hereby.  The Investor and the Company shall promptly furnish each
other with copies of written communications received by them or their
subsidiaries from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated by this Agreement, other than
in respect of information filed or otherwise submitted confidentially to any
such Governmental Entity.

 

4.2           Shareholder Approval.  At the 2008 annual general meeting of the
Company’s shareholders, unless this Agreement has been terminated pursuant to
Section 7.1, the Company shall include a proposal to obtain the approvals
necessary to permit the issuance of the Subsequent Shares, the Reset Shares and
the Pre-Emptive Shares, which meeting shall be the next annual meeting of the
Company for the purpose of obtaining such approval.  The Board of Directors
shall unanimously recommend to the Company’s shareholders that such shareholders
approve the actions referenced above.  In connection with such meeting, the
Company shall promptly prepare (and the Investor will reasonably cooperate with
the Company to prepare) and file with the Commission a preliminary proxy
statement, shall use reasonable best efforts to solicit proxies for such
shareholder approval and shall use reasonable best efforts to respond to any
comments of the

 

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Commission or its staff and to cause a definitive proxy statement related to
such shareholders’ meeting to be mailed to the Company’s shareholders.  The
Company shall notify the Investor promptly of the receipt of any comments from
the Commission or its staff and of any request by the Commission or its staff
for amendments or supplements to such proxy statement or for additional
information and will supply the Investor with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the
Commission or its staff, on the other hand, with respect to such proxy
statement.  If at any time prior to such shareholders’ meeting there shall occur
any event that is required to be set forth in an amendment or supplement to the
proxy statement, the Company shall as promptly as practicable prepare and mail
to its shareholders such an amendment or supplement.  Each of the Investor and
the Company agrees promptly to correct any information provided by it or on its
behalf for use in the proxy statement if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
shall as promptly as practicable prepare and mail to its shareholders an
amendment or supplement to correct such information to the extent required by
applicable laws and regulations.  The Company shall consult with the Investor
prior to mailing any proxy statement, or any amendment or supplement thereto, to
which the Investor reasonably objects.  The Board of Directors’ recommendation
described in this Section 4.2 shall be included in the proxy statement filed in
connection with obtaining such shareholder approval.  In the event that the
shareholder approvals referred to above are not obtained at the 2008 annual
general meeting, the Company shall be under no obligation to include a proposal
to approve such issuance at any subsequent meeting, as long as the Company has
complied with this Section 4.2.

 

4.3           Additional Information.  Each party agrees, upon request, to
furnish the other party with all information concerning itself, its
subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary in connection with the proxy statement in connection
with such shareholders meeting and any other statement, filing, notice or
application made by or on behalf of such other party or any of its subsidiaries
to any Governmental Entity in connection with the transactions contemplated by
this Agreement.

 

ARTICLE V

 

ADDITIONAL AGREEMENTS

 

5.1           Voting Agreement.

 

(a)           The Investor acknowledges and agrees that all of the Securities
purchased by it hereunder are “Controlled Shares” within the meaning of the
Company’s Bye-Laws.  The Investor further acknowledges and agrees that the
voting rights with respect to the Securities and any other Controlled Shares
owned by the Investor shall be reduced so that the voting rights with respect to
all such Controlled Shares will constitute less than 9.5% of the voting power of
all issued and outstanding shares of the Company.  The Company’s Board of
Directors shall apply the principles set forth in Bye-Laws 49-53 of the
Company’s Bye-laws in making the adjustment described in this Section 5.1. For
the avoidance of doubt, in applying the provisions of this Section 5.1 and
Bye-Laws 49-53, a share may carry a fraction of a vote.

 

 

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(b)           The Investor agrees to provide such information as the Company’s
Board of Directors may reasonably request for the purpose of making the
adjustments required under paragraph (a) above.

 

(c)           The Investor agrees to vote all Common Shares of the Company over
which the Investor has voting control with respect to all matters, including
without limitation the election and removal of directors, voted on by the
shareholders of the Company (whether at a regular or special meeting or pursuant
to a written consent), solely in proportion with the votes cast by all holders
of voting securities of the Company on any matter put before them.

