AGREEMENT AND PLAN OF MERGER

 

                                                                     Exhibit 2.1

 

                          AGREEMENT AND PLAN OF MERGER

 

         THIS   AGREEMENT   AND   PLAN OF   MERGER   (the   "AGREEMENT"),   dated as of

February 28, 2005, by and among PROASSURANCE CORPORATION, a Delaware corporation

("PRA"),   NCP MERGER   CORPORATION,   a Delaware   corporation   and a   wholly-owned

subsidiary   of PRA   ("NEWCO"),   and NCRIC GROUP,   INC.,   a Delaware   corporation

("NCRIC").

 

                                   WITNESSETH:

 

         WHEREAS,   PRA is an insurance   holding company which provides,   through

its   insurance   subsidiaries,    medical   professional   liability   insurance   and

personal lines insurance; and

 

         WHEREAS, NCRIC is an insurance holding company which provides,   through

its   subsidiaries,    medical   professional    liability   insurance   and   practice

management and financial services to physicians and other health care providers;

and

 

         WHEREAS,   the   Boards   of   Directors   of   PRA,   NEWCO   and   NCRIC   have

determined   that it is in the best interests of their   respective   companies and

stockholders   for PRA to acquire NCRIC through the   consummation of the business

combination transaction provided for in this Agreement.

 

         NOW,    THEREFORE,    in    consideration    of    the    mutual    covenants,

representations,   warranties and   agreements   contained in this   Agreement,   and

intending to be legally bound by this   Agreement,   the parties to this Agreement

agree as follows:

 

ARTICLE 1

                                   THE MERGER

 

     1.1 MERGER.   Subject to the terms and   conditions of this   Agreement and in

accordance with the Delaware   General   Corporation Law, as amended (the "DGCL"),

at the Effective Time (as defined in Section 1.2 of this Agreement), NCRIC shall

merge   with   and   into   NEWCO   (the   "MERGER").   NEWCO   shall   be the   surviving

corporation in the Merger, and shall continue its corporate   existence under the

laws of the State of Delaware.   Upon   consummation   of the Merger,   the separate

corporate existence of NCRIC shall terminate.

 

     1.2 EFFECTIVE   TIME.   Subject to the provisions of this   Agreement,   and in

connection   with the   Closing,   a   certificate   of merger (the   "CERTIFICATE   OF

MERGER")   will be filed with the   Secretary   of State of   Delaware   pursuant   to

Section 252 of the DGCL.   The parties will make all other   filings or recordings

as may be required under the DGCL, and the Merger will become effective when the

Certificate   of   Merger   is filed in the   office   of the   Secretary   of State of

Delaware,   or at such later date or time as PRA and NCRIC   agree and   specify in

the   Certificate   of   Merger   (the time the   Merger   comes   effective   being the

"EFFECTIVE TIME").

 

     1.3 EFFECTS OF MERGER.   At and after the Effective   Time,   the Merger shall

have the effects set forth in this Agreement,   the Certificate of Merger and the

DGCL. At the Effective Time, (i) all rights, franchises,   licenses and interests

of NCRIC in and to every type of property,   real,   personal   and mixed,   and all

choses in action of NCRIC shall   continue   unaffected and   uninterrupted   by the

Merger and shall   accrue to NEWCO;   (ii) all rights,   franchises,   licenses   and

interests of NEWCO in and to every type of property,   real,   personal and mixed,

and all choses in action of NEWCO shall continue unaffected and uninterrupted by

the Merger and shall accrue to NEWCO;   (iii) all   obligations and liabilities of

NEWCO then outstanding   shall remain   obligations of NEWCO; (iv) all obligations

and   liabilities   of NCRIC then   outstanding   shall become and be obligations of

NEWCO;   and (v) no action or proceeding then pending and to which NCRIC or NEWCO

is a party   shall be   abated   or   discontinued   but may be   prosecuted   to final

judgment by NEWCO.

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     1.4 NEWCO SHARES.   At the Effective Time, all of the shares of NEWCO Common

Stock (as defined in Section 4.3(b) of this   Agreement)   issued and   outstanding

prior to the   Effective   Time shall   remain an issued and   outstanding   share of

common   stock of NEWCO   and   shall   not be   affected   by the   Merger.   It is the

intention of the parties that,   immediately   after the Effective Time, PRA shall

own all of the issued   and   outstanding   shares of Common   Stock of NEWCO as the

surviving corporation of the Merger.

 

     1.5 CONVERSION OF NCRIC COMMON STOCK.

 

          (a) Except as otherwise provided in this Agreement, and subject to the

Market   Adjustment   pursuant to Section 1.5(b) hereof,   each holder of record of

the shares of the common   stock,   $0.01 par value per   share,   of NCRIC   ("NCRIC

COMMON   STOCK") as of the   Effective   Time shall have the right to receive   0.25

(the   "EXCHANGE   RATIO") of a share of common   stock of PRA, par value $0.01 per

share ("PRA   COMMON   STOCK") for each share of NCRIC   Common   Stock (the "MERGER

CONSIDERATION").

 

          (b) The Exchange   Ratio shall be subject to   adjustment   if the MARKET

VALUE (herein   defined) of a share of PRA Common Stock is greater than $44.00 or

less than   $36.00.   In each event,   the   Exchange   Ratio shall be adjusted   (the

"MARKET   ADJUSTMENT") so that each holder of the shares of NCRIC Common Stock as

of the   Effective   Time shall have the right to receive such number of shares or

fraction   of a share (in ten   thousandths;   i.e.,   four   decimal   places) of PRA

Common Stock in accordance with the following   (references to the Exchange Ratio

shall include the Exchange Ratio calculated to reflect the Market Adjustment, if

any):

 

               (i) If the Market   Value is greater   than   $44.00,   the   Exchange

          Ratio shall be such   fraction of a share of PRA Common   Stock as shall

          equal $11.00 divided by the Market Value; or

 

               (ii) If the Market Value is less than $36.00,   the Exchange Ratio

          shall be such   number of shares or   fraction of a share as shall equal

          $9.00 divided by the Market Value.

 

               (iii) The term   "MARKET   VALUE" shall refer to an amount equal to

          the   arithmetic   average of the last reported sale prices of one share

          of PRA Common Stock as reported on the New York Stock Exchange the ten

          (10) trading days ending on the date preceding the Effective Time.

 

 

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          (c) Each   share of NCRIC   Common   Stock   that is owned by NCRIC or any

NCRIC Subsidiary shall automatically be cancelled and retired and shall cease to

exist, and no Merger Consideration shall be delivered in exchange therefore.

 

     1.6   NO   FRACTIONAL    SHARES.   No   certificates   or   scrip   representing   a

fractional share of PRA Common Stock shall be issued upon the surrender of NCRIC

Common Stock certificates for exchange; no dividend or distribution with respect

to PRA Common Stock shall be payable on or with respect to any fractional share;

and such fractional   share interests shall not entitle the owner thereof to vote

or to any other rights of a stockholder   of PRA. In lieu of any such   fractional

share,   PRA shall pay to each former   holder of NCRIC Common Stock who otherwise

would be entitled to receive a fractional share of PRA Common Stock an amount in

cash determined by multiplying the fractional share of PRA Common Stock to which

such holder   would   otherwise   be   entitled by   whichever   of the   following   is

applicable:   (i)   $40.00 if there is no Market   Adjustment;   or (ii) the   Market

Value if there is a Market Adjustment to the Exchange Ratio.

 

     1.7 STOCK OPTIONS.

 

     (a) Section 1.7 of the NCRIC   Disclosure   Schedule (as defined in Article 3

of this   Agreement)   lists (i) all stock options to purchase   NCRIC Common Stock

issued by NCRIC pursuant to the Stock Option Plan and the 2003 Stock Option Plan

(the "NCRIC OPTION   PLANS") that are   outstanding   on the date of this Agreement

(collectively,   the   "NCRIC   STOCK   OPTIONS"),   and (ii) all awards of shares of

NCRIC   Common   Stock that are to be issued by NCRIC   pursuant   to its 2003 Stock

Award Plan (the   "NCRIC   AWARD   PLAN") that are   outstanding   on the date hereof

("NCRIC STOCK AWARDS").   Section 1.7 of the NCRIC Disclosure   Schedule also sets

forth,   with respect to each NCRIC Stock Option,   the option exercise price, the

number   of   shares   subject   to the   option,   the   date   granted,   vesting,   and

expiration of the option and indicates whether the option is either an incentive

or a nonqualified   stock option.   Section 1.7 of the NCRIC   Disclosure   Schedule

also sets forth with   respect   to each   NCRIC   Stock   Award the number of shares

subject to the Stock Awards and the date granted and the vesting schedule of the

award. All NCRIC Stock Options are exercisable as of the date of this Agreement.

 

     (b) Each   unexercised   NCRIC Stock Option that is issued and outstanding at

the Effective Time (a   "CONTINUING   NCRIC STOCK OPTION") shall be assumed by PRA

and, except as provided in this Section 1.7(b), shall be continued in accordance

with its terms and   conditions as in effect   immediately   prior to the Effective

Time. The holder of each   Continuing   NCRIC Stock Option shall have the election

to either:

 

          (i)   exchange   his or her   Continuing   Stock   Option   for the right to

     acquire a number of shares of PRA Common Stock at the Effective Time on the

     following terms and conditions:

 

               (A) Each share of NCRIC   Common   Stock   subject   to a   Continuing

          NCRIC Stock Option so exchanged   shall be converted into shares of PRA

          Common Stock using the Exchange Ratio. The number of shares subject to

          each Continuing NCRIC Stock Option so exchanged shall be multiplied by

          said   Exchange   Ratio to determine   the number of shares of PRA Common

          Stock   subject   to   said   Continuing   NCRIC   Stock   Option;   provided,

          however,   that all fractional shares resulting from such determination

          shall be eliminated;

 

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               (B) The exercise price for the shares of PRA Common Stock subject

          to a Continuing NCRIC Stock Option so exchanged shall be determined by

          dividing the Exchange   Ratio into the exercise   price of the shares of

          NCRIC   Common   Stock   subject to said   Continuing   NCRIC Stock   Option

          immediately prior to the Effective Time;

 

               (C) The NCRIC Option Plans shall be amended at the Effective Time

          to   reserve   for   issuance   pursuant   to the   Continuing   NCRIC   Stock

          Options, the number of shares of PRA Common Stock subject to the NCRIC

          Stock Options after the Effective Time, and to allow former members of

          the Board of Directors of NCRIC to continue to   participate   under the

          NCRIC   Option   Plans with   respect   to their   Continuing   NCRIC   Stock

          Options   during the term of the Consulting   Agreement   executed by the

          directors pursuant to Section 1.12 hereof; or

 

          (ii)   surrender   his or   her   Continuing   NCRIC   Stock   Option   at the

     Effective   Time in   exchange   for a cash   payment   equal to the   greater of

     either (A) the   amount by which the   Adjusted   NCRIC   Share   Value   (herein

     defined)   exceeds   the   unadjusted   exercise   price for each share of NCRIC

     Common Stock subject to the Continuing Stock Option so surrendered as shown

     in Section 1.7(a) of the Disclosure Schedule or (B) $1.00 for each share of

     NCRIC   Common   Stock   subject   to the   Continuing   NCRIC   Stock   Option   so

     surrendered.   The term   "ADJUSTED   NCRIC SHARE   VALUE"   shall mean (i) that

     amount that is equal to 0.25 times the Market   Value;   (ii) $11.00 if there

     is a Market Adjustment   because the Market Value is greater than $44.00; or

     (iii) $9.00 if there is a Market   Adjustment   because   the Market   Value is

     less than $36.00.   A holder of a Continuing NCRIC Stock Option may elect to

     receive cash for any or all of his or her   Continuing   NCRIC Stock Options.

     Each holder of a   Continuing   NCRIC Stock Option shall make his or her cash

     election   on an election   form to be   provided by PRA at least   twenty (20)

     days prior to the Effective   Time. The right to make an election to receive

     a cash payment for the shares of NCRIC Common Stock subject to a Continuing

     NCRIC Stock Option shall terminate on the Effective Time.

