STOCK PURCHASE AGREEMENT
between
ROCKWOOD CASUALTY INSURANCE COMPANY
as Seller
and
FORT WASHINGTON HOLDINGS, INC.
as Buyer
Dated as of December 31, 1996
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT, dated as of December 31, 1996, between ROCKWOOD
CASUALTY INSURANCE COMPANY, a Pennsylvania stock insurance company ("Seller"),
and FORT WASHINGTON HOLDINGS, INC., a Pennsylvania corporation ("Buyer").
RECITALS
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WHEREAS, Seller owns, beneficially and of record, 1,000 shares of common
stock, no par value, (the "Premier Common Stock"), of Premier Auto Insurance
Company, a Pennsylvania stock insurance company (the "Company"), constituting
100% of all of the issued and outstanding shares of Premier Common Stock; and
WHEREAS, Seller desire to sell, and Buyer desires to purchase, all of the
outstanding capital stock of the Company.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein and for other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, it is agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 "Affiliate" shall mean, with respect to a specified person or entity,
another person or entity that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person or entity specified.
1.2 "Agreement" shall mean this Stock Purchase Agreement, together with the
Exhibits and Schedules attached hereto and the Disclosure Schedules, as the same
may be amended from time to time in accordance with the terms hereof.
1.3 "Business Day" shall mean any day except a Saturday, Sunday or any day
on which United States chartered banking institutions are required by Law to
close.
1.4 "Buyer" shall mean Fort Washington Holdings, Inc.
1.5 "Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in Section 2.3.
1.6 "Closing Date" shall mean December 31, 1996.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
1.8 "Commissioner" shall mean the Pennsylvania Insurance Commissioner, her
predecessors and successors.
1.9 "Company" shall mean Premier Auto Insurance Company, a Pennsylvania
stock insurance company.
1.10 "Contracts" shall mean all agreements, contracts and commitments,
written or oral, to which the Company is a party or by which the Company is
bound including, without limitation, equipment leases and Software Licenses.
1.11 "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a person
or entity, whether through the ownership of voting securities, by contract or
otherwise.
1.12 "Department" shall mean the Pennsylvania Insurance Department.
1.13 "Disclosure Schedule of Buyer" shall mean the disclosure schedule,
dated the date hereof, furnished by Buyer to Seller and containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein pursuant to this Agreement.
1.14 "Disclosure Schedule of Seller" shall mean the disclosure schedule,
dated the date hereof, furnished by Seller to Buyer and containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein pursuant to this Agreement.
1.15 "Indemnity Claim" shall have the meaning set forth in Section 9.5.
1.16 "Intellectual Property" shall have the meaning set forth in Section
3.13(a) hereof.
1.17 "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations, permits,
licenses and orders promulgated thereunder.
1.18 "Lien" shall mean any lien, pledge, charge, security interest,
encumbrance, title retention agreement, restriction, advance, claim or option.
1.19 "Material Adverse Effect" shall mean (a) with respect to the Company,
reasonably likely to have a material adverse effect on the properties, business,
results of operations, condition (financial or otherwise) or affairs of the
Company, (b) with respect to Seller, reasonably likely to have a material
adverse
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effect on the properties, business, results of operations, condition (financial
or otherwise) or affairs of Seller, and (c) with respect to Buyer, reasonably
likely to have a material adverse effect on the properties, business, results of
operations, condition (financial or otherwise) or affairs of Buyer.
1.20 "Non-Compete and Non-Solicitation Agreement" shall mean the agreement
between Buyer and Seller, Front Royal Insurance Company, Colony Insurance
Company, and Xxxxxxxx Insurance Company dated as of the Closing Date in the form
of Exhibit B.
1.21 "Pennsylvania Insurance Law" shall mean all of the statutes and
regulations of the Commonwealth of Pennsylvania applicable to insurance
companies, as in effect on the Closing Date.
1.22 "Permits" shall mean all licenses, permits and other governmental
authorizations, registrations and approvals required to conduct the business of
the Company.
1.23 "Permitted Lien" shall mean any lien described in the Disclosure
Schedule of Seller.
1.24 "Pledge Agreement" shall mean the Pledge Agreement from Buyer to
Seller securing the Term Note, substantially in the form of Exhibit A.
1.25 "Premier Common Stock" shall mean the common stock, no par value, of
the Company.
1.26 "Purchased Stock" shall have the meaning set forth in Section 2.1.
1.27 "Purchase Price" shall have the meaning set forth in Section 2.2
hereof.
1.28 "SAP" shall mean statutory accounting practices required, prescribed
or permitted by the Commissioner, consistently applied throughout the specified
period and in the comparable period in the immediately preceding year.
1.29 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.30 "Seller" shall mean Rockwood Casualty Insurance Company.
1.31 "Software Licenses" shall mean all licenses related to software used
by the Company, including, without limitation, those listed in the Disclosure
Schedule of Seller.
1.32 "Subsidiary" of any person or entity shall mean any corporation or
other business entity a majority of the voting
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stock (or other beneficial interests) of which, entitled to vote for the
election of directors (or their counterparts), is owned by such person or entity
or a Subsidiary of such person or entity.
