Exhibit 1.1
Assured Guaranty US Holdings
Inc.
Assured Guaranty
Ltd.
Series A Enhanced Junior
Subordinated Debentures due 2066
UNDERWRITING
AGREEMENT
December 13, 2006
BANC OF AMERICA SECURITIES
LLC
9 West 57 th Street
New York, NY 10019
DEUTSCHE BANK SECURITIES INC.
60 Wall Street
New York, NY 10005
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
4 World Financial Center
New York, NY 10080
As Representatives of the several Underwriters
Ladies and Gentlemen:
Assured Guaranty US Holdings Inc., a
Delaware corporation (the “Issuer”), proposes to issue
and sell to the several underwriters named in Schedule A (the
“Underwriters”) $150,000,000 aggregate principal amount
of its Series A Enhanced Junior Subordinated Debentures due 2066
(the “Debentures”), to be issued under an indenture,
dated as of December 1, 2006 (the “Subordinated
Indenture”), among the Issuer, Assured Guaranty Ltd., a
Bermuda company (the “Guarantor”) and The Bank of New
York, a New York banking corporation, as trustee (the
“Trustee”), as supplemented by the First Supplemental
Indenture, to be dated as of the Closing Date, among the Issuer,
the Guarantor, and the Trustee (the “Supplemental
Indenture,” and, together with the Subordinated Indenture,
the “Indenture”). Banc of America Securities LLC,
Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated have agreed to act as representatives of
the several Underwriters (in such capacity, the
“Representatives”) in connection with the offering and
sale of the Securities (as defined herein).
Pursuant to the Indenture, the
Guarantor has agreed to fully, irrevocably and unconditionally
guarantee, on a subordinated basis (the “Guarantees,”
and together with the Debentures, the “Securities”), to
each holder of the Debentures and to the Trustee, (1) the
full
and punctual payment of principal
of, premium, if any, interest and any Additional Amounts (as
defined in the Indenture) in respect thereof on the Debentures when
due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Issuer under
the Indenture and the Debentures and (2) the full and punctual
performance within applicable grace periods of all other
obligations of the Issuer under the Indenture and the
Debentures.
In addition, the Issuer and the
Guarantor will enter into a Replacement Capital Covenant to be
dated December 20, 2006 (the “ Replacement Capital
Covenant ”) (as described in the Disclosure Package and
the Prospectus) for the benefit of a specified class of Covered
Debtholders (as defined in the Replacement Capital Covenant)
pursuant to which the Issuer and the Guarantor will covenant not to
redeem, repurchase or purchase, as applicable, the Securities on or
before December 15, 2046, unless the Company complies with certain
specified conditions.
SECTION 1. Representations and
Warranties.
Each of the Issuer and the
Guarantor, jointly and severally, hereby represents, warrants and
covenants to each Underwriter as follows:
(a)
Registration Statement and Prospectus. The Issuer and
the Guarantor have prepared and filed with the Securities and
Exchange Commission (the “Commission”) a registration
statement on Form S-3 (File No. 333-125382), which contains a base
prospectus (the “Base Prospectus”), to be used in
respect of the Securities. Such registration statement, as
amended, including the financial statements, exhibits and schedules
thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and
regulations promulgated thereunder (collectively, the
“Securities Act”), including any required information
deemed to be a part thereof at the time of effectiveness pursuant
to Rule 430B under the Securities Act or the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder
(collectively, the “Exchange Act”), is called the
“Registration Statement.” Any preliminary
prospectus supplement to the Base Prospectus that describes the
Securities and the offering thereof and is used prior to filing of
the final prospectus is called, together with the Base Prospectus,
a “preliminary prospectus.” The term
“Prospectus” shall mean the final prospectus supplement
relating to the Securities, together with the Base Prospectus, that
is first filed pursuant to Rule 424(b) after the date and time that
this Agreement is executed and delivered by the parties hereto (the
“Execution Time”). Any reference herein to the
Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act; any reference to any amendment or
supplement to any preliminary prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date
of such preliminary prospectus or Prospectus, as the case may be,
under the Exchange Act, and incorporated by reference in such
preliminary prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be
deemed to refer to and include any annual report of the Issuer or
the Guarantor filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the effective date of the Registration Statement
that is incorporated by reference in the Registration
Statement. All references in this Agreement to the
Registration Statement, a preliminary prospectus, the Prospectus,
or any amendments or
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supplements to any of the foregoing,
shall include any copy thereof filed with the Commission pursuant
to the Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”).