 

          (c) Each NCRIC Stock Award that is   outstanding   at the Effective Time

("CONTINUING   NCRIC STOCK AWARD") shall be assumed by PRA and shall be continued

in   accordance   with its terms as in effect   immediately   prior to the Effective

Time. Each Continuing   NCRIC Stock Award shall give the holder thereto the right

to   acquire   a   number   of   shares   of PRA   Common   Stock   to be   determined   by

multiplying   the   Exchange   Ratio by the number of shares of NCRIC   Common Stock

subject to a Continuing NCRIC Stock Award;   provided that all fractional   shares

resulting therefrom shall be eliminated.

 

     1.8 MERGER   TAX   CONSEQUENCES.   It is   intended   (i) that the Merger   shall

constitute a   reorganization   within the meaning of Section   368(a)(1)(A) of the

Internal   Revenue   Code of 1986,   as amended   (the   "CODE"),   and (ii) that this

Agreement   shall   constitute   a "plan of   reorganization"   for the   purposes   of

Section 368 of the Code.

 

 

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     1.9 NEWCO CERTIFICATE OF INCORPORATION. Subject to the terms and conditions

of this Agreement,   at the Effective Time, the Certificate of   Incorporation   of

NEWCO then in effect shall be, and shall continue in effect as, the   Certificate

of   Incorporation   of NEWCO, as the surviving   corporation in the Merger,   until

amended in accordance with applicable law; provided, however, that in connection

with and as a result of the   consummation   of the   Merger,   the   Certificate   of

Incorporation   of NEWCO then in effect shall be amended so as to change the name

of NEWCO to "NCRIC Corporation."

 

     1.10 NEWCO BYLAWS.   Subject to the terms and conditions of this   Agreement,

at the   Effective   Time,   the Bylaws of NEWCO then in effect shall be, and shall

continue in effect as, the Bylaws of NEWCO, as the surviving   corporation in the

Merger, until amended in accordance with applicable law.

 

     1.11 NEWCO   MANAGEMENT AND OFFICERS.   At the Effective   Time, the directors

and   officers   of NEWCO,   as the   surviving   corporation   in the   Merger,   shall

continue as the Board of Directors and Officers of NEWCO until their   successors

are elected and qualified.

 

     1.12 ADVISORY COMMITTEES.

 

          (a)   PRA   shall   offer   to each   Person   who,   as of the   date of this

Agreement,   is a member   of the Board of   Directors   of NCRIC a   Consulting   and

Noncompetition   Agreement in form a substance reasonably acceptable to PRA (each

a "CONSULTING AGREEMENT"),   substantially in the form attached hereto as EXHIBIT

A. Pursuant to his or her Consulting Agreement, each such Person shall be paid a

monthly consulting fee of $2,500 through December 31, 2006;   provided,   however,

that no fees of any type   shall be paid to such   Person   unless   he or she shall

have executed a Consulting Agreement. PRA shall cause each Person who executes a

Consulting   Agreement to be appointed to an advisory committee maintained by PRA

or its   Subsidiaries.   The Advisory   Committee   shall   provide   advice as to the

transition of NCRIC's business after the Merger.

 

          (b)   It   is   the   intention   of   the   parties,   subject   to   operating

constraints, to maintain the NCRIC physician   underwriting/claims committee that

NCRIC has in the District of Columbia, Delaware, and Virginia (collectively, the

"NCRIC ADVISORY COMMITTEES"). The members of the NCRIC Advisory Committees shall

consist of those persons who are members   thereof at the Effective Time and such

other persons who are appointed to the NCRIC Advisory Committees thereafter. The

NCRIC Advisory   Committees   shall provide advice as to   underwriting   and claims

matters   regarding   medical   professional    liability    insurance.    Except   for

compensation   pursuant to consulting   agreements   described in subparagraph   (a)

above,   PRA shall fix the compensation of, and may change the membership of, the

NCRIC Advisory Committees.

 

     1.13 PRA COMMON STOCK.   At and after the Effective   Time, each share of PRA

Common Stock issued and   outstanding   immediately   prior thereto shall remain an

issued and outstanding share of common stock of PRA and shall not be affected by

the Merger.

 

 

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     1.14 PRA STOCK OPTIONS.   At and after the Effective Time, each stock option

granted by PRA to purchase   shares of PRA Common Stock which is outstanding   and

unexercised   immediately   prior thereto   shall   continue to represent a right to

acquire   shares of PRA Common Stock and shall   remain an issued and   outstanding

option to purchase from PRA shares of PRA Common Stock in the same amount and at

the same exercise price subject to the terms of the PRA stock option plans under

which they were issued and the   agreements   evidencing   grants   thereunder,   and

shall not be affected by the Merger.

 

     1.15 PRA CERTIFICATE OF INCORPORATION.   Subject to the terms and conditions

of this Agreement,   at the Effective Time, the Certificate of   Incorporation   of

PRA then in effect shall be, and shall continue in effect as, the Certificate of

Incorporation of PRA until thereafter amended in accordance with applicable law.

 

     1.16 PRA BYLAWS. Subject to the terms and conditions of this Agreement,   at

the   Effective   Time,   the   Bylaws   of PRA then in effect   shall   be,   and shall

continue in effect as, the Bylaws of PRA until thereafter   amended in accordance

with applicable law.

 

     1.17 PRA   MANAGEMENT.   The directors and officers of PRA shall be the Board

of   Directors   and   officers   of PRA to serve until   their   successors   are duly

elected and qualified.

 

     1.18 INSURANCE OPERATIONS.   It is the intention of the parties,   subject to

operating   constraints,   to   maintain   the NCRIC home   office as a PRA   regional

office with a substantial number of staff positions for the conduct of insurance

operations   in the   mid-Atlantic   states   after the Merger.   PRA may,   after the

Closing Date,   modify or change the   operating   structure in the exercise of its

business judgment.

 

     1.19 ANTI-DILUTION   PROVISIONS.   In the event PRA changes (or establishes a

record date for changing) the number of, or provides for the exchange of, shares

of PRA Common   Stock issued and   outstanding   prior to the   Effective   Time as a

result of a stock split, stock dividend, recapitalization,   reclassification, or

similar   transaction   with respect to the   outstanding   PRA Common Stock and the

record date therefore   shall be on or prior to the Effective   Time, the Exchange

Ratio   (and   the    related    collars   of   the    Market    Adjustment)    shall   be

proportionately and appropriately adjusted, to reflect the economic substance of

the event, in a manner that is mutually acceptable;   provided,   however, that no

such   adjustment   shall be made with   regard to PRA   Common   Stock if PRA issues

additional   shares of Common Stock and receives fair market value   consideration

for such shares.

 

                                   ARTICLE 2

                               EXCHANGE PROCEDURES

 

     2.1 EXCHANGE AGENT. Prior to the mailing of the Proxy Statement (as defined

in Section 3.5(c) of this Agreement),   PRA shall appoint a bank or trust company

to act as an exchange   agent who shall be   reasonably   acceptable   to NCRIC (the

"EXCHANGE AGENT") for the payment of the Merger Consideration. PRA shall pay the

charges and expenses of the Exchange Agent.

 

 

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     2.2 EXCHANGE PROCEDURES.

 

     (a) Prior to the Effective   Time, PRA shall deposit with the Exchange Agent

(or otherwise   make available to the   reasonable   satisfaction   of NCRIC and the

Exchange Agent), for the benefit of the holders of shares of NCRIC Common Stock,

for exchange through the Exchange Agent, the certificates representing shares of

PRA Common Stock for the Merger   Consideration   (such shares of PRA Common Stock

together with any dividends or distributions   with respect to such shares with a

record   date   after   the   Effective   Time   and any cash   payable   in lieu of any

fractional   shares pursuant to this Agreement being   hereinafter   referred to as

the   "EXCHANGE   FUND")   issuable   pursuant to this   Agreement   in   exchange   for

outstanding shares of NCRIC Common Stock.

 

     (b) Promptly after the Effective   Time, but no later than five (5) business

days   following   the Effective   Time,   PRA will send or cause to be sent to each

person who was a record   holder of NCRIC   Common   Stock   immediately   before the

Effective   Time    transmittal    materials   for    exchanging    the    certificates

representing    NCRIC   Common   Stock   ("OLD    CERTIFICATES")    for    certificates

representing   PRA Common Stock ("NEW   CERTIFICATES").   Upon surrender of the Old

Certificate   for   cancellation   to the Exchange   Agent,   together   with the duly

executed transmittal   materials,   and such other documents as the Exchange Agent

may reasonably require,   the holder of such Old Certificate shall be entitled to

receive in exchange   therefore   a   certificate   representing   that number of New

Certificates   which   such   holder has the right to receive in respect of the Old

Certificates   surrendered   pursuant to the provisions of this Section 2.2 (after

taking into   account all shares of NCRIC   Common Stock then held by such holder)

and any check in respect of dividends or distributions or for fractional   shares

that the holder   will be   entitled to receive   (without   interest),   and the Old

Certificates so surrendered   shall   forthwith be cancelled.   Neither PRA nor the

surviving   corporation   of the Merger   shall be   obligated to deliver the Merger

Consideration   to which   any   former   record   holder   of NCRIC   Common   Stock is

entitled as a result of the Merger until such record   holder   surrenders   his or

her   certificate or certificates   representing   the shares of NCRIC Common Stock

for exchange as provided in this Section 2.2.

 

     (c) At the   Effective   Time,   the stock   transfer   books of NCRIC   shall be

closed as to holders of NCRIC Common Stock   immediately   prior to the   Effective

Time,   and no transfer of NCRIC   Common   Stock by any such record   holder   shall

thereafter be made or recognized.   Until   surrendered for exchange in accordance

with   the   provisions   of   this   Section   2.2,   each    certificate    theretofore

representing   shares of NCRIC   Common   Stock shall from and after the   Effective

Time    represent   for   all   purposes   only   the   right   to   receive   the   Merger

Consideration   provided in this Agreement in exchange   therefore.   To the extent

permitted by law,   former   stockholders of record of NCRIC Common Stock shall be

entitled to vote after the Effective Time at any meeting of the PRA stockholders

the number of shares of PRA Common Stock into which their   respective   shares of

NCRIC   Common   Stock are   converted,   regardless   of whether   such   holders have

exchanged    their    certificates    for   NCRIC   Common   Stock   for    certificates

representing the PRA Common Stock.

 

     (d) Any other provision of this Agreement notwithstanding, none of PRA, the

surviving corporation of the Merger, and the Exchange Agent shall be liable to a

holder of NCRIC Common Stock for any amounts paid or property   delivered in good

faith to a public official pursuant to any applicable abandoned property law.

 

 

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     2.3 LOST OR   STOLEN   CERTIFICATES.   If any   holder   of NCRIC   Common   Stock

convertible   into the right to receive   shares of the PRA Common Stock is unable

to deliver the certificate which represents such shares,   the Exchange Agent, in

the absence of actual   notice that any such shares have been   acquired by a bona

fide purchaser,   shall deliver to such holder the Merger   Consideration to which

the holder is entitled for such shares upon   presentation of the following:   (i)

evidence to the reasonable   satisfaction   of the Exchange Agent and PRA that any

such   certificate   has been   lost,   wrongfully   taken or   destroyed;   (ii)   such

security or indemnity as may be   reasonably   requested by the Exchange   Agent or

PRA to   indemnify   and hold   PRA and the   Exchange   Agent   harmless;   and   (iii)

evidence   satisfactory   to the   Exchange   Agent and PRA that such   person is the

owner of the shares theretofore   represented by each certificate   claimed by the

holder to be lost,   wrongfully   taken or   destroyed   and that the   holder is the

person who would be entitled to present such   certificate for exchange   pursuant

to this Agreement.

 

     2.4   DIVIDENDS   AND   OTHER   DISTRIBUTIONS.   Whenever   a   dividend   or other

distribution   is declared on the PRA Common Stock,   the record date for which is

at or after the Effective Time, the declaration shall include dividends or other

distributions on all shares of the PRA Common Stock issuable to holders of NCRIC

Common Stock under this Agreement.   Notwithstanding the preceding sentence,   any

person holding any   certificate   for NCRIC Common Stock after the Effective Time

shall not be   entitled to receive any   dividend   or other   distribution   payable

after the Effective   Time to holders of the PRA Common Stock,   which dividend or

other   distribution   is   attributable   to such person's NCRIC Common Stock until

such person   surrenders said   certificate for NCRIC Common Stock for exchange as

provided in Section   2.2 of this   Agreement.   However,   upon   surrender   of such

certificate,    the   PRA   Common   Stock   certificate    (together   with   all   such

undelivered   dividends   or   other   distributions,   without   interest)   shall   be

delivered and paid (without   interest) with respect to each share represented by

such certificate for NCRIC Common Stock.

