Document:

Exhibit 10.10

 

FORM OF

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of
[                 ],
2004, is among Assured Guaranty Ltd., a Bermuda corporation (the “Company”),
ACE Limited, a Cayman Islands corporation (“ACE”), and ACE Bermuda Insurance Ltd., a Bermuda
corporation (“ACE Bermuda”).

 

RECITALS

 

A.                                   The
Company, ACE and ACE Bermuda are parties to a Master Separation Agreement dated
as of
[                   ],
2004 relating to the formation of the Company.

 

B.                                     The
Company will effect an initial public offering of certain common shares of the
Company beneficially owned by ACE Bermuda and ACE Financial Services Inc., a Delaware corporation, pursuant to
a Registration Statement on Form S-1 (the “Public Offering”).

 

C.                                     After
the completion of the Public Offering, ACE Bermuda will beneficially own
approximately [      ]% (approximately
[     ]% if the over-allotment option granted to the
underwriters in the Public Offering is exercised in full) of the outstanding
common shares of the Company.

 

D.                                    The
Company has agreed to provide the registration rights specified in this
Agreement to ACE, its affiliates and holders of the Registrable Shares (as
defined below), including ACE Bermuda, following the Public Offering, and the
Company, ACE and ACE Bermuda are entering into this Agreement to set forth the
terms and conditions applicable to the grant and exercise of such registration
rights.

 

NOW,
THEREFORE, in consideration of the promises and the mutual covenants and agreements
contained therein and herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties hereto,
the Company, ACE and ACE Bermuda hereby agree as follows:

 

Section
1.  Definitions.  In addition to the capitalized terms defined
elsewhere in this Agreement, the following capitalized terms shall have the
following meanings when used in this Agreement:

 

“ACE Entity” means ACE and any and all Subsidiaries of ACE.

 

“Board” means the board of directors of the Company.

 

“Commission” means the U.S. Securities and Exchange Commission.

 

“Common Shares” means the common shares of the Company.

 

 

“Effective Period” means the period beginning on the Shelf Effective
Date and ending on the earlier of (1) 36 months after the Shelf Effective Date
or (2) the date that the Holders have received an opinion of counsel to the
Company, in form and substance reasonably acceptable to the Holders, that the
Holders can sell all of their Registrable Shares pursuant to Rule 144
promulgated under the Securities Act without regard to the volume limitations
contained in paragraph (e) of such Rule.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Holder” means each of the ACE Entities that holds Common Shares and
their respective successors and assigns contemplated by Section 13 hereof.

 

“Person” means a natural person, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity, or a
governmental entity or any department, agency or political subdivision thereof.

 

“Registrable Shares” means, at any time, the Common Shares owned by the
ACE Entities and Common Shares transferred by the ACE Entities in accordance
with Section 13 hereof.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shelf Effective Date” means the date that the Shelf Registration
Statement is declared effective by the Commission.

 

“Subsidiary” of any Person means any other Person of which securities
or other ownership interests representing 50% or more of the ordinary voting
power are, at the time as of which any determination is being made, owned or
controlled by such Person or one or more Subsidiaries of such Person, or by
such Person and one or more Subsidiaries of such Person.

 

“Target Effective Date” means the date that is 90 days after the Target
Filing Date.

 

“Target Filing Date” means 30 days following receipt of written notice
from ACE pursuant to Section 2(b).

 

Section 2.  Demand
Registrations.

 

(a)                                  Long-Form
Registrations. Subject to the terms of this Agreement, the Holders of at least
a majority of the Registrable Shares may, at any time beginning 180 days after
the effective date of the Registration Statement for the Public Offering,
request registration under the Securities Act on Form S-1, Form S-2 or any
similar long-form registration, of Registrable Shares with an expected
aggregate price to the public of at least $5.0 million.  A registration requested pursuant to this
Section 2(a) is referred to as a “Long-Form Demand Registration.” The Company
is required to effect no more than two Long-Form Demand Registrations.

 

(b)                                 Short-Form
Registration. If at any time the Company becomes eligible to register Common
Shares for resale by a Holder thereof on Form S-3 (or any successor short-form
registration statement), it shall promptly give notice thereof to each Holder
and, at any time thereafter, a majority of

 

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the Holders may give written
notice to the Company to register their Registrable Shares for resale on such
Form S-3 (or successor form).  Upon
receipt of such notice, the Company shall prepare and file with the Commission
no later than the Target Filing Date a “shelf registration statement” on Form
S-3 (or successor form) for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, covering all of the
Registrable Shares then owned by the Holders that have notified the Company of
their intention to participate (the “Shelf Registration Statement,” and
collectively with the Long-Form Demand Registration, the “Demand
Registrations”). The Company will use its reasonable best efforts to have the
Shelf Registration Statement declared effective on or before the Target
Effective Date and to keep such Shelf Registration Statement continuously
effective for the Effective Period (or such shorter period which will terminate
when all Registrable Shares covered by such Shelf Registration Statement have
been sold or withdrawn by the Holders, but not prior to the expiration of the
applicable period referred to in Section 4(3) of the Securities Act and Rule
174 thereunder, if applicable). The Company further agrees, if necessary, to
supplement or amend the Shelf Registration Statement, as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or as
reasonably requested (which request shall result in the filing of a supplement
or amendment) by any Holder of Registrable Shares to which such Shelf
Registration Statement relates, and the Company agrees to furnish to the
Holders, their counsel and any managing underwriter copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission.

 

(i)                                     The Company may
require each Holder of Registrable Shares to which such Shelf Registration
Statement relates to furnish to the Company, upon reasonable notice, such
information concerning the Holder and the distribution of the Registrable
Shares as the Company may from time to time reasonably request, upon reasonable
notice.

 

(ii)                                  The Company shall not
be deemed to have satisfied its obligations under this Section 2(b) until the
Shelf Registration Statement has been declared effective by the Commission and
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto (including keeping the Shelf Registration
Statement effective for the Effective Period), provided, however, that if after
it has been declared effective, the offering of Registrable Shares pursuant to
a Shelf Registration Statement is interfered with by any stop order, injunction
or other order or requirement of the Commission or any other governmental
agency or court, such Shelf Registration Statement will be deemed not to have
been effective during the period of such interference until the offering of
Registrable Shares pursuant to such Shelf Registration Statement may legally
resume and the period of time during which sales under the Shelf Registration
Statement were suspended shall be added to the Effective Period. If a
registration requested pursuant to this Section 2(b) is deemed not to have been
effected, then the Company shall continue to be obligated to effect a
registration pursuant to this Section 2(b).

 

(c)                                  Notice
of Demand Registrations.  Whenever
securities of the Company are to be registered under the Securities Act pursuant
to a Demand Registration, the Company will give prompt written notice (and in
any event within three business days after its receipt of notice of any
exercise of the demand registration rights pursuant to this Section 2 and at
least 20 days prior to the filing of any registration statement) to the Holders
of its intention to effect such a registration and will include in such
registration all Registrable Shares with respect to which the Company has
received written

 

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requests for inclusion therein
within 10 days after the Company’s notice has been given, subject to Section
2(e) hereof.