(b)
Compliance with Registration Requirements . The
Registration Statement has been declared effective by the
Commission under the Securities Act. The Issuer and the
Guarantor have complied to the Commission’s satisfaction with
all requests of the Commission for additional or supplemental
information. No stop order suspending the effectiveness of
the Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best
knowledge of the Issuer and the Guarantor, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the
Prospectus when filed complied in all material respects with the
Securities Act and the rules thereunder and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy
thereof delivered to the Underwriters for use in connection with
the offer and sale of the Securities. Each of the
Registration Statement and any post-effective amendment thereto, at
the time it became effective and at the date hereof, complied and
will comply in all material respects with the Securities Act and
did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not
misleading. The Prospectus, as amended or supplemented, as of
its date, at the date hereof, at the time of any filing pursuant to
Rule 424(b), and at the Closing Date (as defined herein), did not
and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and
warranties set forth in the two immediately preceding sentences do
not apply to (i) the Form T-1 Statements of Eligibility under the
Trust Indenture Act of 1939, as amended (the “Trust Indenture
Act”) or (ii) statements in or omissions from the
Registration Statement or any post-effective amendment thereto, or
the Prospectus, or any amendments or supplements thereto, made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Issuer and the Guarantor in writing by
the Representatives expressly for use therein, it being understood
and agreed that the only such information furnished by the
Representatives consists of the information described as such in
Section 8(b) hereof. There is no contract or other document
required to be described in a preliminary prospectus or the
Prospectus or to be filed as exhibits to the Registration Statement
that has not been described or filed as required.
The documents incorporated by
reference in a preliminary prospectus and the Prospectus, when they
became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable. Any
further documents so filed and incorporated by reference in a
preliminary prospectus or the Prospectus or any further amendment
or supplement thereto, when such documents become effective or are
filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder.
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(c)
Disclosure Package . The term “Disclosure
Package” shall mean (i) a preliminary prospectus, (ii) the
issuer free writing prospectuses as defined in Rule 433 of the
Securities Act (each, an “Issuer Free Writing
Prospectus”), if any, identified in Schedule B hereto, (iii)
any other free writing prospectus that the parties hereto shall
hereafter expressly agree in writing to treat as part of the
Disclosure Package and (iv) the Final Term Sheet (as defined
herein), which also shall be identified in Schedule B hereto.
As of 4:00 p.m. (Eastern time) on the date of this Agreement
(the “Applicable Time”), the Disclosure Package did not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply
to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the
Issuer and the Guarantor by any Underwriter through the
Representatives specifically for use therein, it being understood
and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the information described as such in
Section 8(b) hereof.
(d)
Well-Known Seasoned Issuers . (i) At the time of
filing the Registration Statement, (ii) at the time of the
most recent amendment thereto for the purposes of complying with
Section 10(a)(3) of the Securities Act (whether such amendment
was by post-effective amendment, incorporated report filed pursuant
to Section 13 or 15(d) of the Exchange Act or form of
prospectus), (iii) at the time the Issuer or the Guarantor or any
person acting on their behalf (within the meaning, for this clause
only, of Rule 163(c) of the Securities Act) made any offer
relating to the Securities in reliance on the exemption of
Rule 163 of the Securities Act, and (iv) at the
Execution Time of this Agreement (with such date being used as the
determination date for purposes of this clause (iv)), the Issuer
and the Guarantor each was and is a “well-known seasoned
issuer” as defined in Rule 405 of the Securities
Act.
(e)
The Issuer and the Guarantor Not Ineligible Issuers .
(i) At the earliest time after the filing of the Registration
Statement relating to the Securities that the Issuer or the
Guarantor or another offering participant made a bona fide offer
(within the meaning of Rule 164(h)(2) of the Securities Act) and
(ii) at the Execution Time of this Agreement (with such date being
used as the determination date for purposes of this clause (ii)),
the Issuer and the Guarantor each was not and is not an Ineligible
Issuer (as defined in Rule 405 of the Securities Act), without
taking account of any determination by the Commission pursuant to
Rule 405 of the Securities Act that it is not necessary that the
Issuer or the Guarantor be considered an Ineligible
Issuer.