 

5.2           Standstill Agreement.   (a) The Investor agrees that until the
later of (i) the date on which the Investor and its affiliates beneficially own
(as defined in Rule 13d-3 under the Exchange Act) Common Shares in an amount
less than 10% of the Initial Shares and (ii) the date six months after any
designee of the Investor ceases to be a director of the Company, without the
prior written approval of the Company, the Investor will not, directly or
indirectly, through its Affiliates or associates or any other persons, or in
concert with any person:

 

(i)            acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the Company,
or any assets of the Company or any subsidiary or division thereof or of any
such successor or controlling person;

 

(ii)           make, or in any way participate, directly or indirectly, in any
“solicitation” of “proxies” to vote (as such terms are used in the rules of the
Commission), or seek to advise or influence any person or entity with respect to
the voting of any voting securities of the Company;

 

(iii)          make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any extraordinary
transaction involving the Company or any of its securities or assets;

 

(iv)          form, join or in any way participate in a “group” as defined in
Section 13(d)(3) of the Exchange Act in connection with any of the foregoing; or

 

(v)           publicly request the Company or any of its officers or directors,
directly or indirectly, to amend or waive any provision of this Section 5.2.

 

(b)           The provisions of Section 5.2(a)(i) will not prohibit activities
conducted in accordance with applicable securities law by or on behalf of
Affiliates of the Investor which are (i) registered investment companies
registered under the U.S. Investment Company Act of 1940, as amended, or
registered investment advisors registered under the Investment Advisors Act of
1940, as amended, and (ii) not acting at the direction, directly or indirectly,
or in coordination with the Investor or WLR.

 

(c)           If a third party announces an intent to seek to acquire more than
50% of the voting securities of the Company and the Company has publicly
announced that its Board

 

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of Directors supports or does not oppose such effort, the restrictions set forth
in Sections 5.2(a)(iii) and 5.2(a)(v) will automatically terminate.

 

5.3           Transfer Restrictions.

(a)           Investor agrees that it will not sell, transfer or hedge, directly
or indirectly, its investment in the Company at any time at which it has
material non-public information regarding the Company.

 

(b)           Except as otherwise permitted in this Agreement or with the
written consent of the Company, the Investor will not Transfer any of the
Securities acquired hereunder other than (i) in transactions exempt from
registration under the Securities Act or (ii) pursuant to the Registration
Statement in open market transactions or otherwise where the Investor reasonably
believes that any transferee would not own more than 4.9% of the Common Shares
of the Company then outstanding after the sale, transfer or disposition.

 

(c)           As of the date hereof, Investor does not intend to sell, transfer
or hedge, directly or indirectly, Securities purchased hereunder within one year
after the Initial Investment.

 

(d)           Notwithstanding paragraph (b) above, the Investor shall be
permitted to Transfer any portion or all of its Securities at any time under the
following circumstances:

 

(i)            Transfers to any Affiliate under common control with Investor’s
ultimate parent entity, but only if the transferee agrees in writing for the
benefit of the Company to be bound by the terms of this Agreement (any such
transferee shall be included in the term “Investor”); and

 

(ii)           Transfers pursuant to a merger, tender offer or exchange offer or
other business combination, acquisition of assets or similar transaction or
change of control involving the Company or any of its subsidiaries; provided
that such transaction has been approved by the Board of Directors.

 

(e)           The restrictions on Transfers in Section 5.3 (b) will terminate
should any of the following events occur:

 

(i)            receipt of the written consent of the Company releasing the
Investor from the restrictions in Section 5.3(b);

 

(ii)           the Company materially breaches any of its covenants set forth in
this Agreement; or

 

(iii)          the Company executes definitive documentation for a transaction
that will result in or has resulted in a Change in Control or (B) the Board of
Directors approves, recommends or accepts or there is shareholder approval of a
transaction that in any case upon consummation will result in a Change in
Control, or a Change in Control has been consummated.

 

 

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(f)            For the avoidance of doubt, nothing contained herein shall
prohibit the transfer by Investor of Common Shares in compliance with applicable
law to a limited partner or comparable passive investor in Investor that
receives Common Shares pursuant to a normal course distribution (including a
winding up) pursuant to the constituent documents of Investor; subject to any
such limited partner or passive investor that would receive Common Shares
representing more than 4.9% of the Common Shares then outstanding has agreed in
writing to be bound by the provisions of Sections 5.1, 5.2 and 5.3.

 

5.4           Reset Rights.

(a)           In the event the Company completes the sale, on or before the date
which is six months after the Initial Closing Date or any Subsequent Closing
Date, in one or a series of related transactions, of Common Shares (or
securities convertible into, or exercisable, or exchangeable for, Common Shares)
(“Additional Shares”) resulting in gross proceeds to the Company of $100 million
or more (calculated on a cumulative basis over such six-month period) at a
purchase, conversion or reference price per share (the “Reset Price”) less than
the Initial Price, in the case of the Initial Shares, or less than the Drawdown
Price, in the case of any Subsequent Shares, in each case adjusted as
appropriate to reflect any intervening stock splits, stock dividends or
comparable events, then the Company shall offer to sell to the Investor
additional Common Shares (“Reset Shares”), which shall be deemed to be fully
paid and non-assessable upon issuance, in an amount equal to the difference
between (i) the number of Initial Shares or Subsequent Shares that would have
been issued to the Investor at the Initial Closing or such Subsequent Closing
had such Reset Price been used to determine the number of Initial Shares or
Subsequent Shares to be issued at such Initial Closing or Subsequent Closing, as
the case may be, minus (ii) the number of Initial Shares or Subsequent Shares,
as the case may be, actually issued.  The purchase price per Reset Share shall
be equal to the par value of such Reset Share.

