Document:

EX-4.3

 

Exhibit 4.3

EXECUTION VERSION

          Replacement Capital Covenant, dated as of December 14, 2006 (this “Replacement Capital
Covenant”), by RAM Holdings Ltd., a Bermuda exempted company (together with its successors and
assigns, the “Company”), in favor of and for the benefit of each Covered Debtholder (as defined
below).

Recitals

          A. On the date hereof, the Company is issuing 75,000 shares of its “Series A Preference
Shares,” having an aggregate liquidation preference of $75,000,000 (the “Shares”).

          B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the
Offering Memorandum, dated December 7, 2006 (the “Offering Memorandum”), relating to the Shares.

          C. The Company is entering into and disclosing the content of this Replacement Capital
Covenant in the manner provided below with the intent that the covenants provided for in this
Replacement Capital Covenant be enforceable by each Covered Debtholder and that the Company be
estopped from disregarding the covenants in this Replacement Capital Covenant, in each case to the
fullest extent permitted by applicable law.

          D. The Company acknowledges that reliance by each Covered Debtholder upon the covenants in
this Replacement Capital Covenant is reasonable and foreseeable by the Company and that, were the
Company to disregard its covenants in this Replacement Capital Covenant, each Covered Debtholder
would have sustained an injury as a result of its reliance on such covenants.

          Now, Therefore, the Company hereby covenants and agrees as follows in favor of and
for the benefit of each Covered Debtholder.

          SECTION 1. Definitions. Capitalized terms used in this Replacement Capital Covenant
(including the Recitals) have the meanings set forth in Schedule I hereto.

          SECTION 2. Limitations on Redemption and Purchase of Shares. The Company hereby promises and
covenants to and for the benefit of each Covered Debtholder that neither the Company, nor any
Subsidiary of the Company shall redeem or purchase any of the Shares prior to the Termination Date
except to the extent that the applicable redemption or purchase price does not exceed the sum of
the following amounts:

          (a) the Applicable Percentage of the aggregate amount of net cash proceeds received by the
Company and its Subsidiaries since the most recent Measurement Date (without double counting
proceeds received in any prior Measurement
Period) from the sale of Common Stock and rights to acquire Common Stock to Persons other than
the Company and its Subsidiaries; plus

 

 

          (b) the Applicable Percentage of the aggregate amount of net cash proceeds received by the
Company and its Subsidiaries since the most recent Measurement Date (without double counting
proceeds received in any prior Measurement Period) from the sale of Mandatorily Convertible
Preference Shares, Debt Exchangeable for Equity and Qualifying Capital Securities to Persons other
than the Company and its Subsidiaries

          SECTION 3. Covered Debt. (a) The Company represents and warrants that the Initial Covered
Debt is Eligible Debt.

          (b)
On or during the 30-day period immediately preceding any Redesignation Date with respect
to the Covered Debt then in effect, the Company shall identify each series of Eligible Debt that
will become the Covered Debt on and after such Redesignation Date in accordance with the following
procedures:

     (i) the Company shall identify each series of its then outstanding long-term
indebtedness for money borrowed that is Eligible Debt;

     (ii) if only one series of the Company’s then outstanding long-term indebtedness for
money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on
the related Redesignation Date;

     (iii) if the Company has more than one outstanding series of long-term indebtedness
for money borrowed that is Eligible Debt, then the Company shall identify the series that
has the latest occurring final maturity date as of the date the Company is applying the
procedures in this Section 3(b) and such series shall become the Covered Debt on the
related Redesignation Date;

     (iv) if the series of outstanding long-term indebtedness for money borrowed that is
determined to be Covered Debt pursuant to clauses (ii) and (iii) above has an aggregate
outstanding face amount of less than $100,000,000, and the Company has one or more
additional series of outstanding indebtedness for money borrowed that is Eligible
Subordinated Debt as of any Redesignation Date, then the Company shall also designate, in
reverse chronological order of final maturity dates, such additional outstanding series of
Eligible Subordinated Debt as Covered Debt as of such Redesignation Date and, if the
aggregate principal amount of Covered Debt so designated totals less than $100,000,000, the
Company shall also designate, in reverse chronological order of final maturity dates, any
additional outstanding series of Eligible Senior Debt as Covered Debt as of such
Redesignation Date, provided that not more than $100,000,000 principal amount of Eligible
Subordinated Debt need be designated Covered Debt on any Redesignation Date;

     (v) each series of outstanding long-term indebtedness for money borrowed that is
determined to be Covered Debt pursuant to clause (ii), (iii) and

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(iv) above shall be the
Covered Debt for purposes of this Replacement Capital Covenant for the period commencing on
the related Redesignation Date and continuing to but not including the Redesignation Date
as of which a new series of outstanding long-term indebtedness is next determined to be the
Covered Debt pursuant to the procedures set forth in this Section 3(b);

     (vi) notwithstanding the foregoing, if the Company issues a series of long-term
indebtedness for money borrowed with an outstanding principal amount of at least
$100,000,000 that is Eligible Debt at a time when the aggregate principal amount of all
Covered Debt is less than $100,000,000, then the date of issuance of such series of
long-term indebtedness shall be a Redesignation Date and such new series of Eligible Debt
shall, as of such Redesignation Date, immediately be designated to be the Covered Debt and
all existing Covered Debt will at the same time cease to be Covered Debt; and

     (vii) in connection with any identification of a new series of Covered Debt, the
Company shall, as provided for in Section 3(c), give a notice and file with the Commission
a current report on Form 8-K including or incorporating by reference this Replacement
Capital Covenant as an exhibit within the time frame provided for in such section.

          (c) Notice. In order to give effect to the intent of the Company described in Recital D, the
Company covenants that (i) simultaneously with the execution of this Replacement Capital Covenant
or as soon as practicable after the date hereof, it shall (x) give notice to the Holders of the
Initial Covered Debt, in the manner provided in the indenture relating to the Initial Covered Debt,
of this Replacement Capital Covenant and the rights granted to such Holders hereunder and (y) file
a copy of this Replacement Capital Covenant with the Commission as an exhibit to a Form 8-K under
the Securities Exchange Act; (ii) so long as the Company is a reporting company under the
Securities Exchange Act, the Company will include in each annual report filed with the Commission
on Form 10-K under the Securities Exchange Act a description of the covenant set forth in Section 2
and identify each series of long-term indebtedness for borrowed money that is Covered Debt as of
the date such Form 10-K is filed with the Commission; (iii) if a series of the Company’s long-term
indebtedness for money borrowed (1) becomes Covered Debt or (2) ceases to be Covered Debt, the
Company shall give notice of such occurrence within 30 days to the holders of such long-term
indebtedness for money borrowed in the manner provided for in the indenture, fiscal agency
agreement or other instrument under which such long-term indebtedness for money borrowed was issued
and, so long as the Company is a reporting company under the Securities Exchange Act, report such
change in a current report on Form 8-K including or incorporating by reference this Replacement
Capital Covenant, and include the information required by clause (ii) of this Section 3(c) in the
Company’s next
quarterly report on Form 10-Q or annual report on Form 10-K, as applicable; (iv) if, and only
if, the Company ceases to be a reporting company under the Securities
Exchange

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Act, the Company
shall post on its website the information otherwise required to be included in Securities Exchange
Act filings pursuant to clauses (ii) and (iii) of this Section 3(c); and (v) promptly upon request
by any Holder of Covered Debt, the Company shall provide such Holder with an executed copy of this
Replacement Capital Covenant.

          SECTION 4. Termination, Amendment and Waiver. (a) The obligations of the Company pursuant to
this Replacement Capital Covenant shall remain in full force and effect until the earliest date
(the “Termination Date”) to occur of (i) the date, if any, on which the Holders of a majority by
principal amount of the then-effective series’ of Covered Debt consent or agree in writing to the
termination of this Replacement Capital Covenant and the obligations of the Company hereunder, (ii)
the date on which the Company ceases to have any series of outstanding Eligible Senior Debt or
Eligible Subordinated Debt (without giving effect to the rating requirement in clause (b) of the
definition of each such term, (iii) the date on which no Series A Preference Shares shall be
outstanding and (iv) December 15, 2046. From and after the Termination Date, the obligations of
the Company pursuant to this Replacement Capital Covenant shall be of no further force or effect.

          (b) This Replacement Capital Covenant may be amended or supplemented from time to time by a
written instrument signed by the Company with the consent of the Holders of a majority by principal
amount of the then-effective series’ of Covered Debt, provided that this Replacement
Capital Covenant may be amended or supplemented from time to time by a written instrument signed
only by the Company (and without the consent of the Holders of the then-effective series’ of
Covered Debt) if (i) such amendment eliminates Common Stock or Mandatorily Convertible Preference
Shares as a security or securities covered by clause (i) or (ii) of Section 2 and the Company has
been advised in writing by a nationally recognized independent accounting firm that there is more
than an insubstantial risk that the failure to do so would result in a reduction in the Company’s
earnings per share as calculated for financial reporting purposes or (ii) such amendment or
supplement is not adverse to the Holders of the then-effective series’ of Covered Debt and an
officer of the Company has delivered to the Holders of the then-effective series of Covered Debt in
the manner provided for in the indenture, fiscal agency agreement or other instrument with respect
to such Covered Debt a written certificate stating that, in his or her determination, such
amendment or supplement is not adverse to the Holders of the then-effective series’ of Covered
Debt.