(f)
Issuer Free Writing Prospectuses . Neither any Issuer
Free Writing Prospectus nor the Final Term Sheet, as of its issue
date and at all subsequent times through the completion of the
offering or until any earlier date that the Issuer and the
Guarantor notified or notifies the Representatives as described in
the next sentence, did not, does not and will not include any
information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement, a preliminary
prospectus or the Prospectus. If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or
occurs an event or development as a result of which such Issuer
Free Writing Prospectus conflicted or would conflict with the
information contained in the Registration Statement, a preliminary
prospectus or the Prospectus, the Issuer and the Guarantor have
promptly notified or will promptly notify the Representatives and
have promptly amended or will promptly amend or supplement, at
their own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict. The foregoing two
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sentences do not apply to statements
in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Issuer
and the Guarantor by any Underwriter through the Representatives
specifically for use therein, it being understood and agreed that
the only such information furnished by any Underwriter consists of
the information described as such in Section 8(b)
hereof.
(g)
Distribution of Offering Material . Neither the Issuer
nor the Guarantor have distributed or will distribute, prior to the
later of the Closing Date and the completion of the
Underwriters’ distribution of the Securities, any offering
material in connection with the offering and sale of the Securities
other than a preliminary prospectus, the Prospectus, any Issuer
Free Writing Prospectus reviewed and consented to by the
Representatives and included in Schedule B hereto or the
Registration Statement. The Representatives shall provide
notice to the Issuer if the distribution of the Securities has not
been completed on the date of Closing Date, and upon such later
date as the distribution of the Securities has been
completed.
(h)
No Material Adverse Change. Neither the Guarantor nor
any of its subsidiaries (including the Issuer) has sustained since
the date of the latest audited financial statements included in the
Disclosure Package and the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Disclosure Package and the
Prospectus; and, since the respective dates as of which information
is given in the Disclosure Package and the Prospectus, there has
not been any change in the share capital or capital stock, as the
case may be, or long-term debt of the Guarantor or any of its
subsidiaries (including the Issuer) or any material adverse change,
or any development involving a prospective material adverse change,
in or affecting the business, financial condition,
shareholders’ equity, or results of operations of the
Guarantor and its subsidiaries (including the Issuer), taken as a
whole (a “Material Adverse Change”), otherwise than as
set forth or contemplated in the Disclosure Package and the
Prospectus;
(i)
Incorporation and Good Standing of Guarantor . The
Guarantor has been duly incorporated and is validly existing as an
exempted company in good standing under the laws of the Islands of
Bermuda, with corporate power and authority to own its properties
and conduct its business as described in the Disclosure Package and
the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability
by reason of the failure to be so qualified in any such
jurisdiction;
(j)
Incorporation and Good Standing of Subsidiaries . Each
subsidiary (including the Issuer) of the Guarantor has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
corporate power and authority to own its properties and conduct its
business as described in the Disclosure Package and the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the
failure to be so qualified in any such jurisdiction;
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(k)
Capitalization . The Guarantor has an authorized
capitalization as set forth in each of the Disclosure Package and
the Prospectus under the caption “Capitalization,” and
all of the issued shares of share capital of the Guarantor have
been duly and validly authorized and issued, are fully paid and
non-assessable; and all of the issued shares of share capital of
each subsidiary of the Guarantor (including the Issuer) have been
duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors’ qualifying shares)
are owned directly or indirectly by the Guarantor, free and clear
of all liens, encumbrances, equities or claims;
(l)
Authorization of Agreement . This Agreement has been
duly authorized, executed and delivered by the Issuer and the
Guarantor;
(m)
Authorization of Indenture . The Indenture has been
duly authorized by the Issuer and the Guarantor, has been duly
qualified under the Trust Indenture Act and, when executed and
delivered by the Issuer and the Guarantor and assuming due
authorization, execution and delivery of the Indenture by the
Trustee, will constitute a valid and binding agreement of the
Issuer and the Guarantor, enforceable against the Issuer and the
Guarantor in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally or by general
equitable principles (regardless of whether enforcement is
considered in a proceeding in equity or at law);
(n)
Authorization of the Securities . The Debentures and