 

(d)                                 Selection
of Underwriters.  If the Holders so
elect, the offering of Registrable Shares pursuant to a Demand Registration
shall be in the form of an underwritten offering.  If they so elect, the Holders participating in such Demand
Registration shall select one or more nationally recognized firms of investment
bankers reasonably satisfactory to the Company to act as the book-running
managing underwriter or underwriters in connection with such offering and shall
select any additional investment bankers and managers reasonably satisfactory
to the Company to be used in connection with the offering.

 

(e)                                  Priority
on Demand Registrations. If a Demand Registration is an underwritten public
offering and the managing underwriters advise the Company in writing that, in
their opinion, the inclusion of the number of Registrable Shares and other
securities requested to be included in such offering creates a substantial risk
that the price per share of the Common Shares will be reduced, the Company will
include in such Registration, prior to the inclusion of any securities which
are not Registrable Shares, the number of Registrable Shares requested to be
included which in the opinion of such underwriters can be sold in such offering
without creating such a risk, allocated pro rata among the participating
Holders (or, if an ACE Entity is a participating Holder, as designated by ACE).

 

(f)                                    Restrictions
on Registrations. The Company may postpone for a reasonable period not to
exceed 90 days the filing or the effectiveness of a registration statement for
a Demand Registration if the Company shall furnish to the Holders of
Registrable Shares to be included in such Demand Registration a certificate
signed by the Company’s Chief Executive Officer stating that the Board has
determined reasonably and in good faith that such filing would require
disclosure of a material fact concerning the Company (which the Company is not
otherwise required to disclose) that would have a material adverse effect on
the Company or adversely affect any plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than in the ordinary
course of business) or capital stock or other securities of any other entity,
or any financing, acquisition, reorganization, merger, consolidation, tender
offer or other significant transaction; provided, that the right to postpone
may not be exercised for more than 120 days in any 12-month period. The Company
will not include in any Demand Registration that is an underwritten offering
any securities which are not Registrable Shares without the written consent of
the Holders of a majority of the Registrable Shares to be included in such
registration.

 

Section 3.  Piggyback
Registrations.

 

(a)                                  Right
to Piggyback.  Whenever Common Shares of
the Company are to be registered under the Securities Act (other than pursuant
to a Demand Registration and other than pursuant to a registration statement on
Form S-4 or Form S-8 or successor forms) and the registration form to be used
may be used for the registration of Registrable Shares (a “Piggyback
Registration”), the Company will give prompt written notice (and in any event
within three business days after its receipt of notice of any exercise of
demand registration rights by holders of the Company’s securities other than
the Registrable Shares and at least 20 days prior to the filing of any
registration statement) to the Holders of its intention to effect such a
registration and will include in such registration all Registrable Shares with
respect to which the Company has received written requests for inclusion
therein within 10 days

 

4

 

after the Company’s notice has
been given, subject to Sections 3(b) and 3(c) hereof.  The Company will have the right to select the managing
underwriters in any underwritten Piggyback Registration in which the Company is
selling Common Shares.  If a Holder
desires to include such Holder’s Registrable Shares in a Piggyback Registration
that is an underwritten offering, such Holder shall, as a condition to
including such Holder’s Registrable Shares, enter into an underwriting
agreement containing customary terms and conditions, including customary
representations and indemnities.

 

(b)                                 Priority
on Primary Registrations.  If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company that in their opinion
the number of securities requested to be included in such offering in the
registration creates a substantial risk that the price per share of the Common
Shares will be reduced in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Shares requested to be included in such registration,
allocated pro rata among the participating Holders (or, if an ACE Entity is a
participating Holder, as designated by ACE), and (iii) third, other securities
requested to be included in such registration.

 

(c)                                  Priority
on Secondary Registrations.  If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of the Company’s securities (an “Initiating Securityholder”), and the
managing underwriters advise the Company that in their opinion the inclusion of
the number of securities requested to be included in such offering creates a
substantial risk that the price per share of the Common Shares will be reduced
in such offering, the Company will include in such registration (i) first, the
Registrable Shares requested to be included in such registration, allocated pro
rata among the participating Holders (or, if an ACE Entity is a participating
Holder, as designated by ACE), and (ii) second, the securities to be offered by
the Initiating Securityholder and the Company in such amounts as agreed upon
between the Initiating Securityholder and the Company.

 

(d)                                 Other
Registrations.  If the Company has
previously filed a registration statement which includes Registrable Shares
pursuant to Section 2 or pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, the Company will not file or
cause to be effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-4 or Form S-8 or
successor forms), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of 90 days has elapsed from the
effective date of such previous registration, without the prior consent of the
Holders of a majority of the Registrable Shares covered by such previous
registration statement.

 

Section
4.  Holdback Agreements.  (a) 
Unless the underwriters managing the registered public offering
otherwise agree, (i) the Company will not effect any public sale or
distribution of its equity securities or any securities convertible into or
exchangeable or exercisable for such securities during the seven days prior to
and during the 90-day period beginning on the effective date of the
underwriting agreement relating to any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to a registration on Form S-4 or Form S-8 or successor
forms) (the “Holdback Period”).

 

(b)                                 Unless
the underwriters managing the registered public offering otherwise agree, no
Holder will effect any public sale or distribution of the equity securities of
the Company held by such

 

5

 

Holder (including sales
pursuant to Rule 144), or any securities convertible into or exchangeable or
exercisable for such securities, or engage in any hedging transactions relating
to the same, during the Holdback Period relating to an underwritten Demand
Registration or an underwritten Piggyback Registration.

 

5.  Registration Procedures.

 

(a)                                  Whenever
a Holder has requested that any Registrable Shares be registered pursuant to
the terms of this Agreement, the Company will use its best efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:

 

(i)                                     prepare and file
with the Commission a registration statement on the appropriate form with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective as soon as practicable after such
filing;

 

(ii)                                  prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective and such prospectus usable and to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement until such time as the
Registrable Shares registered thereunder have been disposed of in accordance
with the intended methods of disposition by the sellers thereof set forth in
such registration statement; provided that, at least five business days prior
to filing a registration statement or prospectus or any amendments or
supplements thereto, excluding documents incorporated by reference after the
initial filing of the registration statement, the Company shall furnish to the
Holders of the Registrable Shares covered by such registration statement (the
“Selling Holders”), Selling Holders’ counsel and the underwriters, if any,
draft copies of all such documents proposed to be filed, which documents will
be subject to the review of such Holders’ counsel and the underwriters, if any,
and the Company will not, unless required by law, file any registration
statement or amendment thereto or any prospectus or any supplement thereto to
which Holders of at least a majority of the Registrable Shares covered thereby
(the “Objecting Party”) shall reasonably object, pursuant to notice given to
the Company prior to the filing of such amendment or supplement (the “Objection
Notice”) and no later than five business days after receipt of the documents to
which the Objection Notice relates. The Objection Notice shall set forth the
objections and the specific areas in the draft documents where such objections
arise. The Company shall have five business days after receipt of the Objection
Notice to correct such deficiencies to the satisfaction of the Objecting Party,
and will notify each Selling Holder of any stop order issued or threatened by
the Commission in connection therewith and shall use its best efforts to
prevent the entry of such stop order or to remove it at the earliest possible
moment if entered;