 

(b)           In the case of a sale of securities for a consideration in whole
or in part other than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors; provided, however, that such fair value as determined by the
Board of Directors shall not exceed the aggregate market price of the securities
being offered as of the date the Board of Directors authorizes the offering of
such securities.

 

(c)           Notwithstanding the foregoing, the number of Reset Shares
deliverable by the Company at any time pursuant to the foregoing paragraph shall
be limited to the maximum number of Common Shares that may be issued without
approval of the Company’s shareholders pursuant to Rule 312.03(c) of the NYSE
Listed Company Manual taking into account the Initial Shares, any Subsequent
Shares theretofore issued, any other Reset Shares theretofore issued and any
Pre-Emptive Shares theretofore issued.

 

(d)           In the event the Company would otherwise be required under
paragraph (a) above to offer to sell Reset Shares to the Investor but for
paragraph (c) above (the Reset

 

 

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Shares not offered are referred to as “Excess Reset Shares”), the Company shall
pay to the Investors entitled to the Excess Reset Shares an amount in cash per
Excess Reset Share equal to the closing price of a Common Share on the NYSE on
the closing of the issuance of the related Additional Shares.  Any such amount
shall be payable within two NYSE trading days  of the closing of the issuance of
the related Additional Shares.

 

5.5           Preemptive Right.

(a)           In the event the Company completes the sale, other than sales
pursuant to any stock option, stock purchase or similar employee benefit plan
approved by the Company’s Board of Directors, (a “Pre-Emptive Sale”) on or
before the date which is one year after the Initial Closing Date or any
Subsequent Closing Date in one or a series of related transactions Additional
Shares resulting in gross proceeds to the Company of $100,000,000 or more, the
Company shall deliver to the Investor an offer (the “Offer”) to issue and sell
to the Investor a number of Common Shares (the “Pre-Emptive Shares”) such that
the Investor may maintain its relative Common Share ownership position in the
Company, on a fully diluted basis.  The Offer shall state that the Company
offers to issue and sell to the Investor the Pre-Emptive Shares and shall
specify their number and terms (including purchase price, which shall be equal
to the weighted average price in the Pre-Emptive Sale(s)).  The Offer shall
remain open and irrevocable for a period of 30 days (the “Pre-Emptive Period”)
from the date of its delivery.  For purposes of this Section 5.5, “relative
Common Share ownership position” will be calculated as to all WLR Funds holding
Securities in the aggregate and WLR will be entitled to allocate by written
notice to the Company the aggregate preemptive rights of the Investor among the
WLR Funds.

 

(b)           The Investor may accept the Offer by delivering to the Company a
notice (the “Purchase Notice”) within the Pre-Emptive Period.  The Purchase
Notice shall state the number (the “Pre-Emptive Number”) of Pre-Emptive Shares
the Investor desires to purchase.

 

(c)           The issuance of any Pre-Emptive Shares shall be made on a business
day, as designated by the Company, not less than 10 and not more than 30 days
after expiration of the Pre-Emptive Period on terms and conditions consistent
with this Section.

 

(d)           In the case of a sale of securities for a consideration in whole
or in part other than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors; provided, however, that such fair value as determined by the
Board of Directors shall not exceed the aggregate market price of the securities
being offered as of the date the Board of Directors authorizes the offering of
such securities.

 

(e)           Notwithstanding the foregoing, the number of Pre-Emptive Shares
deliverable by the Company at any time pursuant to the foregoing paragraph shall
be limited to the maximum number of Common Shares that may be issued without
approval of the Company’s shareholders pursuant to Rule 312.03(c) of the NYSE
Listed Company

 

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Manual taking into account the Initial Shares, any Subsequent Shares theretofore
issued, any other Reset Shares theretofore issued and any Pre-Emptive Shares
theretofore issued.

 

(f)            The rights set forth in this Section 5.4 may not be assigned or
transferred by the Investor.