 

     2.5   EXCHANGE    FUND.   Any   portion   of   the   Exchange   Fund   that   remains

undistributed   to the   holders of NCRIC   Common   Stock for six months   after the

Effective Time shall be delivered to PRA, upon demand,   and any holders of NCRIC

Common   Stock   who have not   theretofore   complied   with   this   Agreement   shall

thereafter   look only to PRA for   payment   of their   claim for any shares of PRA

Common   Stock,   any   cash in lieu of   fractional   shares   and any   dividends   or

distributions with respect to PRA Common Stock.

 

     2.6   WITHHOLDING.   PRA or the Exchange Agent will be entitled to deduct and

withhold from the consideration   otherwise payable pursuant to this Agreement or

the transactions   contemplated   thereby to any holder of NCRIC Common Stock such

amounts as PRA (or any Affiliate   thereof) or the Exchange Agent are required to

deduct and withhold   with respect to the making of such payment   under the Code,

or any applicable   provision of U.S. federal,   state, local or non-U.S. tax law.

To the extent that such   amounts are   properly   withheld by PRA or the   Exchange

Agent,   such withheld amounts will be treated for all purposes of this Agreement

as having been paid to the holder of the NCRIC   Common   Stock in respect of whom

such deduction and withholding were made by PRA or the Exchange Agent.

 

 

 

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                                    ARTICLE 3

                     REPRESENTATIONS AND WARRANTIES OF NCRIC

         NCRIC   represents and warrants to PRA that the statements   contained in

this   Article 3 are correct and   complete as of the date of this   Agreement   and

will be correct and   complete as of the Closing Date (as though made then and as

though   the   Closing   Date   was   substituted   for the   date   of   this   Agreement

throughout   this Article),   except (i) as set forth in the   disclosure   schedule

delivered   by NCRIC to PRA on the date hereof and   initialed by the parties (the

"NCRIC   DISCLOSURE   SCHEDULE"),   or (ii) for any changes to the NCRIC Disclosure

Schedule that are disclosed by NCRIC to PRA in accordance with Section 6.9(b) of

this Agreement, or (iii) to the extent such representations and warranties speak

as of an earlier date. Nothing in the NCRIC Disclosure   Schedule shall be deemed

adequate to disclose an exception to a   representation   or warranty   made herein

unless the NCRIC   Disclosure   Schedule   identifies the exception with reasonable

particularity.   The NCRIC   Disclosure   Schedule   will be arranged in   paragraphs

corresponding to the lettered and numbered paragraphs contained in this Article;

provided,   however,   (i) that each   exception set forth in the NCRIC   Disclosure

Schedule   shall be deemed   disclosed   for   purposes of all   representations   and

warranties if such   exception is contained in a section of the NCRIC   Disclosure

Schedule   corresponding   to a   Section   in this   Article   3,   and   (ii) the mere

inclusion of an exception in the NCRIC   Disclosure   Schedule shall not be deemed

an admission by NCRIC that such exception   represents a material fact,   event or

circumstance   or would result in a material   adverse effect or material   adverse

change.

 

     3.1 CORPORATE ORGANIZATION.   NCRIC is a corporation duly organized, validly

existing and in good standing under the laws of the State of Delaware. NCRIC has

the   corporate   power and   authority to own or lease all of its   properties   and

assets and to carry on its   business as it is now being   conducted,   and is duly

licensed or qualified to do business in each jurisdiction in which the nature of

the business   conducted by it or the character or location of the properties and

assets owned or leased by it makes such   licensing or   qualification   necessary,

except   where   the   failure   to be so   licensed   or   qualified   would not have a

Material   Adverse   Effect (as defined in Section   9.18(a) of this   Agreement) on

NCRIC.

 

     3.2 SUBSIDIARIES.

 

      (a) Section 3.2(a) of the NCRIC Disclosure Schedule sets forth the name and

state of incorporation or organization of each Subsidiary (as defined in Section

9.18(a) of this   Agreement)   of NCRIC   (the   "NCRIC   SUBSIDIARIES").   Each NCRIC

Subsidiary (i) is duly organized and validly existing as a corporation under the

laws of its jurisdiction of organization,   (ii) is duly qualified to do business

and in good standing in all   jurisdictions   (whether   federal,   state,   local or

foreign)   where its   ownership   or leasing   of   property   or the   conduct of its

business   requires   it to be so   qualified   and in which   the   failure   to be so

qualified   would   have a   Material   Adverse   Effect on NCRIC,   and (iii) has all

requisite   corporate   power and   authority   to own or lease its   properties   and

assets and to carry on its business as now conducted.

 

     (b) Section 3.2(b) of the NCRIC   Disclosure   Schedule   identifies the NCRIC

Subsidiaries that offer insurance and the states or other jurisdictions in which

they are authorized or licensed to conduct   business,   and the type of insurance

products   that they are   authorized or licensed to offer in each such state (the

"NCRIC   INSURANCE   SUBSIDIARIES").   No NCRIC   Insurance   Subsidiary   offers   any

insurance   products   in any   jurisdiction   where it is   neither   authorized   nor

licensed to offer such insurance products.   The business of each NCRIC Insurance

Subsidiary   has   been   and is   being   conducted   in   compliance   with all of its

licenses in all material   respects.   All of such   licenses are in full force and

effect and there is no proceeding or investigation   pending or, to the knowledge

of   NCRIC,   threatened   which   would   reasonably   be   expected   to   lead   to the

revocation,   amendment, failure to renew, limitation,   suspension or restriction

of such license.

 

                                       9

<PAGE>

 

     (c) Except as set forth in Section 3.2(c) of the NCRIC Disclosure Schedule,

NCRIC is, directly or indirectly,   the record and beneficial owner of all of the

outstanding shares of capital stock of each of the NCRIC Subsidiaries. There are

no irrevocable   proxies granted by NCRIC or any NCRIC Subsidiary with respect to

such shares.   There are no equity   securities   of any of the NCRIC   Subsidiaries

that are or may become required to be issued by reason of any option,   warrants,

scrip, rights, to subscribe to, calls or commitments of any character whatsoever

relating to, or   securities   or rights   convertible   into or   exchangeable   for,

shares of any capital   stock of any of the NCRIC   Subsidiaries   except shares of

the NCRIC Subsidiaries   issued to other wholly owned NCRIC   Subsidiaries.   There

are no contracts,   commitments,   understandings   or arrangements by which any of

the NCRIC   Subsidiaries is bound to issue additional shares of its capital stock

or options,   warrants or rights to purchase or acquire any additional   shares of

its   capital   stock or   securities   convertible   into or   exchangeable   for such

shares.   All of the   shares of the   NCRIC   Subsidiaries   described   in the first

sentence of this Section 3.2(c) are validly issued, fully paid and nonassessable

and free of preemptive rights, and are owned by NCRIC or a NCRIC Subsidiary free

and clear of any and all Liens (as defined in Section 9.18(a) of this Agreement)

and free and clear of any claim, right or option to acquire any such shares.

 

     (d) No NCRIC   Subsidiary is the record or beneficial owner of any shares of

NCRIC Common Stock.

 

     3.3 CORPORATE AFFAIRS.

 

     (a) NCRIC has made   available   to PRA   correct and   complete   copies of the

Certificate   of   Incorporation   and   Bylaws   of   NCRIC   and   each   of the   NCRIC

Subsidiaries   (as amended to date).   NCRIC has made   available to PRA all of the

minute books   containing   the records of the meetings of the   stockholders,   the

board of directors and any committee of the board of directors of NCRIC and each

of the NCRIC   Subsidiaries   (except for   confidential   portions of such   minutes

relating to the Merger,   but provided that the   availability of such information

is subject to Section 6.3 of this Agreement).   The minute books of NCRIC and the

NCRIC   Subsidiaries   reflect all of the material   actions taken by each of their

respective    Boards   of   Directors    (including   each   committee    thereof)   and

stockholders.   NCRIC has made available to PRA all of the stock ledgers of NCRIC

and the NCRIC Subsidiaries.

 

     (b) The books and records of NCRIC and each of the NCRIC   Subsidiaries   (i)

are and have   been   properly   prepared   and   maintained   in form   and   substance

adequate for preparing audited consolidated financial statements,   in accordance

with generally accepted accounting   principles in the United States consistently

applied   ("GAAP") and any other   applicable   legal and accounting   requirements,

(ii) reflect only actual   transactions,   and (iii) fairly and accurately reflect

all assets and liabilities of NCRIC and each of the NCRIC   Subsidiaries   and all

contracts and other transactions to which NCRIC or any of the NCRIC Subsidiaries

is or was a party or by which NCRIC or any of the NCRIC   Subsidiaries   or any of

their respective businesses or assets is or was affected.

 

 

                                       10

<PAGE>

 

     (c) The minute books and stock ledgers of NCRIC   accurately   and completely

list and   describe   all   issuances,   transfers   and   cancellations   of shares of

capital   stock of   NCRIC.   The   minute   books and stock   ledgers   of each   NCRIC

Subsidiary accurately and completely list and describe all issuances,   transfers

and cancellations of shares of capital stock of such NCRIC Subsidiary.

 

     3.4 CAPITALIZATION.

 

     (a) The authorized   capital stock of NCRIC   consists of 13,000,000   shares,

with said shares divided into two classes.   One class of said shares consists of

1,000,000   shares of preferred stock and the other class of said shares consists

of 12,000,000   shares of NCRIC Common Stock.   As of December 31, 2004, no shares

of such preferred   stock and 6,892,517   shares of NCRIC Common Stock were issued

and outstanding and no shares of such preferred stock and 56,134 shares of NCRIC

Common Stock were held in treasury.   All of the issued and outstanding shares of

NCRIC Common Stock have been duly   authorized   and validly   issued and are fully

paid,   nonassessable   and free of preemptive   rights with no personal   liability

attaching to the ownership thereof. As of the date of this Agreement, and except

pursuant to the terms of this   Agreement,   the NCRIC   Options Plans and the 2003

NCRIC   Award   Plan,   NCRIC   does not have   and is not   bound by any   outstanding

subscriptions,   options,   warrants,   calls,   commitments   or   agreements   of any

character   calling for the   purchase   or issuance of any shares of NCRIC   Common

Stock or any other equity securities of NCRIC or any securities representing the

right to purchase or   otherwise   receive any shares of NCRIC Common Stock or any

other   equity   securities   of NCRIC.   As of December 31, 2004 no shares of NCRIC

Common Stock were reserved for issuance,   except for 427,838 shares reserved for

issuance   upon the exercise of NCRIC Stock Options   outstanding   under the NCRIC

Option Plans.   Since   January 1, 2005,   NCRIC has not issued any shares of NCRIC

Common Stock or other equity securities of NCRIC, or any securities   convertible

into or   exercisable   for any   shares   of NCRIC   Common   Stock   or other   equity

securities of NCRIC, other than as contemplated by this Agreement or pursuant to

the exercise of stock options   issued under the NCRIC Option Plans granted prior

to such date.

 

     (b) Section 3.4(b) of the NCRIC   Disclosure   Schedule sets forth a complete

list of (i) the officers and directors of NCRIC and each NCRIC Subsidiary,   (ii)

the percentage of the outstanding voting stock of such NCRIC Subsidiary owned or

controlled,   directly or indirectly,   by NCRIC,   and (iii) the percentage of the

outstanding voting stock of such NCRIC Subsidiary owned or controlled,   directly

or indirectly,   by one or more of the other Subsidiaries of NCRIC. Except as set

forth in Section 3.4(b) of the NCRIC   Disclosure   Schedule,   NCRIC does not have

any direct or indirect   equity or   ownership   interest in any other   business or

entity and does not have any direct or indirect   obligation or any commitment to

invest any funds in any corporation or other business or entity,   other than for

investment   purposes in the ordinary   course of business in accordance with past

practices.