the Guarantees have been duly authorized by the Issuer and the
Guarantor, respectively, and, when the Securities have been
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters
pursuant to this Agreement, the Debentures and the Guarantees will
constitute legal, valid and binding obligations of the Issuer and
the Guarantor, respectively, entitled to the benefits of the
Indenture, enforceable against the Issuer and the Guarantor, as the
case may be, in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally or
by general equitable principles (regardless of whether enforcement
is considered in a proceeding in equity or at law). The Securities
will be in the form contemplated by the Indenture;
(o)
Authorization of Replacement Capital Covenant . The
Replacement Capital Covenant has been duly authorized by the Issuer
and the Guarantor, and when executed and delivered by the Issuer
and the Guarantor, will constitute a valid and binding obligation
of the Issuer and the Guarantor, respectively, enforceable against
the Issuer and the Guarantor, as the case may be, in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
other similar laws affecting the enforcement of creditors’
rights generally or by general equitable principles (regardless of
whether enforcement is considered in a proceeding in equity or at
law). The Replacement Capital Covenant will conform in all
material respects to the description thereof contained in each of
the Disclosure Package and the Prospectus;
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(p)
Non-Contravention of Existing Agreements; No Further
Authorizations or Approvals Required. The compliance by
the Issuer and the Guarantor with all of the provisions of this
Agreement, the Indenture, the Securities and the Replacement
Capital Covenant, and the consummation of the transactions
contemplated herein and therein will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, (i) any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Guarantor or any of its subsidiaries (including the Issuer) is a
party or by which the Guarantor or any of its subsidiaries
(including the Issuer) is bound or to which any of the property or
assets of the Guarantor or any of its subsidiaries (including the
Issuer) is subject, (ii) the provisions of the Memorandum of
Association or the Bye-laws of the Guarantor or the Certificate of
Incorporation or the bylaws of the Issuer or (iii) any statute or
any rule or regulation or order, judgment or decree of any court or
governmental agency or body having jurisdiction over the Guarantor
or any of its subsidiaries (including the Issuer) or any of their
respective properties, except, in the case of clauses (i) and (iii)
above, for such violations that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect
on the business, financial condition, shareholders’ equity,
or results of operations of the Guarantor and its subsidiaries
(including the Issuer) taken as a whole (a “Material Adverse
Effect”); and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body (“Governmental
Authorizations”) is required for the sale of the Securities
or the consummation by the Issuer and the Guarantor of the
transactions contemplated by this Agreement, the Indenture, the
Securities and the Replacement Capital Covenant, except (A) such
Governmental Authorizations as have been duly obtained and are in
full force and effect and copies of which have been furnished to
you and (B) such Governmental Authorizations as may be required
under state securities laws, Blue Sky laws, insurance securities
laws or any laws of jurisdictions outside the United States in
connection with the purchase and distribution of the Securities by
or for the account of the Underwriters;
(q)
Absence of Violations and Defaults. Neither the
Guarantor nor any of its subsidiaries (including the Issuer) is (i)
in violation of its Memorandum of Association or Bye-laws or
comparable organizational documents or (ii) in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound;
(r)
All Necessary Permits, etc. Each of the Guarantor and
its subsidiaries (including the Issuer) possesses all consents,
authorizations, approvals, orders, licenses, certificates, or
permits issued by any regulatory agencies or bodies (collectively,
“Permits”) which are necessary to conduct the business
now conducted by it as described in the Disclosure Package and the
Prospectus, except where the failure to possess such Permits would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; all of such Permits are valid and
in full force and effect, except where the invalidity of such
Permits or the failure to be in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. There is no pending, or to the
Issuer’s and the Guarantor’s knowledge, threatened
action, suit, proceeding or investigation against or involving the
Guarantor and its subsidiaries (including the Issuer), and neither
the Issuer nor the Guarantor knows of any reasonable basis for any
such action, suit, proceeding or investigation, that individually
or in the aggregate would reasonably be expected to lead to the
revocation, modification, termination, suspension or any other
material impairment of the rights of the holder of any such Permit,
except for such revocation,
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modification, termination,
suspension or other material impairment that would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(s)