          (c) For purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement is required
to terminate, amend or supplement the obligations of the Company under this Replacement Capital
Covenant shall be the Holders of the then-effective Covered Debt as of a record date established by
the Company that is not more
than 30 days prior to the date on which the Company proposes that such termination, amendment
or supplement becomes effective.

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          SECTION 5. Miscellaneous. (a) This Replacement Capital Covenant shall be governed by and
construed in accordance with the laws of the State of New York.

          (b) This Replacement Capital Covenant shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Covered Debtholders as they exist from time-to-time
(it being understood and agreed by the Company that any Person who is a Covered Debtholder at the
time such Person acquires, holds or sells Covered Debt shall retain its status as a Covered
Debtholder for so long as the series of long-term indebtedness for borrowed money owned by such
Person is Covered Debt and, if such Person holds such series of long-term indebtedness for borrowed
money at the time the Company violates its covenants in Section 2 and such Person initiates a claim
or proceeding to enforce its rights under this Replacement Capital Covenant after the Company has
violated its covenants in Section 2, such Person’s rights under this Replacement Capital Covenant
shall not terminate by reason of such series of long-term indebtedness for money borrowed no longer
being Covered Debt). Except as specifically provided herein, this Replacement Capital Covenant
shall have no other beneficiaries, and no other Persons are entitled to rely on this Replacement
Capital Covenant.

          (c) All demands, notices, requests and other communications to the Company under this
Replacement Capital Covenant shall be deemed to have been duly given and made if in writing and (i)
if served by personal delivery upon the Company, on the day so delivered (or, if such day is not a
Business Day, the next succeeding Business Day), (ii) if delivered by registered post or certified
mail, return receipt requested, or sent to the Company by a national or international courier
service, on the date of receipt by the Company (or, if such date of receipt is not a Business Day,
the next succeeding Business Day), or (iii) if sent by telecopier, on the day telecopied, or if not
a Business Day, the next succeeding Business Day, provided that the telecopy is promptly
confirmed by telephone confirmation thereof, and in each case to the Company at the address set
forth below, or at such other address as the Company may thereafter notify to Covered Debtholders
or post on its website as the address for notices under this Replacement Capital Covenant:

RAM Holdings Ltd.

RAM Re House

46 Reid Street

Hamilton, HM 12 Bermuda

Attn: Victoria W. Guest

Facsimile: (441) 296-6509

with a copy to:

LeBoeuf, Lamb, Greene & MaCrae LLP

125 West 55th Street

New York, New York 10019

Attn: Michael Groll

Facsimile: (212) 649-0999

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          The Company has caused this Replacement Capital Covenant to be executed by its duly
authorized officer, on the day and year first above written.

	 	 	 	 	 
	 	RAM HOLDINGS, LTD.

 	 
	 	By:  	/s/
Vernon M. Endo 	 
	 	 	Name:  	Vernon M. Endo 	 
	 	 	Title:  	President and Chief Executive Officer 	 

	 	 	Date:	December 14, 2006 	 
	 

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Schedule 1

Definitions

          “Alternative Payment Mechanism” means, with respect to any securities or combination of
securities (together in this definition, “such securities”), provisions in the related transaction
documents requiring the Company to issue (or use commercially reasonable efforts to issue) one or
more types of APM Qualifying Securities raising eligible proceeds at least equal to the deferred
Distributions on such securities and apply the proceeds to pay unpaid Distributions on such
securities, commencing on the earlier of (x) the first Distribution Date after commencement of a
deferral period on which the Company pays current Distributions on such securities and (y) the
fifth anniversary of the commencement of such deferral period, and that

     (a) define “eligible proceeds” to mean, for purposes of such Alternative Payment
Mechanism, the net proceeds (after underwriters’ or placement agents’ fees, commissions or
discounts and other expenses relating to the issuance or sale of the relevant securities,
where applicable, and including the fair market value of property received by the Company
or any of its Subsidiaries as consideration for such securities) that the Company has
received during the 180 days prior to the related Distribution Date from the issuance of
APM Qualifying Securities, up to the Preferred Cap (as defined in paragraph (f), below) in
the case of APM Qualifying Securities that are Qualifying Non-Cumulative Perpetual
Preference Shares;

     (b) permit the Company to pay current Distributions on any Distribution Date out of
any source of funds but (x) require the Company to pay deferred Distributions only out of
eligible proceeds and (y) prohibit the Company from paying deferred Distributions out of
any source of funds other than eligible proceeds, unless (if the Company elects to so
provide in the terms of such securities) any applicable regulatory authority directs
otherwise;

     (c) if deferral of Distributions continues for more than one year, require the Company
not to redeem or repurchase any securities of the Company that on a bankruptcy or
liquidation of the Company rank pari passu with or junior to such securities until at least
one year after all deferred Distributions have been paid;

     (d) notwithstanding the foregoing provision, if any applicable regulatory authority
disapproves the issuer’s sale of APM Qualifying Securities, may (if the Company elects to
so provide in the term of such securities) permit the Company to pay deferred Distributions
from any source without a breach of its obligations under the transaction documents;

     (e) if any applicable regulatory authority does not disapprove the Company’s issuance
and sale of APM Qualifying Securities but disapproves the use of the proceeds thereof to
pay deferred Distributions, may (if the Company

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elects to so provide in the terms of such
securities) permit the Company to use such proceeds for other purposes and to continue to
defer Distributions without a breach of its obligations under the transaction documents;
and

     (f) limit the obligation of the Company to issue (or use commercially reasonable
efforts to issue) APM Qualifying Securities up to:

     (i) in the case of APM Qualifying Securities that are Common Stock or rights
to purchase Common Stock, an amount from the issuance thereof pursuant to the
Alternative Payment Mechanism (including at any point in time from all prior
issuances thereof pursuant to the Alternative Payment Mechanism) with respect to
deferred Distributions attributable to the first five years of any deferral period
equal to 2% of the total number of issued and outstanding shares of Common Stock as
of the date of the Company’s most recent publicly available consolidated financial
statements (the “Common Cap”), provided (and it being understood) that the
Common Cap shall cease to apply to such deferral period by a date (as specified in
the related transaction documents) which shall be not later than the ninth
anniversary of the commencement of such deferral period; and

     (ii) in the case of APM Qualifying Securities that are Qualifying
Non-Cumulative Perpetual Preference Shares, an amount from the issuance thereof
pursuant to the related Alternative Payment Mechanism (including at any point in
time from all prior issuances thereof pursuant to such Alternative Payment
Mechanism) equal to 25% of the initial principal or stated amount of the securities
that are the subject of the related Alternative Payment Mechanism (the “Preferred
Cap”);

provided (and it being understood) that:

     (g) the Company shall not be obligated to issue (or use commercially reasonable
efforts to issue) APM Qualifying Securities for so long as a Market Disruption Event has
occurred and is continuing;

     (h) if, due to a Market Disruption Event or otherwise, the Company is able to raise
and apply some, but not all, of the eligible proceeds necessary to pay all deferred
Distributions on any Distribution Date, the Company will apply any available eligible
proceeds to pay accrued and unpaid Distributions on the applicable Distribution Date in
chronological order subject to the Common Cap and Preferred Cap, as applicable; and

     (i) if the Company has outstanding more than one class or series of securities under
which it is obligated to sell a type of APM Qualifying Securities and apply some part of
the proceeds to the payment of deferred Distributions, then on any date and for any period
the amount of net proceeds received by the

I-8

 

Company from those sales and available for
payment of deferred Distributions on such securities shall be applied to such securities on
a pro rata basis in proportion to the total amounts that are due on such securities, or on
such other basis as any applicable regulatory authority may approve.

          “APM Qualifying Securities” means, with respect to an Alternative Payment Mechanism, one or
more of the following (as designated in the transaction documents for the Qualifying Capital
Securities that include an Alternative Payment Mechanism or Debt Exchangeable for Equity):

          (a) Common Stock;

          (b) rights to purchase Common Stock; or

          (c) Qualifying Non-Cumulative Perpetual Preference Shares;

provided (and it being understood) that if the APM Qualifying Securities for any
Alternative Payment Mechanism include both Common Stock and rights to purchase Common Stock, such
Alternative Payment Mechanism may permit, but need not require, the Company to issue rights to
purchase Common Stock.

          “Applicable Percentage” means:

     (a) in the case of any Common Stock or rights to acquire Common Stock, 100 divided by
(i) 75% with respect to any repayment, redemption or repurchase prior to December 15, 2016,
(ii) 50% with respect to any repayment, redemption or repurchase on or after December 15,
2016 and prior to December 15, 2036 and (iii) 25% with respect to any repayment, redemption
or repurchase on or after December 15, 2036 (for example, prior to December 15, 2016, the
Applicable Percentage in the case of such securities will be 133.33%);

     (b) in the case of any Mandatorily Convertible Preference Shares or Debt Exchangeable
for Equity, 75 divided by (i) 75% with respect to any repayment, redemption or repurchase
prior to December 15, 2016, (ii) 50% with respect to any repayment, redemption or
repurchase on or after December 15, 2016 and prior to December 15, 2036 and (iii) 25% with
respect to any repayment, redemption or repurchase on or after December 15, 2036 (for
example, on or after December 15, 2016 and prior to December 15, 2036, the Applicable
Percentage in the case of such securities will be 150%);

     (c) in the case of any Qualifying Capital Securities described in clause (a) of the
definition of that term, 75 divided by (i) 75% with respect to any
repayment, redemption or repurchase prior to December 15, 2016, (ii) 50% with respect
to any repayment, redemption or repurchase on or after December 15, 2016 and prior to
December 15, 2036 and (iii) 25% with respect to any repayment, redemption or repurchase on
or after December 15, 2036 (for

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example, after December 15, 2036, the Applicable Percentage
in the case of such securities will be 300%);

     (d) in the case of any Qualifying Capital Securities described in clause (b) of the
definition of that term, 50 divided by (i) 50% with respect to any repayment, redemption or
repurchase on or after December 15, 2016 and prior to December 15, 2036, and (ii) 25% with
respect to any repayment, redemption or repurchase on or after December 15, 2036 (for
example, after December 15, 2036, the Applicable Percentage in the case of such securities
will be 200%); and in the case of any Qualifying Capital Securities described in clause (c)
of the definition of that term, 100%.