1.33 "Surplus" shall mean the statutory surplus of the Company determined
in accordance with SAP.
1.34 "Term Note" shall mean the Term Note from Buyer to Seller,
substantially in the form of Exhibit C.
Unless the context of this Agreement otherwise requires, (a) words of any
gender are deemed to include the other gender, (b) words using the singular or
plural number also include the plural or singular number, respectively, (c) the
terms "hereof," "herein," "hereby," "hereto," and derivative or similar words
refer to this entire Agreement, (d) the terms "ARTICLE" or "Section" refer to
the specified ARTICLE or Section of this Agreement, (e) the phrase "in the
ordinary course of business and consistent with past practice" refers to the
business, operations, affairs, and practice of the Company consistent with past
practices of such business, operations, and affairs, (f) the term "including"
and other forms of such term, with respect to any matter or thing, means
"including but not limited to" such matter or thing, (g) all reference to
"dollars" or "$" refer to currency of the United States of America, and (h) any
undefined term in this Agreement shall have the meaning customarily ascribed to
it by the casualty insurance industry.
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 Transfer of Stock. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties contained herein, on the
Closing Date, (a) Seller shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall acquire from Seller, 1,000 shares of Premier Common
Stock, constituting 100% of the issued and outstanding shares of Premier Common
Stock (the "Purchased Stock"). In full payment for the Purchased Stock, Buyer
shall pay the Purchase Price, as provided in Section 2.2.
2.2 Purchase Price. (a) The consideration for the Purchased Stock (the
"Purchase Price") shall be as follows:
(i) Buyer shall pay a total sum equal to the Surplus of the Company as
of December 31, 1996, as follows:
(1) the sum of One Million Dollars (the "Cash Payment") in cash;
and
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(2) the Term Note for the remaining balance.
2.3 Closing. (a) The Closing will take place at the offices of [Xxxxxxxx
Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000], at 10:00 a.m., local time, on the Closing Date.
(b) At the Closing, Buyer shall deliver or cause to be delivered (i) the
Cash Payment by wire transfer of immediately available funds to an account or
accounts designated by Seller, (ii) the Term Note, and (iii) the Pledge
Agreement.
(c) At the Closing, Seller shall deliver one or more certificates
representing 1,000 shares of Premier Common Stock, constituting 100% of the
issued and outstanding shares of Premier Common Stock, accompanied by stock
powers duly endorsed in blank, with all required transfer taxes or stamps paid
for or affixed thereto, free and clear of all Liens;
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Organization and Good Standing. (a) Seller is a stock insurance company
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
(b) The Company is a stock insurance company duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Company has all requisite corporate power and authority to
conduct its business and to own or lease and to operate its properties.
3.2 Authority, Validity and Enforceability. Seller has full corporate power
and authority to execute, deliver and perform its obligations and to consummate
the transactions required of it under this Agreement. The execution, delivery
and performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller. No other action or proceeding on the part of
Seller is necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a valid, legal and binding
obligation of Seller, enforceable in accordance with its terms.
3.3 No Violation or Breach. The execution, delivery and performance by
Seller of this Agreement does not, and the consummation of the transactions
contemplated hereby will not
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(with or without the giving of notice or the lapse of time or both):
(a) violate or require any consent or approval under any provision of
the certificate of incorporation or bylaws of Seller or the Company; or
(b) except as set forth on Schedule 3.3 of the Disclosure Schedule of
Seller, violate or result in a default of, or require any consent or
approval under any judgment, settlement, consent, injunction, decree, order
or ruling of any court or governmental authority, to which Seller or the
Company is a party or is otherwise subject; or
(c) result in any Lien upon any properties, assets, business or
agreements of Seller or the Company howsoever arising, except for such
Liens which would not have a Material Adverse Effect with respect to either
Seller or the Company.
(d) except as set forth in Section 3.9, violate or result in a default
of, or require any consent or approval under, or result in the termination
of or loss of any right (including any right of acceleration, termination
or cancellation) in or with respect to, any Contract, Permit, equipment
lease or Software License, except for such violations or breaches which
would not have a Material Adverse Effect with respect to either Seller or
the Company; or
3.4 Title to Shares. Upon delivery to Buyer of certificates representing
the Premier Common Stock, Buyer will acquire good and valid title to the Premier
Common Stock, free and clear of all Liens other than (a) Liens that arise solely
as a result of Buyer's actions and (b) restrictions on transferability generally
imposed on transfers of securities by federal and state securities laws and
state insurance laws.
3.5 Net Worth. Upon consummation of the transactions contemplated hereby,
the "present fair saleable value" of the assets of Seller as of the Closing Date
shall be greater than the amount of all "liabilities, contingent or otherwise,"
of Seller as of the Closing Date, as such terms are determined in accordance
with applicable federal and state laws governing determinations of the
insolvency of debtors.