 

(iii)                               furnish to each Selling
Holder and the underwriters of the securities being registered such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or
underwriters may

 

6

 

reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such Selling Holder or the sale of such securities
by such underwriters;

 

(iv)                              use
its reasonable best efforts to comply with all applicable rules and regulations
of the Commission and make generally available to the security holders as soon
as practicable after the effective date of the applicable registration
statement an earnings statement satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 promulgated thereunder;

 

(v)                                 use its reasonable
best efforts to register or qualify such Registrable Shares under such other
securities or “blue sky” laws of such jurisdictions as any Selling Holder
reasonably requests and do any and all other acts and things which may be
necessary or desirable to enable such seller to consummate the public sale or
other disposition in such jurisdictions of the Registrable Shares owned by such
Selling Holder (provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph or consent to
general service of process in any such jurisdiction);

 

(vi)                              cause all such
Registrable Shares to be listed on each securities exchange on which similar
securities issued by the Company are then listed;

 

(vii)                           enter into customary
agreements (including underwriting agreements) and take all such other actions
as a Selling Holder or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Shares;

 

(viii)                        make available for inspection
by the Selling Holders, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent designated by any such Selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company’s officers, directors, employees and independent accountants
to supply all information reasonably requested by any such Selling Holder,
underwriter, attorney, accountant or agent in connection with such registration
statement; provided, however, that any such records, documents, properties and
information provided by the Company that is designated in writing by the
Company in good faith as confidential at the time of delivery of such records,
documents, properties or information, as applicable, shall be kept confidential
by all such Persons unless (x) disclosure thereof is made in connection with a
court proceeding or required by law (provided, however that each such Person
shall, upon learning that disclosure of such records, documents, properties or
information, as applicable, is sought in a court proceeding or required by law,
give notice to the Company to allow the Company to undertake appropriate action
to prevent disclosure at the Company’s sole expense), or (y) such records,
documents, properties or information, as applicable, has previously been made
or becomes available to the public generally through the Company or through a
third party without an accompanying obligation of confidentiality;

 

(ix)                                cause
the Company’s officers, directors and employees to participate in marketing
efforts as reasonably requested by the underwriters, including participating in
“roadshow” meetings with potential investors;

 

7

 

(x)                                   notify each Selling
Holder, promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming apart of such registration statement has been filed;

 

(xi)                                notify each Selling
Holder of any request by the Commission for the amending or supplementing of
such registration statement or prospectus or for additional information;

 

(xii)                             prepare and file with the
Commission, promptly upon the request of any Selling Holder, any amendments or
supplements to such registration statement or prospectus which, in the
reasonable opinion of counsel selected by such Selling Holder, is required
under the Securities Act or Exchange Act or the rules and regulations
thereunder in connection with the distribution of Registrable Shares by such
Selling Holder;

 

(xiii)                          prepare and promptly file
with the Commission and promptly notify each Selling Holder of such Registrable
Shares of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;

 

(xiv)                         at the request of any Selling
Holder in connection with an underwritten offering, furnish on the date or
dates provided for in the underwriting agreement a customary opinion of
counsel, addressed to the underwriters and the Holders, covering such matters
as such underwriters and Holders may reasonably request;

 

(xv)                            obtain “cold comfort”
letters and updates thereof from the independent certified public accountants
of the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each Selling
Holder (provided such Selling Holder furnishes the accountants with such
representations as the accountants customarily require in similar situations)
and the underwriters, if any, in customary form and covering matters of the
type customarily covered in “cold comfort” letters in connection with
underwritten offerings; and

 

(xvi)                         deliver such documents and
certificates as may be reasonably requested by the Selling Holders and the
underwriters, including those to evidence compliance with any customary
conditions contained in the underwriting agreement.

 

(b)                                 The
Company may require the Holders to furnish to the Company such information
regarding the distribution of such securities and such other information
relating to the Holders participating in such distribution and the ownership by
the Holders of Registrable Shares as the Company may from time to time
reasonably request in writing.  Each
Holder shall furnish such

 

8

 

information to the Company and
cooperate with the Company as reasonably necessary to enable the Company to
comply with the provisions of this Agreement.

 

Section 6.  Registration
Expenses.  All expenses incident to
the Company’s performance of or compliance with this Agreement, including, but
not limited to, all registration and filing fees, fees and expenses of
compliance with federal, state and foreign securities laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the
Company and its independent certified public accountants, underwriters
(excluding discounts and commissions attributable to the Registrable Shares
included in such registration) and other Persons retained by the Company (all
such expenses being herein called “Registration Expenses”), will be borne by the
Company. In addition, the Company will pay its internal expenses (including,
but not limited to, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance obtained by the
Company and the expenses and fees for listing the securities to be registered
on each securities exchange.  In
addition, the Company shall reimburse the Holders for the reasonable fees and
disbursements of one firm of legal counsel in connection with any registration
under this Agreement.

 

Section 7.  Indemnification.

 

(a)                                  The
Company agrees to indemnify, to the fullest extent permitted by law, each
seller of Registrable Shares, its officers and directors and each Person who
controls such seller (within the meaning of the Securities Act or the Exchange
Act) from and against all losses, claims, damages, liabilities and expenses
(including, but not limited to, reasonable attorneys’ fees except as limited by
Section 7(c)) arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement,
preliminary prospectus or prospectus, or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or any violation by
the Company of any Federal or state securities laws, except insofar as the same
are caused by or contained in any information furnished in writing to the
Company by such seller expressly for use therein or by such seller’s failure to
deliver a copy of the prospectus or any amendments or supplements thereto after
the Company has furnished such seller with a sufficient number of copies of the
same.  In connection with an
underwritten offering, the Company will indemnify the underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act or the Exchange Act) to the same extent as
provided above with respect to the indemnification of the sellers of
Registrable Shares.  The reimbursements
required by this Section 7(a) will be made by periodic payments during the
course of the investigation or defense, promptly after bills are received or
expenses incurred.

 

(b)                                 In
connection with any registration statement in which a seller of Registrable
Shares is participating, each seller will furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any such registration statement or prospectus and, to the fullest extent
permitted by law, will indemnify the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act
or the Exchange Act) from and against any losses, claims, damages, liabilities
and expenses (including, but not limited to, reasonable attorneys’ fees except
as limited by Section 7(c)) resulting from any untrue statement or alleged
untrue statement of a material fact contained in the registration statement,
preliminary prospectus or

 

9

 

prospectus, or any amendment
thereof or supplement thereto, or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission is contained in any information so
furnished in writing by such seller; provided that the obligation to indemnify
will be several, not joint and several, among such sellers of Registrable
Shares, and the liability of each such seller of Registrable Shares will be in
proportion to the number of Registrable Shares sold by each such seller divided
by the total number of Registrable Shares included in such registration
statement, and provided further that such liability will be limited to, in any
event, the net amount received by such seller from the sale of Registrable
Shares pursuant to such registration statement.