          “Business Day” means each day other than (a) a Saturday or Sunday or (b) a day on which
banking institutions in The City of New York and Hamilton, Bermuda are authorized or required by
law or executive order to remain closed.

          “Commission” means the United States Securities and Exchange Commission.

          “Common Shares” means common shares of the Company (including common shares issued pursuant to
the Company’s employee benefit plans and any dividend reinvestment plan).

          “Company” has the meaning specified in the introduction to this instrument.

          “Covered Debt” means (a) at the date of this Replacement Capital Covenant and continuing to
but not including the first Redesignation Date, the Initial Covered Debt and (b) thereafter,
commencing with each Redesignation Date and continuing to but not including the next succeeding
Redesignation Date, each series of Eligible Debt identified pursuant to Section 3(b) as the Covered
Debt for such period.

          “Covered Debtholder” means each Person (whether a Holder or a beneficial owner holding through
a participant in a clearing agency) that holds Covered Debt for so long as the long-term
indebtedness for money borrowed that such Person holds is Covered Debt.

          “Debt Exchangeable for Equity” means a security or combination of securities (together in this
definition, “such securities”) that:

     (ii) gives the holder a beneficial interest in (a) subordinated debt securities of the
Company that include a provision requiring the Company to issue
(or use commercially reasonable efforts to issue) one or more types of APM Qualifying
Securities raising proceeds at least equal to the deferred Distributions on such
subordinated debt securities commencing not later than two years after initial issuance of
such securities and that are the most junior subordinated debt of

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the Company (or rank pari
passu with the most junior subordinated debt of the Company) and (b) a fractional interest
in a stock purchase contract for a share of Qualifying Non-Cumulative Perpetual Preference
Shares that ranks pari passu with or junior to all other preferred stock of the Company;

     (iii) provides that the investors directly or indirectly grant to the Company a
security interest in such subordinated debt securities and their proceeds (including any
substitute collateral permitted under the transaction documents) to secure the investors’
direct or indirect obligation to purchase Qualifying Non-Cumulative Perpetual Preference
Shares pursuant to such stock purchase contracts;

     (iv) includes a remarketing feature pursuant to which the subordinated debt of the
Company is remarketed to new investors commencing not later than the first Distribution
Date that is at least five years after the date of issuance of the security (or combination
of securities) or earlier in the event of an early settlement event based on one or more
financial tests or other express terms set forth in the terms of such securities or related
transaction agreements;

     (v) provides for the proceeds raised in the remarketing to be used to purchase
Qualifying Non-Cumulative Perpetual Preference Shares under the stock purchase contracts
and, if there has not been a successful remarketing by the first Distribution Date that is
six years after the date of issuance of such securities, provides that the stock purchase
contracts will be settled by the Company foreclosing on its subordinated debt securities or
other collateral directly or indirectly pledged by investors in the Debt Exchangeable for
Equity;

     (vi) includes a replacement capital covenant substantially similar to this Replacement
Capital Covenant that will apply to such securities and to the Qualifying Non-Cumulative
Perpetual Preference Shares and will not include Debt Exchangeable for Equity in the
definition of “qualifying capital securities”; and

     (vii) after the issuance of such Qualifying Non-Cumulative Perpetual Preference
Shares, provides the holder of the security with a beneficial interest in such preferred
stock of the Company.

          “Distribution Date” means, as to any securities or combination of securities, the dates on
which Distributions on such securities are scheduled to be made.

          “Distribution Period” means, as to any securities or combination of securities, each period
from and including a Distribution Date for such securities to but not including the next succeeding
Distribution Date for such securities.

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          “Distributions” means, as to a security or combination of securities, dividends, interest or
other income distributions to the holders thereof that are not Subsidiaries of the Company.

          “Eligible Debt” means, at any time, Eligible Subordinated Debt or, if no Eligible Subordinated
Debt is then outstanding, Eligible Senior Debt.

          “Eligible Senior Debt” means, at any time, each series of outstanding long-term indebtedness
for money borrowed of the Company that (a) upon a bankruptcy, liquidation, dissolution or winding
up of the Company, ranks most senior among the Company’s then outstanding classes of indebtedness
for money borrowed, (b) is then assigned a rating by at least one NRSRO (provided that this clause
(b) shall apply on a Redesignation Date only if on such date the Company has outstanding senior
long-term indebtedness for money borrowed that satisfies the requirements of clauses (a) and (c)
that is then assigned a rating by at least one NRSRO) and (c) was issued through or with the
assistance of a commercial or investment banking firm or firms acting as underwriters, initial
purchasers or placement or distribution agents. For purposes of this definition as applied to
securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed that has
(or, if such indebtedness is held by a trust or other intermediate entity established directly or
indirectly by the Company, the securities of such intermediate entity that have) a separate CUSIP
number shall be deemed to be a series of the Company’s long-term indebtedness for money borrowed
that is separate from each other series of such indebtedness.

          “Eligible Subordinated Debt” means, at any time, each series of the Company’s then-outstanding
long-term indebtedness for money borrowed that (a) upon a bankruptcy, liquidation, dissolution or
winding up of the Company, ranks subordinate to the Company’s then outstanding series of
indebtedness for money borrowed that ranks most senior, (b) is then assigned a rating by at least
one NRSRO (provided that this clause (b) shall apply on a Redesignation Date only if on such date
the Company has outstanding subordinated long-term indebtedness for money borrowed that satisfies
the requirements in clauses (a) and (c) that is then assigned a rating by at least one NRSRO) and
(c) was issued through or with the assistance of a commercial or investment banking firm or firms
acting as underwriters, initial purchasers or placement or distribution agents. For purposes of
this definition as applied to securities with a CUSIP number, each issuance of long-term
indebtedness for money borrowed that has (or, if such indebtedness is held by a trust or other
intermediate entity established directly or indirectly by the Company, the securities of such
intermediate entity that have) a separate CUSIP number shall be deemed to be a series of the
Company’s long-term indebtedness for money borrowed that is separate from each other series of such
indebtedness.

          “Holder” means, as to the Covered Debt then in effect, each holder of such Covered Debt as
reflected on the securities register maintained by or on behalf of the Company with respect to such
Covered Debt.

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          “Initial Covered Debt” means the Company’s outstanding $40,000,000 aggregate principal amount
of 6.875% Senior Notes due 2024.

          “Intent-Based Replacement Disclosure” means, as to any security or combination of securities,
that the Company has publicly stated its intention, either in the prospectus or other offering
document under which such securities were initially offered for sale or in filings with the
Commission made by the Company under the Securities Exchange Act prior to or contemporaneously with
the issuance of such securities, that the Company will redeem or repurchase such securities only
with the proceeds of specified replacement capital securities that have terms and provisions at the
time of redemption or repurchase that are as or more equity-like than the securities then being
redeemed or repurchased, raised within 180 days prior to the applicable redemption or repurchase
date.

          “Mandatorily Convertible Preference Shares” means cumulative preferred stock with (a) no
prepayment obligation on the part of the issuer thereof, whether at the election of the holders or
otherwise, and (b) a requirement that the preferred stock convert into Common Stock of the Company
within three years from the date of its issuance at a conversion ratio within a range established
at the time of issuance of the preferred stock.

          “Mandatory Trigger Provision” means, as to any security or combination of securities (together
in this definition, “securities”), provisions in the terms thereof or of the related transaction
agreements that (A) require, or at its option in the case of qualifying non-cumulative perpetual
preference shares permit, the issuer of such securities to make payment of Distributions on such
securities only pursuant to the issue and sale of APM Qualifying Securities, within one year of a
failure to satisfy one or more financial tests set forth in the terms of such securities or related
transaction agreements, in amount such that the net proceeds of such sale are at least equal to the
amount of unpaid Distributions on such securities (including without limitation all deferred and
accumulated amounts) and in either case require the application of the net proceeds of such sale to
pay such unpaid Distributions, provided that if the APM Qualifying Securities issued and sold are
Qualifying Non-Cumulative Perpetual Preference Shares the amount of the net proceeds of Qualifying
Non-Cumulative Perpetual Preference Shares which the issuer may apply to pay such Distributions
pursuant to such provision may not exceed 25% of the initial liquidation or principal amount of
such securities, (B) if the APM Qualifying Securities are Common Stock or rights to acquire Common
Stock, prohibit the issuer from repurchasing any Common Stock prior to the date six months after
the issuer applies the net proceeds of the sales described in clause (A) to pay such unpaid
Distributions in full, and (C) upon any liquidation, dissolution, winding up, reorganization or in
connection with any insolvency, receivership or proceeding under any bankruptcy law with respect to
the Company, limit the claim of the holders of such
securities (other than qualifying non-cumulative perpetual preference shares) to Distributions
that accumulate during a period in which the Company fails to satisfy one or more financial tests
set forth in the terms of such securities or related transaction

I-13

 

agreements to (x) 25% of the
principal amount of such securities then outstanding in the case of securities not permitting the
issuance and sale pursuant to the provisions described in clause (A) above of securities other than
Common Stock or rights to acquire Common Stock or (y) two years of accumulated and unpaid
Distributions (including compounded amounts thereon) in all other cases. No remedy other than
Permitted Remedies will arise by the terms of such securities or related transaction agreements in
favor of the holders of such securities as a result of the issuer’s failure to pay Distributions
because of the Mandatory Trigger Provision or as a result of the issuer’s exercise of its right
under an Optional Deferral Provision until Distributions have been deferred for one or more
Distribution Periods that total together at least ten years.