3.6 Licenses and Permits. The Company has all Permits required to engage in
the business of writing insurance policies of the type specified on such
Schedule 3.6 except for such Permits, the absence, expiration or invalidity of
which, individually or in the aggregate, does not have a Material Adverse Effect
with respect to the Company. The Company is duly licensed and qualified to
transact those lines of insurance business in those states and jurisdictions
listed on such Schedule 3.6. Except as set forth on such Schedule 3.6, all such
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Permits are owned by the Company, are in full force and effect and none of the
Company or Seller has received any notice of any event, inquiry, investigation
or proceeding that could result in a penalty or fine in excess of $25,000.00,
singly or in the aggregate, or in the suspension, revocation or limitation on
any such Permit, and to the knowledge of Seller, there is no basis for any such
fine, penalty, suspension, revocation or limitation. The Company possesses the
minimum statutory capital and surplus as required by each such jurisdiction for
the type of insurance written by the Company in each jurisdiction set forth on
such Schedule 3.6.
3.7 Capitalization. (a) The authorized capital stock of the Company
consists of 1,000 shares of capital stock, no par value, all of which are
designated Premier Common Stock. 1,000 shares of Premier Common Stock are issued
and outstanding, all of which are owned of record and beneficially by Seller,
free and clear of any Liens except for the Lien created pursuant to this
Agreement. All such outstanding shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) There are no outstanding securities, rights (pre-emptive or other),
subscriptions, calls, warrants, options, or other agreements (except for this
Agreement) that give any person or entity the right to (i) purchase or otherwise
receive or be issued any shares of capital stock of the Company (or any interest
therein) or any security convertible into or exchangeable for any shares of
capital stock of any of the Company (or any interest therein), (ii) receive any
dividend, voting or ownership rights similar to those accruing to a holder of
shares of capital stock of the Company, or (iii) participate in the equity,
income or election of directors or officers of the Company. Except as set forth
in Schedule 3.7 of the Disclosure Schedule of Seller, there are no proxies,
voting trusts or other agreements or understandings to which either Seller is a
party with respect to the voting of any of the Purchased Stock.
3.8 Subsidiaries. The Company has no Subsidiaries.
3.9 Consents. Except as set forth in Schedule 3.9 of the Disclosure
Schedule of Seller, no consent, license, approval, order or authorization of, or
registration, filing or declaration with, any governmental authority, is
required to be obtained or made, and no consent of any third party is required
to be obtained, by Seller or the Company in connection with the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
3.10 Litigation. Except as set forth on Schedule 3.10 of the Disclosure
Schedule of Seller, there is no action, proceeding, investigation or claim
pending or, to the Seller's knowledge, threatened against or affecting the
Company or its assets before any court or governmental or regulatory authority
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or body that, if adversely determined, would have a Material Adverse Effect with
respect to the Company or which questions the validity of this Agreement or any
action taken or to be taken pursuant hereto or in connection with the purchase
and sale of the Purchased Stock.
3.11 No Brokers. Other than counsel, Seller and the Company have not
employed any finder, broker, agent or other intermediary in connection with the
negotiation of this Agreement or the consummation of any of the transactions
contemplated hereby.
3.12 Compliance with Other Instruments and Laws. Except as set forth on
Schedule 3.12 of the Disclosure Schedule of Seller, the Company is not in
violation of any term of its charter or by-laws or any Contract or of any
judgment, decree or order and the Company is not in violation of any Law,
permit, concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties, except for
such violation that would not have a Material Adverse Effect with respect to the
Company.
3.13 Assets and Properties. (a) Schedule 3.13(a) of the Disclosure Schedule
of Seller contains an accurate and complete list of all domestic and foreign
letters patent, patents, patent applications, patent licenses, software licenses
and know-how licenses, trade names, trademarks, copyrights, unpatented
inventions, service marks, trademark registrations and applications, service
xxxx registrations and applications, and copyright registrations and
applications and software owned by the Company or its Affiliates and used by the
Company in connection with the operation of its business (collectively the
"Intellectual Property"). Unless otherwise indicated in such Schedule 3.13(a),
the Company owns the entire right, title and interest in and to the Intellectual
Property (including, without limitation, the exclusive right to use and license
the same), and, to the Seller's knowledge, no person is infringing on the
Company's ownership or use of the Intellectual Property.
(b) Schedule 3.13(b) of the Disclosure Schedule of Seller contains a list
of all debentures, notes, stocks, limited partnership interests, other
securities, mortgages, and other investment assets owned by the Company as of
[September 30], 1996. The Company had good and marketable title to all
debentures, notes, stocks, limited partnership interests, other securities,
mortgages, and other investment assets (excluding real property) owned by it as
of such date, free and clear of all Liens.
3.14 Bank Accounts. Schedule 3.14 of the Disclosure Schedule of Seller
contains (a) a true and complete list of the names and locations of all banks,
trust companies, securities brokers, and other financial institutions at which
the Company
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has an account or safe deposit box or maintains a banking, custodial, trading,
trust, or other similar relationship, (b) a true and complete list and
description of each such account, box and relationship, (c) a true and complete
list of all signatories for each such account and box and (d) a true and
complete list of all compensating balances required with respect to each such
account.
3.15 Charter Documents and Bylaws. Seller has heretofore made available to
Buyer true and complete copies of the articles of incorporation and bylaws of
the Company, as in effect on the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania.
