Document:

Exhibit
10.67

 

For Use Without
Employment Agreement

 

Non-Qualified Stock
Option Agreement under

Assured Guaranty Ltd. 2004
Long-Term Incentive Plan

 

THIS AGREEMENT is effective as of the Grant Date, by and between the
Participant and Assured Guaranty Ltd. (the “Company”).

 

WHEREAS, the Company maintains the Assured Guaranty Ltd. 2004 Long-Term
Incentive Plan (the “Plan”), and the Participant has been selected by the
committee administering the Plan (the “Committee”) to receive a Non-Qualified
Stock Option Award under the Plan; and

 

NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

 

1.  Terms of Award.  
The following words and phrases used in this Agreement shall have the
meanings set forth in this paragraph 1:

 

(a)                                  The “Participant” is                                    

 

(b)                                 The “Grant Date” is February 14,
2008.

 

(c)                                  The number of “Covered Shares” shall be                    shares
of Stock.

 

(d)                                 The “Exercise Price” is $                per
share.

 

Other words and phrases used in this Agreement are defined pursuant to
paragraph 17, elsewhere in this Agreement or the Plan.

 

2.  Non-Qualified Stock Option.  This Agreement specifies the terms of the
option (the “Option”) granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1.  The Option is not intended
to constitute an “incentive stock option” as that term is used in Code section
422.

 

3.  Date of Exercise. 
Subject to the limitations of this Agreement, each Installment of
Covered Shares of the Option shall be exercisable on and after the Vesting Date
for such Installment as described in the following schedule (but only if the
Date of Termination has not occurred before the Vesting Date):

 

 

 

 

 

	
  INSTALLMENT

  	
   

  	
  VESTING
  DATE APPLICABLE TO INSTALLMENT

  
	
  1/3 of Covered
  Shares

  	
   

  	
  One year
  anniversary of the Grant Date

  
	
  1/3 of Covered
  Shares

  	
   

  	
  Two year
  anniversary of the Grant Date

  
	
  1/3 of Covered
  Shares

  	
   

  	
  Three year
  anniversary of the Grant Date

  

 

Notwithstanding the foregoing provisions of this paragraph 3, the
Option shall become vested and exercisable as follows:

 

(a)                                  The Option shall become fully exercisable
upon the Date of Termination, if the Date of Termination occurs by reason of
the Participant’s death or Disability.

 

(b)                                 The Option shall become fully exercisable
upon a Change in Control that occurs on or before the Date of Termination.

 

(c)                                  If the Option is not fully exercisable
upon the Participant’s Date of Termination, and the Participant’s Date of
Termination occurs because of Retirement, then, for purposes of this paragraph
3 and subject to paragraph 17(g), the Participant shall be treated as though
employed by the Company and Subsidiaries after the Participant’s actual Date of
Termination until the one-year anniversary of the Date of Termination.

 

Subject to paragraph (c) above, the Option may be exercised on or
after the Date of Termination only as to that portion of the Covered Shares for
which it was exercisable immediately prior to (or became exercisable on) the
Date of Termination.  Notwithstanding the
foregoing provisions of this paragraph 3, as of the Participant’s Date of
Termination for Cause, the Option shall be canceled as to any Covered Shares as
to which it has not previously been exercised.

 

4.  Expiration. 
The Option shall not be exercisable after the Company’s close of
business on the last business day that occurs prior to the Expiration
Date.  The “Expiration Date” shall be the
earliest to occur of:

 

(a)                                  the ten-year anniversary of the Grant
Date;

 

(b)                                 if the Participant’s Date of Termination
occurs by reason of death or Disability, the two-year anniversary of such Date
of Termination;

 

(c)                                  if the Participant’s Date of Termination
occurs for Cause, the Date of Termination;

 

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

 

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

 

 

2

 

 

Notwithstanding the foregoing provisions of this paragraph 4, if a
Change in Control occurs on or before the Participant’s Date of Termination,
the Expiration Date shall be the earlier of the two-year anniversary of the
Change in Control or the ten-year anniversary of the Grant Date (without regard
to whether the Participant’s Date of Termination occurs after the Change in
Control).