 

(c)                                  If
any action is brought in respect of which indemnity may be sought pursuant to
this Agreement, the Person seeking indemnification (the “indemnified party”)
shall promptly notify the Person against whom indemnification is sought (the
“indemnifying party”) in writing of the institution of such action (but the
failure so to notify will not relieve the indemnifying party from any liability
that it may have to the indemnified party under this Section 7 to the extent
the indemnifying party is not materially prejudiced as a result thereof, and in
no event shall it relieve the indemnifying party from any liability it may have
otherwise than pursuant to this Section 7), and the indemnifying party shall
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party or parties and payment of
expenses.  The indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
indemnified party or parties unless (i) the employment of such counsel shall have
been authorized in writing by the indemnifying party, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party or parties within a reasonable time or (iii) such indemnified
party or parties shall have reasonably concluded (based on the advice of
counsel) that there may be defenses available to it or them which are different
from or additional to those available to the indemnifying party and may present
a conflict for counsel representing the indemnified party or parties and the
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party
or parties), in any of which events such fees and expenses shall be borne by the
indemnifying party and paid as incurred (it being understood, however, that the
indemnifying party shall not be liable for the fees and expenses of more than
one separate counsel (in addition to local counsel) for the indemnified parties
in any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties to such action).  Anything in this paragraph to the contrary
notwithstanding, the indemnifying party shall not be liable for any settlement
effected without its written consent unless the indemnifying party shall have
failed to assume the defense of such action or reimburse the indemnified party
for fees and expenses of counsel as contemplated by this Section 7(c) within 30
days after receipt by the indemnifying party of the request therefor.  An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment in any action in respect of which
indemnification may be sought hereunder unless such settlement, compromise or
consent includes an unconditional release of the indemnified parties from all
liability arising out of action.

 

(d)                                 If
the indemnification provided for in this Section is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
losses, claims, damages or liabilities referred to herein, the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall to the
fullest extent permitted by applicable law contribute to the amount paid or

 

10

 

payable by such indemnified
party as a result of such loss, claim, damage or liability in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on
the one hand and of the indemnified party on the other in connection with the
matters that resulted in such loss, claim, damage or liability, as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact related to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement of omission;
provided, that in no event shall the amounts payable in indemnity by a Holder
under Section 7 exceed the net proceeds received by such Holder in the
registered offering out of which such indemnification arises. No party guilty
of fraudulent misrepresentation under Section 11(f) of the Securities Act shall
be entitled to contribution under this Section 7(d).

 

(e)                                  Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten pubic offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.

 

(f)                                    The
indemnification provided for under this Agreement will remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
party or any officer, director or controlling Person of such indemnified party
and will survive the transfer of securities.

 

Section 8.  Compliance with
Rule 144.  At any time and from time
to time after the Company has a class of securities registered under Section 12
of the Exchange Act, the Company will (i) make available to the public and the
Holders such information as will enable the Holders to make sales pursuant to
Rule 144 promulgated under the Securities Act, and (ii) file with the
Commission in a timely manner all reports and other documents required of the
Company under the Exchange Act.

 

Section 9.  Underwritten
Registrations.  Each Holder shall
agrees that, in connection with any underwritten offering, such Holder will (a)
sell its Registrable Shares on the basis provided in any underwriting
arrangements governing such underwritten offering and (b) complete and execute
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements.

 

Section 10.  Adjustments
Affecting Registrable Shares.  The
Company will not knowingly take any action, or knowingly permit any change to
occur, with respect to its securities which would materially adversely affect
the ability of the Holders to include Registrable Shares in a registration
undertaken pursuant to this Agreement or which would materially adversely
affect the marketability of such Registrable Shares in any such registration.

 

Section 11.  Remedies.
Any Person having rights under any provision of this Agreement will be entitled
to enforce such rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all other rights granted
by law.

 

11

 

Section 12.  Amendments and
Waivers.  Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended or
waived at any time only by the written agreement of the Company and ACE, and
ACE Bermuda.  Any waiver, permit,
consent or approval of any kind or character on the part of any Holders of any
provision or condition of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in writing.

 

Section 13.  Successors and
Assigns.  The rights to cause the
Company to register Registrable Shares granted pursuant to this Agreement may
be transferred or assigned by any Holder to a transferee or assignee that
acquires from such Holder and any other Holder an amount of Registrable Shares
equal to at least 5% of the Common Shares then outstanding, provided, however,
that the transferee or assignee of such rights assumes the obligations of such
transferor or assignor, as the case may be, under this Agreement and that such
transferee or assignee executes and delivers a copy of this Agreement to the
Company.

 

Section 14.  Termination.  Except as otherwise provided in this
Agreement and except for the provisions of Section 7, the rights of a Holder
under this Agreement shall remain in effect with respect to the Registrable
Shares of such Holder until such Registrable Shares (i) have been sold under an
effective registration statement; (ii) have been sold to the public pursuant to
Rule 144 under the Securities Act; or (iii) may be resold, without regard to
the volume limitations, under Rule 144 under the Securities Act.

 

Section 15.  Entire Agreement.  This Agreement constitutes the entire
agreement of the parties concerning the matters referred to herein, and
supersedes all prior agreements and understandings.

 

Section 16.  Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.

 

Section 17.  Descriptive
Headings.  The descriptive headings
of this Agreement are inserted for convenience of reference only and do not
constitute a part of and shall not be utilized in interpreting this Agreement.

 

Section 18.  Notices. Any
notices required or permitted to be sent hereunder shall be delivered
personally, or mailed, certified mail, return receipt requested, or delivered
by overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be deemed
to have been given upon receipt, if delivered personally, or mailed, or one
business day after delivery to the courier, if delivered by overnight courier
service:

 

If to the Company, to:

 

Assured Guaranty Ltd.

30 Woodbourne Avenue

Hamilton HM08 Bermuda

Attention: General Counsel

 

12

 

If to an ACE Entity:

 

ACE Limited

ACE Global Headquarters

17 Woodbourne Avenue

Hamilton HM08 Bermuda

Attention: General Counsel

 

If to any other Holder:

 

To the address specified in writing by such
Holder.

 

Section 19.  Governing Law;
Dispute Resolution.  (a)  The validity, meaning and effect of this
Agreement shall be determined in accordance with the laws of New York
applicable to contracts made and to be performed in that state.

 

(b)                                 Mandatory Arbitration.  The parties hereto shall promptly submit any dispute, claim, or
controversy arising out of or relating to this Agreement and/or the
transactions contemplated hereunder, including effect, validity, breach,
interpretation, performance, or enforcement (collectively, a “Dispute”) to
binding arbitration in New York, New York at the offices of Judicial
Arbitration and Mediation Services, Inc. (“JAMS”) before an arbitrator (the
“Arbitrator”) in accordance with JAMS’ Arbitration Rules and Procedures and the
Federal Arbitration Act, 9 U.S.C. Section 1, et seq. The Arbitrator shall be a
former federal judge selected from JAMS’ pool of neutrals.  The parties agree that, except as otherwise
provided herein respecting temporary or preliminary injunctive relief, binding
arbitration shall be the sole means of resolving any Dispute.