4.2 Authority, Validity and Enforceability. Buyer has full corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions required of it contemplated hereby.
The execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Buyer's Board of Directors. No other action or proceeding on the
part of the Buyer is necessary to authorize the Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer, and constitutes a legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms.
4.3 No Violation or Breach. The execution, delivery and performance of this
Agreement by Buyer does not, and the consummation of the transactions required
by Buyer contemplated hereby, will not (with or without the giving of notice or
lapse of time or both):
(a) violate or require any consent or approval under, any provision of
the certificate of incorporation or bylaws of Buyer;
(b) except as set forth in Section 4.4 hereof, violate or result in a
default of, or require any consent or approval under any agreement, policy,
instrument, contract, commitment, license, franchise, permit or trust to
which Buyer is a party or is otherwise subject, except for such violations
or breaches
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which would not have a Material Adverse Effect with respect to Buyer; or
(c) violate or result in a default of, or require any consent or
approval under, any judgment, settlement, consent, injunction, decree,
order or ruling of any court or governmental authority to which Buyer is a
party or otherwise subject.
4.4 Consents. Except as set forth on Schedule 4.4 of the Disclosure
Schedule of Buyer, no consent, license, approval, order or authorization of, or
registration, filing or declaration with, any governmental authority is required
to be obtained or made, and no consent of any third party is required to be
obtained, by Buyer, in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby.
4.5 Purchase for Investment. Buyer is purchasing the Purchased Stock for
its own account for investment and not with a view to any distribution thereof
within the meaning of the Securities Act. Buyer acknowledges that the offer and
sale of the Purchased Stock pursuant hereto are intended to be exempt from the
Securities Act pursuant to Section 4(2) thereof, and the Purchased Stock may not
be resold or otherwise transferred except pursuant to an effective registration
statement or an exemption from registration thereunder, and pursuant to
registration or qualification (or exemption therefrom) under applicable state
securities laws.
4.6 Litigation. There is no action, proceeding, investigation or inquiry
pending or, to the knowledge of Buyer, threatened against Buyer which questions
the validity of this Agreement or any action taken or to be taken pursuant
hereto or thereto or in connection with the purchase and sale of the Purchased
Stock.
4.7 No Brokers. Other than counsel, Buyer has not employed any finder,
broker, agent or other intermediary in connection with the negotiation of this
Agreement or the consummation of the transactions contemplated hereby.
ARTICLE V
CERTAIN MATTERS PENDING THE CLOSING
5.1 Indebtedness. Without the prior written consent of Buyer, which shall
not be unreasonably withheld, the Company shall not:
(a) create, incur or assume any indebtedness for borrowed money;
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(b) mortgage, pledge or otherwise encumber or subject to any Lien any
of its properties or assets other than Permitted Liens; or
(c) create or assume any other indebtedness except accounts payable
and other liabilities incurred in the ordinary course of business.
5.2 Issuance of Stock. The Company shall not issue any shares of capital
stock of any class or grant any warrants, options or rights to subscribe for any
shares of capital stock of any class or securities convertible into or
exchangeable for, or which otherwise confer on the holder any right to acquire,
any shares of capital stock of any class.
5.3 Compliance with Law. The Company shall use its commercially reasonable
best efforts to comply in all material respects with all applicable Law and with
all orders of any court or of any federal, state, municipal or other
governmental department.
5.4 Cooperative; Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper and advisable under applicable Law (including, without
limitation, the Pennsylvania Insurance Law), to consummate and make effective
the transactions contemplated by this Agreement. Each of the parties hereto
agrees to make all required regulatory filings promptly after the date hereof
and to diligently pursue compliance with Pennsylvania Law.
5.5 Consents. Seller and Buyer shall diligently pursue obtaining consents
of all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Agreement.
5.6 Publicity. All general notices, releases, statements and communications
to employees, suppliers, distributors and customers of the Company and to the
general public and the press relating to the transactions covered by this
Agreement shall be made only at such times and in such manner as may be mutually
agreed upon by Seller and Buyer.
5.7 Articles and Bylaws. Seller covenants and agrees that the Company shall
not amend its Articles of Incorporation or bylaws, except as may be necessary to
comply with the terms of this Agreement, or merge or consolidate with or into
any other corporation.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (it being the understanding of the parties that any
of such conditions, except as set forth in Sections 6.7 [Regulatory Approvals],
may be waived by Buyer):
6.1 Compliance with Agreement. Seller shall have performed and complied in
all material respects with all of its obligations under this Agreement that are
to be performed or complied with by it prior to or on the Closing Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken by Seller and the Company in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to Buyer and Buyer's counsel, and
Seller shall have made available to Buyer for examination the originals or true
and correct copies of all documents that Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
6.3 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.4 Representations and Warranties. The representations and warranties made
by Seller in this Agreement shall be true and correct as of the Closing Date
with the same force and effect as though such representations and warranties
have been made on the Closing Date, except as otherwise contemplated hereby and
except to the extent that such representations and warranties were made as of a
specified date and as to such representations and warranties the same shall
continue on the Closing Date to have been true and correct as of the specified
date.