 

     3.5 AUTHORITY; NO VIOLATION; CONSENTS AND APPROVALS.

 

     (a) NCRIC has full   corporate   power and   authority   to execute and deliver

this   Agreement   and   to   consummate   the   transactions    contemplated   by   this

Agreement.   The execution and delivery of this Agreement and the consummation of

the   transactions   contemplated   by this   Agreement   have been duly and   validly

approved by the Board of Directors of NCRIC. The Board of Directors of NCRIC has

directed that this Agreement and the transactions contemplated by this Agreement

be   submitted   to the   stockholders   of NCRIC for   approval at a meeting of such

stockholders   and,   except for the adoption of this Agreement by the affirmative

vote of the   holders of a majority   of the   outstanding   shares of NCRIC   Common

Stock,   no other   corporate   proceedings   on the part of NCRIC are   necessary to

approve this Agreement and to consummate the   transactions   contemplated by this

Agreement.   This   Agreement has been duly and validly   executed and delivered by

NCRIC and (assuming due   authorization,   execution and delivery by NEWCO and PRA

and the receipt of all   Requisite   Regulatory   Approvals   (as defined in Section

7.1(d) of this Agreement))   constitutes a valid and binding obligation of NCRIC,

subject   to   applicable   bankruptcy,    insolvency   and   similar   laws   affecting

creditors'   rights   generally,   and subject,   as to   enforceability,   to general

principles of equity.   On or prior to the date of this   Agreement,   the Board of

Directors of NCRIC received the oral opinion of Sandler, O'Neil & Partners, L.P.

that the   Merger   Consideration   is fair to the   stockholders   of   NCRIC   from a

financial point of view.

 

                                       11

<PAGE>

 

     (b) Neither the execution   and delivery of this   Agreement by NCRIC nor the

consummation by NCRIC of the   transactions   contemplated by this Agreement,   nor

compliance by NCRIC with any of the terms or provisions of this Agreement,   will

(i) violate any provision of the Certificate of Incorporation or Bylaws of NCRIC

or (ii) assuming that all Requisite Regulatory Approvals and all of the consents

and approvals referred to in Section 3.5(c) of this Agreement are duly obtained,

(x) violate any statute,   code, ordinance,   rule, regulation,   judgment,   order,

writ,   decree or   injunction   applicable   to NCRIC or any of its   properties   or

assets, or (y) violate, conflict with, result in a breach of any provision of or

the loss of any benefit   under,   constitute a default (or an event   which,   with

notice or lapse of time, or both, would   constitute a default) under,   result in

the termination of or a right of termination or cancellation   under,   accelerate

the   performance   required by, or result in the creation of any Lien upon any of

the   properties   or assets   of NCRIC   under,   any of the   terms,   conditions   or

provisions   of any note,   bond,   mortgage,   indenture,   deed of trust,   license,

lease, agreement or other instrument or obligation to which NCRIC is a party, or

by which it or any of its properties or assets may be bound or affected,   except

(in the case of clause (y) above) as set forth in Section   3.5(b)(ii)(y)   of the

NCRIC   Disclosure   Schedule,   or for such   violations,   conflicts,   breaches   or

defaults   which,   either   individually   or in the   aggregate,   would   not have a

Material Adverse Effect on NCRIC.

 

     (c) Except for (i) the filing of applications,   notices and forms with, and

the obtaining of approvals from, the Insurance Regulators (as defined in Section

9.18(a) of this Agreement) pursuant to the Insurance Laws (as defined in Section

9.18(a) of this   Agreement),   with respect to the   transactions   contemplated by

this Agreement, (ii) the filing with the Securities and Exchange Commission (the

"SEC") of a proxy   statement   in   definitive   form   relating   to the   meeting of

stockholders   of NCRIC to be held in   connection   with   this   Agreement   and the

transactions   contemplated   by this   Agreement (the "PROXY   STATEMENT")   and the

registration statement on Form S-4 in which the Proxy Statement will be included

as a prospectus (the "S-4"),   (iii) the filing of the Certificate of Merger with

the   Secretary of State of Delaware   pursuant to the DGCL,   (iv) the filing of a

notification   and   report   form   (the   "HSR ACT   REPORT")   with   the   Pre-Merger

Notification   Office of the   Federal   Trade   Commission   and with the   Antitrust

Division   of   the    Department   of   Justice    (collectively,    the    "PRE-MERGER

NOTIFICATION    AGENCIES")    pursuant    to    the    Hart-Scott-Rodino    Anti-Trust

Improvements   Act,   as   amended,   and   the   rules   and   regulations    thereunder

(collectively,   the "HSR ACT"),   (v) any   consents,   authorizations,   orders and

approvals   required under the Securities Act of 1933, as amended,   and the rules

and regulations thereunder (collectively,   the "SECURITIES Act"), the Securities

Exchange   Act of 1934,   as   amended,   and the rules and   regulations   thereunder

(collectively,   the   "EXCHANGE   ACT"),   and   the HSR   Act,   (vi)   any   consents,

authorizations,   approvals,   filings or exemptions in connection with compliance

with the applicable   provisions of federal and state securities laws relating to

the regulation of broker-dealers or investment advisers, and federal commodities

laws relating to the   regulation of futures   commission   merchants and the rules

and   regulations   thereunder   and of   any   applicable   industry   self-regulatory

organization   (including,    without   limitation,   the   National   Association   of

Insurance   Regulators (the "NAIC"),   the New York Stock   Exchange,   the National

Association   of Securities   Dealers,   Inc. (the "NASD") and the Nasdaq   National

Market)   (each,   an "SRO"),   or which are required   under the Insurance Laws and

other similar laws,   (vii) such filings and approvals as are required to be made

or   obtained   under   the   securities   or "Blue   Sky" laws of   various   states in

connection   with the issuance of the shares of PRA Common Stock pursuant to this

Agreement,   and (viii) the approval of this Agreement by the requisite   votes of

the stockholders of NCRIC and the stockholder of NEWCO, no consents or approvals

of or filings or registrations   with any   Governmental   Authority (as defined in

Section   9.18(a) of this   Agreement),   or with any other   Person (as   defined in

Section   9.18(a)   of this   Agreement)   are   necessary   in   connection   with   the

execution and delivery by NCRIC of this Agreement or the   consummation   by NCRIC

of the transactions contemplated by this Agreement.

 

                                       12

<PAGE>

 

     (d) No   stockholder   of   NCRIC   or any   NCRIC   Subsidiary   shall   have   any

pre-emptive   rights under applicable law with respect to, or as a result of, the

transactions contemplated by this Agreement (including the Merger).

 

     3.6 INSURANCE REPORTS.

 

     (a) "NCRIC SAP   STATEMENTS"   means (i) the annual   statutory   statements of

each of the NCRIC Insurance   Subsidiaries filed with any Insurance Regulator for

each of the years ended December 31, 2003,   2002 and 2001 and each calendar year

ending after December 31, 2003, (ii) the quarterly statutory   statements of each

of the NCRIC Insurance   Subsidiaries filed with any Insurance Regulator for each

quarterly   period in 2004 and for each quarterly period ending after the date of

this Agreement,   and (iii) all exhibits,   interrogatories,   notes, schedules and

any actuarial   opinions,   affirmations   or   certifications   or other   supporting

documents   filed   in   connection   with   such   annual   statutory   statements   and

quarterly statutory statements.

 

     (b) All   such   NCRIC   SAP   Statements   were   and   will be   prepared   (i) in

conformity with statutory   accounting   practices   prescribed or permitted by the

Insurance   Regulators   consistently   applied ("SAP") and (ii) in accordance with

the books and records of NCRIC and the NCRIC Insurance   Subsidiaries.   The NCRIC

SAP   Statements,   when   read in   conjunction   with   the   notes   thereto   and any

statutory audit reports relating thereto,   present, and will present,   fairly in

all   material   respects   the   statutory    financial   condition   and   results   of

operations   of the   NCRIC   Insurance   Subsidiaries   for the   dates   and   periods

indicated and are consistent   with the books and records of the NCRIC   Insurance

Subsidiaries   (which   books and records are correct and complete in all material

respects). The annual statutory balance sheets and income statements included in

the NCRIC SAP   Statements   have been,   and will be, where   required by Insurance

Laws,   audited   by   an   independent    accounting   firm   of   recognized   national

reputation.   In accordance with Section 3.6(b) of the NCRIC Disclosure Schedule,

NCRIC has made available to PRA true and complete copies of all of the NCRIC SAP

Statements and all audit opinions related thereto.

 

                                       13

<PAGE>

 

     (c) Since December 31, 2000 NCRIC and each NCRIC   Subsidiary (i) have filed

or   submitted   with   all   applicable   Insurance   Regulators,    all   registration

statements,   notices and reports,   together   with all   exhibits   and   amendments

thereto under the Insurance Laws applicable to insurance   holding companies (the

"NCRIC HOLDING COMPANY ACT Reports"),   (ii) have filed all NCRIC SAP Statements,

(iii) have filed all other reports and statements,   together with all amendments

and supplements thereto, required to be filed with any Insurance Regulator under

the Insurance   Laws, and (iv) have paid all fees and assessments due and payable

by them   under the   Insurance   Laws.   Section   3.6(c)   to the   NCRIC   Disclosure

Schedule sets forth a list of, and NCRIC has made available to PRA, accurate and

complete copies of, all NCRIC SAP Statements,   NCRIC Holding Company Act Reports

and all   other   reports   and   statements   filed   by   NCRIC   or any of the   NCRIC

Subsidiaries   with   any   Insurance   Regulator   for   periods   ending   and   events

occurring,   after December 31, 2000 and prior to the Closing Date (as defined in

Section 9.1 of this   Agreement),   and the latest requests for approval of a rate

increase   in each state or other   jurisdiction   that a NCRIC   subsidiary   writes

insurance. All such NCRIC SAP Statements,   NCRIC Holding Company Act Reports and

other reports and statements complied with the Insurance Laws when filed and, as

of   their   respective   dates,   contained   all   information   required   under   the

Insurance    Laws   and   did   not   contain   any   false    statements    or   material

misstatements   of fact or omit to state any material facts necessary to make the

statements   set   forth   therein   not   materially   misleading   in   light   of   the

circumstances   in which such   statements   were made. No   deficiencies   have been

asserted   by   any   Governmental    Authority   with   respect   to   such   NCRIC   SAP

Statements, NCRIC Holding Company Act Reports and other reports and statements.

 

     (d) Except for normal examinations conducted by a Governmental Authority in

the regular course of the business of NCRIC and its Subsidiaries,   and except as

set forth in Section 3.6(d) of the NCRIC   Disclosure   Schedule,   no Governmental

Authority   has initiated any   proceeding or   investigation   into the business or

operations of NCRIC, any NCRIC   Subsidiary,   or any director or officer of NCRIC

or any   NCRIC   Subsidiary,   since   December   31,   2000.   There is no   unresolved

violation, criticism, or exception by any Governmental Authority with respect to

any examinations of NCRIC or any of its Subsidiaries.

 

     (e) Section   3.6(e) of the NCRIC   Disclosure   Schedule   lists all financial

examinations that any Insurance Regulator has conducted with respect to NCRIC or

any of the NCRIC Insurance   Subsidiaries since December 31, 2000. NCRIC has made

available to PRA correct and complete reports issued by the applicable Insurance

Regulator with respect to such financial   examinations.   There are no regulatory

examinations   of NCRIC or any of the NCRIC Insurance   Subsidiaries   currently in

process.

 

     (f) Neither NCRIC nor any NCRIC Subsidiary has received from any Person any

Notice on Form A or such other form as may be prescribed   under   applicable   law

indicating   that such Person intends to make or has made a tender offer for or a

request or   invitation   for   tenders of, or intends to enter into or has entered

into any   agreement   to   exchange   securities   for, or intends to acquire or has

acquired (in the open market or   otherwise),   any voting   security of NCRIC,   if

after the   consummation   thereof such Person would   directly or indirectly be in

control of NCRIC.