Compliance with Insurance Laws. Except as described
in the Disclosure Package and the Prospectus, each of the Guarantor
and its insurance subsidiaries is duly registered, licensed or
admitted as an insurer or reinsurer or as an insurance holding
company, as the case may be, under applicable insurance holding
company statutes or other insurance laws (including laws that
relate to companies that control insurance companies) and the
rules, regulations and interpretations of the insurance regulatory
authorities thereunder (collectively, “Insurance Laws”)
in each jurisdiction where it is required to be so licensed or
admitted to conduct its business as described in the Disclosure
Package and the Prospectus, except where the failure to be so
registered, licensed or admitted would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Except as described in the Disclosure Package and the
Prospectus, each of the Guarantor and its insurance subsidiaries
has all other necessary authorizations, approvals, orders,
consents, certificates, permits, registrations and qualifications
of and from, and has made all declarations and filings with, all
insurance regulatory authorities necessary to conduct their
respective businesses as described in the Disclosure Package and
the Prospectus, and all of the foregoing are in full force and
effect, except where the failure to have such authorizations,
approvals, orders, consents, certificates, permits, registrations
or qualifications, the failure to make such declarations and
filings, or the failure to be in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as otherwise described in the
Disclosure Package and the Prospectus, none of the Guarantor nor
any of its insurance subsidiaries has received any notification
from any insurance regulatory authority to the effect that any
additional authorization, approval, order, consent, certificate,
permit, registration or qualification is needed to be obtained by
either the Guarantor or any of its insurance subsidiaries to
conduct its business as currently conducted, except where the
failure to have such additional authorization, approval, order,
consent, certificate, permit, registration or qualification would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Except as otherwise described in
the Disclosure Package and the Prospectus, no insurance regulatory
authority has issued to the Guarantor or any subsidiary (including
the Issuer) any order impairing, restricting or prohibiting (A) the
payment of dividends by any of the Guarantor’s subsidiaries
(including the Issuer), (B) the making of a distribution on any
subsidiary’s (including the Issuer’s) share capital,
(C) the repayment to the Guarantor of any loans or advances to any
of its subsidiaries (including the Issuer) from the Guarantor, (D)
the repayment to the Issuer of any loans or advances to any of its
subsidiaries from the Issuer, or (E) the transfer of any of the
Guarantor’s subsidiary’s property or assets to the
Guarantor or any other subsidiary of the Guarantor (including the
Issuer). Each of the Guarantor, the Issuer, Assured Guaranty Re
Ltd., Assured Guaranty Re Overseas Ltd., Assured Guaranty Mortgage
Insurance Company, Assured Guaranty Corp. and Assured Guaranty (UK)
Ltd. maintains its books and records in accordance with all
applicable Insurance Laws, except where the failure to so maintain
its books and records would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect;
(t)
Bermuda Tax Assurances. Each of the Guarantor, Assured
Guaranty Corp., Assured Guaranty Re Ltd. and Assured Guaranty Re
Overseas Ltd. has received from the
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Bermuda Minister of Finance an
assurance under The Exempted Undertakings Tax Protection Act, 1966
of Bermuda to the effect that, in the event of there being enacted
in Bermuda any legislation imposing tax computed on profits or
income or computed on any capital asset, gain or appreciation, or
any tax of the nature of estate duty or inheritance tax, then the
imposition of any such tax shall not be applicable to the
Guarantor, Assured Guaranty Corp., Assured Guaranty Re Ltd. or
Assured Guaranty Re Overseas Ltd. or any of the their operations or
their shares, debentures or other obligations, until 28 March 2016
(subject to certain provisos expressed in such assurance), and the
Guarantor has not received any notification to the effect (and is
not otherwise aware) that such assurances may be revoked or
otherwise not honored by the Bermuda government;
(u)
Treatment Under the Internal Revenue Code . The
Guarantor and the Issuer do not believe that (1) either the
Guarantor or any of its subsidiaries (including the Issuer)
currently should be, or upon the sale of the Securities herein
contemplated should be, (A) treated as a “passive foreign
investment company” as defined in Section 1297(a) of the
Internal Revenue Code of 1986, as amended (the “Code”),
(B) considered a “foreign personal holding company” as
defined in Section 552 of the Code, (C) characterized as a
“personal holding company” as defined in Section 542 of
the Code, (D) except for the Issuer, Assured Guaranty Financial
Products Inc., Assured Guaranty Corp., Assured Guaranty Overseas US
Holdings Inc., Assured Guaranty Re Overseas Ltd., Assured Guaranty
Risk Assurance Company and Assured Guaranty Mortgage Insurance
Company, considered to be engaged in a trade or business within the
United States for purposes of Section 864(b) of the Code or (E)