6.5 Closing Under the Rockwood Casualty Purchase Agreement. The closing
shall have occurred under that certain Stock Purchase Agreement (the "Rockwood
Casualty Purchase Agreement") among PIC Insurance Group, Inc. and Trirock
Limited Partnership, as sellers, and Front Royal, Inc., as buyer, dated as of
December 6, 1996, for the acquisition by Front Royal, Inc. of the stock of
Seller.
6.6 Additional Deliveries at Closing. Seller shall have, or shall cause to
have, delivered to Buyer (a) certificates representing the Purchased Stock,
accompanied by stock powers
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duly endorsed in blank, with all required transfer taxes or stamps paid for or
affixed thereto, free and clear of all Liens, and (b) the Non-Compete and
Non-Solicitation Agreement, duly executed and delivered and dated as of the
Closing Date.
6.7 Regulatory Approvals. All required authorizations, registrations and
approvals from federal and state regulatory agencies with jurisdiction over
Seller, the Company or Buyer to permit the sale of the Purchased Stock and the
other transactions contemplated hereby shall have been obtained and shall remain
in full force and effect (without any material term, condition or restriction
that is reasonably unacceptable to Buyer).
6.8 Consents. There shall have been obtained written consent with respect
to any contract which requires any third party consent due to the consummation
of the transactions contemplated by this Agreement except for such consents the
failure of which to obtain would not, individually or in the aggregate, have a
Material Adverse Effect with respect to the Company.
6.9 Resignation of Directors and Officers. Each member of the Board of
Directors and each officer of the Company shall have resigned from such
positions effective on the Closing Date.
6.10 Policyholders' Surplus. The Surplus shall be equal to or greater than
Three Million Five Hundred Thousand Dollars ($3,500,000) as of December 31,
1996.
6.11 Books and Records. Seller shall have delivered to Buyer all minute
books, stock records and other corporate and financial records of the Company.
ARTICLE VII
CONDITIONS PRECEDENT TO
THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (it being the understanding of the parties that any
of such conditions, except as set forth in Sections 7.7 [Regulatory Approvals],
may be waived by Seller):
7.1 Compliance with Agreement. Buyer shall have performed and complied in
all material respects with all of its obligations under this Agreement that are
to be performed or complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
or other, to be taken by Buyer in connection
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with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Seller and
their respective counsel, and Buyer shall have made available to Seller for
examination the originals or true and correct copies of all documents that
Seller may reasonably request in connection with the transactions contemplated
by this Agreement.
7.3 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.4 Representations and Warranties. The representations and warranties made
by Buyer in this Agreement shall be true and correct in all material respects as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date, except as
otherwise contemplated hereby and except to the extent that such representations
and warranties were made as of a specified date and as to such representations
and warranties the same shall continue on the Closing Date to have been true and
correct as of the specified date.
7.5 Closing Under Rockwood Casualty Purchase Agreement. The closing shall
have occurred under the Rockwood Casualty Purchase Agreement for the acquisition
by Front Royal, Inc. of the stock of Seller.
7.6 Additional Deliveries at Closing. Buyer shall have, or shall cause to
have, delivered to Seller (a) the Cash Payment, (b) the following documents,
each duly executed and delivered and dated as of the Closing Date: (i) the Term
Note; and (ii) the Pledge Agreement, and (c) the certificates or other
instruments representing the Pledged Collateral (as defined in the Pledge
Agreement) pursuant to terms of the Pledge Agreement.
7.7 Regulatory Approvals. All required authorizations, registrations and
approvals from federal and state regulatory agencies and from any foreign
regulatory agencies, in either case with jurisdiction over Seller, the Company
or Buyer to permit the sale of the Purchased Stock and the other transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect (without any material term, condition or restriction that is reasonably
unacceptable to Seller).
7.8 Consents. There shall have been obtained written consent with respect
to any contract which requires any third party consent due to the consummation
of the transactions contemplated by this Agreement except for such consents the
failure of which to obtain would not, individually or in the aggregate, have a
Material Adverse Effect with respect to Buyer.
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ARTICLE VIII
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
8.1 Records. Buyer shall preserve and keep, free of charge, all books,
papers and records included in the assets of the Company relating to their
respective businesses for periods prior to the Closing Date for a period of not
less than five years following the Closing Date; provided, however, prior to the
fifth year following the Closing Date, Buyer may destroy such materials if Buyer
provides Seller 30 Business Days' prior notice that Buyer intends to destroy any
or all of such books, papers and records and Seller shall have the right to
review and remove any books, papers and records to be destroyed at Seller's
expense. Buyer agrees to permit Seller and its attorneys, accountants, agents
and designees access to such books, papers and records from and after the
Closing Date for all reasonable purposes. Any such examination shall be at the
expense of Seller, shall be performed at the place such books, papers and
records are regularly maintained and shall not unreasonably interfere with
Buyer's or the Company's normal business activities.
