EXHIBIT 10.27
SHAREHOLDERS AGREEMENT
This Shareholders Agreement ("Agreement") is entered into as of April
1, 1997, by and among APS Insurance Services, Inc., a Delaware corporation
("APS"), Florida Physicians Insurance Company, Inc., a Florida corporation
("FPIC"), and American Physicians Service Group, Inc., a Texas corporation
("APSG").
RECITALS
A. APSG owns a total of 1,000 shares of the issued and
outstanding capital stock of APS, which constitutes 100% of
the APS capital stock issued and outstanding. APS, in turn
owns a total of 1,000 shares of the issued and outstanding
capital stock of APS Facilities Management, Inc. ("APSFMI"),
which constitutes 100% of the APSFMI capital stock issued and
outstanding.
B. The parties have entered into a Stock Purchase and Stock
Option Agreement whereby: (i) APSG has agreed to sell and FPIC
has agreed to purchase 200 shares of APS common stock (the
"Shares"); and (ii) FPIC has the option to purchase from APSG
350 additional shares of APS common stock (the "Additional
Shares").
C. APSG and FPIC desire to enter into certain agreements
concerning FPIC and APSG representation on the APS Board of
Directors, the disposition of any shares of APS common stock
owned by FPIC or APSG, and the disposition of shares between
APS and FPIC.
AGREEMENT
In consideration of the foregoing, the promises contained herein, and
other valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
1. Applicability. All capital stock of APS now owned or
hereafter acquired by FPIC or APSG, or their Permitted
Transferees (as hereinafter defined), shall be subject to the
terms and conditions of this Agreement.
2. General Prohibition on Transfers. Neither FPIC nor APSG shall
sell, assign, convey, give or otherwise transfer its APS stock
except as permitted by this Agreement. Any attempted transfer
of APS stock or any interest therein other than as permitted
hereby shall be void and of no force or effect and shall not
be reflected on the APS stock transfer books. The transfer of
a majority equity or equivalent interest in either FPIC or
APSG in or by virtue of one or more transactions, shall be
deemed a transfer of such shareholder's stock and therefore
subject to the transfer restrictions set forth in this
Agreement. FPIC and APSG, and their Permitted Transferees,
shall be entitled to pledge and grant a security interest in
all or any interest in their APS stock without requiring any
consent or approval of any
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other party hereto; provided, however, that each agrees to
give the other parties hereto prompt written notice of default
or acceleration of the underlying secured indebtedness and,
prior to the commencement of any acts to enforce the rights of
the applicable secured party, to give the other shareholder
the right to purchase such encumbered APS stock on such terms
and conditions as shall be agreed upon by the secured party
and the shareholder proposing to purchase the encumbered APS
stock. The shareholder whose APS stock is subject to any such
pledge or security interest shall cooperate fully, and in good
faith, to facilitate the purchase of the encumbered APS stock
by the other shareholder at a reasonable fair market value so
as to prevent the outright sale or other transfer of the
encumbered APS stock to the secured party or any other third
party. In addition, at the time a shareholder pledges or
grants a security interest in its APS stock (or immediately
upon execution of this Agreement in the case of an existing
pledge) such shareholder shall obtain a certificate from the
pledgee or secured party, addressed to all the parties to this
Agreement, to the effect that (i) the pledgee or secured party
is aware of the existence and terms of this Agreement, and
(ii) the pledgee or secured party will honor the rights of
parties to this Agreement to purchase the encumbered APS
stock, and will release such stock and all rights therein in
exchange for full payment of the purchase price directly to
the secured party or pledgee, upon the exercise by any party
hereto of an option arising pursuant to this Agreement which
gives such party the right to purchase such encumbered APS
stock.
3. Transfer Following Waiver. Notwithstanding any other
provisions of this Agreement, either FPIC or APSG may sell or
convey some or all of its APS stock after first obtaining the
written consent of APS, and the other shareholder, to the
particular disposition. The written consent, if given, shall
identify the transferor, the transferee, the number of shares
to be transferred, and the time within which the transfer
shall occur, and shall state whether or not, as a condition of
such transfer, the transferor shall be required to execute a
shareholders agreement containing provisions substantially
similar to those contained in this Agreement.
4. Permitted Transfers. Notwithstanding any other provisions of
this Agreement, either FPIC or APSG may sell, assign or
otherwise transfer all, or any part of their APS Shares, to
any current or future wholly-owned, or majority-owned, direct
or indirect subsidiary of FPIC or APSG. Any APS shares
transferred pursuant to, or the transfer of which is
permitted by, the immediately preceding sentence shall remain
subject to this Agreement, and any transferees thereunder are
hereinafter referred to as the "Permitted Transferees."
Permitted Transferees may transfer APS shares pursuant to this
paragraph provided that the party to whom such shares are to
be transferred would then be a Permitted Transferee of the
shareholder holding such shares,as defined above. Any APS
shares held by a Permitted Transferee will be subject to the
same rights and restrictions as would have applied
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to such shares in the hands of the original shareholder, and
such Permitted Transferees shall execute a counterpart hereof.
5. Voting Agreement.
5.1 As shall be required to effect the intent of this
Agreement, the number of directors of APS will be
increased to four from three. The positions currently
held by the three directors shall be described herein
as the "APSG Seats". The newly added position on the
Board of Directors shall be described herein as the
"FPIC Seat." The FPIC Seat shall initially be filled
as provided by the APS Bylaws. Each member of the
Board of Directors shall cast his vote so as to cause
the election to the FPIC Seat one candidate
designated by FPIC. Subsequent changes to the APS
Board of Directors shall be made in accordance with
the terms of this Agreement as set forth herein.
In any election of directors of APS during the term
of this Agreement while FPIC owns 20% of the
outstanding common stock of APS, and at which the
FPIC Seat is to be filled (including the election in
which the FPIC Seat is initially filled), APSG shall
cast its votes so as to cause the election to the
FPIC Seat of one candidate designated by FPIC, if
FPIC is a shareholder of APS at the time of the
election. In any election of directors of APS during
the term of this Agreement, if FPIC is not then a
shareholder of APS, APSG may cast its votes with
respect to the FPIC Seat in its sole discretion.
In any election of directors of APS during the term
of this Agreement at which the APSG Seats are to be
filled, and while APSG owns 80% of the outstanding
common stock of APS, FPIC shall cast its votes so as
to cause the election to the APSG Seats of three
candidates designated by APSG, if APSG is a
shareholder of APS at the time of the election. In
any election of directors of APS during the term of
this Agreement, if APSG is not then a shareholder of
APS, FPIC may cast its votes with respect to the APSG
Seats in its sole discretion.
5.2. Upon receipt of a written instruction from FPIC
during the term of this Agreement asking for the
removal of the director then holding the FPIC Seat,
APSG shall exercise its rights as a shareholder of
APS to the greatest extent possible to effect the
removal of that person as a director, subject to the
Bylaws of APS.
Upon receipt of a written instruction from APSG
during the term of this Agreement asking for the
removal of any director then holding an APSG
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Seat, FPIC shall exercise its rights as a shareholder
of APS to the greatest extent possible to effect the
removal of that person as a director, subject to the
Bylaws of APS.
5.3 If this Agreement has not terminated, and if FPIC
purchases the Additional Shares, then APSG and FPIC
shall vote their respective shares, and shall direct
their respective Board of Directors designees to
vote, to increase the total number of directors of
APS to five (5) from four (4), three (3) of which
directorships shall be FPIC Seats and two (2) of
which directorships shall be APSG Seats. At such
time, APSG shall cause the resignation or removal of
one (1) APSG designated director and FPIC shall have
the right to designate two (2) candidates to serve as
the new directors ("New FPIC Seats"). APSG agrees to
cast its votes so as to cause the election to the New
FPIC Seats of two (2) candidates designated by FPIC.
Thereafter, in any election of directors of APS
during the term of this Agreement while FPIC owns
fifty five percent (55%) of the outstanding common
stock of APS, APSG and FPIC shall cast their votes so
as to cause the election of three (3) directors
designated by FPIC to the Board of Directors of APS
and two (2) directors designated by APSG to the Board
of Directors of APS.
5.4 Nothing in this Agreement shall impair the right of
APSG, APS, its other shareholders, or its directors,
to exercise any and all rights they may have to
remove any director for cause, as described in
paragraph c below. FPIC hereby agrees that such
persons shall have the right to take any action in
their discretion to remove any director occupying a
FPIC Seat if:
a. FPIC ceases to be a shareholder; or
b. this Agreement expires or is terminated; or
c. the person occupying the FPIC Seat (i)
breaches his fiduciary duties to APS or its
shareholders; (ii) becomes unable to
exercise the significant duties of a
director of APS because of a physical or
mental condition that appears to be
permanent or of indefinite duration; or
(iii) is found guilty of a felony or a crime
of moral turpitude.
Nothing in this Agreement shall impair the right of
FPIC, APS, its other shareholders, or its directors,
to exercise any and all rights they may have to
remove any director for cause, as described in
paragraph f below. APSG hereby agrees that such
persons shall have the right to take any action in
their discretion to remove any director occupying an
APSG Seat if:
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d. APSG ceases to be a shareholder; or
e. this Agreement expires or is terminated; or
f. any person occupying an APSG Seat (i)
breaches his fiduciary duties to APS or its
shareholders; (ii) becomes unable to
exercise the significant duties of a
director of APS because of a physical or
mental condition that appears to be
permanent or of indefinite duration; or
(iii) is found guilty of a felony or a crime
of moral turpitude.
5.5 At any time during the term of this Agreement when
the FPIC Seat is vacant for any reason, APSG shall
exercise its rights as a shareholder of APS to cause
the shareholders to elect a person designated by FPIC
to occupy the FPIC Seat. At any time during the term
of this Agreement when any APSG Seat is vacant for
any reason, FPIC shall exercise its rights as a
shareholder of APS to the greatest extent possible to
cause the shareholders to elect a person designated
by APSG to occupy the APSG Seat.
5.6 A designation or other voting instruction under this
Agreement shall be valid and binding on APSG only if
given to the President of APSG before the
commencement of the shareholders meeting at which, or
before the contemplated date of a shareholders
consent in which, the instruction is to be
implemented. A designation or other voting
instruction under this Agreement shall be valid and
binding on FPIC only if given to the President of
FPIC before the commencement of the shareholders
meeting at which, or before the contemplated date of
a shareholders consent in which, the instruction is
to implemented.
5.7 Each certificate representing shares of APS's stock,
and each certificate which may be issued and
delivered by APS or its transfer agent upon transfer
of such shares, shall contain a legend to
substantially the following effect:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THESE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO APS THAT SUCH REGISTRATION IS NOT
REQUIRED."
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"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT
TO THE PROVISIONS OF A SHAREHOLDERS' AGREEMENT DATED
AS OF APRIL 1, 1997, A COUNTERPART OF WHICH HAS BEEN
DEPOSITED WITH THE CORPORATION AT ITS PRINCIPAL
OFFICE."
5.8 In case APS is merged into or consolidated with
another corporation, or all or substantially all of
the assets of APS are transferred to another
corporation, then in connection with such transfer
the term "APS" for all purposes of this Shareholders
Agreement shall be deemed to include such successor
corporation. The term "shares" shall include any
shares of capital stock of APS issued in connection
with any stock split, stock dividend or other
recapitalization of APS.
5.9 APSG and FPIC agree to take all such action, or cause
all such action to be taken, as may be necessary to
amend the Articles of Incorporation and/or Bylaws of
APS to require the affirmative vote of more than (i)
75% of directors and (ii) 80% of shareholders to
approve any of the following:
a. amending the articles of incorporation of
APS or any subsidiary of APS;
b. amending the Bylaws of APS or any subsidiary
of APS;
c. changing accounting practices or reserve
levels for American Physicians Insurance
Exchange;
d. merging or dissolving APS or any subsidiary
of APS, unless a higher percentage is
required by applicable law at the time of
such approval;
e. the issuance of any additional capital stock
of APS or any subsidiary of APS;
f. disposing of the stock of APS or any
subsidiary of APS; or
g. filing any registration statement under
state or federal securities laws.
5.10 APS will neither pledge nor grant a security interest
in its APSFMI stock, nor will it permit APSFMI to
sell, transfer, assign, amend or otherwise convey its
existing Attorney-In-Fact relationship with American
Physicians Insurance Exchange.
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6. Sale of Stock.
6.1. If FPIC desires to sell or otherwise transfer any of
its shares of APS stock,or any interest therein to a
third party, FPIC may do so only after first
offering the stock for sale to APSG in writing for
the same price, which shall be paid in cash, and on
the same terms and conditions as have been offered by
the third party. APSG shall notify FPIC in writing
whether it will buy the stock so offered within 30
days of its receipt of written notice of FPIC's
intention to sell the stock. If APSG elects not to
purchase the stock or if APSG does not timely notify
FPIC of its intention, FPIC may sell the stock to the
entity designated, but only upon the terms and
conditions contained in its notice and subject to the
right of APSG to include its APS stock in such sale
on a pro-rata basis as provided below.The foregoing
right of first refusal shall only apply to bona fide
third party offers to purchase APS stock for cash,
and FPIC agrees to give APSG a copy of the written
offer from such third party at the time it gives APSG
its right of first refusal offer as described above.
If APSG elects, or is deemed to have elected, not to
purchase the APS stock subject to such right of first
refusal, and FPIC does not thereafter close its sale
to the third party on the same terms and conditions
as offered to APSG within 90 days, then FPIC shall
not be entitled to conclude such sale without first
providing APSG with another written offer to exercise
its right of first refusal with respect to such
transaction. Third party offers to purchase APS stock
other than for cash shall not give rise to the right
of first refusal provided herein and shall not be
permitted except pursuant to the written consent of
APS and the other shareholder as provided in Section
3 of this Agreement.Furthermore, as a condition to
FPIC being allowed to sell or otherwise transfer any
of its shares to a third party after APSG elects, or
is deemed to have elected, not to purchase the stock
by exercise of its right of first refusal, FPIC must
allow APSG to include such shares of APSG's APS stock
in such transaction, for the same per share price and
on the same other terms and conditions, to the extent
that the total shares of APS stock acquired by such
third party will include shares owned by FPIC and
APSG in the same relative percentage as each of
FPIC's and APSG's ownership of shares of APS stock
immediately prior to such transaction bears to the
total shares of APS stock owned by both APSG and FPIC
at that time. Any third party who acquires any APS
stock pursuant to this Section must, as a condition
to such acquisition, execute an agreement reasonably
acceptable to APS and the remaining shareholders of
APS containing the same terms and restrictions
relating to transfer of shares as is contained
herein.
6.2 If APSG desires to sell or otherwise transfer any of
its shares of APS stock, or any interest therein to a
third party, APSG may do so only after first
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offering the stock for sale to FPIC in writing for
the same price, which shall be paid in cash, and on
the same terms and conditions as have been offered by
the third party. FPIC shall notify APSG in writing
whether it will buy the stock so offered within 30
days of its receipt of written notice of APSG's
intention to sell the stock. If FPIC elects not to
purchase the stock or if FPIC does not timely notify
APSG of its intention, APSG may sell the stock to the
entity designated, but only upon the terms and
conditions contained in its notice and subject to the
right of FPIC to include its APS stock in such sale
on a pro-rata basis as provided below. The foregoing
right of first refusal shall only apply to bona fide
third party offers to purchase APS stock for cash,
and APSG agrees to give FPIC a copy of the written
offer from such third party at the time it gives FPIC
its right of first refusal offer as described above.
If FPIC elects, or is deemed to have elected, not to
purchase the APS stock subject to such right of first
refusal, and APSG does not thereafter close its sale
to the third party on the same terms and conditions
as offered to FPIC within 90 days, then APSG shall
not be entitled to conclude such sale without first
providing FPIC with another written offer to exercise
its right of first refusal with respect to such
transaction. Third party offers to purchase APS stock
other than for cash shall not give rise to the right
of first refusal provided herein and shall not be
permitted except pursuant to the written consent of
APS and the other shareholder as provided in Section
3 of this Agreement. Furthermore, as a condition to
APSG being allowed to sell or otherwise transfer any
of its shares to a third party after FPIC elects, or
is deemed to have elected, not to purchase the stock
by exercise of its right of first refusal, APSG must
allow FPIC to include such shares of FPIC's APS stock
in such transaction, for the same per share price and
on the same other terms and conditions, to the extent
that the total shares of APS stock acquired by such
third party will include shares owned by APSG and
FPIC in the same relative percentage as each of
APSG's and FPIC's ownership of shares of APS stock
immediately prior to such transaction bears to the
total shares of APS stock owned by both APSG and FPIC
at that time. Any third party who acquires any APS
stock pursuant to this Section must, as a condition
to such acquisition, execute an agreement reasonably
acceptable to APS and the remaining shareholders of
APS containing the same terms and restrictions
relating to transfer of shares as is contained
herein.
6.3 Any transfer of stock by FPIC or by APSG to a
Permitted Transferee, or which is otherwise
specifically allowed by this Agreement with respect
to APS stock which is subject to a pledge or security
interest, shall not be subject to the foregoing
Sections 6.1 and 6.2.
7. Sales Between the Parties.
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7.1 Offer to Sell. At any time 48 months or more after
FPIC acquires its initial 200 shares of APS stock,
FPIC or APSG (the "Offeror") may provide to the other
(the "Offeree") written notice ("Offer Notice") of
the value as determined by the Offeror of 100% of the
stock of APS owned by the Offeree. The right to send
an Offer Notice is exclusive to each of FPIC and APSG
and their Permitted Transferees, is not otherwise
transferable or assignable, and will remain effective
for so long as FPIC and APSG, or their Permitted
Transferees, own any interest in APS.
7.2 Response. Within 60 business days following the
Offeree's receipt of an Offer Notice, Offeree shall
give written notice ("Intent Notice") to Offeror of
Offeree's intent either (i) to buy all of Offeror's
APS stock at the same price per share described in
the Offer Notice, or (ii) to sell all of Offeree's
APS stock to Offeror at the per share price
determined by Offeror in the Offer Notice. If Offeree
does not respond within 60 business days of receipt
of an Offer Notice, Offeree shall sell all of
Offeree's APS stock to Offeror at the price set forth
in the Offer Notice in accordance with the terms of
Section 7.3.
7.3 Closing of Purchase. Within 10 business days of the
later of (i) Offeror's receipt of the Intent Notice
or (ii) the expiration of 60 business days of
Offeree's receipt of an Offer Notice, the parties
shall close the purchase and sale of the APS stock at
a location to be agreed upon in writing by the
parties, or in the event of failure to agree, at the
principal executive offices of APSG. At closing the
purchasing party will buy from the selling party, for
cash, all the APS stock owned by the selling party at
a price-per-share equivalent to the price stated in
the Offer Notice. At closing, the seller shall
deliver the stock free and clear of all liens and
encumbrances. The parties agree to execute and
deliver all documents which are reasonably necessary
to consummate the sale and purchase. The foregoing
notwithstanding, Buyer shall be entitled to extend
the period for closing the purchase and sale of the
Additional Shares by an additional 90 days, if
required by Buyer to obtain all necessary regulatory
approvals.
8. Dividends. APSG and FPIC agree to vote and agree that the
occupants of the APSG Seats and the FPIC Seat(s) shall vote,
to authorize paying as dividends all earnings of APS, subject
to reasonable reserves established by the APS Board of
Directors, from time to time throughout the APS fiscal
year, but not less frequently than once per year. APS shall
cause all of its subsidiaries to authorize paying as dividends
all of their earnings, subject to reasonable reserves
established by their Boards of Directors, from time to time
throughout their fiscal year, but not less frequently than
once per year.
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9. Miscellaneous.
9.1 Survival. The warranties, representations and
covenants of the parties hereto contained in or made
pursuant to this Agreement shall survive: (i) the
execution and delivery of this Agreement, (ii) the
Closing, and (iii) the closing of any sale and
purchase of the Additional Shares.
9.2 Entire Agreement. This Agreement, together with the
Stock Purchase and Stock Option Agreement, which it
amends, and the related Reinsurance Agreement and
Managing General Agency Agreement, constitute the
entire agreement between the parties and no party
shall be liable or bound to any party in any manner
by any warranties, representations, or covenants
except as specifically set forth in these agreements.
The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the
respective successors and assigns of the parties
hereto. Other than as provided for herein, this
Agreement shall not be assigned without the written
consent of all parties to this Agreement.
9.3 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Delaware
applicable to agreements made and fully performable
therein.
9.4 Modification; Waiver. No modification or amendment of
any provision of this Agreement shall be effective
unless in writing and approved by each of the parties
hereto, and no consent or waiver of any provision of
this Agreement or departure therefrom shall be
effective unless in writing and executed by the party
against which such consent or waiver is effective.
9.5 Effectiveness. This Agreement shall commence and be
effective as of the date first written above and
shall, unless terminated upon agreement of all the
parties, terminate upon the earliest to occur of (i)
the date on which FPIC or APSG (and their respective
Permitted Transferees) is no longer a shareholder of
the Company or (ii) the effective date of any
registration statement under the Federal Securities
Act of 1933 whereby common stock of APS is being
registered for sale by APS in a public offering.
9.6 Binding Effect. This Agreement shall be binding upon,
and inure to the benefit of, the heirs, executors,
administrators, successors and assigns of the parties
hereto, and shall not be assigned without the written
consent of all parties hereto.
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9.7 Specific Performance. APSG agrees that upon deposit
of a counterpart of this Agreement at the principal
office of APS as provided above and upon endorsement
of the above-described legend upon the certificates
representing its shares of APS's stock, this
Agreement shall be specifically enforceable by the
parties hereto in a court of competent jurisdiction,
which remedy shall be in addition to any other
remedies that may be available to them at law or in
equity.
9.8 Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall constitute
one and the same instrument.
9.9 Notice. Any notice, communication or demand to be
given or made hereunder by or to any party to this
Agreement shall be in writing and hand delivered or
sent by certified mail, return receipt requested,
nationally recognized overnight courier service or
facsimile transmission, addressed to the parties at
their respective addresses set forth below:
If to FPIC:
Xxxxxx Xxxxx
Florida Physicians Insurance Company, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
With a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
If to APSG:
Xxxxx X. Xxxx
American Physicians Service Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxx X-000
Xxxxxx, Xxxxx 00000
If to APS:
Xxxxx X. Xxxx
APS Insurance Services, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxx X-000
Xxxxxx, Xxxxx 00000
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With a copy to:
Xxxxx, Xxxxx & Werkenthin, P.C.
Suite 1100
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. XxXxxx
Any such notice shall be deemed given when so personally delivered or
sent by facsimile transmission (provided confirmation is received immediately
thereafter) or if mailed three (3) business days after the date of deposit in
the mail or if sent by overnight courier service one (1) business day after the
date of delivery to the courier service marked for overnight delivery. A party
may change its address for notice by giving notice as provided hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
April 1, 1997.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
FLORIDA PHYSICIANS INSURANCE
COMPANY, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
APS INSURANCE SERVICES, INC.
By_______________________________________
Name_____________________________________
Title______________________________________
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