 

                                       14

<PAGE>

 

     3.7 SEC REPORTS; FINANCIAL STATEMENTS.

 

     (a) NCRIC has on a timely   basis   filed all forms,   reports   and   documents

required to be filed by it with the SEC since January 1, 2001. Section 3.7(a) of

the NCRIC   Disclosure   Schedule lists, and NCRIC has delivered to PRA (except to

the extent available in full without redaction on the SEC's web site through the

Electronic   Data   Gathering,   Analysis and Retrieval   System   ("EDGAR") two days

prior to the date of this   Agreement)   copies in the form   filed with the SEC of

(i) NCRIC's   Regulation   Statement on Form S-1   effective May 14, 2003 (SEC File

No.   333-104023);   (ii) NCRIC's Annual Reports on Form 10-K for each fiscal year

of NCRIC commencing after December 31, 2000, (iii) its Quarterly Reports on Form

10-Q for each of the first three fiscal   quarters in each of the fiscal years of

NCRIC commencing   after January 1, 2001, (iv) all proxy   statements   relating to

NCRIC's   meetings of   stockholders   (whether   annual or special)   held,   and all

information statements relating to stockholder consents,   since January 1, 2001,

(v) all certifications and statements required by (x) the SEC's Order dated June

27, 2002 pursuant to Section 21(a)(1) of the Exchange Act (File No. 4-460),   and

(y) Rule   13a-14   or   15d-14   under the   Exchange   Act or (z) 18 U.S.C.   ss.1350

(Section   906 of the   Sarbanes-Oxley   Act of 2002   ("SOX"))   with respect to any

report referred to in clause (i) or (ii) of this sentence, (vi) all other forms,

reports,   registration   statements and other documents   (other than   preliminary

materials if the   corresponding   definitive   materials have been provided to PRA

pursuant to this Section   3.7(a))   filed by NCRIC with the SEC since   January 1,

2001 (the forms, reports,   registration   statements and other documents referred

to in causes (i), (ii), (iii), (iv) and (v) of this sentence are,   collectively,

the "NCRIC SEC REPORTS" and, to the extent   available in full without   redaction

on the   SEC's   web   site   through   EDGAR   two   days   prior   to the   date of this

Agreement,   are,   collectively,   the "NCRIC   FILED SEC   REPORTS"),   and (vi) all

comment   letters   received   by NCRIC from the Staff of the SEC since   January 1,

2001 and all responses to such comment letters by or on behalf of NCRIC.

 

     (b) Except as set forth in Section 3.7(b) of the NCRIC Disclosure Schedule,

the   NCRIC SEC   Reports   (i) were or will be   prepared   in   accordance   with the

requirements   of the Securities Act and the Exchange Act, as the case may be, in

all   material   respects,   and (ii) did not at the time they were   filed with the

SEC,   or will not at the time they are filed   with the SEC,   contain   any untrue

statement   of a material   fact or omit to state a material   fact   required to be

stated therein or necessary in order to make the statements made therein, in the

light of the   circumstances   under   which they were   made,   not   misleading.   No

Subsidiary   of   NCRIC   is or   has   been   required   to   file   any   form,   report,

registration   statement or other   document with the SEC. As used in this Section

3.7, the term "file" shall be broadly construed to include any manner in which a

document or   information   is furnished,   supplied or otherwise made available to

the SEC.

 

     (c) NCRIC has established and maintains   disclosure controls and procedures

(as such   term is   defined   in   Section   13(b)(2)(B)   and   Rules   13a-15(e)   and

15d-15(e) under the Exchange Act). Such disclosure controls and procedures:   (i)

are   designed   to ensure   that   material   information   relating to NCRIC and its

Subsidiaries   is made known to NCRIC's   chief   executive   officer   and its chief

financial   officer by others   within   those   entities,   particularly   during the

periods in which   NCRIC's   reports and filings   under the Exchange Act are being

prepared,   (ii) have been evaluated for   effectiveness as of the end of the most

recent annual period reported to the SEC, and (iii) are effective to perform the

functions for which they were established. Neither the auditors of NCRIC nor the

Audit Committee of the Board of Directors of NCRIC have been advised of: (x) any

significant   deficiencies   or material   weaknesses in the design or operation of

the   internal   controls   over   financial   reporting   (as such term is defined in

Section   13(b)(2)(B)   and Rules   13d-15(d) and 15d-15(d) of the Exchange Act) of

NCRIC and its   Subsidiaries   which could   adversely   affect   NCRIC's   ability to

record, process, summarize and report financial data, and (y) any fraud, whether

or not material,   that involves management or other employees who have a role in

the internal   controls over financial   reporting of NCRIC and its   Subsidiaries.

Since the date of the most recent   evaluation   of such   internal   controls   over

financial   reporting and procedures,   there have been no significant   changes in

internal   controls   over   financial   reporting   or in other   factors   that could

significantly affect such internal controls over financial reporting,   including

any   corrective   actions with regard to   significant   deficiencies   and material

weaknesses.

 

                                       15

<PAGE>

 

     (d) The financial statements of NCRIC and its Subsidiaries   included in the

NCRIC SEC Reports   (including   the   related   notes) (i) did or will comply as to

form,   as of their   respective   dates of filing   with the SEC,   in all   material

respects with   applicable   accounting   requirements   and the published rules and

regulations   of the SEC with respect   thereto   (including,   without   limitation,

Regulation   S-X), (ii) were or will be prepared in accordance with GAAP (except,

in the case of unaudited   statements,   to the extent permitted by Regulation S-X

for   Quarterly   Reports on Form 10-Q)   applied on a consistent   basis during the

periods   and at the dates   involved   (except   as may be   indicated   in the notes

thereto),   and (iii)   did or will   fairly   present   the   consolidated   financial

condition   of   NCRIC   and   its    Subsidiaries   at   the   dates   thereof   and   the

consolidated   results of   operations   and cash flows for the periods   then ended

(subject,   in the case of   unaudited   statements,   to notes and normal   year-end

audit   adjustments   that   were   not,   or   with   respect   to any   such   financial

statements contained in any NCRIC SEC Reports to be filed subsequent to the date

hereof are not reasonably expected to be, material in amount or effect).   Except

(x) as reflected in NCRIC's   unaudited   balance   sheet at September 30, 2004, or

liabilities   described in any notes   thereto (or   liabilities   for which neither

accrual nor footnote   disclosure is required pursuant to GAAP), (y) as reflected

in NCRIC's   unaudited   draft of the   consolidated   balance sheet at December 31,

2004   included in Section   3.7(d) of the   Disclosure   Schedule   (the "2004 NCRIC

BALANCE   SHEET"),   or (z) for   liabilities   incurred in the   ordinary   course of

business since December 31, 2004   consistent with past practice or in connection

with this Agreement or the transactions   contemplated hereby,   neither NCRIC nor

any NCRIC Subsidiary has any material liabilities or obligations of any nature.

 

     (e) Since   July 31,   2002,   each   NCRIC   Filed SEC   Report   which   included

financial   statements   was   accompanied by the   certifications   of NCRIC's chief

executive officer and chief financial officer as required under Sections 302 and

906 of SOX.

 

     (f) Section 3.7(f) of the NCRIC   Disclosure   Statement lists, and NCRIC has

delivered   to PRA   copies   of   the   documentation   creating   or   governing,   all

securitization   transactions and "off-balance sheet arrangements" (as defined in

Item 303(c) of Regulation S-K of the SEC) effected by NCRIC or its   Subsidiaries

since December 31, 1999.

 

                                       16

<PAGE>

 

     (g) Deloitte & Touche LLP,   which has expressed its opinion with respect to

the   financial   statements of NCRIC and its   subsidiaries   included in NCRIC SEC

Reports   (including the related   notes),   is and has been throughout the periods

covered by such financial   statements   (with respect to (i) and (ii) below,   for

the periods required by SOX) (i) a registered public accounting firm (as defined

in Section 2(a)(12) of SOX), (ii) "independent" with respect to NCRIC within the

meaning of Regulation S-X, and (iii) in compliance with   subsections (g) through

(l) of   Section   10A of the   Exchange   Act and   the   Public   Company   Accounting

Oversight   Board.   Section   3.7(g) of the NCRIC   Disclosure   Schedule   lists all

non-audit   services   performed by Deloitte & Touche LLP for NCRIC and each NCRIC

Subsidiary for each year commencing after December 31, 2002.

 

     (h) NCRIC and each NCRIC   Subsidiary   maintains   accurate books and records

reflecting its assets and liabilities and maintains proper and adequate internal

accounting   controls over financial   reporting which provide   assurance that (i)

transactions are executed with management's authorization; (ii) transactions are

recorded   as   necessary   to permit   preparation   of the   consolidated   financial

statements of NCRIC and to maintain   accountability for the consolidated   assets

of   NCRIC;   (iii)   access   to   assets   is   permitted   only   in   accordance   with

management's   authorization;   (iv) the   reporting   of   assets is   compared   with

existing   assets   at   regular   intervals;   and (v)   accounts,   notes   and   other

receivables   and   inventory   are   recorded   accurately,   and proper and adequate

procedures are   implemented   to effect the   collection   thereof on a current and

timely basis.

 

     3.8 ACCOUNTS   RECEIVABLE.   All accounts   receivable of NCRIC and each NCRIC

Subsidiary are reflected   properly on their   respective   books and records,   are

valid receivables subject to no set offs or counterclaims, are presently current

and   collectible,   and will be collected in   accordance   with their terms at the

recorded amounts, subject only to a reasonable reserve for bad debts.

 

     3.9   BROKER'S   FEES.   Except   as set   forth   in   Section   3.9 of the   NCRIC

Disclosure Schedule,   none of NCRIC, the NCRIC Subsidiaries and their respective

officers   and   directors,   has   employed   any broker or finder or   incurred   any

liability for any broker's   fees or   commissions,   or investment   banker fees or

commissions,   or finder's fees in connection with the transactions   contemplated

by this Agreement.

 

     3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS.

 

     (a)   Except   for (i)   those   liabilities   and   obligations   that are   fully

reflected   or   reserved   against on the 2004   NCRIC   Balance   Sheet,   (ii) those

liabilities   and   obligations   incurred   in   the   ordinary   course   of   business

consistent   with past practice   since   December 31, 2004, and (iii) coverage and

other   claims   (other   than bad faith   claims)   made with   respect to   insurance

policies   issued by any NCRIC   Insurance   Subsidiary for which   adequate   claims

reserves have been established, or otherwise disclosed in Section 3.10(a) of the

NCRIC   Disclosure   Schedule,   neither   NCRIC   nor   any of its   Subsidiaries   has

incurred any liability or obligation of any nature whatsoever (whether absolute,

accrued, contingent or otherwise and whether due or to become due), that, either

individually or in the aggregate, would have a Material Adverse Effect on NCRIC,

and,   there is no existing   condition,   situation or set of   circumstances   that

would be reasonably expected to result in such a liability or obligation. Except

as disclosed in the NCRIC SEC Reports filed prior to the date of this Agreement,

since   December   31,   2004,   NCRIC and its   Subsidiaries   have   carried on their

respective   businesses in all material respects in the ordinary and usual course

theretofore conducted.

 

                                        17

<PAGE>

 

     (b) Since December 31, 2004, and except as set forth in Section   3.10(b) of

the NCRIC   Disclosure   Schedule,   neither NCRIC nor any of its   Subsidiaries has

(except as required by   applicable   law):   (i)   increased   the wages,   salaries,

compensation,   pension,   or other fringe benefits or perquisites   payable to any

executive officer, employee, or director from the amount thereof in effect as of

December 31, 2004,   (ii) granted any stock   options or severance or   termination

pay,   entered into any contract to make or grant any stock   options or severance

or   termination   pay, or paid any bonuses,   or (iii)   suffered any strike,   work

stoppage, slowdown, or other labor disturbance.