8.2 Access. Buyer and Seller and each of their authorized agents, officers
and representatives shall have reasonable access to the properties, books,
records, contracts, information and documents of the Company and each other to
conduct such examinations and investigations of its or their business as it
deems necessary, provided that such examinations and investigations: (a) shall
be germane to rights or obligations arising out of this Agreement, the
operations of the Company prior to the Closing Date or to the transactions
occurring between the Company and any Affiliates prior to the Closing Date; (b)
shall be conducted only in the presence of a designated representative of Buyer
or Seller, as appropriate; (c) shall be during normal business hours; (d) shall
not unreasonably interfere with operations and activities; and (e) shall be
subject to prior approval if the information or documents requested are, in the
reasonable opinion of an officer, of a nature that may compromise the
competitive position of Buyer or Seller. Buyer and Seller shall cooperate in all
reasonable respects with each other's examinations and investigations.
8.3 Cooperation. Buyer and Seller will cooperate in all respects in
connection with the giving of any notices to any governmental authority or
self-regulatory organization or securing the permission, approval,
determination, consent or waiver of any governmental authority or other party
required in connection with the consummation of the transactions contemplated
under this Agreement. Buyer promptly will furnish to Seller copies of the Forms
A filed with the Pennsylvania Insurance
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Department and all correspondence with the Pennsylvania Insurance Department
with respect thereto.
8.4 Confidentiality. Following the Closing, Seller shall keep confidential
all information concerning the business, operations, properties, assets and
financial affairs of the Company and may disclose such information only upon
receipt of prior written consent from Buyer, as required by law, or if such
disclosure is required (a) in connection with a Seller's filing of any state or
federal income tax returns, (b) in connection with filings made with the
Securities and Exchange Commission or any national securities exchange or (c) by
order of any judicial or administrative authority, provided, however, Seller
shall not be required to keep confidential information that (x) is or becomes
generally available to the public other than as a result of disclosure by
Seller, (y) is or becomes available to Seller on a nonconfidential basis from a
source other than Buyer, or (z) Seller or any of their Affiliates is required to
disclose pursuant to applicable law, rule, regulation or subpoena. Buyer
acknowledges and agrees that nothing in this Section 8.5 shall be deemed to
release it from any of its liabilities or obligations under this Agreement.
8.5 Use of Name. From and after the Closing Date, neither Seller nor any of
its Affiliates shall use the name "Somerset" or any names similar thereto or
variants thereof in connection with the casualty insurance business.
8.6 Non-Solicitation of Employees. Seller hereby agrees that for a period
commencing on the Closing Date and ending three years thereafter, neither Seller
nor any of its Affiliates shall solicit for employment by Seller or any of its
Affiliates any employees of the Company.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The right to enforce claims
for breaches of representations, warranties, covenants and agreements of Seller,
on the one hand, and Buyer, on the other hand, contained in this Agreement and
the respective obligations of the parties with respect thereto, shall survive
the making of this Agreement, any investigations made by or on behalf of the
parties hereto and the Closing Date, and shall continue in full force and effect
until the expiration of thirty (30) months from the Closing Date (except with
respect to Section 3.7 [Capitalization] and the indemnification provided
pursuant to Sections 9.2(c) and 9.3(c), to which there shall be no expiration),
at which respective times all such representations and warranties and
liabilities shall expire and terminate, except for any claims relating to any
specific breaches of any
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representations or warranties which are asserted in writing on or before the
applicable termination date. Each of the parties agrees to give notice to the
breaching party of any breach of any such representation, warranty, covenant, or
agreement, describing such breach in reasonable detail, as soon as practicable
after the discovery thereof; provided, however, that the failure to receive such
notice shall not relieve the breaching party from any liability in respect to
such breach unless and to the extent that the breaching party shall be prevented
from curing such breach as a direct result of its failure to receive a timely
notice. Any claim for indemnification for which notice has been given within the
prescribed period may be prosecuted to conclusion notwithstanding the subsequent
expiration of such period.
9.2 Indemnification by Seller. After the Closing Date and subject to the
limitations set forth below, including without limitation the limitations
described in Section 9.4, Seller agrees to and does hereby indemnify and hold
Buyer and its Affiliates, officers, directors and employees harmless against any
claims, suits, losses, expenses, damages, obligations, liabilities (including
costs and reasonable attorneys' fees) (hereinafter referred to collectively as
"Losses") which result from or are related to any of the following:
(a) any breach or failure of Seller to perform any of its covenants or
agreements set forth herein;
(b) the inaccuracy of any representation or warranty made herein by
Seller;
(c) any liabilities of Seller or its Affiliates (other than the
Company), except for (i) those liabilities incurred pursuant to this
Article IX or (ii) liabilities of Seller or its Affiliates which are
actually the primary obligation of the Company; or
(d) any joint liabilty of the Seller and the Company which is actually
the primary obligation of the Seller or any liability of the Company solely
to the extent it arises from the Company's joining in a consolidated,
unitary or combined tax return with the Seller.