 

(c)                                  Costs.  The costs of the arbitration proceeding and
any proceeding in court to confirm or to vacate any arbitration award or to
obtain temporary or preliminary injunctive relief as provided in Section 19(d)
hereof, as applicable (including, without limitation, actual attorneys’ fees
and costs), shall be borne by the unsuccessful party and shall be awarded as
part of the Arbitrator’s decision, unless the Arbitrator shall otherwise
allocate such costs in such decision.

 

(d)                                 Injunctive
Relief.  Nothing herein prevents
the parties hereto from seeking or obtaining temporary or preliminary
injunctive relief in a court for any breach or threatened breach of any provision
hereof pending the hearing before and determination of the Arbitrator.  The parties hereby agree that they shall
continue to perform any and all obligations under this Agreement pending the
hearing before and determination of the Arbitrator, it being agreed and
understood that the failure to so perform will cause irreparable harm to each
party and its affiliates and that the putative breaching party has assumed all
of the commercial risks associated with such breach or threatened breach of any
provision hereof by such party.

 

(e)                                  Discovery.  The parties shall be entitled to reasonably
discovery, including a production of non-privileged documents and answers to a
reasonable number of interrogatories. 
Depositions may be ordered by the arbitrator upon a showing of need.

 

13

 

(f)                                    Courts.  The parties agree that the State and Federal
courts in The City of New York shall have jurisdiction for purposes of
enforcement of their agreement to submit Disputes to arbitration and of any
award of the Arbitrator.

 

Section 20.  Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original, and such
counterparts together shall constitute one instrument.  Each party shall receive a duplicate
original of the counterpart copy or copies executed by it and the Company.

 

[Intentionally left blank]

 

14

 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement on the date first set
forth above.

 

	
   

  	
  ASSURED GUARANTY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
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  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ACE LIMITED

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
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  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ACE BERMUDA INSURANCE LTD.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

 

15Exhibit 10.11

 

FORM OF
TAX SHARING
AGREEMENT

 

This TAX SHARING AGREEMENT (the ‘Agreement”),
dated March 
        , 2004, is by and among
Assured Guaranty Limited (“AGL”), a Bermuda corporation having its principal
office at 30 Woodbourne Avenue, Hamilton, Bermuda,  ACE Financial Services, Inc. (“AFS”), a Delaware corporation
having its principal office at 1325 Avenue of the Americas, New York, New York
10018, ACE Prime, Inc (“ACE Prime”), a Delaware corporation having its
principal office at 1209 Orange Street, Wilmington, Delaware, 19801, Assured
Guaranty US Holdings, Inc (“AG US Holdings”), a Delaware corporation having its
principal office at 1325 Avenue of the Americas, New York, New York 10018, ACE
Guaranty Corp. (“AGC”), a Maryland Corporation having its principal office at
1325 Avenue of the Americas, New York, New York 10018, AGR Financial Products
(“AGR FP”), a New York Corporation having its principal office at 1325 Avenue
of the Americas, New York, New York 10018, and ACE Risk Assurance (“ARA”), a New
York Corporation having its principal office at 1325 Avenue of the Americas,
New York, New York 10018 .

 

WITNESSETH:

 

WHEREAS, AG US Holdings,
AGC, AGR FP, and ARA have been members of an affiliated group of corporations
filing consolidated federal income tax returns with ACE Prime (the common
parent) within which AFS is the common parent of a subgroup comprised of AFS,
AG US Holdings, AGC, AGR FP and ARA;

 

WHEREAS, AGL is
acquiring all of the outstanding stock of AG US Holdings (the “Transfer”), the
direct parent of AGC and AGR FP, pursuant to a Master Separation Agreement
dated the date hereof among AFS and AGL (the “MSA”);

 

WHEREAS, upon
consummation of the Closing (defined below), AGL and AG US Holdings and
Subsidiaries will become members of a worldwide affiliated group of
corporations (the “Buyer Group”), of which AG US Holdings will be the common
parent of the affiliated US group within the Buyer Group,  and AG US Holdings and subsidiaries will
cease to be a member of the ACE Prime affiliated group which includes the AFS
subgroup;

 

WHEREAS, AFS and each of the AG US Holdings
and Subsidiaries were a party to the Amended and Restated Agreement Concerning
Filing of Consolidated Federal Income Tax Returns (“AFS Tax Sharing Agreement”)
dated November 13, 1995 with respect to the AFS subgroup included within the
ACE Prime consolidated US group; and

 

WHEREAS, the parties wish to assign
responsibility for the preparation and filing of tax returns; to set forth the
methodology for determining their respective liabilities for

 

 

Taxes (defined below) and for
allocating such liabilities among themselves for all Taxes that may be owed to
or assessed by the Internal Revenue Service or any other comparable state or
local governmental authority attributable to the periods before, after and
including the Closing Date (defined below); to establish procedures for
reimbursing one party for Taxes allocated to the other under this Agreement;
and to provide for certain tax elections and for the division of any tax benefits
which may arise as a result of such elections;

 

NOW THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth, the
parties hereby agree as follows:

 

1. Definitions. For
purposes of this Agreement, the following terms shall be defined as follows:

 

1.1           “AG US Holdings and Subsidiaries” means AG US Holdings, its
direct subsidiaries AGC and AGR FP, and its indirect subsidiary ARA.

 

1.2           “Buyer” means AGL, and any successors thereto.

 

1.3           “Closing” means the closing of the Transfer and the sale by AFS
of the stock of AGL to underwriters for public sale as described in the
Registration Statement on Form S-1 filed
            .

 

1.4           “Closing Date” means the date on which the Closing occurs.

 

1.5           “Code” means the Internal Revenue Code of 1986, as amended.

 

1.6           “Current
Amount” has the meaning specified in Section 8 hereof.

 

1.7           “Election”
has the meaning specified in Section 4 hereof.

 

1.8           “Estimated
Tax Payment Date” means any of the dates specified in Section 6655 of the Code
for the payment of Buyer’s or AG US Holdings and Subsidiaries’ estimated
federal income tax.

 

1.9           “Returns”
means all returns, declarations, reports, statements and other documents
required to be filed with a Tax Authority in respect of Taxes, and the term
“Return” means any one of the foregoing Returns.

 

1.10         “Tax
Authority” means the Internal Revenue Service or any other comparable state,
local or foreign governmental authority.

 

1.11         “Tax
Benefit Base Amount” for any Taxable Period means (i) any increase in an amortization,
depreciation or loss deduction in such

 

 

Taxable Period
or any decrease in an item of income or gain in such Taxable Period arising as
a result of a basis increase occurring as a result of the Election, including
any basis increase arising from payments made pursuant to this Agreement, or
(ii) any increase in any net operating or capital loss carryover or carryback
or tax credit which is carried to such Taxable Period and which arose or arises
in a prior or subsequent Taxable Period as a result of any such increase in
deduction or decrease in income or gain in such prior or subsequent Taxable
Period.

 

1.12         “Tax Benefit Issue” has
the meaning specified in Section 9.3.1
hereof.