 

     (c) Since September 30, 2004, and except as set forth in Section 3.10(c) of

the   NCRIC   Disclosure   Schedule,   there   has not   been:   (i) any   change in the

financial condition, assets, liabilities, prospects (financial and otherwise) or

business of NCRIC or any NCRIC Subsidiary,   which, either individually or in the

aggregate,   has had or would have a Material   Adverse Effect on NCRIC;   (ii) any

material change in any method of accounting or accounting principals or practice

by   NCRIC   or any   NCRIC   Subsidiary,   except   as   required   by   GAAP or SAP and

disclosed in the notes to the   unaudited   financial   statements of NCRIC and the

NCRIC   Subsidiaries;   (iii) any material   change in the   actuarial,   investment,

reserving,    underwriting    or   claims    administration    policies,    practices,

procedures,   methods,   assumptions or principles of NCRIC or any NCRIC Insurance

Subsidiary;   (iv) any   damage,   destruction   or loss,   whether or not covered by

insurance,   materially   and adversely   affecting   the   properties or business of

NCRIC or any NCRIC   Subsidiary;   (v) any declaration or payment of any dividends

or   distribution   of any kind in respect of any of the capital stock of NCRIC or

any NCRIC Subsidiary; (vi) any direct or indirect redemption,   purchase or other

acquisition   by NCRIC or any NCRIC   Subsidiary   of any of the   capital   stock of

NCRIC or any NCRIC Subsidiary;   (vii) any discharge or cancellation,   whether in

part or in whole, of any   indebtedness   owed by NCRIC or any NCRIC Subsidiary to

any Person,   except   reimbursement to employees of ordinary business expenses or

other   debts   arising in the   ordinary   course of   business;   (viii) any sale or

transfer or cancellation of any of the assets, properties, or claims of NCRIC or

any NCRIC Subsidiary,   except in the ordinary course of business; (ix) any sale,

assignment   or transfer of any   trademarks,   trade   names,   or other   intangible

assets   of NCRIC or any NCRIC   Subsidiary;   (x)   except as set forth in   Section

3.10(c)   of   the   NCRIC   Disclosure   Schedule,   any   material   amendment   to   or

termination of any material contract, agreement,   instrument or license to which

NCRIC or any NCRIC   Subsidiary is a party;   or (xi) any other event or condition

of any character   materially and adversely   affecting the business or properties

of NCRIC or any NCRIC Subsidiary.

 

     3.11 LEGAL PROCEEDINGS AND JUDGMENTS.

 

     (a)   Except   as set   forth   in   Section   3.11(a)   of the   NCRIC   Disclosure

Schedule,   neither   NCRIC nor any NCRIC   Subsidiary is a party to any, and there

are no pending or, to the knowledge of NCRIC, threatened, legal, administrative,

arbitral   or   other   inquiries,    proceedings,    claims   (whether    asserted   or

unasserted),   actions or governmental or regulatory or SRO investigations of any

nature (including noncontractual claims, bad faith claims and claims against any

directors or officers of NCRIC or any NCRIC Subsidiary,   but excluding   coverage

and other   claims made with respect to   insurance   policies   issued by any NCRIC

Insurance   Subsidiary for which adequate claims reserves have been   established)

against   NCRIC,   any NCRIC   Subsidiary,   any of their   respective   businesses or

assets,   any assets of any other Person which are used in any of the business or

operations of NCRIC or any NCRIC Subsidiary,   any directors or officers of NCRIC

or any NCRIC Subsidiary,   or the transactions contemplated by this Agreement, or

challenging the validity or propriety of the   transactions   contemplated by this

Agreement,   and to the knowledge of NCRIC Subsidiaries there is no basis for any

such proceedings, claims, actions or investigations.

 

                                       18

<PAGE>

 

     (b) Except for the 2004 Judgment and as set forth in Section 3.11(b) of the

NCRIC Disclosure Schedule, there is no injunction,   order, judgment,   decree, or

regulatory   restriction   (including   noncontractual claims, bad faith claims and

claims against any directors or officers of NCRIC or any NCRIC   Subsidiary,   but

excluding   coverage and other   claims made with   respect to   insurance   policies

issued by any NCRIC Insurance Subsidiary for which adequate claims reserves have

been   established)   imposed upon NCRIC,   any NCRIC   Subsidiary   or the assets of

NCRIC or any NCRIC Subsidiary.

 

     (c)   Except   as set   forth   in   Section   3.11(c)   of the   NCRIC   Disclosure

Schedule,   no breach of contract,   breach of fiduciary   duties under ERISA,   bad

faith,    breach    of    warranty,    tort,    negligence,     infringement,    fraud,

discrimination,   wrongful   discharge   or   other   claim   of any   nature   has been

asserted or, to the   knowledge of NCRIC,   threatened   against NCRIC or any NCRIC

Subsidiary, nor is there any basis for any such claim.

 

     (d) As to each matter (if any)   described   on Section   3.11(c) of the NCRIC

Disclosure   Schedule,   accurate and complete   copies of all relevant   pleadings,

judgments, orders and correspondence have been made available to PRA.

 

     (e) Except for each   matter (if any)   described   on Section   3.11(d) of the

NCRIC   Disclosure   Schedule,   no   legal,    administrative,    arbitral   or   other

inquiries,   proceedings,   claims,   actions or   governmental or regulatory or SRO

investigations   alleging   violations of Federal   securities   laws (including the

Securities   Act and the Exchange Act) have been filed against   NCRIC,   any NCRIC

Subsidiary or any director or officer of NCRIC or any NCRIC   Subsidiary   and not

dismissed with prejudice.

 

     3.12 INSURANCE.

 

     (a)   Except   as set   forth   in   Section   3.12(a)   of the   NCRIC   Disclosure

Schedule,   NCRIC   and   the   NCRIC   Subsidiaries   maintain   policies   of   general

liability,   fire and casualty,   automobile,   directors and officers,   errors and

omissions,   fiduciary,   and   other   forms of   insurance   (the   "NCRIC   INSURANCE

POLICIES") in such   amounts,   with such   deductibles   and against such risks and

losses as are   reasonable   for the   business   and   assets of NCRIC and the NCRIC

Subsidiaries.   All such policies are in full force and effect,   all premiums due

and payable   thereon   have been paid (other than   retroactive   or   retrospective

premium   adjustments   that are not yet,   but may be,   required   to be paid   with

respect to any   period   ending   prior to the   Closing   Date under   comprehensive

general liability and workmen's compensation insurance policies),   and no notice

of cancellation or termination has been received with respect to any such policy

which has not been replaced on substantially   similar terms prior to the date of

such   cancellation.   To the knowledge of NCRIC, the activities and operations of

NCRIC   and the   NCRIC   Subsidiaries   have   been   conducted   in a manner so as to

conform in all material respects to all applicable   provisions of such insurance

policies.

 

                                       19

<PAGE>

 

     (b)   No    issuer    of   the    NCRIC    Insurance    Policies    has    issued   a

reservation-of-rights    letter,   or   entered   into   a   nonwaiver   agreement,   or

otherwise   denied or limited   coverage   (in whole or in part),   under any of the

NCRIC   Insurance   Policies,   and no declaratory   judgment has been sought by any

Person or entered by any court of competent   jurisdiction   that denies or limits

coverage (in whole or in part) under any of the NCRIC Insurance Policies.

 

     3.13 TAXES AND TAX RETURNS.

 

     (a) As used in this Agreement:   "TAX" or "TAXES" means all federal,   state,

county,   local,   and foreign   income,   excise,   gross   receipts,   gross   income,

profits,   franchise,   license,   ad   valorem,   profits,   gains,   capital,   sales,

transfer, use, payroll, employment, severance, withholding, duties, intangibles,

franchise, backup withholding,   stamp, occupation,   premium, social security (or

similar),   unemployment,   disability,   real property,   personal property, sales,

use, registration,   alternative or add on minimum,   estimated,   and other taxes,

charges, levies or like assessments together with all penalties and additions to

tax and   interest   thereon).   "TAX   RETURN" or "TAX   RETURNS"   means any and all

returns,   declarations,   claims for refunds,   reports,   information   returns and

information statements (including,   without limitation,   Form 1099, Form W-2 and

W-3,   Form 5500,   and Form 990) with respect to Taxes   filed,   or required to be

filed,   by any Person or any Subsidiary of such Person with the IRS or any other

Governmental   Authority or tax authority or agency,   whether domestic or foreign

(including consolidated, combined and unitary tax returns).

 

     (b) NCRIC   and the   NCRIC   Subsidiaries   have   duly   filed all Tax   Returns

required to be filed by them on or prior to the date of this Agreement (all such

Tax Returns being   accurate and complete in all material   respects) and has duly

paid or made sufficient provisions for the payment of all Taxes shown thereon as

owing on or prior to the date of this Agreement (including, if and to the extent

applicable, those due in respect of their properties,   income, business, capital

stock,   premiums,   franchises,   licenses,   sales and payrolls)   other than Taxes

which are not yet   delinquent or are being   contested in good faith and have not

been   finally   determined   for   which   adequate   reserves   have been made on the

financial   statements   described in Section   3.6(a) of this   Agreement.   Neither

NCRIC nor any NCRIC   Subsidiary has waived any statute of limitations in respect

of Taxes or agreed to any   extension of time with respect to a Tax Return or tax

assessment or deficiency other than extensions that are automatically granted by

the taxing authorities upon filing on application therefore. The unpaid Taxes of

NCRIC and the NCRIC Subsidiaries do not exceed the reserve for tax liability set

forth on the 2004   NCRIC   Balance   Sheet as   adjusted   for the   passage   of time

through the Closing Date in accordance with past custom and practice of NCRIC in

filing   its   returns.   No claim   has been made   since   December   31,   1999 by an

authority in a jurisdiction   where NCRIC or any NCRIC   Subsidiary   does not file

Tax Returns that it is or may be subject to taxation by that jurisdiction.

 

     (c) There is no claim, audit, action, suit, proceeding or investigation now

pending or, to the   knowledge   of NCRIC,   threatened   against or with respect to

NCRIC or any NCRIC   Subsidiary   in respect of any material   Tax.   NCRIC and each

NCRIC   Subsidiary   in   connection   with   amounts   paid or owed to any   employee,

independent contractor, creditor, stockholder or other third party have complied

with applicable tax withholding in all material   respects.   NCRIC and each NCRIC

Subsidiary   have   reported   such   withheld   amounts   to the   appropriate   taxing

authority   and   to   each   such   employee,    independent   contractor,    creditor,

stockholder or other third party as required by applicable law.

 

                                       20

<PAGE>

 

     (d)   There   are no Tax Liens   upon any   property   or assets of NCRIC or its

Subsidiaries   except Liens for current Taxes not yet due.   Neither NCRIC nor any

NCRIC Subsidiary has been required to include in income any adjustment   pursuant

to Section 481 of the Code by reason of a voluntary change in accounting   method

initiated   by NCRIC or any NCRIC   Subsidiary,   and the IRS has not   initiated or

proposed any such adjustment or change in accounting method. Except as set forth

in the   financial   statements   described   in Section   3.7(a) of this   Agreement,

neither NCRIC nor any NCRIC   Subsidiary has entered into a transaction   which is

being accounted for as an installment   obligation under Section 453 of the Code.

Neither   NCRIC   nor any   NCRIC   Subsidiary   is a party   to or   bound   by any tax

indemnity,   tax sharing or tax allocation   agreement (other than such agreements

as exist by and among   themselves).   Neither NCRIC nor any NCRIC   Subsidiary has

ever been a member of an affiliated group of corporations   within the meaning of

Section   1504 of the Code other   than as a common   parent   corporation.   Neither

NCRIC   nor any NCRIC   Subsidiary   is liable   for the Taxes of any   person   under

Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,

local or foreign Tax law) or by contract,   as a successor or   otherwise.   During

the five (5) year period ending on the date hereof,   neither NCRIC nor any NCRIC

Subsidiary   was a   distributing   corporation   or a controlled   corporation   in a

transaction   intended to be governed by Section 355 of the Code.   Neither   NCRIC

nor any NCRIC   Subsidiary is a party to any joint venture,   partnership or other

arrangement   or   contract   that could be treated as a   partnership   for   federal

income tax   purposes.   NCRIC's   basis and excess loss   account,   if any, in each

NCRIC   Subsidiary   is set   forth in   Section   3.13(d)   of the   NCRIC   Disclosure

Schedule.

 

     (e)   Except   as set   forth   in   Section   3.13(e)   of the   NCRIC   Disclosure

Schedule,   any amount that is reasonably   likely to be received (whether in cash

or property or the vesting of property)   as a result of any of the   transactions

contemplated by this Agreement by any employee,   officer or director of NCRIC or

any of its   affiliates   who is a   "Disqualified   Individual"   (as   such   term is

defined in proposed Treasury   Regulation Section 1.280G-1) under any employment,

severance or   termination   agreement,   other   compensation   arrangement or NCRIC

Benefit Plan (as defined in Section 3.14 of this Agreement)   currently in effect

will not be   characterized   as an "excess   parachute   payment"   (as such term is

defined in Section 280G(b)(1) of the Code).

 

     (f) There has been no   disallowance   of a deduction under Section 162(m) of

the Code for employee remuneration of any amount paid or payable by NCRIC or any

NCRIC    Subsidiary    under   any   contract,    plan,    program,    arrangement    or

understanding.

 

     (g) To the knowledge of NCRIC,   there is no dispute or claim concerning any

tax   liability of NCRIC or any NCRIC   Subsidiary   except as disclosed in Section

3.13(g)   of   the   NCRIC   Disclosure   Schedule.   Section   3.13(g)   of   the   NCRIC

Disclosure   Schedule   identifies   the last Tax Returns that have been audited by

the taxing   authority with whom they were filed, and indicates those Tax Returns

that currently are the subject of an audit   procedure or that NCRIC or any NCRIC

Subsidiary has received notice will be subject to an audit procedure.   NCRIC has

made   available   to PRA correct and   complete   copies of all federal   income tax

returns   (including   amendments   thereto)   of, all   examination   reports of, and

statements of deficiencies   assessed against or agreed to by, NCRIC or any NCRIC

Subsidiary since December 31, 1999.

 

                                        21

<PAGE>

 

     3.14 EMPLOYEE PLANS; LABOR MATTERS.

 

     (a) Section 3.14(a) of the NCRIC Disclosure   Schedule sets forth a true and

complete   list of all of the   Employee   Plans (as   defined in Section   9.18) for

employees of NCRIC and any NCRIC   Subsidiary   ("NCRIC EMPLOYEE   PLANS").   Except

with respect to the NCRIC Employee Plans, neither NCRIC nor any NCRIC Subsidiary

sponsors,   maintains   or   contributes   to,   or has   any   ongoing   obligation   or

liability   whatsoever with respect to: (i) any employee   benefit plan as defined

in Section   3(3) of the Employee   Retirement   Income   Security   Act of 1974,   as

amended   ("ERISA"),   or   (ii)   any   other   program,   plan,   trust   agreement   or

arrangement   for any   bonus,   severance,   hospitalization,   vacation,   sick pay,

deferred compensation,   pension,   profit sharing,   post-employment,   retirement,

payroll savings, stock option, stock purchase, group insurance,   self insurance,

death benefit,   fringe   benefit,   welfare or any other employee   benefit plan or

fringe benefit   arrangement   of any nature   whatsoever   including   those for the

benefit of former   employees.   Neither   NCRIC nor any NCRIC   Subsidiary   has any

agreement, arrangement, commitment, or understanding, whether legally binding or

not,   to create any   additional   NCRIC   Employee   Plan or to   continue,   modify,

change, or terminate,   in any material respect, any NCRIC Employee Plan. PRA may

modify, amend and/or terminate any NCRIC Employee Plan after the Effective Time,

subject to applicable law and the terms of such NCRIC Employee Plan.

 

     (b)   NCRIC   has   heretofore   delivered   or made   available   to PRA true and

complete   copies of each NCRIC   Employee   Plan and   certain   related   documents,

including:   (i) the plan   document   and the related   trust   agreement or annuity

contract for such NCRIC Employee   Plan;   (ii) the summary plan   description   and

material employee communication document for such NCRIC Employee Plan; (iii) the

actuarial   report for such NCRIC Employee Plan (if   applicable)   for each of the

last two years; (iv) all determination   letters from the IRS (if applicable) for

such NCRIC Employee Plan; (v) all insurance   policies   relating   thereto and any

written   materials used by NCRIC to describe   employee   benefits to employees of

NCRIC and the NCRIC   Subsidiaries;   (vi) the most recent   annual   return on Form

5500   (including   all schedules   thereto along with the   accompanying   auditor's

opinion,   if applicable) and tax return (Form 990) for such NCRIC Employee Plan;

(vii)   the   most   current   actuarial,    valuation,   and   trustee's   reports   (as

applicable) for such NCRIC Employee Plan; and (viii) all material communications

with any governmental   entity or agency   (including the Department of Labor, the

Internal Revenue   Service,   the Pension Benefit   Guaranty   Corporation,   and the

Securities   and Exchange   Commission)   with respect to such NCRIC Employee Plan.

Each such actuarial or valuation   report correctly shows the value of the assets

of such NCRIC Employee Plan as of the date thereof, the total accrued and vested

liabilities,   all   contributions   by NCRIC and the NCRIC   Subsidiaries,   and the

assumptions on which the calculations are based.

 

     (c)   Except   as set   forth   in   Section   3.14(c)   of the   NCRIC   Disclosure

Schedule, each of the NCRIC Employee Plans has been operated and administered in

all material   respects in compliance with applicable   laws,   including,   but not

limited to, ERISA and the Code.   To the   knowledge of NCRIC,   there has not been

any material   violation of the reporting and   disclosure   provisions of the Code

and ERISA. There has not been any termination or partial termination   (including

any   termination   or   partial   termination    attributable   to   the   transactions

contemplated   by this   Agreement)   of such   plans.   Neither   NCRIC nor any NCRIC

Subsidiary nor any of their   respective   ERISA   affiliates,   nor any predecessor

thereof,   contributes   to, or has within the past six years   contributed to, any

multiemployer   plans,   as   defined in Section   3(37) of ERISA,   or any   multiple

employer   welfare   arrangements,   as defined in Section 3(40) of ERISA.   Neither

NCRIC nor any NCRIC Subsidiary nor any of their respective ERISA affiliates, nor

any predecessor thereof, sponsors, participates in, or contributes to, or has at

any time in the past sponsored,   participated in, or contributed to (i) any plan

which is subject to the funding   standards or requirements   described in Section

412 of the Code,   or (ii) any plan which is subject to any of the   requirements,

obligations, and liabilities imposed by Title IV of ERISA.

 

                                       22

<PAGE>

 

 

     (d) Each   NCRIC   Employee   Plan which is   intended   to be   qualified   under

Section   401(a)   of the   Code is so   qualified   and   has   received   a   favorable

determination   letter or has pending or has time   remaining in which to file, an

application for such   determination   from the IRS, and NCRIC is not aware of any

reason why any such   determination   letter should be revoked or not be reissued,

and any related trust is exempt from taxation   under Section 501(a) of the Code.

NCRIC has made   available   to PRA   copies of the most   recent   Internal   Revenue

Service   determination letters with respect to each such NCRIC Employee Plan (if

applicable).   Except as set forth in   Section   3.14(d)   of the NCRIC   Disclosure

Schedule,   each NCRIC Employee Plan has been   maintained in material   compliance

with its terms and with the   requirements   prescribed by any and all   applicable

laws and   regulations,   including   but not   limited   to ERISA and the   Code.   No

prohibited   transaction   within the   meaning of Section   406 of ERISA or Section

4975 of the   Code,   or   breach   of   fiduciary   duty   under   Title I of ERISA has

occurred with respect to any NCRIC Employee Plan or with respect to NCRIC or any

NCRIC   Subsidiary.   No events have occurred   with respect to any NCRIC   Employee

Plan that could result in payment or assessment   by or against   Parent or any of

its   Subsidiaries of any material excise taxes under Sections 4972,   4975, 4976,

4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

 

     (e) There has been no amendment to, written   interpretation or announcement

(whether   or not   written)   by NCRIC or any of its   affiliates   relating   to, or

change in employee   participation   or coverage   under,   any NCRIC   Employee Plan

which would increase   materially the expense of maintaining NCRIC Employee Plans

above the level of the expense   incurred in respect   thereof for the fiscal year

ended December 31, 2003. No event has occurred or circumstances exist that could

result in a material   increase in the premium costs of NCRIC Employee Plans that

are insured, or a material increase in benefit costs of the NCRIC Employee Plans

that are self-insured.

 

     (f)   Except   as set   forth   in   Section   3.14(f)   of the   NCRIC   Disclosure

Schedule, there is no action, suit,   investigation,   audit or proceeding pending

against   or   involving   or, to the   knowledge   of NCRIC,   threatened   against or

involving   any NCRIC   Employee Plan before any court or arbitrator or any state,

federal or local   governmental   body,   agency or official,   except as would not,

individually   or in the   aggregate,   reasonably   be   expected to have a Material

Adverse   Effect   on   NCRIC.    Other   than   claims   for   benefits    submitted   by

participants or beneficiaries,   no claim against, or legal proceeding involving,

any NCRIC Employee Plan is pending or threatened.

 

                                       23

<PAGE>

 

      (g)   Except   as   described   in   Section   3.14(g)   of the   NCRIC   Disclosure

Schedule,   neither   the   execution   and   delivery   of   this   Agreement   nor   the

consummation of the transactions   contemplated by this Agreement will (i) result

in any material payment (including severance,   unemployment compensation, golden

parachute or otherwise) becoming due to any director or employee of NCRIC or any

of its   Subsidiaries   from   NCRIC or any of its   Subsidiaries   under   any   NCRIC

Employee   Plan or otherwise;   (ii)   materially   increase any benefits   otherwise

payable under any NCRIC Employee Plan;   (iii) result in any   acceleration of the

time of payment or vesting of any such benefits to any material   extent (in each

case under   clauses   (i),   (ii) or (iii)   whether or not such payment or benefit

would   constitute a parachute   payment within the meaning of Section 280G of the

Code); or (iv) constitute a prohibited transaction within the meaning of Section

406 of ERISA or   Section   4975 of the Code,   or breach of   fiduciary   duty under

Title I of ERISA.

 

     (h)   Neither   NCRIC nor any NCRIC   Subsidiary   has any   direct or   indirect

material   liability or   obligation   under any NCRIC   Employee Plan other than as

described in the terms of such NCRIC Employee Plans.   There are no circumstances

arising out of the   sponsorship   of any NCRIC Employee Plan which will result in

any direct or   indirect   material   liability   to NCRIC or any NCRIC   Subsidiary,

other than liability for contributions,   benefit payments,   administrative costs

and   liabilities   incurred in   accordance   with the terms of the NCRIC   Employee

Plans consistent with past practice.

 

     (i)   NCRIC   and   each   NCRIC    Subsidiary    have   made   all    payments   and

contributions   due from them to each NCRIC   Employee   Plan.   There are no funded

benefit   obligations under any NCRIC Employee Plan for which   contributions have

not been made or properly accrued, and there are no unfunded benefit obligations

that have not been accounted for by reserves, or otherwise properly footnoted in

accordance   with   generally   accepted   accounting   principles   on the   financial

statements of NCRIC and each NCRIC Subsidiary.

 

     (j) Each NCRIC   Employee Plan which is an "employee   pension   benefit plan"

within the meaning of Section 3(2) of ERISA that is not qualified   under Section

401(a)   or 403(a)   of the Code is   exempt   from   Parts 2, 3, and 4 of Title I of

ERISA as an   unfunded   plan that is   maintained   primarily   for the   purpose   of

providing   deferred   compensation   for a select   group of   management   or highly

compensated employees,   pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of

ERISA. Except as set forth in Section 3.14(j) of the NCRIC Disclosure   Schedule,

no assets of NCRIC or any NCRIC   Subsidiary are allocated to or held in a "rabbi

trust" or similar funding vehicle.

 

     (k) Each NCRIC   Employee   Plan that is a "group health plan" (as defined in

Section 607(1) of ERISA or Section   5001(b)(1) of the Code) has been operated at

all times in   compliance   with the   provisions   of Section 4980B of the Code and

Part 6 of Subtitle B of Title I of ERISA   ("COBRA"),   with the provisions of the

Code and ERISA enacted by the Health   Insurance   Portability and   Accountability

Act of 1996 ("HIPAA"),   and with the provisions of any applicable   similar state

law.

 

     (l)   Except   as set   forth   in   Section   3.14(l)   of the   NCRIC   Disclosure

Schedule,   no NCRIC   Employee   Plan   provides   benefits   to   current   or   former

employees   beyond their   retirement or other   termination of service (other than

coverage   mandated   by COBRA,   the cost of which is fully paid by the current or

former employee or his or her dependents).

 

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     3.15 EMPLOYEES.