 

5.  Method of Option Exercise.  Subject to this Agreement and the Plan, the
Option may be exercised in whole or in part by filing a written notice with the
Secretary of the Company at its corporate headquarters prior to the Company’s
close of business on the last business day that occurs prior to the Expiration
Date.  Such notice shall specify the
number of shares of Stock which the Participant elects to purchase, and shall
be accompanied by payment of the Exercise Price for such shares of Stock
indicated by the Participant’s election. 
Payment shall be by cash or by check payable to the Company.  Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price
may be paid by the Participant by delivery of shares of Stock owned by the
Participant and acceptable to the Committee having an aggregate Fair Market
Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Participant may pay the
Exercise Price by authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such
exercise.  The Option shall not be
exercisable if and to the extent the Company determines that such exercise
would violate applicable state or Federal securities laws or the rules and
regulations of any securities exchange on which the Stock is traded.  If the Company makes such a determination, it
shall use all reasonable efforts to obtain compliance with such laws, rules and
regulations.  In making any determination
hereunder, the Company may rely on the opinion of counsel for the Company.

 

6.  Withholding. 
All deliveries and distributions under this Agreement are subject to
withholding of all applicable taxes.  At
the election of the Participant, and subject to such rules and limitations
as may be established by the Committee from time to time, such withholding
obligations may be satisfied through the surrender of shares of Stock which the
Participant already owns, or to which the Participant is otherwise entitled
under the Plan; provided, however, that such shares may be used to satisfy not
more than the Company’s minimum statutory withholding obligation (based on
minimum statutory withholding rates for Federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income).

 

7.  Transferability. 
Except as otherwise provided by the Committee, the Option is not
transferable other than as designated by the Participant by will or by the laws
of descent and distribution, and during the Participant’s life, may be
exercised only by the Participant.

 

8.  Cancellation and Rescission of Options.

 

(a)                                  The Committee may cancel, rescind,
suspend, withhold or otherwise limit or restrict the Option at any time if the
Participant engages in any “Detrimental Activity.”

 

(b)                                 Upon exercise of the Option, the
Participant shall certify, to the extent provided by the Committee, in a manner
acceptable to the Committee, that the Participant is not engaging

 

 

4

 

 

and has not
engaged in any Detrimental Activity.  In
the event a Participant has engaged in any Detrimental Activity prior to, or
during the twelve months after, any exercise of the Option, such exercise may
be rescinded by the Committee within two years thereafter.  In the event of any such rescission, the
Participant shall pay to the Company the amount of any gain realized as a
result of the rescinded exercise, in such manner and on such terms and
conditions as may be required, and the Company shall be entitled to set-off
against the amount of any such gain any amount owed to the Participant by the
Company and/or Subsidiary.

 

9.  Heirs and Successors.  This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.  If any rights exercisable by the Participant
or benefits deliverable to the Participant under this Agreement have not been
exercised or delivered, respectively, at the time of the Participant’s death,
such rights shall be exercisable by the Designated Beneficiary, and such
benefits shall be delivered to the Designated Beneficiary, in accordance with
the provisions of this Agreement and the Plan. 
The “Designated Beneficiary” shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such
form and at such time as the Committee shall require.  If a deceased Participant fails to designate
a beneficiary, or if the Designated Beneficiary does not survive the
Participant, any rights that would have been exercisable by the Participant and
any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant.  If a deceased Participant designates a
beneficiary and the Designated Beneficiary survives the Participant but dies
before the Designated Beneficiary’s exercise of all rights under this Agreement
or before the complete distribution of benefits to the Designated Beneficiary
under this Agreement, then any rights that would have been exercisable by the
Designated Beneficiary shall be exercised by the legal representative of the
estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of the
estate of the Designated Beneficiary.

 

10.  Administration. 
The authority to manage and control the operation and administration of
this Agreement shall be vested in the Committee, and the Committee shall have
all powers with respect to this Agreement as it has with respect to the
Plan.  Any interpretation of this
Agreement by the Committee and any decision made by it with respect to this Agreement
is final and binding on all persons.  The
Committee shall have the authority to obtain such information from the
Participant (including tax return information) as it determines may be
necessary to confirm that the Participant is in compliance with the
requirements applicable to Cause or Detrimental Activity, and if the
Participant fails to provide such information, the Committee may conclude that
the Participant is not in compliance with such requirements.