9.3 Indemnification by Buyer. After the Closing Date, and subject to the
limitations set forth below, including, without limitation, the limitations
described in Section 9.4, Buyer agrees to and does hereby indemnify and hold
Seller and its Affiliates, officers, directors and employees harmless against
any Losses which result from or are related to any of the following:
(a) any breach or failure of Buyer to perform any of its covenants or
agreements set forth herein;
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(b) the inaccuracy of any representations or warranties made by Buyer
herein;
(c) any liabilities of Buyer or its Affiliates (other than the
Company), except for those liabilities of Buyer or its Affiliates incurred
pursuant to this Article IX; or
(d) the conduct of the Company's business after the Closing Date.
9.4 Limitation of Liability. Buyer shall not have any liability to
indemnify Seller in respect of Losses incurred by Seller pursuant to Sections
9.3(a) and (b), and Seller shall not have any liability to indemnify Buyer in
respect of Losses incurred by Buyer pursuant to Section 9.2(a), (b) or (d), in
either case unless and until the aggregate amount of such Losses exceeds
$25,000, in which event the party seeking indemnity may recover the full amount
of such Losses, other than the initial $25,000, provided that recovery by Buyer,
on the one hand, or Seller, on the other hand, in respect of such Losses shall
be limited to $2,300,000. Notwithstanding the foregoing, (i) Buyer may recover
all Losses whenever incurred by Buyer pursuant to Section 9.2(c) without regard
to the 30-month limitation set forth in Section 9.1 or the $25,000 limit
referenced above, and (ii) Seller may recover all Losses whenever incurred
pursuant to Section 9.3(c) without regard to the 30-month limitation set forth
in Section 9.1 or the $25,000 limit referenced above.
9.5 Notice of Indemnity Claims. If a party intends to assert a claim for
indemnification (an "Indemnified Party") under this Article IX (an "Indemnity
Claim"), the Indemnified Party shall promptly provide notice of such Indemnity
Claim, to the party from whom indemnification is sought (the "Indemnifying
Party") (and in any event within fifteen (15) days after becoming aware of such
Indemnity Claim). The failure to receive such notice shall not relieve the
Indemnifying Party from any liability in respect of such claim unless and to the
extent that the Indemnifying Party shall be prevented from curing such situation
as a direct result of its failure to receive timely notice. At the time the
Indemnity Claim is made and thereafter, the Indemnified Party shall provide the
Indemnifying Party with copies of any materials in its possession describing the
facts or containing information providing the basis for the Indemnity Claim. If
the Indemnity Claim involves a claim by a third party (a "Third Party Indemnity
Claim"), the Indemnifying Party may assume and control at its expense the
defense of the claim by the third party, provided that the Indemnifying Party
agrees in writing with respect to such Third Party Indemnity Claim that it is
obligated hereunder to indemnify and hold the Indemnified Party harmless in
accordance with the terms of this Article IX; and provided, further, that the
Indemnified Party shall be entitled to participate in the defense of such claim
at its own expense. The failure of the Indemnifying Party to assume the
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defense of any such claim shall not affect any indemnification obligation under
this Agreement.
Neither an Indemnified Party nor an Indemnifying Party shall settle a
claim, suit, action or proceeding without the consent of the other party, which
shall not unreasonably be withheld. A party shall not be liable under this
Article IX for any such settlement effected without its consent. In the event an
Indemnified Party fails to consent to a settlement of a Third Party Claim
recommended by the Indemnifying Party, then the amount of indemnification
payable with respect to such Third Party Claim shall not exceed the amount of
such settlement offer plus all Losses incurred with respect to such claim prior
to the date the Indemnified Party rejected the settlement offer.
9.6 Indemnity Amounts to be Computed on After-Tax Basis. The amount of any
indemnification payable under any of the provisions of this Article IX shall be
(a) net of any federal or state income tax benefit realized or the then-present
value (based on a discount rate of 5%) of any such income tax benefit to be
realized by the Indemnified Party (or, where Buyer is the Indemnified Party, the
Company) by reason of the facts and circumstances giving rise to the
indemnification, and (b) increased by the amount of any federal or state income
tax required to be paid by the Indemnified Party on the accrual or receipt of
the indemnification payment. For purposes of the preceding sentence, the amount
of any state income tax benefit or cost shall take into account the federal
income tax effect of such benefit or cost.
9.7 Arbitration. Any dispute arising between the parties hereto as to any
matter covered by this Agreement, including any claim for indemnification
pursuant to Section 9.2 or 9.3, shall be submitted to arbitration in the
following manner:
(a) The party desiring to submit such controversy to arbitration shall
give to the other party notice in writing, stating with specificity the
matter upon which arbitration is sought. The written notice shall also name
the arbitrator selected by such party, which arbitrator shall be a present
or retired insurance company executive unaffiliated with such party.
(b) Within ten Business Days following the receipt of such notice, the
other party shall give written notice to the party desiring arbitration of
the arbitrator selected by it, which second arbitrator shall likewise be a
present or retired insurance company executive unaffiliated with such
party.
(c) Upon the appointment of the second arbitrator, the two arbitrators
so chosen shall select a third arbitrator, which third arbitrator shall
likewise be a present or retired insurance company executive unaffiliated
which such party.
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(d) The three arbitrators thus chosen shall give to each of the
parties hereto written notice of the time and place of hearing, which
hearing shall be held in Somerset County, Pennsylvania not less than ten
Business Days, nor more than 20 Business Days, after the selection of the
third arbitrator.