 

5.6          Governance Matters.   (a)   With respect to each of the Company’s
annual general meetings beginning in 2009, as long as the Investor beneficially
owns Securities acquired hereunder with an initial aggregate purchase price of
$250,000,000 or more, the Company’s nominating committee will nominate, and the
Company’s board of directors will recommend to the Company’s shareholders, the
election of Mr. Ross or, if Mr. Ross is no longer actively involved in the
day-to-day operations of the Investor, a designee of the Investor reasonably
acceptable to the Company’s nominating committee.

 

(b)           Mr. Ross (including any successor nominees) (the “Board
Representative”) shall, subject to applicable law, be the Company’s and the
Company’s Nominating and Governance Committee’s nominee to serve on the
Company’s board of directors, the Company shall use all reasonable best efforts
to have such person elected as a director of the Company and the Company shall
solicit proxies for such person to the same extent as it does for any of its
other nominees to the board of directors.

 

(c)           If the Investor no longer beneficially owns Securities acquired
hereunder with an initial aggregate purchase price of $250,000,000 or more, the
Investor will have no further rights under this Section 5.6.

 

5.7          Legend.  (a)  The Investor agrees that all certificates or other
instruments representing the Securities subject to this Agreement will bear a
legend substantially to the following effect:

 

“(i)  THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

 

(ii)  THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND
OTHER RESTRICTIONS SET FORTH IN AN INVESTMENT AGREEMENT, DATED AS OF FEBRUARY ·,
2008, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER.”

 

(b)           Upon request of the Investor, upon receipt by the Company of an
opinion of counsel reasonably satisfactory to the Company to the effect that
such legend is no longer required under the Securities Act or applicable state
laws, as the case may be, the Company shall promptly cause clause (i) of the
legend to be removed from any certificate for any Securities to be so
Transferred and clause (ii) of the legend shall be removed upon the expiration
of such transfer and other restrictions set forth in this Agreement. The
Investor

 

 

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acknowledges that the Securities have not been registered under the Securities
Act or under any state securities laws and agrees that it will not sell or
otherwise dispose of any of the Securities, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws.

 

5.8          Exchange Listing. The Company shall promptly use its reasonable
best efforts to cause the Common Shares to be issued pursuant to this Agreement
to be approved for listing on the NYSE, subject to official notice of issuance,
as promptly as practicable, and in any event before the applicable Closing or
date of issuance.

 

5.9          Expenses. Each of the parties will bear and pay all of the costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated under this Agreement, provided that the Company will pay all HSR
Act filing fees incurred to comply with this Agreement.  The Company agrees that
the Board Representative, if any, shall be entitled to the same rights,
privileges and compensation as the other members of the Company’s Board of
Directors, including with respect to reimbursement for Board of Directors
participation and related expenses.

 

ARTICLE VI

REGISTRATION RIGHTS

 

6.1          Registration on Form S-3.  The Company will agree to file a
Registration Statement on Form S-3 (the “Registration Statement”) within 90 days
of the Initial Closing covering the resale of the Initial Shares pursuant to
Rule 415 under the Securities Act.  The Registration Statement shall be amended
from time to time to add any Subsequent Shares, Reset Shares or Pre-Emptive
Shares issued pursuant to this Agreement promptly after such issuance.  Upon
filing the Registration Statement, the Company will keep such Registration
Statement effective with the Commission at all times and any Registration
Statement shall be re-filed upon its expiration, and shall cooperate in any
shelf take-down by amending or supplementing the prospectus related to such
Registration Statement as may be requested by the Investor or as otherwise
required, until the Investor no longer holds Registrable Securities (as defined
below); provided that the Investor shall not be permitted to sell under such
“shelf” registration statement during such times as the trading window is not
open for Company senior management in accordance with the Company’s policies.
The Company will pay all Registration Expenses incurred in connection with any
Registration Statement.

 

6.2          Registrable Securities.  For purposes of this Agreement,
“Registrable Securities” means (i) all Initial Shares, Subsequent Shares, Reset
Shares and Pre-Emptive Shares and (ii) any equity securities issued or issuable
directly or indirectly with respect to the securities referred to in the
foregoing clause by way of share dividend or share split or in connection with a
combination of shares, recapitalization, reclassification, merger, amalgamation,
arrangement, consolidation or other reorganization. As to any particular
securities constituting Registrable Securities, such securities will cease to be
Registrable Securities when (w) they have been effectively registered or
qualified for sale by a prospectus filed under the Securities Act and disposed
of in accordance with

 

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the Registration Statement covering therein, (x) they have been sold to the
public pursuant to Rule 144 or Rule 145 or other exemption from registration
under the Securities Act, (y) they have been acquired by the Company or (z) they
are able to be sold by the Investor without restriction as to volume or manner
of sale pursuant to Rule 144(k) under the Securities Act and the Investor holds
no more than 3% of the applicable class outstanding. In addition, for purposes
of this Agreement, “Registration Statement” means the prospectus and other
documents filed with the Commission to effect a registration under the
Securities Act.