except for Assured Guaranty Finance Overseas Ltd. and Assured
Guaranty (UK) Ltd., characterized as resident, managed or
controlled or carrying on a trade through a branch or agency in the
United Kingdom or (2) any U.S. person who owns shares of the
Guarantor directly or indirectly through foreign entities should be
treated as owning (directly, indirectly through foreign entities or
by attribution pursuant to Section 958(b) of the Code) 10 percent
or more of the total voting power of the Guarantor or any of its
non-U.S. subsidiaries;
(v)
Related Person Insurance Income . Assured Guaranty Re
Ltd. and Assured Guaranty (UK) Ltd. intend to operate in a manner
that is intended to ensure that the related person insurance income
of each such company does not equal or exceed 20% of each such
company’s gross insurance income for any taxable year in the
foreseeable future;
(w)
Accuracy of Statements . The statements set forth in
the Disclosure Package and the Prospectus under the captions
“Description of the Capital Securities,” “Certain
Terms of the Replacement Capital Covenant” and
“Description of the Assured Guaranty US Holdings Debt
Securities and Assured Guaranty Guarantee” insofar as they
purport to constitute a summary of the terms of the Securities, the
Indenture and the Replacement Capital Covenant, and under the
caption “Material U.S. Federal Income Tax
Consequences,” and in the Guarantor’s Annual Report on
Form 10-K for the year ended December 31, 2005, under the captions
“Part I—Item 1—Business—Regulation,”
and “Part I—Item 3—Legal Proceedings,”
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are true, accurate and complete in
all material respects. The Indenture, the Securities and this
Agreement will be in substantially the form filed or incorporated
by reference, as the case may be, as an exhibit to the Registration
Statement;
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(x)
Internal Controls and Procedures. The Guarantor
maintains a system of internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act)
designed by, or under the supervision of, the Guarantor’s
principal executive officer and principal financial officer to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles. The Guarantor’s internal control over financial
reporting was effective as of the end of the quarter ended
September 30, 2006, and there have been no changes in the
Guarantor’s internal control over financial reporting since
such time and the Guarantor is not aware of any material weaknesses
in its internal control over financial reporting;
(y)
No Material Action or Proceeding. Other than as set
forth in the Disclosure Package and the Prospectus, there are no
legal or governmental proceedings pending to which the Guarantor or
any of its subsidiaries (including the Issuer) is a party or of
which any property of the Guarantor or any of its subsidiaries
(including the Issuer) is the subject which, if determined
adversely to the Guarantor or any of its subsidiaries (including
the Issuer), would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and, to the best of the
Guarantor’s and Issuer’s knowledge, no such proceedings
are threatened or contemplated by governmental authorities or
threatened by others;
(z)
Not an “Investment Company.” Neither the
Issuer nor the Guarantor is and, after giving effect to the
offering and sale of the Securities, will be an “investment
company”, as such term is defined in the Investment Company
Act of 1940, as amended (the “Investment Company
Act”);
(aa)
No Stamp Duty, Transfer, Excise or Similar Tax . None
of the Underwriters or any subsequent purchasers of the Securities
is subject to any stamp duty, transfer, excise or similar tax
imposed in Bermuda in connection with the issuance, offering or
sale of the Securities to the Underwriters or to any subsequent
purchasers;
(bb)
Bermuda
Exempted Companies. There are no currency exchange
control laws or withholding taxes, in each case of Bermuda, that
would be applicable to (1) the payment of interest or principal on
the Securities by the Issuer or the Guarantor (other than as may
apply to residents of Bermuda for Bermuda exchange control
purposes) or (2) the payment of dividends, interest or principal by
the any of the Guarantor’s subsidiaries (including the
Issuer) to such subsidiary’s parent company. The BMA has
designated the Guarantor, Assured Guaranty Re Ltd. and Assured
Guaranty Re Overseas Ltd. (Assured Guaranty Re Ltd. and Assured
Guaranty Re Overseas Ltd. are collectively referred to as the
“Bermuda Subsidiaries”) as non-resident for exchange
control purposes. Each of the Guarantor and the Bermuda
Subsidiaries are “exempted companies” under Bermuda law
and have not (A) acquired and do not hold any land for its business
in Bermuda, other than that held by way of lease or tenancy for
terms of not more than 50 years, without the express authorization
of the Bermuda Minister of Finance, (B) acquired and do not hold
land by way of lease or tenancy which is acquired for its business
and held for terms of not more than 21 years in order to provide
accommodation or recreational facilities for its officers and
employees, without the express authorization of the Minister of
Finance of Bermuda, (C) taken mortgages on land in Bermuda to
secure an amount in excess of $50,000, without the consent of the
Bermuda Minister of Finance, (D) acquired any bonds or
debentures
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