RIGHT OF FIRST OFFER TO REINSURE
TERM SHEET
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PARTIES: Commercial Guaranty Assurance, Ltd.
("CGA") and Capital Reinsurance
Company ("Cap Re").
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COVERED BUSINESS: All insurance contracts, including
contracts of financial guaranty
insurance or reinsurance, issued by
CGA.
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RIGHT OF FIRST OFFER: 1. Before soliciting any offer from
any person to reinsure all or a
portion of the Covered Business,
CGA will first notify Cap Re of
its intention to solicit such
offer and give Cap Re the right
to make a first offer to provide
such reinsurance.
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2. Before CGA accepts the offer of
any person to reinsure all or a
portion of the Covered Business,
CGA will first notify Cap Re and
give Cap Re the right to provide
such reinsurance at the same
price and on the same terms
offered by such other person,
except that CGA shall not be
required to give Cap Re the right
to provide such reinsurance if:
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a. CGA has already provided Cap Re with
an opportunity to make an offer to
reinsure such Covered Business and
Cap Re failed to offer reinsurance
within the time allowed by this
Agreement; or
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b. Cap Re has, within the
preceding 10 business days,
made an offer to reinsure
such Covered Business and
the reinsurance offered by
such other person is more
favorable to CGA in material
respects than the
reinsurance offered by Cap Re.
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TIME FOR THE EXERCISE OF THE Cap Re shall have at least 5 business
RIGHT TO MAKE FIRST OFFER: days after receipt of the notices
described above to make an offer to reinsure
CGA, provided that such period shall not begin
to run until CGA shall have provided to Cap Re
all information which is reasonably necessary
to formulate an offer.
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MATERIALITY: A difference in reinsurance offered by
Cap Re and another reinsurer shall be
deemed to be material only if it
involves any of the following:
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a. A difference in the applicable
term of coverage of more than one
year.
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b. A difference in the basis on which risks
attach.
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c. A difference in the overall allowable
ceding commission or profit commission of
more than 5% of total ceded premium.
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d. Positive differences in the ratings made
by any nationally recognized rating agency
of one entire rating category.
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e. A difference in the premium of more than
5%.
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TERM: Cap Re's rights under this Agreement
commence on June 4, 1997 and terminate
on the earlier of (x) the date that
Cap Re no longer owns 5% of the Common
Stock of CGA Group, Ltd. or (y) a
Qualified Public Offering (as defined
in the CGA Group Bye-laws) by CGA
Group.
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REQUIRED TERMS FOR REINSURANCE All quota share reinsurance must
PROVIDED BY CAP RE: include a provision for a ceding
commission. The ceding
2
commission must be not less than
the applicable pro rata share of
CGA's allocable expenses.
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OTHER PROVISIONS: Arbitration, Service of Suit,
Governing Law (New York)
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CAPITAL REINSURANCE COMPANY
By:
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Name:
Title:
Agreed and Accepted by:
CGA GROUP, LTD.
By:
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Name:
Title: