Exhibit 99.1.2
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (this "Agreement") is entered into as of the
28th day of December, 2006, by and among WHX Corporation, a Delaware corporation
("WHX"), Handy & Xxxxxx, a New York corporation ("H&H"), and Pension Benefit
Guaranty Corporation (the "PBGC"), a United States government corporation
created by Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The PBGC herein acts on behalf of the WHX Pension Plan
("Plan").
W I T N E S S E T H:
WHEREAS, WHX and H&H are and hereafter may be indebted to the Plan, and
PBGC has filed statutory liens under 26 U.S.C. ss. 412(n) ("Statutory Liens")
against WHX and H&H on behalf of the Plan and may record other liens, statutory
or consensual; and
WHEREAS, WHX sought from the Internal Revenue Service ("IRS") a waiver
of the minimum funding standards for the Plan for the plan year ended December
31, 2005, pursuant to Section 412(d) of the Internal Revenue Code ("Code") and
Section 303 of ERISA; and
WHEREAS, by letter dated December 20, 2006, the IRS granted such waiver
for the Plan with conditions (the "Waiver"); and
WHEREAS, H&H and its subsidiaries ("Borrowers") now are and hereafter
will be indebted to Wachovia Bank, National Association, a national banking
association, in its capacity as agent (in such capacity, "Agent") for itself and
certain other financial institutions (collectively, "Lenders"), on account of
loans or other extensions of credit or financial accommodations from the Agent
and Lenders to the Borrowers pursuant to the Loan and Security Agreement, dated
March 31, 2004, as heretofore amended, by and among Borrowers, certain of their
affiliates, Agent and Lenders (as the same may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the "Wachovia Loan
Agreement"); and
WHEREAS, to secure the payment of their indebtedness to the Agent and
Lenders, Borrowers have granted to the Agent security interests in their
personal and real property, pursuant to various financing agreements; and
WHEREAS, PBGC and the Agent entered into the Lien Subordination
Agreement dated as of October 20, 2006, as amended by Amendment No. 1 to Lien
Subordination Agreement dated on or about the date hereof (the "Subordination
Agreement"), under which PBGC agreed to subordinate the Statutory Liens and any
future statutory or consensual liens it obtains for the benefit of the Plan to
the liens held by Agent (the "Wachovia Liens"); and
WHEREAS, the Borrowers now are and hereafter will be indebted to Steel
Partners II, L.P., a Delaware limited partnership ("Steel"), on account of loans
or other extensions of credit or financial accommodations from Steel to the
Borrowers: and
WHEREAS, to secure the payment of their indebtedness to Steel,
Borrowers have granted to Steel security interests in their personal and real
property, pursuant to a security agreement; and
WHEREAS, the parties to this Agreement understand that the Waiver
requires that Borrowers provide security to the Plan, acceptable to the PBGC, as
a condition of granting the Waiver; and
WHEREAS, the PBGC has requested that, upon the IRS' granting the
Waiver, Borrowers be prepared to grant to the Plan a security interest,
enforceable by the PBGC, in certain of their respective assets to secure
Borrowers' obligations under the Waiver; and
WHEREAS, on October 30, 2006, WHX made a contribution to the Plan in
the amount of $4,960,000 (the "October 30, 2006 Contribution"), an amount
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calculated, assuming a favorable ruling on the requested waiver, to satisfy the
quarterly contribution requirements to the Plan under Section 412(m) of the Code
for the year ending December 31, 2006; and
WHEREAS, in addition to the matters specifically pertaining to the
Waiver and the collateral for the Waiver, the parties hereto desire to resolve
certain other outstanding differences, disputes and claims that each has or may
have against the other, including, without limitation, certain potential issues
that could arise under Section 4062(e) of ERISA; and
WHEREAS, the Agent and Steel will require intercreditor agreements with
PBGC to reflect the priority and terms of each party's security interests.
NOW THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. The following agreements shall be executed and delivered by the
respective parties thereto concurrently with the execution and delivery of this
Agreement:
A. Second Priority Security Agreement by and among H&H, the
subsidiaries of H&H named therein and the PBGC, in the form of
EXHIBIT A hereto, and related UCC-1 financing statement;
B. Fourth Priority Security Agreement by and among H&H, the
subsidiaries of H&H named therein and the PBGC, in the form of
EXHIBIT B hereto, and related UCC-1 financing statement (as the
same may be amended, modified, supplemented, extended, renewed,
restated or replaced, the "Fourth Lien Agreement");
C. Amended and Restated Intercreditor Agreement by and among the
Agent, Steel and the PBGC, in the form of EXHIBIT C hereto (as
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the same may be amended, modified, supplemented, extended,
renewed, restated or replaced, the "Intercreditor Agreement");
D. Guarantee, Pledge and Security Agreement by and among WHX, WHX
CS Corp., a Delaware corporation ("WHXCS"), and Steel, in the
form of EXHIBIT D hereto, and related UCC-1 financing
statement;
E. WHX Pledge and Security Agreement by and among WHX, WHXCS and
the PBGC, in the form of EXHIBIT E hereto, and related UCC-1
financing statement; and
X. Xxxx Subordination Agreement by and between Steel and the PBGC,
in the form of EXHIBIT F hereto.
All of the foregoing agreements, as the same may be amended, modified,
supplemented, extended, renewed, restated or replaced, are collectively referred
to herein as the "Security and Subordination Agreements."
2. The PBGC has recommended with respect to the requested waiver that
IRS include in a favorable ruling thereon that the outstanding balance of the
waived amount of $15,505,353 ("Waiver Amount") be amortized over a period of
five years commencing with respect to the Plan year beginning January 1, 2006
(the "Amortization Period"). The PBGC acknowledges that, to the extent permitted
by applicable law, a portion of the 2006 plan year contributions for the Plan,
including, without limitation, a portion of the October 30, 2006 Contribution,
will be applied towards the required amortization of the Waiver Amount. Each
Plan year during the Amortization Period, upon WHX having paid to the Plan the
minimum required contribution for such Plan year (which shall be paid no later
than September 15 of the following Plan year), the unamortized balance of the
Waiver Amount will be reduced by the interest adjusted annual amortization of
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the Waiver Amount. Within ten business (10) days after WHX provides proof to
PBGC that it has satisfied its commitment with respect to the minimum required
contributions for a Plan year, the PBGC shall certify in writing to WHX, and
such lenders or potential lenders as WHX shall designate, as to the outstanding
unamortized balance of the Waiver Amount after giving effect to all of such
payments to the Plan made for such Plan year. The parties hereto agree that the
outstanding balance of the Waiver Amount will not be eliminated solely by virtue
of any provision of or regulation pertaining to the Pension Protection Act of
2006. WHX may pay, without prior notice and without penalty, all or any portion
of the outstanding balance of the Waiver Amount at any time and from time to
time prior to the expiration of the Amortization Period. In the event that WHX
pays the full amount of the then outstanding balance of the Waiver Amount prior
to the end of the Amortization Period (an "Early Payment"), (i) WHX will provide
to PBGC written certification by the Plan's enrolled actuary that the Waiver
Amount has been reduced to zero (the "Actuary Certification"), (ii) WHX will
commence as soon as reasonably possible, and the PBGC will cooperate with WHX,
to seek to have the IRS recompute (the "Recomputation") the Amortization Period
for the Waiver Amount to reflect such Early Payment, (iii) (A) if the Early
Payment occurs prior to the 2008 plan year, WHX will elect under Section
303(f)(5)(A) of ERISA and Section 430(f)(5)(A) of the Code to reduce any
carryover balance in the funding standard account of the Plan generated by and
as a direct result of such Early Payment as of the beginning of the 2008 plan
year, or (B) if the Early Payment occurs during or after the 2008 plan year, WHX
will not make an election under Section 303(f)(6)(B)(i) of ERISA and Section
430(f)(6)(B)(i) of the Code to increase the prefunding balance by amounts paid
in the Early Payment, and (iv) WHX will continue to comply with the conditions
included in the Waiver unless modified by the IRS as part of, or separate from,
any Recomputation. Whether or not the IRS agrees to the Recomputation, if the
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PBGC agrees with the Actuary Certification, PBGC will take or cause to be taken
such actions and will execute and deliver or cause to be executed and delivered
such documents and instruments as may be necessary or reasonably requested by
WHX to terminate any and all remaining security interests granted to the Plan
pursuant to the Security and Subordination Agreements, and, at the request of
WHX, will provide written confirmation of the termination of such security
interests to any lender or potential lender to WHX, H&H or any of their
respective subsidiaries.
3. The PBGC agrees to withdraw all Notices of Statutory Liens that it
filed or caused to be filed prior to the date of this Agreement with respect to
the Plan (such notices, the "Prior Lien Notices") upon the occurrence of the
following event (such event, the "Prior Lien Release Event"): 91 days after the
perfection of all security interests granted to the Plan pursuant to the
Security and Subordination Agreements (the "PBGC Liens"). The PBGC represents
and warrants that the Prior Lien Notices attached as SCHEDULE A hereto
constitute all of the Prior Lien Notices that have been filed with respect to
the Plan. The PBGC agrees that, at all times prior to the effective date of the
Intercreditor Agreement or, if later, the occurrence of the Prior Lien Release
Event, the priority of the Statutory Liens shall be controlled by the
Subordination Agreement (provided, that, for purposes of this Section 3, the
term of the Subordination Agreement shall be deemed to be extended beyond
December 31, 2006 until the occurrence of the Prior Lien Release Event).
4. The PBGC agrees that WHX, H&H and/or any of their respective
subsidiaries may enter into a credit facility or facilities, in replacement of
the Wachovia Loan Agreement, providing for aggregate borrowings of up to $100
million (the "Existing Debt Level"), which replacement credit facility(ies) may
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include an amendment to the Wachovia Loan Agreement (any such credit facility or
facilities, a "Replacement Credit Facility"); provided, that, with the prior
written consent of the PBGC (not to be unreasonably withheld, delayed or
conditioned), the borrowings under such Replacement Credit Facility may be
increased to up to $125 million in connection with H&H's (or any of its
subsidiaries') acquisition and operation of the roofing company previously
discussed with the PBGC. In connection with any such Replacement Credit
Facility, WHX, H&H and/or any of their respective subsidiaries may grant to the
lender(s) thereunder a first priority security interest in any or all of their
respective assets (collectively, the "Replacement Lender Liens"), subject to
Section 5 below (which limits the amount of first priority senior secured
indebtedness that may be incurred by WHX pursuant to a Replacement Credit
Facility to an amount equal to the Existing Debt Level). In connection with the
closing of any such Replacement Credit Facility, the PBGC will agree to
subordinate the PBGC Liens to the Replacement Lender Liens to the same extent as
the PBGC Liens are subordinated to the Wachovia Liens pursuant to the terms of
the Intercreditor Agreement, or the Intercreditor Agreement may be assigned to
the agent under the Replacement Credit Facility. Upon payment in full of the
Waiver Amount to the Plan (whether such amount is paid in accordance with the
amortization schedule in Section 2 or as a result of an Early Payment), the
types and amount of senior secured indebtedness pursuant to the Replacement
Credit Facility and/or other first priority or other senior secured indebtedness
that may be incurred by WHX, H&H and/or any of their respective subsidiaries
shall no longer be subject to any limitation or restriction hereunder, except to
the extent provided in Section 5 below; provided, that any valid PBGC Liens that
are not terminated upon WHX's payment in full of the Waiver Amount shall remain
in full force and effect pursuant to the terms of the applicable Security and
Subordination Agreements until terminated in accordance with the applicable
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provisions thereof; provided, further that, except to the extent provided in
Section 5 below, the PBGC agrees to subordinate any such PBGC Liens to any and
all security interests granted in connection with any such senior secured
indebtedness to the same extent as the PBGC Liens are subordinated to the
Wachovia Liens pursuant to the terms of the Intercreditor Agreement.
5. The PBGC hereby waives, with respect to any secured indebtedness, up
to the Existing Debt Level, incurred by WHX pursuant to a Replacement Credit
Facility, its rights under Section 4(b) of the Agreement, dated as of July 31,
2003, by and among the PBGC, WHX, Wheeling-Pittsburgh Corporation,
Wheeling-Pittsburgh Steel Corporation and the United Steelworkers of America,
AFL-CIO-CLC (the "2003 Agreement"). Any other secured financing obtained by WHX
shall be subject to the provisions of Section 4(b) of the 2003 Agreement.
6. In full satisfaction and settlement of all liability, if any, under
Section 4062(e) of ERISA with respect to the Plan that has arisen, may have
arisen or may arise from the cessation of operations at a facility owned by WHX,
H&H or any member of WHX's controlled group (within the meaning of Section
4001(a)(14) of ERISA) as a result of (a) a sale or transfer of all or any part
of the stock or assets (any such sale or transfer, a "Sale") of, or closing of
any facility (a "Facility Closing") currently owned by, (i) Handy & Xxxxxx Tube
Company, Inc., (ii) Micro-Tube Fabricators, Inc. and/or (iii) Handy & Xxxxxx
Electronic Materials Corporation / Handy & Xxxxxx ele (Asia) Sdn Bhd (any Sale
of any of such entities, a "Specified Sale" and any Facility Closing involving
any of such entities, a "Specified Facility Closing"), (b) a Sale involving any
facility not included in (a), above, consummated prior to the date hereof (a
"Prior Sale") or (c) the closing of any facility not included in (a), above,
prior to the date hereof (a "Prior Facility Closing"), WHX, H&H and its
subsidiaries will provide to the Plan the following: (1) WHX will contribute, or
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cause to be contributed, $3,000,000 to the Plan promptly after the actual
receipt by H&H and/or any of its subsidiaries of the first $3,000,000 of
aggregate net proceeds (which, for the avoidance of doubt, shall exclude any
fees, expenses, and environmental clean-up liabilities) resulting from one or
more Specified Sales. WHX shall have fully complied with the foregoing
obligation upon the contribution of $3,000,000 to the Plan in accordance with
this Section 6. WHX agrees that (A) if said contribution occurs prior to the
2008 plan year, WHX will elect under Section 303(f)(5)(A) of ERISA and Section
430(f)(5)(A) of the Code to reduce any carryover balance in the funding standard
account of the Plan generated by and as a direct result of such contribution as
of the beginning of the 2008 plan year, or (B) if said contribution occurs
during or after the 2008 plan year, WHX will not make an election under Section
303(f)(6)(B)(i) of ERISA and Section 430(f)(6)(B)(i) of the Code to increase the
prefunding balance by the amount of said contribution; and (2) H&H and certain
of its subsidiaries shall grant the Plan a fourth lien on their assets (as
provided in the Fourth Lien Agreement) to secure a portion of the liability that
would arise under section 4062(b) of ERISA in the event that the Plan terminates
prior to the time that the Waiver Amount is reduced to zero (whether the Waiver
Amount is reduced to zero in accordance with the amortization schedule in
Section 2 or as a result of an Early Payment prior to the expiration of the
Amortization Period) (the "Termination Amount"). The Termination Amount shall
equal, on the effective date of the Fourth Lien Agreement, $30,000,000 (subject
to the last sentence of this paragraph), but will decrease by an amount equal to
two dollars for every one dollar decrease in the Waiver Amount, whether such
decrease is in accordance with the amortization schedule in Section 2 or is the
result of an Early Payment of the Waiver Amount. For the avoidance of doubt, if
an Early Payment of the Waiver Amount occurs prior to the expiration of the
Amortization Period, the Termination Amount shall be reduced to zero and the
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Fourth Lien Agreement shall terminate, regardless of whether the IRS shall have
agreed to the Recomputation. The Termination Amount will be payable to the Plan
in the event of a termination of the Plan under section 4041(c) or 4042 of ERISA
that occurs prior to the time that the Waiver Amount is reduced to zero (whether
the Waiver Amount is reduced to zero in accordance with the amortization
schedule in Section 2 or by an Early Payment prior to the expiration of the
Amortization Period). The PBGC acknowledges that, for each one dollar of the
2006 plan year contributions for the Plan (including, without limitation, the
October 30, 2006 Contribution) that is applied towards the amortization of the
Waiver Amount, the Termination Amount shall be reduced by two dollars.
The parties agree that this Section 6 shall fully resolve among the parties all
issues, if any, of any kind pertaining to the applicability of Section 4062(e)
in any respect with regard to any Specified Sale(s), Specified Facility
Closing(s), Prior Sale(s) or Prior Facility Closing(s), including, without
limitation, with respect to the legality of aggregating a Specified Sale,
Specified Facility Closing, Prior Sale and/or Prior Facility Closing with any
other Sale or Facility Closing (whether or not a Specified Sale, Specified
Facility Closing, Prior Sale or Prior Facility Closing), for purposes of
determining liability under Section 4062(e). The parties reserve their rights in
all respects and do not waive any arguments with regard to the applicability of
Section 4062(e) to any Sale or Facility Closing other than (x) a Specified
Sale(s), Specified Facility Closing(s), Prior Sale(s) or Prior Facility
Closing(s) and (y) in relation to, or the aggregation with, a Specified Sale(s),
Specified Facility Closing(s), Prior Sale(s) and/or Prior Facility Closing(s).
The parties agree that the provisions of this Section 6 shall not constitute or
be used as an admission, precedent or evidence or as the basis of any argument
in any litigation, proceeding or forum, including, without limitation, with
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respect to any administrative review, to determine the rights of the parties
with regard to the applicability of Section 4062(e) to any past or future Sale
or Facility Closing.
7. Each party hereby represents and warrants to the other parties
hereto the following: The execution, delivery and performance of this Agreement
by such party are within the corporate powers of such party and have been duly
authorized by all necessary action of such party. The person signing this
Agreement on behalf of such party is authorized to execute and deliver this
Agreement in such capacity. This Agreement has been duly and validly executed
and delivered by such party and constitutes the legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms.
8. All notices and other communications provided for under this
Agreement shall be in writing (including facsimile transmissions) and
transmitted or delivered: if to WHX or H&H, to WHX Corporation, 000 Xxxxxxxx
Xxxxx Xxxxxx, Xxx, Xxx Xxxx 00000, Facsimile: (000) 000-0000, Attention: Xxxxx
X. Xxxxxx, Esq., with a copy to Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP,
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Facsimile: (000) 000-0000,
Attention: Xxxxxx Xxxxxxx, Esq.; if to the PBGC, to Pension Benefit Guaranty
Corporation, Department of Insurance Supervision and Compliance, 0000 X Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000-0000, Facsimile: (000) 000-0000, Attention: Xxxxxx
Xxxxx, Deputy Director, Department of Insurance Supervision and Compliance; or,
as to each party, at such other address as shall be designated by such party in
a written notice to the other parties complying as to delivery with the terms of
this Section 8. Notices may be sent by (i) first-class mail, postage prepaid,
(ii) Federal Express or other reputable overnight delivery service (for delivery
the next business day), (iii) telecopy or (iv) personal delivery by messenger.
Any notice (a) if sent by first-class mail and properly addressed with postage
prepaid, shall be deemed given on the earlier of (1) three business days after
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deposit with the United States Postal Service and (2) when received, (b) if sent
by overnight delivery service, shall be deemed given on the next business day
following the date on which it was deposited with such service prior to the
deadline for overnight delivery and (c) if transmitted by telecopy or personal
delivery, shall be deemed given when received (a dated receipt of a notice by
telecopy being conclusive evidence of the receipt thereof).
9. This Agreement effects the settlement of claims among the parties
hereto, and nothing contained in this Agreement shall be construed as an
admission by any party hereto, or any of its officers, directors, employees,
affiliates, agents, attorneys or representatives, of any fault, liability or
wrongdoing whatsoever, which is expressly denied.
10. The parties hereto shall take or cause to be taken such other and
further actions and shall execute and deliver or cause to be executed and
delivered such other and further documents and instruments as may be necessary
or reasonably requested to effectuate fully the purposes of this Agreement.
11. No party is entering into this Agreement in reliance upon any oral
or written promises, inducements, representations, understandings,
interpretations or agreements other than those expressly contained in this
Agreement and in the Security and Subordination Agreements.
12. This Agreement, together with the Security and Subordination
Agreements, supersedes any and all prior agreements and negotiations among the
parties hereto with respect to the subject matter hereof and supersedes any and
all obligations the parties hereto may have to one another under any prior
agreements, except for the 2003 Agreement (other than those rights of the PBGC
under Section 4(b) thereof that have been waived hereby). This Agreement,
together with the Security and Subordination Agreements, represents the complete
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understanding among the parties with respect to the subject matter hereof. This
Agreement may not be altered, amended or modified in any manner whatsoever, and
no provision herein may be waived, except by a writing duly signed by all
parties.
13. This Agreement shall be binding upon the parties hereto and upon
their respective successors and assigns, and shall inure to the benefit of said
parties and to their respective successors and assigns.
14. Each of the undersigned parties hereby acknowledges that it fully
negotiated the terms of this Agreement, that each such party had an equal
opportunity to influence the drafting of the language contained in this
Agreement, and that there shall be no presumption against any such party on the
ground that such party was responsible for preparing this Agreement or any part
hereof. Whenever the words "include" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation." The words
"hereof," "herein" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
15. Nothing herein, expressed or implied, is intended or shall be
construed to confer upon or give any other person or legal entity other than the
parties hereto any of the rights, remedies or other benefits under or by reason
of the provisions of this Agreement, except that each of Agent and Steel shall
be an express third-party beneficiary of Section 3 hereof.
16. The provisions of this Agreement are severable and if any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Agreement in any jurisdiction.
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17. This Agreement shall be governed by the laws of the State of New
York, without regard to the provisions governing conflicts of law, except to the
extent that the laws of the State of New York are inconsistent with ERISA. Each
party agrees to submit to the exclusive jurisdiction of the United States
District Court for the Southern District of New York in any dispute arising out
of or concerning this Agreement.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and facsimile and photostatic copies of an executed
counterpart of this Agreement shall be given the same effect as the original.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above stated.
WHX CORPORATION
By:/s/ Xxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President and Chief Financial Officer
HANDY & XXXXXX
By:/s/ Xxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President and Chief Financial Officer
PENSION BENEFIT GUARANTY CORPORATION
By: /s/ Xxxxx X. XxXxxxxxx
---------------------------------------
Name: Xxxxx X. XxXxxxxxx
Title: Acting Director, Dept. of Insurance
Supervision and Compliance
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