 

1.13         “Tax Benefits” means, for
any Taxable Period, the excess, if any, of (a) the total amount of federal,
state, local and foreign income and franchise taxes, respectively, that would
be payable by AG US Holdings and Subsidiaries in respect of such Taxable Period
if the Tax Benefit Base Amount for such Taxable Period were not taken into
account (“Notional Tax Liability”), over (b) the total amount of federal,
state, local and foreign income and franchise taxes, respectively, actually
payable by AG US Holdings and Subsidiaries in respect of such Taxable Period
after taking into account the Tax Benefit Base Amount for such Taxable Period
(“Actual Tax Liability”). Any Tax Benefits hereunder shall be determined using
the method of reporting (i.e. consolidated, combined or separate returns)
actually utilized by AG US Holdings and Subsidiaries or the particular member
of the AG US Holdings US affiliated Group. In any Taxable Period ending after
the Closing, the Tax Benefits shall be no less than the Tax Benefits calculated
without giving effect to any items of income, expense, loss, deduction or
credit of, or attributable to any businesses, assets or liabilities other than
(i) historic businesses conducted by AG US Holdings and Subsidiaries as of the
Closing, (ii) any assets held by AG US Holdings and Subsidiaries prior to the Closing,
(iii) any assets acquired by AG US Holdings and Subsidiaries from the ACE Prime
Group subsequent to the Closing, and (iv) any liabilities of AG US Holdings and
Subsidiaries as of the Closing or incurred or assumed by AG US Holdings and
Subsidiaries with respect to
any asset described in (iii) above.

 

1.14         “Taxable Period” means any taxable year ending after the date of
the Closing.

 

1.15         “Taxes” means any and all U.S. federal, state, local and foreign
taxes,

 

 

assessments or similar charges, including
interest, additions to tax, and penalties, on, based on, measured by or with
respect to income, net worth or capital, and the term “Tax” means any one of
the foregoing Taxes.

 

1.16         “Underpayment
Rate” has the meaning specified in Section 9.3 hereof.

 

2. Tax Returns. AFS agrees to prepare and
file or cause to be prepared and filed timely any and all applicable Returns in
respect of AG US Holdings and Subsidiaries that (i) are required to be filed on
or before Closing; or (ii) are required to be filed after Closing that (A) are
required to include, on a consolidated or combined basis, the operations of AG
US Holdings and Subsidiaries for any tax period ending on or before Closing; or
(B) are required to be filed by AG US Holdings and Subsidiaries on a separate
return basis for any tax period ending on or before Closing. To the extent
requested by AFS in writing, AG US Holdings and Subsidiaries shall participate
in the filing of and, at the direction of AFS, shall file any required separate
basis Returns with respect to any period that ends on or before Closing. The
Buyer shall prepare or cause to be prepared the schedules in respect of AG US
Holdings and Subsidiaries containing the information necessary for AFS to
prepare any consolidated or combined returns. The Buyer shall also prepare or
cause to be prepared and shall file or cause to be filed all other Returns
required of AG US Holdings and Subsidiaries, or in respect of its activities,
for any Taxable Period ending after Closing that includes the operations of AG
US Holdings and Subsidiaries prior to Closing.

 

3. Obligation for Payment of Taxes.  AFS and AG US Holdings and its Subsidiaries
agree to the termination of the AFS Tax Sharing Agreement as of the Closing
date subject to the following provisions. 
The terms of the AFS Tax Sharing Agreement, including paragraphs 4 and 5
thereof regarding effects of termination, shall be adhered to for the timely
payment of Taxes covered thereunder subject to the following modifications:

 

(i)            AFS,  AGL and AG US Holdings and its Subsidiaries
agrees that the tax liability or benefit associated with any deferred
inter-company transactions under Internal Revenue Code Section 267 or 1502
triggered as a result of the Transfer will be the sole liability or benefit of
AFS.

 

(ii)           AFS,
AGL and AG US Holdings and its Subsidiaries agree that the tax liability
associated with the recapture of AGC’s contingency reserve deductions
previously taken for income tax purposes that will be triggered as a result of
the Election in Section 4 will be the sole liability of AFS.  Any proceeds associated with the sale of the
Tax and Loss bonds will be retained by AGC.

 

(iii)          All
Taxes associated with the Election in Section 4 will be the responsibility of
AFS.

 

 

The terms under the AFS Tax
Sharing Agreement relating to the payment of the tax liability associated with
the tax period ending on the Closing Date (subject to the above modifications)
will continue until the final cash settlement for the period including the
Closing Date is completed based on a filed tax return for each of AG US
Holdings and Subsidiaries as included in the ACE Prime, Inc. and Subsidiaries
consolidated income tax return which includes the period ending on the Closing
Date.  All other Taxes will be the
responsibility of Buyer. The parties hereto will, to the extent permitted by
applicable law, elect with the relevant Tax Authority to treat for all purposes
the Closing Date as the last day of a taxable period of each of AG US Holdings
and its subsidiaries, and such period shall be treated as a “Short Period” for
purposes of this Agreement. In any case where applicable law does not permit AG
US Holdings and its subsidiaries to treat the Closing Date as the last day of a
Short Period, then for purposes of this Agreement, the portion of such Taxes
that is attributable to the operations of AG US Holdings and its subsidiaries
for such Interim Period (as defined below) shall be, the Taxes that would be
due with respect to the Interim Period, if such Interim Period were a Short
Period. “Interim Period” means with respect to any Taxes imposed on AG US
Holdings and its subsidiaries on a periodic basis for which the Closing Date is
not the last day of a Short Period, the period of time beginning on the first
day of the actual taxable period that includes (but does not end on) the
Closing Date and ending on and including the Closing Date.

 

4. Election Under Section 338 (h) (10). Buyer
and AFS shall timely make or cause to be made a valid joint election under
Section 338(h) (10) of the Code and under any comparable provisions of state
law in respect of the Transfer so as to have the transfer treated as a deemed
sale of assets of AG US Holdings and each of its subsidiaries and the deemed
asset sale gain recognized in ACE Prime’s consolidated federal income tax
return and any relevant state income or franchise tax returns that include the
Short Period for AG US Holdings and each of its subsidiaries ending on the
Closing Date (collectively, the “Election”).

 

5. Valuation and Allocation of Consideration.
The parties agree that the “aggregate deemed sale price” and “adjusted
grossed-up basis” (as such terms are defined in the regulations under Section
338 of the Code) with respect to the Transfer and Election shall be determined
by AFS, such determination to be made, in part, based on allocable proceeds of
the sales price per share of the common stock of AGL in the initial public
offering of such stock. The value of the consideration shall be allocated among
the assets of AG US Holdings and each of its subsidiaries as indicated on a
schedule (the “Tax Allocation Schedule”) to be prepared by AFS and delivered to
AG US Holdings and each of its subsidiaries no later than sixty days prior to
the date the Election must be filed, subject to adjustment by AFS to the extent
necessary to make such allocations consistent with any post-Closing
adjustments. The parties agree that any and all payments made pursuant to this
Agreement with respect to Tax

 

 

Benefits shall be treated as an
adjustment to the “aggregate deemed sale price” and allocated in accordance
with the terms of the Tax Allocation Schedule. Absent a final and unappealable
decision, judgment, decree or other order by any court of competent
jurisdiction or a closing agreement under Section 7121 of the Code to the
contrary, the parties (i) shall be bound by such allocation for purposes of
determining any Taxes and (ii) shall prepare and file all Returns in a manner
consistent with such allocation. In the event that any Tax Authority disputes such
allocation, the party receiving notice of such dispute shall promptly notify
and consult with the other party hereto concerning resolution of such dispute.