 

6.3          Underwritten Offerings.  If the Investor intends that the
Registrable Securities covered by the Registration Statement shall be
distributed by means of an underwritten offering, the Investor will so advise
the Company.  In such event, the lead underwriter to administer the offering
will be chosen by the Investor subject to the prior written consent, not to be
unreasonably withheld or delayed, of the Company.

 

6.4          Registration Procedures.  In connection with the registration
referred to in Section 6.1, Company shall use its reasonable best efforts to as
expeditiously as possible:

 

(a)           prepare and file with the Commission the Registration Statement
with respect to such Registrable Securities, make all required filings with the
Financial Industry Regulatory Authority, Inc. and thereafter use its reasonable
best efforts to cause such Registration Statement to become effective as soon as
reasonably practicable, provided that before filing a Registration Statement or
any amendments or supplements thereto, the Company will furnish to the Investor
copies of all such documents proposed to be filed, which documents will be
subject to review of the Investor;

 

(b)           prepare and file with the Commission such amendments and
supplements to such Registration Statement as may be necessary to keep such
Registration Statement effective continuously until the earlier of (i) the date
that the securities covered by such Registration Statement cease to constitute
Registrable Securities or (ii) when all of the securities covered by such
Registration Statement have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
Registration Statement (but in any event not before the expiration of any longer
period required under the Securities Act);

 

(c)           furnish to each seller of Registrable Securities such number of
copies, without charge, of such Registration Statement, each amendment and
supplement thereto, including each preliminary prospectus, final prospectus, any
other prospectus (including any prospectus filed under Rule 424, Rule 430A or
Rule 430B under the Securities Act and any “issuer free writing prospectus” as
such term is defined under Rule 433 promulgated under the Securities Act), all
exhibits and other documents filed therewith and such other documents as such
seller may reasonably request including in order to facilitate the disposition
of the Registrable Securities owned by such seller;

 

(d)           register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any seller reasonably
requests and do any and all other acts and things that may be reasonably
necessary or reasonably advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities

 

 

 

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owned by such seller (provided that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);

 

(e)           notify each seller of such Registrable Securities at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the discovery of the happening of any event as
a result of which, the prospectus contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading
in the light of the circumstances under which they were made, and, as soon as
reasonably practicable, prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;

 

(f)            notify each seller of any Registrable Securities covered by such
Registration Statement (i) when such Registration Statement or the prospectus or
any prospectus supplement or post-effective amendment has been filed and, with
respect to such Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission for amendments
or supplements to such Registration Statement or to amend or to supplement such
prospectus or for additional information, and (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for any of such purposes;

 

(g)           cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed or, if no similar securities issued by the Company are then listed on any
securities exchange, use its reasonable best efforts to cause all such
Registrable Securities to be listed on the NYSE or such other market on which
the Common Shares are then listed or quoted, subject to official notice of
issuance;

 

(h)           provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such Registration Statement;

 

(i)            enter into such customary agreements (including underwriting
agreements and, subject to Section 6.9, lock-up agreements in customary form,
and including provisions with respect to indemnification and contribution in
customary form) and take all such other customary actions as the Investor, the
participating transferees or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities
(including, making members of management and executives of the Company available
to participate in “road shows,” similar sales events and other marketing
activities; provided that the Company shall not be required to make members of
management and executives of the Company so available for more than five
consecutive days or more than 10 days in any 365 day period);

 

 

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(j)            make available for inspection by any seller of Registrable
Securities and its counsel, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and documents relating to the business of
the Company, and cause the Company’s officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement, provided that it shall be a condition to such inspection
and receipt of such information that the inspecting person (i) enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company and (ii) agree to minimize the disruption to the Company’s business in
connection with the foregoing;

 

(k)           timely provide to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;

 

(l)            in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending or
preventing the use of any related prospectus or ceasing trading of any
securities included in such Registration Statement for sale in any jurisdiction,
use every reasonable effort to promptly obtain the withdrawal of such order;

 

(m)          obtain one or more comfort letters, addressed to the underwriters,
if any, dated the effective date of any underwriting agreement and the date of
the closing under the underwriting agreement for such offering, signed by the
Company’s independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as such underwriters
shall reasonably request; and

 

(n)           provide legal opinions of the Company’s counsel, addressed to the
underwriters, if any, dated the date of the closing under the underwriting
agreement, with respect to the Registration Statement, each amendment and
supplement thereto (including the preliminary prospectus) and such other
documents relating thereto as the underwriter shall reasonably request in
customary form and covering such matters of the type customarily covered by
legal opinions of such nature.