          “Market Disruption Event” means the occurrence or existence of any of the following events or
sets of circumstances:

     (a) the Company would be required to obtain the consent or approval of its
shareholders or a regulatory body (including, without limitation, any securities exchange)
or governmental authority to issue or sell APM Qualifying Securities and such consent or
approval has not yet been obtained notwithstanding the Company’s commercially reasonable
efforts to obtain such consent or approval;

     (b) trading in securities generally on the Nasdaq National Market or any other
national securities exchange or over-the-counter market on which the Common Stock and/or
the Company’s preferred stock is then listed or traded shall have been suspended or the
settlement of such trading generally shall have been materially disrupted or minimum prices
shall have been established on any such exchange or market by the Commission, by the
relevant exchange or by any other regulatory body or governmental body having jurisdiction,
and the establishment of such minimum prices materially disrupts or otherwise has a
material adverse effect on trading in, or the issuance and sale of, Common Shares and/or
the Company’s preference shares;

     (c) a banking moratorium shall have been declared by the federal or state authorities
of the United States such that market trading in the Common Stock and/or the Company’s
preferred stock has been materially disrupted;

     (d) a material disruption shall have occurred in commercial banking or securities
settlement or clearance services in the United States such that market trading in the
Common Stock and/or the Company’s preferred stock has been materially disrupted;

     (e) the United States shall have become engaged in hostilities, there shall have been
an escalation in hostilities involving the United States, there shall
have been a declaration of a national emergency or war by the United States or there
shall have occurred any other national or international calamity or crisis

I-14

 

such that market
trading in the Common Stock and/or the Company’s preferred stock has been materially
disrupted;

     (f) there shall have occurred such a material adverse change in general domestic or
international economic, political or financial conditions, including without limitation as
a result of terrorist activities, such that market trading in the Common Stock and/or the
Company’s preferred stock has been materially disrupted;

     (g) an event occurs and is continuing as a result of which the offering document for
such offer and sale of APM Qualifying Securities would, in the reasonable judgment of the
Company, contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading
and either (a) the disclosure of that event at such time, in the reasonable judgment of the
Company, is not otherwise required by law and would have a material adverse effect on the
business of the Company or (b) the disclosure relates to a previously undisclosed proposed
or pending material business transaction and the Company has a bona fide reason for keeping
the same confidential or its disclosure would impede the ability of the Company to
consummate such transaction, provided that no single suspension period contemplated by this
paragraph (vii) shall exceed 90 consecutive days and multiple suspension periods
contemplated by this paragraph (vii) shall not exceed an aggregate of 180 days in any
360-day period; or

     (h) the Company reasonably believes, for reasons other than those referred to in
paragraph (g) above, that the offering document for such offer and sale of APM Qualifying
Securities would not be in compliance with a rule or regulation of the Commission and the
Company is unable to comply with such rule or regulation or such compliance is unduly
burdensome, provided that no single suspension period contemplated by this paragraph (h)
shall exceed 90 consecutive days and multiple suspension periods contemplated by this
paragraph (h) shall not exceed an aggregate of 180 days in any 360-day period.

The definition of “Market Disruption Event” as used in any securities or combination of securities
that constitute Qualifying Securities may include less than all of the paragraphs outlined above,
as determined by the Company at the time of issuance of such securities, and in the case of clauses
(a), (b), (c) and (d), as applicable to a circumstance where the Company would otherwise endeavor
to issue preferred stock, shall be limited to circumstances affecting markets where the Company’s
preferred stock trades or where a listing for its trading is being sought.

          “Measurement Date” means, with respect to any redemption or purchase of Shares, the date six
months prior to the delivery of notice of such redemption or the date of such purchase.

I-15

 

          “Non-Cumulative” means, with respect to any securities, that the issuer thereof may elect not
to make any number of periodic Distributions without any remedy arising under the terms of the
securities or related agreements in favor of the holders, other than one or more Permitted
Remedies.

          “No Payment Provision” means a provision or provisions in the transaction documents for
securities (referred to in this definition as “such securities”) that include the following:

     (a) an Alternative Payment Mechanism;

     (b) an Optional Deferral Provision modified and supplemented from the general
definition of that term to provide that:

     (i) the issuer of such securities may, in its sole discretion, or (if the
Company elects to so provide in the terms of such securities) shall in response to
a directive or order from any applicable regulatory authority, defer in whole or in
part payment of Distributions on such securities for one or more consecutive
Distribution Periods of up to five years or, if a Market Disruption Event has
occurred and is continuing, ten years, without any remedy other than Permitted
Remedies and the obligations (and limitations on obligations) described in the
definition of “Alternative Payment Mechanism” applying; and

     (ii) if the Company becomes subject to a bankruptcy, insolvency, receivership
or similar proceeding prior to the redemption or repayment of such securities, the
holders of such securities will have no claim to any deferred and unpaid
Distributions exceeding (x) if the APM Qualifying Securities include only Common
Stock or rights to acquire Common Stock and do not include Qualifying
Non-Cumulative Perpetual Preference Shares, 25% of the principal or stated amount
of such securities then outstanding and (y) if the APM Qualifying Securities
include Qualifying Non-Cumulative Perpetual Preference Shares, two years of
Distributions on such securities; provided, however, that if the
APM Qualifying Securities include Qualifying Non-Cumulative Perpetual Preference
Shares and, accordingly, clause (y) applies, holders of such securities may have an
additional preferred equity claim in respect of deferred and unpaid distributions
which are in excess of two years of Distributions that is senior to the Company’s
common stock and is or would be pari passu with any Qualifying Non-Cumulative
Perpetual Preference Shares up to the amount equal to their pro rata shares of any
unused portion of the Preferred Cap (as defined in the definition of “Alternative
Payment Mechanism”).

          “Notes” has the meaning specified in Recital A.

I-16

 

          “NRSRO” means a nationally recognized statistical rating organization within the meaning of
Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

          “Offering Memorandum” has the meaning specified in Recital A.

          “Optional Deferral Provision” means, as to any securities or combination of securities
(together in this definition, “securities”), a provision in the terms thereof or of the related
transaction agreements to the effect that the issuer of such securities may in its sole discretion,
or shall in response to a directive order from any applicable regulatory authority, defer or skip
in whole or in part payment of Distributions on such securities for one or more consecutive
Distribution Periods of up to ten years without any remedy other than Permitted Remedies.

          “Permitted Remedies” means, with respect to any securities, one or more of the following
remedies:

     (a) rights in favor of the holders of such securities permitting such holders to elect
one or more directors of the issuer (including any such rights required by the listing
requirements of any stock or securities exchange on which such securities may be listed or
traded);

     (b) complete or partial prohibitions on the issuer paying Distributions on or
repurchasing common stock or other securities that rank pari passu with or junior as to
Distributions to such securities for so long as distributions on such securities, including
unpaid distributions, remain unpaid; and

     (c) provisions obligating the Company to cause, or use commercially reasonable
efforts to cause, such unpaid Distributions to be paid in full pursuant to an Alternative
Payment Mechanism.

          “Person” means any individual, Company, partnership, joint venture, trust, limited liability
company or Company, unincorporated organization or government or any agency or political
subdivision thereof.