 

11.  Plan Governs. 
Notwithstanding anything in this Agreement to the contrary, this
Agreement shall be subject to the terms of the Plan, a copy of which may be
obtained by the Participant from the office of the Secretary of the Company;
and this Agreement is subject to all interpretations, amendments,
rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

 

 

5

 

12.  Not an Employment Contract.  The Option will not confer on the Participant
any right with respect to continuance of employment or other service with the
Company or any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate or modify the terms
of such Participant’s employment or other service at any time.

 

13.  Notices. 
Any written notices provided for in this Agreement or the Plan shall be
in writing and shall be deemed sufficiently given if either hand delivered or
if sent by fax or overnight courier, or by postage paid first class mail.  Notices sent by mail shall be deemed received
three business days after mailing but in no event later than the date of actual
receipt.  Notices shall be directed, if
to the Participant, at the Participant’s address indicated by the Company’s
records, or if to the Company, at the Company’s principal executive office.

 

14.  Fractional Shares.  In lieu of issuing a fraction of a share upon
any exercise of the Option, resulting from an adjustment of the Option pursuant
to the Plan or otherwise, the Company will be entitled to pay to the
Participant an amount equal to the fair market value of such fractional share.

 

15.  No Rights As Shareholder.  The Participant shall not have any rights of
a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

 

16.  Amendment. 
This Agreement may be amended in accordance with the provisions of the
Plan, and may otherwise be amended by written agreement of the Participant and
the Company without the consent of any other person.

 

17.  Definitions. 
For purposes of this Agreement, words and phrases shall be defined as
follows:

 

(a)                                  Cause.  The term
“Cause” shall mean (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is or becomes competitive
with the Company or the Subsidiaries (including, without limitation, AMBAC
Financial Group Inc., Berkshire Hathaway Financial Guaranty, CIFG Group,
Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA, Inc.,
Radian Group Inc. and Security Capital Assurance Ltd.), or which organization
or business, or the rendering of services to such organization or business, is
or becomes otherwise prejudicial to or in conflict with the interests of the
Company or the Subsidiaries; (ii) the disclosure to anyone outside the
Company or the Subsidiaries, or the use in other than the Company’s or the
Subsidiaries’ business, without prior written authorization from the Company or
the Subsidiaries, of any confidential information or material, relating to the
business of the Company or the Subsidiaries, acquired by the Participant either
during or after employment with the Company or the Subsidiaries; (iii) a
violation of any rules, policies, procedures or guidelines of the Company or
the Subsidiaries, including but not limited to the Company’s Code of Conduct,
Policy on Trading in Assured Guaranty Ltd. Securities, Management Stock
Ownership Guidelines and other business conduct guidelines; (iv) any
attempt directly or indirectly to induce any employee of the Company to be
employed or perform services elsewhere or any attempt directly or indirectly to
solicit the

 

 

6

 

trade or business
of any current or prospective customer, supplier or partner of the Company; (v) the
Participant being convicted of, or entering a guilty plea with respect to, a
crime, whether or not connected with the Company; or (vi) any other
conduct or act determined to be injurious, detrimental or prejudicial to any
interest of the Company.

 

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

 

(c)                                  Date of
Termination.  A Participant’s “Date of Termination” means,
with respect to an employee, the date on which the Participant’s employment
with the Company and Subsidiaries terminates for any reason, and with respect
to a Director, the date immediately following the last day on which the
Participant serves as a Director; provided that a Date of Termination shall not
be deemed to occur by reason of a Participant’s transfer of employment between
the Company and a Subsidiary or between two Subsidiaries; further provided that
a Date of Termination shall not be deemed to occur by reason of a Participant’s
cessation of service as a Director if immediately following such cessation of
service the Participant becomes or continues to be employed by the Company or a
Subsidiary, nor by reason of a Participant’s termination of employment with the
Company or a Subsidiary if immediately following such termination of employment
the Participant becomes or continues to be a Director; and further provided
that a Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.

 

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

 

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

 

(f)                                    Disability. 
The Participant shall be considered to have a “Disability” during the
period in which the Participant is unable, by reason of a medically
determinable physical or mental impairment, to engage in any substantial
gainful activity, which condition, in the opinion of a physician selected by
the Committee, is expected to have a duration of not less than 120 days.