 

6.5          Provision of Information.  As a condition to registering
Registrable Securities, the Company may require the Investor holding Registrable
Securities as to which any registration is being effected to furnish the Company
with such information regarding such person and pertinent to the disclosure
requirements relating to the registration and the distribution of such
securities as the Company may from time to time reasonably request in writing.

 

6.6          Registration Expenses.  Except as otherwise provided in this
Agreement, all expenses incidental to the Company’s performance of or compliance
with this Agreement, including all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, word processing,
duplicating and printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and counsel (limited to one law firm)
for the holders of the securities registered and all independent certified
public accountants and other persons retained by the Company (all such expenses,
“Registration Expenses”), will be borne by

 

 

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the Company.  The Company will, in any event, pay its internal expenses
(including all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit or quarterly
review, the expenses of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed.  The holders of the
securities so registered shall pay all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities
hereunder, the fees and expenses of counsel beyond the one law firm paid for by
the Company and any other Registration Expenses required by law to be paid by a
selling holder pro rata on the basis of the amount of proceeds from the sale of
their shares so registered.

 

6.7          Participation Conditions.  (a)            The Investor may not
participate in any registration hereunder that is underwritten unless such
person (i) agrees to sell its Registrable Securities on the basis provided in
any underwriting arrangements approved by the Investor (including pursuant to
the terms of any over-allotment or “green shoe” option requested by the managing
underwriter(s), provided that no such person will be required to sell more than
the number of Registrable Securities that such person has requested the Company
to include in any registration), (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and
(iii) cooperates with the Company’s reasonable requests in connection with such
registration or qualification (it being understood that the Company’s failure to
perform its obligations hereunder, which failure is caused by such person’s
failure to cooperate with such reasonable requests, will not constitute a breach
by the Company of this Agreement). Notwithstanding the foregoing, the liability
of the Investor or any transferee participating in such an underwritten
registration shall be limited to an amount equal to the amount of gross proceeds
attributable to the sale of such person’s Registrable Securities.

 

(b)           Each person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 6.4(e), such person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
Registration Statement until such person receives copies of a supplemented or
amended prospectus as contemplated by such Section 6.4(e). In the event the
Company gives any such notice, the applicable time period mentioned in
Section 6.4(b) during which a Registration Statement is to remain effective will
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to this Section 6.7(b) to and including
the date when each seller of a Registrable Security covered by such Registration
Statement will have received the copies of the supplemented or amended
prospectus contemplated by Section 6.4(e).

 

6.8          Rule 144.  (a)        The Company will use its reasonable best
efforts to timely file all reports and other documents required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Company is not required to file
such reports, it will, upon the request of the Investor or any transferee, make
publicly available such information as necessary to permit sales pursuant to
Rule 144), and will use reasonable best efforts to take such further action as
the Investor or any transferee may reasonably request, all to the extent
required from time to time to enable such person to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144. Upon the request of the Investor or any
transferee, the

 

 

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Company will deliver to such person a written statement as to whether it has
complied with such information requirements.

 

(b)           The Company will not issue new certificates for shares of
Registrable Securities without a legend restricting further transfer unless
(i) such shares have been sold to the public pursuant to an effective
Registration Statement under the Securities Act or Rule 144, or
(ii) (x) otherwise permitted under the Securities Act, (y) the holder of such
shares shall have delivered to the Company an opinion of counsel, which opinion
and counsel shall be reasonably satisfactory to the Company, to such effect, and
(z) the holder of such shares expressly requests the issuance of such
certificates in writing.

 

6.9          Holdback. In consideration for the Company agreeing to its
obligations under this Agreement, the Investor (and any transferee) agrees in
connection with any registration of the Company’s securities (whether or not
such person is participating in such registration) upon the request of the
Company and the underwriters managing any underwritten offering of the Company’s
securities, not to effect (other than pursuant to such registration) any public
sale or distribution of Registrable Securities, including, any sale pursuant to
Rule 144 or Rule 144A, or make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities, any other
equity securities of the Company or any securities convertible into or
exchangeable or exercisable for any equity securities of the Company without the
prior written consent of the Company or such underwriters, as the case may be,
during the Holdback Period (as defined below).  With respect to any underwritten
offering of Registrable Securities covered by a registration pursuant to
Section 6.1, the Company further agrees not to effect any public sale or
distribution, or to file any Registration Statement covering any, of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, (other than with respect to awards pursuant to employee
benefit plans and issuances of Common Shares upon exercise of any such awards)
during the Holdback Period with respect to such underwritten offering, if
required by the managing underwriter; provided that notwithstanding anything to
the contrary herein, the obligations under this Section 6.9 shall not apply
during any twelve-month period for more than an aggregate of 90 days. “Holdback
Period” means, with respect to any registered offering covered by this
Agreement, (1) ninety days after and during the ten days before, the effective
date of the related Registration Statement or, in the case of a takedown from a
shelf registration statement, ninety days after the date of the prospectus
supplement filed with the Commission in connection with such takedown and during
such prior period (not to exceed ten days) as the Company has given reasonable
written notice to the holder of Registrable Securities or (2) such shorter
period as the Investor, the Company and the underwriter of such offering, if
any, shall agree.