 

6. Tax Reporting. AFS and AGL (including the
post election tax returns of AG US Holdings and Subsidiaries) shall file, or
cause to be filed, its respective federal income tax Returns treating the
Transfer as a purchase of the assets of AG US Holdings and Subsidiaries
pursuant to Sections 338(a) and 338(h) (10) of the Code. AFS and AGL (including
the post election tax returns of AG US Holdings and Subsidiaries) shall file,
or cause to be filed, on a similar basis all state and local tax returns to the
extent that such treatment is consistent with such state and local tax law.

 

7. Liability for
Assessments or Refunds. AFS shall pay any assessments for income Taxes incurred
(subsequent to AG US Holdings and Subsidiaries satisfying its obligations under
Section 3) and be entitled to receive all refunds of income Taxes (i) with
respect to all periods ending on or prior to the Closing Date; and (ii) with
respect to any period beginning before the Closing Date and ending after the
Closing Date, but only with respect to the portion of such period up to and
including the Closing Date for which Taxes are allocated to AFS in accordance
with Section 3 above. AFS shall have sole and exclusive discretion at its
expense to contest or not to contest, negotiate and settle proposed adjustments
relating to the inclusion in any Return of the income, deductions, credits, allowances
or other tax items of AG US Holdings and subsidiaries for any period ending
prior to or on the Closing Date.

 

8. Tax Benefit Sharing Payment to AFS.

 

8.1           Estimated Tax Payments.  AG US Holdings and Subsidiaries shall pay to
AFS, on each Estimated Tax Payment Date, an amount equal to the estimated Tax
Benefits for the applicable Taxable Period. For this purpose, 25 percent (or,
in the case of Taxable Periods of less than one year, one divided by the number
of Estimated Tax Payment Dates in such Period) of Tax Benefits as then
estimated for the applicable Taxable Period shall be deemed to accrue and the
applicable percentage thereof set forth in the preceding sentence shall be paid
at each Estimated Tax Payment Date. For the avoidance of doubt, estimated Tax
Benefits shall be calculated utilizing the notional/actual method set forth in
Section 1.13 above and using consistent methods and assumptions between periods
and notional/actual comparisons.

 

 

8.2           Current Amount Adjustment. At the time AG US
Holdings and Subsidiaries or successors files its federal income tax return for
each Taxable Period, to the extent that the amounts paid to AFS pursuant to
Section 8.1 hereof for such Taxable Period exceeded the Tax Benefits for the
applicable Taxable Period (the “Current Amount”), such excess amounts paid
shall be refunded together with interest at the Underpayment Rate from the
close of such Taxable Period by AFS to AG US Holdings. To the extent that the
amounts paid to AFS pursuant to Section 8.1 hereof for such Taxable Period were
less than the Current Amount, such deficit in amounts paid shall be paid to AFS
by AG US Holdings together with interest at the Underpayment Rate from the
close of such Taxable Period.

 

8.3           Tax Computation Assumptions. When allocation
factors are required for any tax computation, the factors used in AG US
Holdings’ most recently filed consolidated Return or the affected member of AG
US Holdings and Subsidiaries most recently filed Returns in the relevant
jurisdictions shall be used.

 

8.4           Subsequent Transactions by Buyer. Buyer
agrees that it shall not enter into any transactions a significant effect of
which is to reduce the amount of the Tax Benefits otherwise payable to AFS
under this Agreement.

 

8.5           Benefit Estimates. AG US Holdings and
Subsidiaries shall prepare and deliver to AFS no less than 60 days prior to the
end of each calendar year, an estimate of the amount of the Tax Benefits that
will be payable to AFS during the immediately following year, such estimate to
be agreed upon by the parties in good faith and subject to the provisions of
Section 9.3.3. AG US Holdings and Subsidiaries shall revise and update each
such estimate on a quarterly basis to be delivered to AFS no less than 15 days
prior to the end of each quarter, such revision or update to be agreed upon by
the parties in good faith and subject to the provisions of Section 9.3.3.

 

8.6           Payments in General. All payments to AFS
pursuant to this Agreement shall be made directly by wire transfer of
immediately available funds prior to 10:30 A.M., New York time, on the date of
payment, to
                            ,
for the account of
                        ,  Account No. 
                        
(or such other account as directed by AFS)

 

8.7           Termination Payment. As promptly as
practicable following close of the fifteenth taxable year of Buyer ending after
the Closing Date, Buyer and AFS shall negotiate in good faith to reach an
agreement which requires Buyer to pay AFS an amount, if any, equal to the then
present value (determined by using the then current Underpayment Rate) of the
aggregate Tax Benefits which AG US Holdings and Subsidiaries would reasonably be expected to
realize as a result of the Election in any taxable year beginning after Buyer’s
fifteenth taxable year ending after the Closing Date, in consideration of Buyer
and AG US Holdings and Subsidiaries being relieved thereafter of its future
obligations under this Section 8.

 

 

9.             Tax Issues Arising After the Closing
Date.

 

9.1           Mutual Cooperation. The parties
agree to consult in good faith and to provide each other with such assistance
as reasonably may be requested in writing by any of them in connection with (i)
the preparation and execution of any Return, (ii) the negotiation and
settlement of any audit or other examination of any Return by any Tax
Authority, or (iii) the handling of any judicial or administrative proceeding
relating to any Tax liability for periods of AG US Holdings and Subsidiaries
prior to the Closing Date. The parties’ general obligation to cooperate shall
require, but not be limited to requiring, each party (i) to notify the other of
any Tax Authority’s initiating an audit, requesting information or proposing
adjustment, or any extension of statutes of limitation and of final determinations
of adjustment, (ii) to preserve records, documents and other information
relevant to liabilities for Taxes until the expiration of the applicable
statute of limitations or extensions thereof and to provide, upon written
request, copies of such records and/or reasonable access thereto, (iii) to make
available without charge at a location determined by Buyer or AG US Holdings
and Subsidiaries during normal working hours, upon written request, personnel
responsible for preparing, maintaining, or explaining information, records and
documents in connection with matters relating to Taxes, and (iv) to execute and
deliver such powers of attorney, consents, and other documents as are necessary
to carry out the intent of this Agreement.

 

9.2           Buyer’s and AG US Holdings and
Subsidiaries’ Discretion to Contest, Negotiate and Settle. Buyer and AG US
Holdings and Subsidiaries’ shall have sole and exclusive discretion to contest
or not to contest, negotiate and settle proposed adjustments relating to the
inclusion in any Return of the income, deductions, credits, allowances or other
tax items of AG US Holdings and Subsidiaries for any period after the Closing
Date, subject to Sections 7 and 9.3 hereof.