 

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

 

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

 

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

 

 

 

7

 

Company or its
Subsidiaries, years of service shall also include service with ACE Limited and
its subsidiaries occurring prior to such initial public offering.

 

(iii) 
Notwithstanding that the Participant’s Date of Termination satisfies the
requirements of paragraph (i) above, the Participant will not be
considered to have retired (or have terminated by reason of Retirement) with
respect to any unexercised portion of the Option if the Committee determines
that the Participant has provided significant commercial or business services
to any one or more persons or entities on or before the Option exercise,
regardless of whether such entity is owned or controlled by the Participant;
provided that the Participant may devote reasonable time to the supervision of
his personal investments, and activities involving professional, charitable,
community, educational, religious and similar types of organizations, speaking
engagements, membership on the boards of directors of other organizations, and
similar types of activities, to the extent that the Committee, in its
discretion, determines that such activities are consistent with the
Participant’s Retirement.

 

(iv)  At the
request of the Committee, and as a condition of exercising the Option, the
Participant shall be required to provide a listing of the activities engaged in
by the Participant following the Participant’s Date of Termination and prior to
such exercise and such other information that the Committee determines may be
necessary from time to time to establish whether the Participant has acted in a
manner that is consistent with the requirements of paragraph (iii).  Such listing and information shall be
provided promptly by the Participant, but in no event more than 10 days after
written request is delivered to the Participant.

 

(v)  At the
request of the Participant, the Committee shall determine whether a proposed
activity of the Participant will be consistent with the requirements of
paragraph (iii).  Such request shall be
accompanied by a description of the proposed activities, and the Participant shall
provide such additional information as the Committee may determine is necessary
to make the determination.  Such a
determination shall be made promptly, but in no event more than 30 days after
the written request, together with any additional information requested of the
Participant, is delivered to the Committee.

 

(vi)  If,
prior to the exercise of the Option with respect to a portion of the Covered
Shares (including the exercise with respect to all the Covered Shares), the
Participant engages in one or more activities that the Committee determines to
be inconsistent with Retirement, as set forth in paragraph (iii) above,
the right to exercise the Option with respect to a portion of the Covered
Shares (including the exercise with respect to all the Covered Shares) as of or
after the date the Participant first engages in such activities may be canceled
by the Committee.  If, after the Option
has been exercised with respect to all or any portion of the Covered Shares,
the Committee determines that the Participant engaged in activities prior to
such exercise that are inconsistent with Retirement, as set forth in paragraph (iii) above,
such exercise may be rescinded by the Committee within two years after the
exercise.  In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain
realized as a result of the rescinded exercise, in such manner and on such
terms and conditions as may be required by the Committee, and the Company shall
be entitled to set-off against the amount of any such gain any amount

 

 

8

 

owed to the
Participant by the Company and/or Subsidiary. 
For the avoidance of doubt, it is recited that the cancellation of the
right to exercise the Option shall include cancellation of the right to vest in
the Option.

 

(h)                                 Plan Definitions. 
Except where the context clearly implies or indicates the contrary, a
word, term, or phrase used in the Plan is similarly used in this Agreement.

 

IN WITNESS WHEREOF, the Participant has executed the
Agreement, and the Company has caused these presents to be executed in its name
and on its behalf, all as of the Grant Date.

 

	
  Agreed
  Upon:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Assured
  Guaranty Ltd.

  	
   

  	
  Participant:

  	
   

  

 

 

9Exhibit 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 

 

 

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 

 

2

 

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 

 

3

 

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 

 

4

 

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 

 

5

 

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”);

 

6

 

(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.

 

7

 

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 

 

8

 

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 

 

9

 

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.

 

10

 

(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.

 

11

 

(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 

 

 

12

 

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 

 

 

13

 

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) 

 

 

14

 

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.

 

 

15

 

(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

 

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 

 

17

 

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 

 

18

 

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.

 

 

19

 

(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 

 

20

 

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.

 

 

21

 

(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 

 

 

22

 

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

 

23

 

 

 

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 

 

 

24

 

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 

 

25

 

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 

 

 

 

26

 

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);

 

 

27

 

(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 

 

 

28

 

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 

 

 

29

 

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 

 

 

30

 

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 

 

 

 

31

 

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:

 

 

32

 

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

 

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

 

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

 

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

 

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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