 

ARTICLE VII

TERMINATION

 

7.1          Termination. This Agreement shall be terminated (a) if the Initial
Closing shall not have occurred prior to the date six months from the date of
this Agreement, by either the Company or the Investor, (b) by mutual agreement
of the Company and the Investor, (c) if any Governmental Entity shall have
issued a nonappealable final judgment, injunction, order or decree that shall
prohibit the Initial Closing or shall prohibit or restrict the Investor or its
Affiliates from

 

 

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owning or voting any Securities, (d) by the Company upon a breach of or failure
to perform in any material respect (which breach or failure cannot be or has not
been cured within 30 days after giving of notice to the Investor of such breach
or failure) any covenant on the part of the Investor set forth in this
Agreement, such that the closing conditions set forth in this Agreement would
not be satisfied if such breach or failure existed or were continuing on the
Initial Closing, as the case may be, (e) by the Investor upon a breach of or
failure to perform in any material respect (which breach or failure cannot be or
has not been cured within 30 days after giving of notice to the Investor of such
breach or failure) any covenant on the part of the Company set forth in this
Agreement, such that the closing conditions set forth in this Agreement would
not be satisfied if such breach or failure existed or were continuing on the
Initial Closing, as the case may be, or (f) prior to the Initial Closing, by the
Investor, if the Company shall, or agree to, execute definitive documentation
that will result in or have resulted in a Change in Control, resolve to pursue a
transaction through its Board of Directors that is contemplated by the Board of
Directors to result in a Change in Control or have its Board of Directors
approve, recommend or accept or enter into a transaction requiring approval by
the Company’s shareholders of a transaction that in any case upon consummation
will result in a Change in Control, or otherwise permit a Change in Control to
be consummated.

 

7.2          Effects of Termination. In the event of any termination of this
Agreement as provided in Section 7.1, this Agreement (other than Section 5.9
(except in the event of termination pursuant to Section 7.1(d) or 7.1(e)) and
Article VIII, which shall remain in full force and effect) shall forthwith
become wholly void and of no further force and effect; provided that,
notwithstanding Section 5.9, nothing herein shall relieve any party from
liability for willful breach of this Agreement.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1          Survival. Each of the representations and warranties set forth in
this Agreement shall survive the Initial Closing but only for a period of 1 year
following the Initial Closing Date or, if a Subsequent Closing occurs, the last
Subsequent Closing, and thereafter shall expire and have no further force and
effect; provided that the representations and warranties in Sections 3.2(a),
3.2(b), 3.2(c), 3.2(d), 3.3(a) and 3.3(b) shall survive for the duration of any
statutes of limitations applicable thereto.  Except as otherwise provided
herein, all covenants and agreements contained herein shall survive for the
duration of any statutes of limitations applicable thereto or until, by their
respective terms, they are no longer operative.

 

8.2          Amendment. No amendment or waiver of any provision of this
Agreement will be effective with respect to any party unless made in writing and
signed by an officer of a duly authorized representative of such party.

 

8.3          Waivers. The conditions to each party’s obligation to consummate
the Initial Closing or a Subsequent Closing, as the case may be, are for the
sole benefit of such party and may be waived by such party in whole or in part
to the extent permitted by applicable law. No waiver of any party to this
Agreement will be effective unless it is in a writing signed by a duly
authorized

 

 

 

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officer of the waiving party that makes express reference to the provision or
provisions subject to such waiver.

 

8.4          Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement. Executed signature
pages to this Agreement may be delivered by facsimile and such facsimiles will
be deemed as sufficient as if actual signature pages had been delivered.

 

8.5          Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State. The parties hereby irrevocably
and unconditionally consent to submit to the exclusive jurisdiction of the state
and federal courts located in the State of New York for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby.

 

8.6          WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

8.7          Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other must be in writing and will be deemed
to have been duly given (a) on the date of delivery if delivered personally or
by telecopy or facsimile, upon confirmation of receipt, (b) on the first
business day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.