 

9.3           Contesting Disputed Tax Benefits.

 

9.3.1 Control
of Proceedings. In the event that the Internal Revenue Service or a state Tax
Authority disputes the existence or amount of the Tax Benefit Base Amount or of
any Tax Benefits, including any challenge to the Tax Allocation Schedule (the
“Tax Benefit Issue”), Buyer or AG US Holdings and Subsidiaries shall contest
the matter on audit, through Internal Revenue Service or state appellate
proceedings and through judicial proceedings. Representatives of AFS shall be
allowed to participate in such proceedings in so far as they relate to the Tax
Benefit Issue and such participation shall be reflected by the grant of
appropriate powers of attorney. Decisions regarding the conduct of such contest
shall be made by AFS or its representatives after consultation with Buyer and
its representatives, provided, however, that ultimate control over contesting
the Tax Benefit Issue, including control over procedural matters that
necessarily relate to all issues being contested (including, without
limitation, choice of forum), shall be exercised in good faith by AFS and its
representatives, and Buyer and AG US Holdings and Subsidiaries shall take any
action as is necessary to effectuate the decisions of AFS. Decisions relating
solely to tax issues unrelated

 

 

to the Tax Benefit Issue shall
be made exclusively by Buyer and its representatives, provided, however, that
such decisions could not reasonably have an adverse tax consequence on the Tax
Benefits Issue. Decisions regarding the settlement of a contest of the Tax
Benefit Issue shall be made jointly by AFS and Buyer and their respective
representatives, provided, however, that if AFS or Buyer declines a settlement
proposal relating to the Tax Benefit Issue that the other wishes to accept, the
contest will continue and the declining party will (i) bear all further contest
costs, (ii) indemnify the party wishing to accept the settlement against any outcome more
adverse than that of the proposed settlement, and (iii) be entitled to all
benefits more advantageous than those of the proposed settlement.

 

9.3.2 Adverse Outcome and Repayment. If, as
the result of a contest subject to Section 9.3.1, Tax Benefits are less than
those taken into account in computing any payments made under Section 8 hereof,
such payments will be recomputed on the basis of such revised Tax Benefits, and
any excess payments shall be refunded by AFS to AG US Holdings and Subsidiaries
together with any related penalties imposed by a Tax Authority. Interest shall
be payable at the rates prescribed for underpayments in Section 6621(a) of the
Code (the “Underpayment Rate”) with respect to Tax Benefits or at the
corresponding state underpayment rate in connection with revisions relating to
state tax revisions.

 

9.3.3 Resolution of Computational Disputes.
If the parties hereto are unable to agree on the amount of the Tax Benefit Base
Amount or of any Tax Benefits reflected in an estimate delivered pursuant to
Section 8.5 (the “Disputed Amount”), the determination of such Disputed Amount
shall be made by an independent firm of certified public accountants jointly
selected by AFS and AG US Holdings and Subsidiaries, whose cost shall be borne
equally by AFS and AG US Holdings and Subsidiaries. Each party shall bear their
own amount of all other costs arising in connection with a dispute under this
Section 9.3.3. If AFS and AG US Holdings and Subsidiaries cannot agree on the
selection of an independent firm of certified public accountants, such firm
will be jointly selected by the firms of certified public accountants that
certify (or selected by the firm of certified public accountants that
certifies) the financial statements of AFS and Buyer and that is other than the
selecting firm(s). Such accountants shall be given access by AFS, Buyer and
their respective subsidiaries to all information necessary to determine the
Disputed Amount, subject to the agreement of such accountants that such
information shall be kept confidential and shall not be released without the
written consent of AFS or Buyer, as appropriate, except as compelled by legal
process. Any amount otherwise due under this Agreement that is a Disputed
Amount shall be paid, together with interest at the Underpayment Rate from the
date on which such payment was originally due, within 10 days of the
determination of such Disputed Amount.

 

9.3.4
Expenses. Except as otherwise provided in this Agreement, fees and expenses
paid to third-party service providers and incurred after the date hereof by
AFS, Buyer or any of their subsidiaries for the purpose of obtaining the Tax
Benefits, including, without limitation, legal and accounting expenses relating
to the resolution of any dispute with any

 

 

Tax Authority regarding a Tax
Benefit Issue or any related activity shall be borne by AFS in the same
percentage as the Tax Benefits in controversy bears to the Tax Benefits paid to
AFS pursuant to this Agreement for such Taxable Period. All other such fees and
expenses shall be borne by Buyer. Notwithstanding the above, the obligation of
any party to bear any portion of such fees or expenses related to service
providers not retained by it shall be contingent upon prior written
approval by such party of the retention of any such advisers.

 

9.4           Attorney’s Fees. AFS on the one hand
and AG US Holdings and Subsidiaries and Buyer on the other hand shall, upon a
breach of this Agreement, in addition to other penalties, damages or
liabilities, be responsible for and shall pay (or cause to be paid) to the
non-breaching party an amount equal to reasonable out-of-pocket attorney’s fees
actually incurred by such party in its efforts to enforce its rights under this
Agreement.

 

10.           Construction. Each of the parties hereto
agree that (i) the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation or construction of this Agreement, and (ii) except as
specifically provided in this Agreement,
no usage of trade, course of dealing, course of performance or enforcement or
surrounding circumstance shall be used in interpreting or construing this
Agreement.

 

11.           Notices. Any notice required under
any provision of this Agreement shall be made in the manner provided in the
section entitled “Notices” in the Stock Agreement.

 

12.           Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
applicable to contracts made and to be performed therein, without effect to its
choice of law.

 

13.           Binding Effect; Successors. This
Agreement shall be effective as of the date of this Agreement and shall apply
to the first taxable year, or portion thereof, beginning on or after the
Closing and shall be binding upon and inure to the benefit of any successor, by
merger, acquisition of assets or otherwise, to any of the parties hereto (including
but not limited to any successor of AFS, AG US Holdings and Subsidiaries or
Buyer succeeding to the tax attributes of AFS, AG US Holdings and Subsidiaries
or Buyer under Section 381 of the Code) , to the same
extent as if such successor had been an original party to the Agreement. In
addition, in the event of any acquisition of the assets of AGC US Holding and
Subsidiaries in which gain or loss is not recognized, in whole or in part, for
federal income tax purposes, AG US Holdings and Subsidiaries and Buyer shall
ensure that any purchaser of such assets shall assume the obligations set forth
in this Agreement. Any other tax sharing agreement other than as referenced in
Section 3, or provision of such tax sharing agreement other than as referenced
in Section 3, among any parties to this Agreement or their predecessors, shall
have no force and effect for any taxable years, or portions thereof, beginning
on or after the Closing.

 

 

14.           Severability. In the event that any
term or provision of this Agreement shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or provision and this
Agreement shall be interpreted and construed as if such term or provision, to
the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.

 

15.           Headings.
The headings in the sections of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.

 

16            Amendments.  This Agreement may not be modified or amended except by agreement
in writing signed by each of the parties hereto.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the date first
above written.

 

 

	
  ACE Financial Services, Inc.

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Assured Guaranty Limited

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Assured Guaranty US Holdings, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ACE Guaranty Corp.

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

	
  AGR Financial Products, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ACE Risk Assurance

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  ACE Prime, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title

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