(e) At the time and place (in Somerset County, Pennsylvania)
appointed, the three arbitrators shall proceed with the hearing unless for
some good cause, of which a majority of the arbitrators shall be the judge,
it shall be postponed until some other day within a reasonable time. The
parties hereto shall have full opportunity to be heard on any question thus
submitted.
(f) The arbitrators shall be relieved of following judicial
formalities and the rules of evidence shall not apply to such hearing. The
determination by a majority of the arbitrators shall be made in writing and
a copy thereof delivered to each of the parties hereto. The arbitrators
shall in every case deliver their decision within 60 days after the
hearing, unless the parties shall otherwise agree to extend the time.
Unless the arbitrator determines otherwise, all costs and expenses of
arbitration and the reasonable legal fees and disbursements of the
prevailing party shall be paid by the other party.
(g) The determination of the arbitrator in any arbitration proceeding
hereunder shall bind Buyer and Seller, provided that each received notice
of such proceeding and the opportunity to participate therein and shall be
final and unappealable.
(h) Any award, judgment or determination of the arbitrators hereunder
may be entered for enforcement in the Court of Common Pleas in Somerset
County, Pennsylvania, or in the United States District Court for the
Western District of Pennsylvania, and each of the parties hereto consents
to venue and the personal jurisdiction of such courts in connection with
any such entry and enforcement.
9.8 Remedies Cumulative. Each indemnified party shall be entitled to the
indemnification provided in this Article IX from time to time and shall be
entitled to rely upon one or more provisions of this Agreement without waiving
its right to rely upon any other provision at the same time or at any other
time.
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ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing as follows:
(a) by mutual written consent of Buyer and Seller;
(b) by Buyer or Seller, if the Closing Date shall not have occurred on
or before December 31, 1996 (provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or has resulted in the failure of the Closing Date to occur on or
before such date);
(c) by Buyer or Seller, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the sale of the Purchased Stock and such order,
decree, ruling or other action shall have become final and nonappealable.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under or pursuant to this
Agreement shall terminate without further liability of either party to the
other, other than any provision of this Agreement that specifically sets forth
that it is to so survive.
10.3 Extension; Waiver. At any time prior to the Closing, the parties may
(a) by mutual consent extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein; provided,
however, any party that knowingly waives any representation, warranty, agreement
or condition with respect to another party under subsection (b) and (c) shall
thereafter be barred from seeking indemnification from such other party for such
waived breach of any representation, warranty, agreement or condition. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
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ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement. This Agreement and the documents referred to herein
and to be delivered pursuant hereto constitute the entire agreement between the
parties pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein or therein.
11.2 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses of their respective counsel, investment bankers, financial advisors,
accountants and other experts and the other expenses incident to the negotiation
and preparation of this Agreement and consummation of the transactions
contemplated hereby.
11.3 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the Commonwealth of Pennsylvania, without regard to the
conflicts of law rules thereof.
11.4 Assignment. This Agreement and each party's respective rights
hereunder may not be assigned at any time except as expressly set forth herein
without the prior written consent of the other party.
11.5 Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary action. Seller and Buyer will execute, and Buyer shall cause the
Company to execute, any additional instruments necessary to consummate the
transactions contemplated hereby.
11.6 Notices. All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given (i) when delivered if delivered personally or by messenger or by overnight
delivery service, or (ii) three days after mailing when mailed by registered or
certified United States mail, postage prepaid, return receipt requested, or
(iii) when received if sent by telecopy (provided that a copy is mailed
concurrently therewith pursuant to the terms hereof), in all cases addressed to
the person for whom it is intended at its address set forth below or to such
other address as a party shall have designated by notice in writing to the other
party in the manner provided by this Section 11.6:
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If to Seller: Rockwood Casualty Insurance Company
c/o Front Royal, Inc.
0000 Xxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: J. Xxxx Xxxxx
Chief Executive Officer
and
Xxxxx X. Xxxxx
Chief Financial Officer
Telecopier No.: (000) 000-0000
With a copy to: Xxxxxxxx Xxxxxxxxx Xxxxxx
Aronsohn & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
If Buyer: Fort Washington Holdings, Inc.
000 Xxxx Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
With a copy to: Dilworth, Paxson, Xxxxxx & Xxxxxxxx LLP
3200 Mellon Bank Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. XxXxxxxxx, Esq.
Telecopier No.: (000) 000-0000
11.7 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
11.8 Interpretation. All references in this Agreement to contracts,
agreements, leases or other understandings or arrangements shall refer to oral
as well as written matters.
11.9 Severability. If any provision, clause or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby.
11.10 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and
Seller, Buyer and the Company assume no
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liability to any third party because of any reliance on the representations,
warranties and agreements of Seller and Buyer contained in this Agreement.
11.11 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties. The requirements of this
Section 11.11 may not be waived.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
ROCKWOOD CASUALTY INSURANCE
COMPANY
By:___________________________
Name:
Title:
FORT WASHINGTON HOLDINGS, INC.
By:___________________________
Name:
Title:
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