          “Qualifying Capital Securities” means securities (other than Common Stock, rights to acquire
Common Stock, Mandatorily Convertible Preference Shares and Debt Exchangeable for Equity) that, in
the determination of the Company’s Board of Directors reasonably construing the definitions and
other terms of this Replacement Capital Covenant, meet one of the following criteria:

     (a) in connection with any redemption or purchase of Shares on or prior to December
15, 2016:

     (i) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to

I-17

 

all of the Company’s indebtedness for money borrowed, other than the Company’s
indebtedness for money borrowed from time-to-time outstanding that by its terms
ranks pari passu with such securities, (B) have a No Payment Provision, (C) have no
maturity or a maturity of at least 60 years and (D) either (x) are subject to a
replacement capital covenant substantially similar to this Replacement Capital
Covenant or (y) have a Mandatory Trigger Provision and are subject to Intent-Based
Replacement Disclosure; or

     (ii) preferred stock (other than the Shares) issued by the Company or its
Subsidiaries that (A) has no prepayment obligation on the part of the issuer
thereof, whether at the election of the holders or otherwise, (B) has no maturity
or a maturity of at least 60 years, and (C) either (x) is subject to a replacement
capital covenant substantially similar to this Replacement Capital Covenant or (y)
has a Mandatory Trigger Provision and is subject to Intent-Based Replacement
Disclosure and (D) is Non-Cumulative (except that, for purposes of this clause (D),
clause (c) in the definition of “Permitted Remedies” shall not apply); or

     (iii) securities issued by the Company or its Subsidiaries that (A) rank pari
passu or junior to other preferred stock of the issuer, (B) have no maturity or a
maturity of at least 40 years, (C) are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant, (D) have an Optional
Deferral Provision and (E) have a Mandatory Trigger Provision; or

     (b) in connection with any redemption or purchase of Shares at any time after December
15, 2016 but on or prior to December 15, 2036:

     (i) securities described under clause (a) of this definition;

     (ii) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time outstanding that by its terms ranks pari passu with such
securities, (B) have no maturity or a maturity of at least 60 years, (C) are
subject to a replacement capital covenant substantially similar to this Replacement
Capital Covenant and (D) have an Optional Deferral Provision;

     (iii) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time

I-18

 

outstanding that by its terms ranks pari passu with such securities, (B) (x)
have no maturity or a maturity of at least 60 years and (y) are subject to
Intent-Based Replacement Disclosure and (C) have a No Payment Provision;

     (iv) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time outstanding that by its terms ranks pari passu with such
securities, (B) have no maturity or a maturity of at least 40 years and (C) either
(x) are subject to a replacement capital covenant substantially similar to this
Replacement Capital Covenant or (y) have a Mandatory Trigger Provision and are
subject to Intent-Based Replacement Disclosure and (D) have a No Payment Provision;

     (v) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time outstanding that by its terms ranks pari passu with such
securities, (B) have an Optional Deferral Provision, (C) have a Mandatory Trigger
Provision and (D) have no maturity or a maturity of at least 60 years;

     (vi) cumulative preferred stock issued by the Company or its Subsidiaries that
(A) has no prepayment obligation on the part of the issuer thereof, whether at the
election of the holders or otherwise, and (B) (x) has no maturity or a maturity of
at least 60 years and (y) is subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant; or

     (vii) other securities issued by the Company or its Subsidiaries that (A) rank
upon a liquidation, dissolution or winding-up of the Company either (x) pari passu
with or junior to the Shares or (y) pari passu with the claims of the Company’s
trade creditors and junior to all of the Company’s long-term indebtedness for money
borrowed (other than the Company’s long-term indebtedness for money borrowed from
time to time outstanding that by its terms ranks pari passu with such securities on
a liquidation, dissolution or winding-up of the Company), (B) have an Optional
Deferral Provision and (C) either (x) have no maturity or a maturity of at least 40
years, Intent-Based Replacement Disclosure and a Mandatory Trigger Provision or (y)
have no maturity or a maturity of at least 25 years and are subject to a
replacement capital covenant

I-19

 

substantially similar to this Replacement Capital Covenant and have a
Mandatory Trigger Provision; or

     (c) in connection with any repayment, redemption or purchase of Shares at any time
after December 15, 2036:

     (i) securities described under clause (b) of this definition;

     (ii) preference shares (other than the Shares) issued by the Company that (A)
(x) has no maturity or a maturity of at least 50 years and (y) is subject to
Intent-Based Replacement Disclosure and (B) is Non-Cumulative (except that, for
purposes of this clause (B), clause (c) in the definition of “Permitted Remedies”
shall not apply;

     (iii) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time outstanding that by its terms ranks pari passu with such
securities, (B) either (x) have no maturity or a maturity of at least 60 years and
are subject to Intent-Based Replacement Disclosure or (y) have no maturity or a
maturity at least 30 years and are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant and (C) are
Non-Cumulative;

     (iv) securities issued by the Company or its Subsidiaries that (A) upon the
liquidation, dissolution or winding up of the Company rank pari passu with the
claims of the Company’s trade creditors and junior to all of the Company’s
indebtedness for money borrowed, other than the Company’s indebtedness for money
borrowed from time-to-time outstanding that by its terms ranks pari passu with such
securities, (B) have an Optional Deferral Provision, (C) have a Mandatory Trigger
Provision and (D) (x) have no maturity or a maturity at least 30 years and (y) are
subject to Intent-Based Replacement Disclosure; or

     (v) cumulative preferred stock issued by the Company or its Subsidiaries that
either (A) (x) has no maturity or a maturity of at least 60 years and (y) are
subject to Intent-Based Replacement Disclosure or (B) has a maturity of at least 40
years and is subject to a replacement capital covenant substantially similar to
this Replacement Capital Covenant.

          “Qualifying Non-Cumulative Perpetual Preference Shares” means non-cumulative preference shares
of the Company that rank pari passu with or junior to all other outstanding preference shares of
the Company, are perpetual and are subject to either a replacement capital covenant substantially
similar to this Replacement Capital

I-20

 

Covenant or provide for mandatory deferral tied to the breach of certain financial triggers
and are subject to Intent-Based Replacement Disclosure, and in each case as to which the
transaction documents provide for no remedies as a consequence of non-payment of Distributions
other than Permitted Remedies (except for those provided under clause (c) of the definition
thereof).

          “Redesignation Date” means, as to the Covered Debt in effect at any time, the earliest of (a)
the date that is two years prior to the final maturity date of such Covered Debt, (b) if the
Company elects to redeem, or the Company or a Subsidiary of the Company elects to repurchase, such
Covered Debt either in whole or in part with the consequence that after giving effect to such
redemption or repurchase the aggregated outstanding principal amount of such Covered Debt is less
than $100,000,000, the applicable redemption or repurchase date, (c) if such Covered Debt, in the
aggregate, has an outstanding principal amount of less than $100,000,000, the date on which the
Company issues additional long term indebtedness that qualifies as Eligible Subordinated Debt or
Eligible Senior Debt, (d) the date upon which the Company issues a series of long-term indebtedness
for money borrowed with an outstanding principal amount of at least $100,000,000 that is Eligible
Debt at a time when the aggregate principal amount of all Covered Debt is less than $100,000,000,
and (e) if such Covered Debt does not include Eligible Subordinated Debt of the Company, the date
on which the Company issues long-term indebtedness for money borrowed that is Eligible Subordinated
Debt.

          “Replacement Capital Covenant” has the meaning specified in the introduction to this
instrument.

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

          “Shares” has the meaning specified in Recital B.

          “Subsidiary” means, at any time, any Person the shares of stock or other ownership interests
of which having ordinary voting power to elect a majority of the board of directors or other
managers of such Person are at the time owned, or the management or policies of which are otherwise
at the time controlled, directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by another Person. As of the date of this Replacement Capital Covenant, RAM
Reinsurance Company Ltd is the Company’s only subsidiary.

          “Termination Date” has the meaning specified in Section 4(a).

I-21EX-4.4

 

Exhibit 4.4

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

by and among

RAM Holdings Ltd.

and

Merrill Lynch & Co.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Dated as of December 14, 2006

 

 

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of December
14, 2006, by and among RAM Holdings Ltd., a Bermuda exempted company (the “Company”), and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Initial Purchaser”), who have
entered that certain Purchase Agreement (as defined below) with the Company providing for the
purchase and sale of the Company’s Non-Cumulative Preference Shares, Series A (the “Initial
Securities”).

     This Agreement is made pursuant to the Purchase Agreement, dated December 7, 2006 (the
“Purchase Agreement”), among the Company and the Initial Purchaser (i) for the benefit of the
Initial Purchaser and (ii) for the benefit of the holders from time to time of the Initial
Securities, including the Initial Purchaser. In order to induce the Initial Purchaser to purchase
the Initial Securities, the Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the obligations of the
Initial Purchaser set forth in Section 5(j) of the Purchase Agreement.

     The parties hereby agree as follows:

     Section 1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:

     Advice: As defined in Section 6 hereof.

     Agreement: As defined in the preamble hereto.

     Broker-Dealer: Any broker or dealer registered under the Exchange Act.

     Business Day: Any day other than a Saturday, Sunday or U.S. federal holiday or a day on which
banking institutions or trust companies located in New York, New York are authorized or obligated
to be closed.

     Certificate of Designations: The Certificate of Designations of the Company, dated December
14, 2006, pursuant to which the Securities are to be issued, as such Certificate of Designations is
amended or supplemented from time to time in accordance with the terms thereof.

     Closing Date: The date of this Agreement.

     Commission: The Securities and Exchange Commission.

     Company: As defined in the preamble hereto.

     Consummate: A registered Exchange Offer shall be deemed “Consummated” for purposes of this
Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the
Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the

 

 

minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Holders of Transfer Restricted Securities of Exchange Securities in the same aggregate
liquidation preference as the aggregate liquidation preference of Initial Securities that were
tendered by Holders thereof pursuant to the Exchange Offer.

     Effectiveness Target Date: As defined in Section 5 hereof.

     Exchange Act: The Securities Exchange Act of 1934, as amended.

     Exchange Effectiveness Target Date: As defined in Section 3 hereof.

     Exchange Offer: The registration by the Company under the Securities Act of the Exchange
Securities pursuant to a Registration Statement pursuant to which the Company offers the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities held by such Holders for Exchange Securities in an aggregate
liquidation preference equal to the aggregate liquidation preference of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.

     Exchange Offer Registration Statement: The Registration Statement relating to the Exchange
Offer, including the related Prospectus.

     Exchange Securities: The Non-Cumulative Preference Shares, of the same series under the
Certificate of Designations as the Initial Securities, to be issued to Holders in exchange for
Transfer Restricted Securities pursuant to this Agreement.

     Holders: As defined in Section 2(b) hereof.

     Indemnified Holder: As defined in Section 8(a) hereof.

     Initial Placement: The issuance and sale by the Company of the Initial Securities to the
Initial Purchaser pursuant to the Purchase Agreement.

     Initial Purchaser: As defined in the preamble hereto.

     Initial Securities: As defined in the preamble hereto.

     NASD: National Association of Securities Dealers, Inc.

     Person: Any individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, limited liability company or government or other
entity.

     Prospectus: The prospectus included in a Registration Statement, as amended or supplemented
by any prospectus supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.

     Purchase Agreement: As defined in the preamble hereto.

2

 

     Registrar: An office or agency maintained by the Company where Non-Cumulative Preference
Shares, Series A may be presented for registration of transfer or for exchange.

     Registration Default: As defined in Section 5 hereof.

     Registration Statement: Any registration statement of the Company relating to (a) an offering
of Exchange Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference therein.

     Securities: The Initial Securities and the Exchange Securities.

     Securities Act: The Securities Act of 1933, as amended.

     Shelf Filing Deadline: As defined in Section 4(a) hereof.

     Shelf Registration Statement: As defined in Section 4(a) hereof.

     Transfer Restricted Securities: Each Initial Security, until the earliest to occur of (a) the
date on which such Initial Security is exchanged for a freely transferable Exchange Security in the
Exchange Offer and (b) the date on which such Initial Security has been effectively registered
under the Securities Act and disposed of in accordance with a Shelf Registration Statement.

     Underwritten Registration or Underwritten Offering: A registration in which securities of the
Company are sold to an underwriter for reoffering to the public.

     Section 2. Securities Subject to this Agreement.

     (a) Transfer Restricted Securities. The securities entitled to the benefits of this
Agreement are the Transfer Restricted Securities.

     (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer
Restricted Securities (each, a “Holder”) whenever such Person owns Transfer Restricted Securities.

     Section 3. Registered Exchange Offer.

     (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission
policy (after the procedures set forth in Section 6(a) hereof have been complied with), the Company
shall use commercially reasonable efforts to (i) cause to be filed with the Commission no later
than 240 days after the Closing Date (or if such 240th day is not a Business Day, the next
succeeding Business Day), a Registration Statement under the Securities Act relating to the
Exchange Securities and the Exchange Offer, (ii) cause such Registration Statement to become
effective no later than 120 days after the filing of such Exchange Offer Registration Statement (or
if such 120th day is not a Business Day, the next succeeding Business

3

 

Day) (such 120th day, the “Exchange Effectiveness Target Date”), (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Registration Statement as may be necessary
in order to cause such Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities
Act and (C) cause all necessary filings in connection with the registration and qualification of
the Exchange Securities to be made under the state securities or blue sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) as soon as
practicable following the effectiveness of such Registration Statement, commence the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange
Securities to be offered in exchange for the Transfer Restricted Securities and to permit resales
of Initial Securities held by Broker-Dealers as contemplated by Section 3(c) hereof.

     (b) The Company shall use commercially reasonable efforts to cause the Exchange Offer
Registration Statement to be effective continuously and to keep the Exchange Offer open for a
period of not less than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be
less than 30 days after the date notice of the Exchange Offer is mailed to the Holders. The
Company shall use commercially reasonable efforts to cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the Exchange Securities
shall be included in the Exchange Offer Registration Statement. The Company shall use commercially
reasonable efforts to cause the Exchange Offer to be Consummated no later than 30 Business Days
after the Exchange Effectiveness Target Date.

     (c) The Company shall indicate in a “Plan of Distribution” section contained in the
Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer, who
holds Initial Securities that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such Initial Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an “underwriter”
within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the Exchange Securities
received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such “Plan of Distribution” section shall also contain all other
information with respect to such resales by Broker-Dealers that the Commission may require in order
to permit such resales pursuant thereto, but such “Plan of Distribution” shall not name any such
Broker Dealer or disclose the amount of Initial Securities held by any such Broker Dealer except to
the extent required by the Commission.

     Except as otherwise set forth in Section 5 hereof, the Company shall use commercially
reasonable efforts to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) hereof to the extent
necessary to ensure that it is available for resales of Exchange Securities received by
Broker-Dealers pursuant to the Exchange Offer in exchange for Initial Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from the Company), and to
ensure

4

 

that it conforms in all material respects with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the Commission as announced from time to
time, for a period ending on the earlier of (i) 90 days from the date on which the Exchange Offer
Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no
longer required to deliver a prospectus in connection with market-making or other trading
activities.

     The Company shall provide sufficient copies of the latest version of such Prospectus to
Broker-Dealers promptly upon their reasonable request at any time during such 90-day (or shorter as
provided in the foregoing sentence) period in order to facilitate such resales.

     Section 4. Shelf Registration.

     (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the procedures set forth in the first
paragraph of Section 6(a) hereof have been complied with), (ii) for any reason the Exchange Offer
is not Consummated within 30 Business Days after the Exchange Effectiveness Target Date, or (iii)
with respect to any Holder of Transfer Restricted Securities (A) such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder
may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a
Broker-Dealer and holds Initial Securities acquired directly from the Company or one of its
affiliates, then, in the case of clause (iii), such Holder so notifies the Company, then the
Company shall use commercially reasonable efforts to:

     (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the
Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in
either event, the “Shelf Registration Statement”) on or prior to 90 days after such filing
obligation arises (or if such 90th day is not a Business Day, the next succeeding Business
Day) (such date being the “Shelf Filing Deadline”), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof; and

     (y) cause such Shelf Registration Statement to be declared effective by the Commission
on or before the 180th day after the obligation to file such Shelf Registration Statement
arises (or if such 180th day is not a Business Day, the next succeeding Business Day).

     The Company shall use commercially reasonable efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required by the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of
Transfer Restricted Securities by the Holders of Transfer Restricted Securities entitled to the
benefit of this Section 4(a), and to ensure that it conforms in all material respects with the
requirements of this Agreement, the Securities Act and the policies, rules and regulations of the

5

 

Commission as announced from time to time, for a period of at least two years following the
Closing Date (or shorter period that will terminate when all the Initial Securities covered by such
Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement or are no
longer Transfer Restricted Securities).

     (b) Provision by Holders of Certain Information in Connection with the Shelf Registration
Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor,
such information as the Company may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein. By acquiring the
Initial Securities, each Holder of Transfer Restricted Securities agrees to provide the indemnity
set forth in Section 8(b) hereof with respect to the information such Holder furnishes to the
Company in writing expressly for use in any Shelf Registration Statement. No increased dividend
payment rate will become effective with respect to a Transfer Restricted Security if the applicable
Registration Default arises by reason of the Holder of such Transfer Restricted Security failing to
make the required representations or to deliver the required information. The Company shall not be
obligated to supplement such Shelf Registration Statement after it has been declared effective by
the Commission more than once quarterly to reflect additional Holders. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.

     Section 5. Increased Dividend Payment Rate. If (i) any of the Registration
Statements required by this Agreement is not filed with the Commission on or prior to the date
specified for such filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the “Effectiveness Target Date”), (iii) the Exchange Offer has not been Consummated
within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be usable for its intended
purpose and such Registration Statement is not succeeded within ten days by a post-effective
amendment to such Registration Statement that cures such ineffectiveness or failure and that is
itself within ten days of filing declared effective; provided that with respect to a Shelf
Registration Statement that the Company is required to keep effective, pursuant to Section 4
hereof, the Company may suspend such Shelf Registration Statement in excess of the periods set
forth in clause (iv) above so long as such suspensions do not exceed 30 days in the aggregate in
any twelve-month period (each such event referred to in clauses (i) through (iv), a “Registration
Default”), the Company hereby agrees that dividends will accrue on the relevant Transfer Restricted
Securities, with respect to the semi-annual dividend payment period during which the first
Registration Default occurred, on the liquidation preference amount of $1,000 per share, at an
annual rate of 7.75% (regardless of how many Registration Defaults shall have occurred and be
continuing) and shall increase by 0.25% per annum at the end of each subsequent semi-annual
dividend payment period, but in no event shall such increase exceed 1.00% per annum (regardless of
how many Registration Defaults shall have occurred and be continuing). Following the cure of all
Registration Defaults relating to any particular Transfer

6

 

Restricted Securities, dividends will accrue on the relevant Transfer Restricted Securities of
the annual rate provided in the Certificate of Designations for the payment of dividends in the
absence of a Registration Default; provided, however, that, if after any such reduction in the
dividend payment rate, a different Registration Default occurs, the dividend payment rate
applicable to the relevant Transfer Restricted Securities shall again be increased pursuant to the
foregoing provisions. Notwithstanding anything to the contrary herein, in the case of a Shelf
Registration Statement required to be filed due to a failure to consummate the Exchange Offer
within the required time period, all Registration Defaults with respect to such Shelf Registration
Statement will be deemed cured upon consummation of the Exchange Offer (it being understood that
the foregoing shall not apply to any Shelf Registration Statement to the extent required to be
filed to register any Transfer Restricted Securities pursuant to Section 4(a)(iii) hereof).

     Section 6. Registration Procedures.