 

(a)     If to the Investor:

WL Ross & Co. LLC

1166 Avenue of the Americas

New York, New York  10036
Attention:  Wilbur L. Ross, Jr.

Facsimile:

 

      with a copy to (which copy alone shall not constitute notice):

 

 

Jones Day

 

 

222 East 41st Street

 

 

New York, New York 10017

 

 

Attention:

Robert A. Profusek

 

 

 

John K. Kane

 

 

Facsimile: (212) 755-7306

 

 

(b)     If to the Company:

 

 

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Assured Guaranty Ltd.

30 Woodbourne Street

Hamilton. HM 08 Bermuda.

Attn:  James M. Michener, Esq.

Facsimile: (441) 296-1083

 

with a copy to (which copy alone shall not constitute notice):

 

Mayer Brown LLP

71 South Wacker Drive

Chicago, Illinois  60606

Attention: Edward S. Best, Esq.

Facsimile: (312) 701-7711

 

8.8          Entire Agreement, Etc. This Agreement and the confidentiality
letter, dated as of February 14, 2008, between the Company and the Investor,
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter hereof; and this Agreement will
not be assignable by operation of law or otherwise (any attempted assignment in
contravention hereof being null and void); provided, however, that each WLR Fund
that purchases Securities hereunder will be entitled to the benefits of this
Agreement as it relates to such Securities upon such WLR Fund’s written
assumption of the corresponding obligations hereunder.  This Agreement will be
binding upon and will inure to the benefit of the successors and permitted
assignees of the parties hereto.

 

8.9          Other Definitions. Wherever required by the context of this
Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time.

 

When used herein:

 

(a)           the term “subsidiary” means those corporations, banks, savings
banks, associations and other persons of which such person owns or controls 51%
or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 51% or more of the outstanding
equity securities is owned directly or indirectly by its parent; provided,
however, that there shall not be included any such entity to the extent that the
equity securities of such entity were acquired in satisfaction of a debt
previously contracted in good faith or are owned or controlled in a bona fide
fiduciary capacity;

 

(b)           the term “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person; provided that with respect to the Company, Affiliate shall
not include ACE Limited or any of its subsidiaries.  For purposes of this
definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”) when used with

 

 

 

33

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respect to any person, means the possession, directly or indirectly, of the
power to cause the direction of management or policies of such person, whether
through the ownership of voting securities by contract or otherwise;

 

(c)           the word “or” is not exclusive;

 

(d)           the words “including,” “includes,” “included” and “include” are
deemed to be followed by the words “without limitation”; and

 

(e)           the terms “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision;

 

(f)            “business day” means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
governmental actions to close;

 

(g)           “person” has the meaning given to it in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;
and

 

(h)           all article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement.

 

8.10        Captions. The article, section, paragraph and clause captions herein
are for convenience of reference only, do not constitute part of this Agreement
and will not be deemed to limit or otherwise affect any of the provisions
hereof.

 

8.11        Severability. If any provision of this Agreement or the application
thereof to any person (including, the officers and directors of the Investor and
the Company) or circumstance is determined by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, will remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original intent
of the parties.

 

8.12        No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any person or entity other than
the parties hereto, any benefit right or remedies.

 

8.13        Time of Essence. Time is of the essence in the performance of each
and every term of this Agreement.

 

8.14        Public Announcements. Subject to each party’s disclosure obligations
imposed by law or regulation, each of the parties hereto will cooperate with
each other in the development and distribution of all news releases and other
public information disclosures with respect to this

 

 

 

34

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Agreement and any of the transactions contemplated by this Agreement, and no
party hereto will make any such news release or public disclosure without first
consulting with the other party hereto and receiving its consent (which shall
not be unreasonably withheld or delayed) and each party shall coordinate with
the other with respect to any such news release or public disclosure.

 

 

35

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first herein above
written.

 

 

ASSURED GUARANTY LTD.

 

 

 

 

 

By:

/s/ JAMES M. MICHENER

 

 

Name:

James M. Michener

 

 

Title:

General Counsel and Secretary

 

 

WLR RECOVERY FUND IV, L.P.

 

 

 

By:

WLR Recovery Associates IV LLC,
        its General Partner

 

 

 

 

By:

WL Ross Group, L.P., its managing member

 

 

 

 

By:

El Vedado, LLC, its General Partner

 

 

 

 

By:

/s/ WILBUR L. ROSS, JR.

 

 

Name:

Wilbur L. Ross, Jr.

 

 

Title:

Managing Member

 

 

36

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WLR Funds

 

WLR Recovery Fund III, L.P.

WLR/GS Master Co-Investment, L.P.

WLR IV Parallel ESC, L.P.

Any other investment fund managed by WLR.

 

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