     (a) Exchange Offer Registration Statement. (i) In connection with the Exchange Offer, the
Company shall comply with all of the applicable provisions of Section 6(c) hereof, shall use
commercially reasonable efforts to effect the exchange of Exchange Securities for Transfer
Restricted Securities being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with the following provision:

     If in the reasonable opinion of counsel to the Company there is a question as to
whether the Exchange Offer is permitted by applicable law, the Company hereby agrees (x) to
seek a favorable decision from the Commission allowing the Company to Consummate an Exchange
Offer for such Initial Securities and (y) to pursue the issuance of such a decision to the
Commission staff level, but shall not be required to take commercially unreasonable action.

     (ii) As a condition to its participation in the Exchange Offer pursuant to the terms
of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the
request of the Company, prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange Securities
to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its
ordinary course of business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Company’s preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission’s letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (which may include any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale

7

 

transaction should be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Exchange Securities obtained by such Holder in exchange
for Initial Securities acquired by such Holder directly from the Company.

     (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the
Company shall comply with all the applicable provisions of Section 6(c) hereof and shall use
commercially reasonable efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or methods of distribution
thereof, and pursuant thereto the Company shall use commercially reasonable efforts to prepare and
file with the Commission a Registration Statement relating to the registration on any appropriate
form under the Securities Act that is available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof. To the extent the
Company is required to include any Securities in a Shelf Registration Statement, the Company may
include such Securities on any other shelf registration statement otherwise being filed by the
Company with respect to other of its securities, so long as all the procedures described therein
are adhered to.

     (c) General Provisions. In connection with any Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted Securities
(including, without limitation, any Registration Statement and the related Prospectus required to
permit resales of Initial Securities by Broker-Dealers), the Company shall use commercially
reasonable efforts to:

     (i) keep such Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 hereof, as applicable; upon
the occurrence of any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use commercially reasonable efforts
to cause such amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon as practicable
thereafter;

     (ii) prepare and file with the Commission such amendments and post-effective
amendments to the applicable Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period set forth in Section 3 or 4
hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable

8

 

period in accordance with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to the Prospectus;

     (iii) advise the underwriter(s), if any, and selling Holders promptly and, if
requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, or (D) of the existence of any fact or the happening of any event that
makes any statement of a material fact made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in (x) the Registration
Statement by reason of an omission of any material fact in order to make the statements
therein, not misleading or (y) the Prospectus by reason of an omission of any material fact
in order to make the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities or blue sky laws,
the Company shall use commercially reasonable efforts to obtain the withdrawal or lifting of
such order as early as practicable;

     (iv) upon written request, furnish to each of the Initial Purchaser, each selling
Holder named in any Registration Statement, and each of the underwriter(s), if any, before
filing with the Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement or Prospectus
(including, if so requested, all documents to be incorporated by reference which have not
been filed with the Commission), and use best efforts to reflect reasonable comments within
5 Business Days. The objection of such an Initial Purchaser or underwriter, if any, shall
be deemed to be reasonable if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material misstatement or
omission;

     (v) upon written request, make available, subject to appropriate confidentiality
agreements, at reasonable times and in a reasonable manner for inspection by a
representative of, and not more than one counsel acting for, the Initial Purchaser that is a
selling Holder and the managing underwriter(s), if any, participating in any disposition
pursuant to such Registration Statement and any accountant retained by the Initial Purchaser
or any of the underwriter(s), all financial and other records, pertinent corporate documents
and properties of the Company necessary, in the opinion of the Initial Purchaser, any
underwriter(s) or their counsel, to conduct a reasonable investigation

9

 

within the meaning of Section 11 of the Securities Act and cause the Company’s
officers, directors and employees to supply all information reasonably requested by any such
representative or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and prior to its
effectiveness and to participate in meetings at reasonable times and at reasonable places
with investors to the extent requested by the managing underwriter(s), if any;

     (vi) if requested by any selling Holders or the underwriter(s), if any, promptly
incorporate in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment, if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included therein, including, without
limitation, information relating to the “Plan of Distribution” of the Transfer Restricted
Securities, information with respect to the aggregate liquidation preference of the Transfer
Restricted Securities being sold to such underwriter(s), the purchase price being paid
therefor and any other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as reasonably practicable after the Company is notified of
the matters to be incorporated in such Prospectus supplement or post-effective amendment;

     (vii) furnish to the Initial Purchaser, each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including, if requested by
the Initial Purchaser, any selling Holder or underwriter(s), financial statements and
schedules, all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);

     (viii) deliver to each selling Holder and each of the underwriter(s), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus approved by
the Company for distribution in any offering, and the sale of the Transfer Restricted
Securities) and any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus (including each preliminary
prospectus approved by the Company for distribution in any offering, and the sale of the
Transfer Restricted Securities) and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection with the offering and
the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;

     (ix) in case of an Underwritten Offering, enter into such customary agreements
(including an underwriting agreement), and make such customary representations and
warranties, and take all such other customary actions reasonably requested to be taken in
connection therewith in order to expedite or facilitate the disposition of the Transfer
Restricted Securities pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably requested by the underwriter(s) or a majority of
Holders of the outstanding aggregate liquidation preference of the Transfer Restricted
Securities being sold in connection with any sale or resale pursuant to any

10

 

Registration Statement contemplated by this Agreement; and whether or not an
underwriting agreement is entered into, the Company shall:

     (A) furnish to the selling Holders and the underwriters, if any, in such
substance and scope as they may reasonably request and as are customarily made by
issuers to underwriters in primary underwritten offerings, upon the effectiveness of
the Shelf Registration Statement:

     (1) a certificate, dated the date of effectiveness of the Shelf
Registration Statement, signed by (y) the President or any Vice President of
the Company and (z) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set forth in
paragraphs (i), (ii) and (iii) of Section 5(g) of the Purchase Agreement;

     (2) opinions and a negative assurance letter, in each case reasonably
satisfactory to the underwriters, dated the date of effectiveness of the
Shelf Registration Statement of counsel or counsels for the Company,
covering such matters as are customarily covered in opinions given in
connection with underwritten firm commitment offerings; and

     (3) a customary comfort letter (if such comfort letter shall be
issuable to the underwriters in accordance with the relevant industry
accounting pronouncements), dated the date of effectiveness of the Shelf
Registration Statement, from the Company’s independent accountants, in the
customary form and covering matters of the type customarily requested to be
covered in comfort letters by underwriters in connection with primary
underwritten offerings (to the extent practicable), substantially similar in
scope to the form of the comfort letter delivered pursuant to Section 5(a)
of the Purchase Agreement; and

     (B) deliver such other documents and certificates as may be reasonably
requested by the underwriters or a majority of the Holders of the outstanding
aggregate liquidation preference of the Transfer Restricted Securities being sold
and which are customarily delivered in underwritten offerings.

     (x) prior to any public offering of Transfer Restricted Securities that will result in
such securities no longer being Transfer Restricted Securities, cooperate with the selling
Holders, the underwriter(s), if any, and their respective counsel in connection with the
registration and qualification of the Transfer Restricted Securities under the state
securities or blue sky laws of such jurisdictions as the selling Holders or underwriter(s),
if any, may reasonably request and do any and all other acts or things reasonably necessary
or advisable to enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation where it is not then
so qualified or to take any action that would subject it to the service of process in suits
or to taxation in any jurisdiction where it is not then so subject;

11

 

     (xi) in connection with any sale of Transfer Restricted Securities that will result in
such Securities no longer being Transfer Restricted Securities, cooperate with the selling
Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in such authorized
denominations and registered in such names as the Holders or the underwriter(s), if any, may
reasonably request at least two Business Days prior to any sale of Transfer Restricted
Securities made by such Holders or underwriter(s);

     (xii) if any fact or event contemplated by Section 6(c)(iii)(D) hereof shall exist or
have occurred, prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Registration Statement will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements
therein not misleading, and the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;

     (xiii) provide a CUSIP number for all Exchange Securities not later than the effective
date of the Registration Statement covering such Exchange Securities;

     (xiv) cooperate and assist in any filings required to be made with the NASD and in the
performance of any customary due diligence investigation by any underwriter (including any
“qualified independent underwriter”) that is required to be retained in accordance with the
rules and regulations of the NASD; and

     (xv) comply with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm commitment or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with
the first month of the Company’s first fiscal quarter commencing after the effective date of
the Registration Statement.

     Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any
notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder’s receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised
in writing (the “Advice”) by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such Holder’s possession,
of the Prospectus covering such Transfer Restricted Securities that were current at the time of
receipt of such notice. In the event the Company shall

12

 

give any such notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of
days during the period from and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice; provided, however, that no such
extension shall be taken into account in determining whether an increased dividend payment rate is
applicable pursuant to Section 5 hereof or the amount of such additional dividend payment rate.

     Section 7. Registration Expenses.

     (a) All expenses incident to the Company’s performance of or compliance with this Agreement
will be borne by the Company, regardless of whether a Registration Statement becomes effective,
including, without limitation: (i) all registration and filing fees and expenses (including
filings made by the Initial Purchaser or Holder with the NASD (and, if applicable, the fees and
expenses of any “qualified independent underwriter” and reasonable expenses of its counsel that may
be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance
with federal securities and state securities or blue sky laws including the reasonable fees and
expenses of counsel for any underwriters in connection therewith; (iii) all expenses of printing
(including printing certificates for the Exchange Securities to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section 7(b) hereof, the Holders of the
Transfer Restricted Securities; (v) all application and filing fees (if any) in connection with
listing the Exchange Securities on a securities exchange or automated quotation system pursuant to
the requirements thereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).

     The Company will, in any event, bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including special experts,
retained by the Company.

     (b) In connection with any Shelf Registration Statement required by this Agreement, the
Company will reimburse the Holders of Transfer Restricted Securities being registered pursuant to
the Shelf Registration Statement for the reasonable fees and disbursements of not more than one
counsel as may be chosen by the Holders of a majority in liquidation preference of the Transfer
Restricted Securities for whose benefit such Registration Statement is being prepared.

     Section 8. Indemnification.

     (a) The Company agrees to indemnify and hold harmless (i) each Holder and (ii) each Person,
if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) any Holder (any of the Persons referred to in this clause (ii) being hereinafter
referred to as a “controlling person”) and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person (any

13

 

Person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
“Indemnified Holder”), to the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including, without limitation, and as
incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling,
compromising, paying or defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable fees and expenses of
counsel to any Indemnified Holder), joint or several, directly or indirectly caused by, based upon
or arising out of any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission
or alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein, in respect of any Registration Statement, not misleading and, in
respect of any Prospectus, not misleading in light of the circumstances under which they were made,
except insofar as such losses, claims, damages, liabilities or expenses, directly or indirectly,
are caused by or based upon or arise out of an untrue statement or omission or alleged untrue
statement or omission that is made in reliance upon and in conformity with information relating to
any of the Holders furnished in writing to the Company by any of the Holders expressly for use
therein. This indemnity agreement shall be in addition to any liability which the Company may
otherwise have.

     In case any action or proceeding (including any governmental or regulatory investigation or
proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to
which indemnity may be sought against the Company, such Indemnified Holder (or the Indemnified
Holder controlled by such controlling person) shall promptly notify the Company in writing;
provided, however, that the failure to give such notice shall not relieve the Company of its
obligations pursuant to this Agreement, except to the extent that the Company is prejudiced as a
proximate cause of such failure. The Company will be entitled to participate in and, to the extent
that any of them shall elect, by written notice delivered to the Indemnified Holder promptly after
receiving the aforesaid notice from such Indemnified Holder, to assume the defense of such action
or proceeding with counsel reasonably satisfactory to such Indemnified Holder; provided, however,
if the defendants in any such action include both of the Indemnified Holder and the Company and the
Indemnified Holder shall have reasonably concluded that a conflict may arise between the positions
of the Company and the Indemnified Holder in conducting the defense of any such action or that
there may be legal defenses available to it and/or other Indemnified Holders which are different
from or additional to those available to the Company which is raised in a proceeding involving both
parties that would give rise to such a conflict, the Indemnified Holder or Indemnified Holders
shall have the right to select one separate counsel (in addition to any local counsel) to assume
such legal defenses and to otherwise participate in the defense of such action on behalf of such
Indemnified Holder or Indemnified Holders. Upon receipt of notice from the Company to assume the
defense of such action and approval by the Indemnified Holder of counsel, the Company will not be
liable to such Indemnified Holder under this Section 8 for any legal or other expenses subsequently
incurred by such Indemnified Holder in connection with the defense thereof unless the Indemnified
Holder shall have employed separate counsel in accordance with the proviso to the next preceding
sentence. The Company shall not, in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any

14

 

local counsel) at any time for all Indemnified Holders, which firm shall be designated by the
Holders. The Company shall not be liable for any settlement of any such action or proceeding
effected without the Company’s prior written consent, and the Company agrees to indemnify and hold
harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by
reason of any settlement of any action effected with the written consent of the Company. The
Company shall not, without the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification may be sought hereunder (whether or
not any Indemnified Holder is a party thereto), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Holder from all liability or claims that are
the subject matter of such action, litigation or proceeding.

     (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to
indemnify and hold harmless the Company and its directors and officers who sign a Registration
Statement, and any Person controlling (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners,
employees, representatives and agents of each such Person, to the same extent as the foregoing
indemnity from the Company to each of the Indemnified Holders, but only with respect to claims and
actions directly or indirectly caused by, based on or arising out of information relating to such
Holder furnished in writing by such Holder expressly for use in any Registration Statement or
Prospectus. In case any action or proceeding shall be brought against the Company or its directors
or officers or any such controlling person in respect of which indemnity may be sought against a
Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the
Company, and the Company, its respective directors and officers and such controlling person shall
have the rights and duties given to each Holder by the preceding paragraph.

     (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified
party under Section 8(a) or (b) hereof (other than by reason of exceptions provided in those
Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Holders, on the other hand,
from the Initial Placement (which in the case of the Company shall be deemed to be equal to the
total gross proceeds to the Company from the Initial Placement), the increased dividend payment
rate which did not become payable as a result of the filing of the Registration Statement resulting
in such losses, claims, damages, liabilities or expenses, and such Registration Statement or, if
such allocation is not permitted by applicable law, the relative fault of the Company, on the one
hand, and the Holders, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other, shall be determined 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 relates to information supplied by the Company, on the one hand, or the
Indemnified Holders, on the other hand, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and

15

 

expenses referred to above shall be deemed to include, subject to the limitations set forth in
the second paragraph of Section 8(a) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action or claim.

     The Company and each Holder of Transfer Restricted Securities agree that it would not be just
and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this Section 8, none of the
Holders that is an Initial Purchaser (and its related Indemnified Holders) shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the net proceeds received
by such Holder with respect to the Initial Securities sold by such Holder exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to
contribute pursuant to this Section 8(c) are several in proportion to the respective liquidation
preference of Initial Securities held by each of the Holders hereunder and not joint.

     Section 9. Rule 144A. The Company hereby agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities, in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner,
the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of
such Transfer Restricted Securities pursuant to Rule 144A under the Securities Act.

     Section 10. Participation in Underwritten Registrations. No Holder may participate
in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder’s
Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up
letters and other documents required under the terms of such underwriting arrangements.

     Section 11. Selection of Underwriters. The Holders of Transfer Restricted
Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker(s) and managing underwriter(s) that will administer such offering will be
selected by the Company; provided that such investment bankers and managing underwriters must be
reasonably satisfactory to the Holders of a majority in aggregate liquidation preference of the
Transfer Restricted Securities included in such offering.

16

 

     Section 12. Miscellaneous.

     (a) Remedies. The Company hereby agrees (to the extent permitted by applicable law) that
monetary damages would not be adequate compensation for any loss incurred by reason of a breach by
it of the provisions of this Agreement and hereby agrees (to the extent permitted by applicable
law) to waive the defense in any action for specific performance that a remedy at law would be
adequate.

     (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement
enter into any agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

     (c) Adjustments Affecting the Securities. The Company will use commercially reasonable
efforts not to take any action, or permit any change to occur, with respect to the Securities that
would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer.

     (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions hereof may not be given
unless the Company has (i) in the case of Section 5 hereof and this Section 12(d)(i), obtained the
written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case
of all other provisions hereof, obtained the written consent of Holders of a majority of the
outstanding liquidation preference of Transfer Restricted Securities (excluding any Transfer
Restricted Securities held by the Company or its Affiliates). Notwithstanding the foregoing, a
waiver or consent to departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect
directly or indirectly the rights of other Holders whose securities are not being tendered pursuant
to such Exchange Offer may be given by the Holders of a majority of the liquidation preference
principal amount of Transfer Restricted Securities being tendered or registered; provided, however,
that, with respect to any matter that directly or indirectly affects the rights of any Initial
Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser
with respect to which such amendment, qualification, supplement, waiver, consent or departure is to
be effective.

     (e) Notices. All notices and other communications provided for or permitted hereunder shall
be made in writing by hand-delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier, or air courier guaranteeing overnight delivery:

     (i) if to a Holder, at the address set forth on the records of the Registrar under the
Certificate of Designations, with a copy to the Registrar under the Certificate of
Designations; and

     (ii) if to the Company:

RAM Holdings Ltd.

Ram Re House

46 Reid Street

Hamilton, HM 12 Bermuda

17

 

Facsimile: (441) 296-6509

Attention: Victoria W. Guest

With a copy to:

LeBoeuf, Lamb, Greene & MacRae LLP

125 West 55th Street

New York, New York 10019

Facsimile: (212) 649-0999

Attention: Michael Groll

     All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.

     (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, including, without limitation, and without the
need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted
Securities from such Holder.

     (g) Counterparts. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same agreement.

     (h) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

     (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES
OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.

     (j) Severability. In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein (to the extent permitted by applicable law) shall not be
affected or impaired thereby.

     (k) Entire Agreement. This Agreement (together with the Purchase Agreement, the Certificate
of Designations and the Securities) is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to

18

 

herein with respect to the registration rights granted by the Company with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

19

 

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

	 	 	 	 	 
	 	RAM HOLDINGS LTD.

 	 
	 	By:  	/s/ Vernon M. Endo
 	 
	 	 	Name:  	Vernon M. Endo 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

MERRILL LYNCH & CO.

MERRILL LYNCH, PIERCE, FENNER & SMITH

          INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ Daniel Luckshire	 	 
	 

	 	 

Title:   Relationship Manager
	 	 
	 

	 	Name: Daniel Luckshire	 	 

20

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