 

     (a) NCRIC has made available to PRA a true and correct list of the names of

the   employees   of NCRIC and the NCRIC   Subsidiaries,   their birth   dates,   hire

dates,   compensation rates, name of employer and capacity in which employed, and

accrued vacation and sick leave, if any, all as of December 31, 2004.   Except as

limited by any employment   agreements and severance agreements listed on Section

3.15(a) of the NCRIC   Disclosure   Schedule,   and except for any   limitations   of

general application which may be imposed under applicable employment laws, NCRIC

and the NCRIC   Subsidiaries have the right to terminate the employment of any of

their respective employees at will and without payment to such employees.

 

     (b) NCRIC and the NCRIC   Subsidiaries   are in   compliance,   in all material

respects,   with all applicable ordinances or other laws, orders, and regulations

regarding   labor   and   employment   and the   compensation   therefore,   labor   and

employment   matters,   discrimination   in   employment,   terms and   conditions   of

employment,   wages,   hours and   occupational   safety and health,   and employment

practices,   whether state or federal (including,   without   limitation,   wage and

hour laws;   workplace safety laws; workers'   compensation laws; equal employment

opportunity laws; equal pay laws; civil rights laws; the Occupational Safety and

Health   Act of 1970,   as   amended;   the Equal   Employment   Opportunity   Act,   as

amended;   the Americans With   Disabilities   Act, 42 U.S.C. ss. 12101 et seq., as

amended;   the Fair Labor   Standards Act, 29 U.S.C.   ss. 201 et seq., as amended;

the Equal Pay Act, 29 U.S.C. ss. 206d, as amended,   the Portal-to-Portal Pay Act

of 1947, 29 U.S.C.   ss. 255 et seq.,   as amended;   Title VII of the Civil Rights

Act of 1964, 42 U.S.C. ss. 2000e, as amended and 42 U.S.C. ss. 1981, as amended;

Rehabilitation Act of 1973, as amended; the Vietnam-Era   Veterans'   Readjustment

Assistance Act of 1974, as amended;   the   Immigration   Reform and Control Act, 8

U.S.C. ss. 1324A et seq., as amended;   the Employee Polygraph   Protection Act of

1988, as amended; the Veterans   Re-employment Act - Handicap Bias, 38 U.S.C. ss.

2027 et seq., as amended;   the Civil Rights Act of 1991, as amended;   the Family

and Medical Leave Act of 1993, as amended; the Religious Freedom Restoration Act

of 1993, as amended;   and the Age   Discrimination and Employment Act of 1967, as

amended). No action or investigation has been instituted or, to the knowledge of

NCRIC,   is threatened to be conducted by any state or federal   agency   regarding

any potential   violation by NCRIC or any NCRIC   Subsidiary of any laws,   orders,

ordinances and regulations   regarding   labor and employment or the   compensation

therefore (including,   without limitation,   any of the aforementioned   statutes)

during the past five (5) years.

 

     (c)   Neither   NCRIC   nor any NCRIC   Subsidiary   has ever been a party to or

bound by any union or collective   bargaining contract,   nor is any such contract

currently in effect or being negotiated by NCRIC or any NCRIC Subsidiary.   NCRIC

does not know of any   activities or   proceedings   of any labor union to organize

any   employees of NCRIC or any NCRIC   Subsidiary.   Since   December 31, 2004,   no

executive   officer of NCRIC or any NCRIC   Subsidiary   has indicated to the Chief

Executive Officer of NCRIC an intention to terminate his or her employment.

 

                                       25

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     (d) NCRIC and each   NCRIC   Subsidiary   have   complied   with all   applicable

notice   provisions of and have no material   obligations   under the   Consolidated

Omnibus Budget   Reconciliation   Act of 1985 with respect to any former employees

or qualifying   beneficiaries   thereunder.   There is no action,   claim,   cause of

action, suit or proceeding pending or, to the knowledge of NCRIC, threatened, on

the part of any employee,   independent   contractor or applicant for   employment,

including any such action,   claim, cause of action,   suit or proceeding based on

allegations of wrongful termination or discrimination on the basis of age, race,

religion, sex, sexual preference,   or mental or physical handicap or disability.

All sums due   from   NCRIC or any   NCRIC   Subsidiary   for   employee   compensation

(including,   without limitation,   wages, salaries, bonuses, relocation benefits,

stock   options   and other   incentives)   have been   paid,   accrued   or   otherwise

provided for, and all employer   contributions for employee   benefits,   including

deferred   compensation   obligations,   and all benefits   under any NCRIC Employee

Plan have been duly and adequately   paid or provided for in accordance with plan

documents.   To the   knowledge   of NCRIC,   no person   treated   as an   independent

contractor by NCRIC or any NCRIC Subsidiary is an employee as defined in Section

3401(c) of the Code, nor has any employee been otherwise improperly   classified,

as exempt,   nonexempt or otherwise,   for purposes of federal or state income tax

withholding or overtime laws, rules, or regulations.

 

     (e) Since   September 30, 2004,   neither NCRIC nor any NCRIC   Subsidiary has

effectuated   (i) a "plant   closing"   (as   defined in the Worker   Adjustment   and

Retraining   Notification   Act (the "WARN ACT")) affecting any site of employment

or one or more   facilities   or operating   units within any site of employment or

facility of NCRIC or any NCRIC   Subsidiary;   (ii) a "mass layoff" (as defined in

the WARN Act); or (iii) such other   transaction,   layoff,   reduction in force or

employment   terminations   sufficient   in number to   trigger   application   of any

similar foreign, state or local law.

 

     3.16 COMPLIANCE WITH APPLICABLE LAW.

 

     (a) NCRIC and the NCRIC Subsidiaries hold all licenses, franchises, permits

and   authorizations   necessary   for   the   lawful   conduct   of   their   respective

businesses   under and   pursuant to, and have   complied in all material   respects

with,   and are not in default in any respect under any, and have   maintained and

conducted their   respective   businesses in all respects in compliance   with, all

applicable   laws,   statutes,    orders,   rules,    regulations,    policies   and/or

guidelines.

 

     (b)    Neither    NCRIC   nor   any   NCRIC    Subsidiary    is    subject   to   any

cease-and-desist   or   other   order   issued   by,   or is a   party   to any   written

agreement,   consent agreement or memorandum of understanding with, or is a party

to any commitment   letter or similar   undertaking to, or is subject to any order

or directive   by, or has been a recipient   of any   supervisory   letter from,   or

since   that   date,   has   adopted   any board   resolutions   at the   request of any

Governmental   Authority   that:   (i)   limits   the   ability   of NCRIC or any NCRIC

Insurance   Subsidiary   to   conduct   any   line   of   business,   (ii)   require   any

investments   of   NCRIC   or any   NCRIC   Insurance   Subsidiary   to be   treated   as

non-admitted   assets,   (iii) require   divestiture of any investments of NCRIC or

any NCRIC Insurance   Subsidiary,   (iv) in any manner imposes any requirements on

NCRIC or any   NCRIC   Insurance   Subsidiary   in   respect   of risk   based   capital

requirements that add to or otherwise modify the risk based capital requirements

imposed   under the   Insurance   Laws,   (v) in any manner relate to the ability of

NCRIC   or   any   NCRIC   Insurance   Subsidiary   to   pay or   declare   dividends   or

distributions,   or (vi)   restricts   in any   material   respect the conduct of the

business,   credit policies or management of NCRIC or any NCRIC Subsidiary (each,

whether or not set forth in the NCRIC Disclosure   Schedule,   a "NCRIC REGULATORY

AGREEMENT"),   nor has   NCRIC   or any of its   Subsidiaries   been   advised   by any

Governmental   Authority   that it is   considering   issuing or requesting any such

NCRIC Regulatory   Agreement.   Neither NCRIC nor any NCRIC Insurance   Subsidiary,

directly or indirectly, engages in any activity prohibited by applicable law.

 

 

                                       26

<PAGE>

 

     (c)   Except   as set   forth   in   Section   3.16(c)   of the   NCRIC   Disclosure

Schedule,   there is no pending or, to the knowledge of NCRIC,   threatened charge

by any Governmental   Authority that NCRIC or any NCRIC Insurance   Subsidiary has

violated any   applicable   laws,   rules or   regulations   (including any Insurance

Laws), nor any pending or, to the knowledge of NCRIC,   threatened   investigation

by any   Governmental   Authority   with   respect   to   possible   violations   of any

applicable laws, rules or regulations (including any Insurance Laws).

 

     (d) There are no contracts   (other than contracts   relating to employment),

real estate leases,   loans,   guarantees or other arrangements or transactions of

any nature   between NCRIC or any NCRIC   Subsidiary,   on the one hand, and any of

their respective officers,   directors, or affiliates (as such term is defined in

Rule 405 of the SEC),   on the other hand.   NCRIC has not,   since July 30,   2002,

extended or maintained credit,   arranged for the extension of credit, or renewed

an extension of credit, in the form of a personal loan to or for any director or

executive   officer (or   equivalent   thereof)   of NCRIC or any NCRIC   Subsidiary.

Section   3.16(d)   of the   NCRIC   Disclosure   Schedule   identifies   each   loan or

extension of credit   maintained   by NCRIC or any NCRIC   Subsidiary   to which the

second sentence of Section 13(k)(1) of the Exchange Act applies.

 

     (e) NCRIC is, or will timely be, in all material   respects,   in   compliance

with all current and proposed listing and corporate   governance   requirements of

the NASD and the Nasdaq National Market.

 

     (f) Each of NCRIC,   its directors and its executive   officers has consulted

with NCRIC's   independent   auditors and outside counsel with respect to, and (to

the extent applicable to NCRIC) is familiar in all material respects with all of

the   requirements   of SOX.   NCRIC is in   compliance   with the   provisions of SOX

applicable to it as of the date hereof and has implemented such programs and has

taken   reasonable   steps,   upon the advice of NCRIC's   independent   auditors and

outside counsel,   respectively,   to ensure NCRIC's future   compliance (not later

than   the   relevant   statutory   and   regulatory   deadlines   therefore)   with all

provisions of SOX which shall become   applicable to NCRIC after the date of this

Agreement.

 

     (g) None of NCRIC, the NCRIC Subsidiaries,   any of their respective current

directors or officers,   and, to the knowledge of NCRIC,   any of their respective

former   officers   or   directors   or   current   or   former   employees,   agents   or

representatives    have:    (i)   used   any    corporate    funds   for   any    illegal

contributions,   gifts,   entertainment   or other   unlawful   expenses   relating to

political   activity,   (ii) used any   corporate   funds for any direct or indirect

unlawful payments to any foreign or domestic government   officials or employees,

(iii) violated any provision of the Foreign Corrupt   Practices Act of 1977, (iv)

established or maintained any unlawful or unrecorded fund of corporate monies or

other assets,   (v) made any false or fictitious entries on the books and records

of NCRIC or any NCRIC Subsidiary, (vi) made any bribe, rebate, payoff, influence

payment,   kickback or other   unlawful   payment of any   nature,   or (vi) made any

material   favor or gift which is not deductible for federal income tax purposes.

To the   knowledge   of NCRIC:   (x) no   director   or officer of NCRIC or any NCRIC

Subsidiary   has engaged in any "insider   trading" in violation of applicable law

with respect to any security issued by NCRIC or any NCRIC Subsidiary; and (y) no

such director or officer has made any false   certifications   or statements under

(i) the SEC's   Order dated June 27,   2002   pursuant   to Section   21(a)(1) of the

Exchange Act (File No. 4-460), (ii) Rule 13a-14 or 15d-14 under the Exchange Act

or (iii) 18 U.S.C.   ss.1350   (Section   906 of SOX) with respect to any NCRIC SEC

Report.

 

                                       27

<PAGE>

 

     3.17 CERTAIN CONTRACTS.

 

     (a) The   documents   listed in Item 15(c) in NCRIC's   Annual   Report on Form

10-K for the year ended   December 31, 2003 and the   documents   listed on Section

3.17(a) of the NCRIC   Disclosure   Schedule set forth all contracts,   agreements,

arrangements,   commitments, or understandings (whether written or oral) to which

NCRIC or a NCRIC   Subsidiary   is a party to or bound by: (i) with respect to the

employment   of any   directors,   officers   or   employees;   (ii)   which,   upon the

consummation   of the   transactions   contemplated   by this Agreement will (either

alone or upon the   occurrence of any   additional   acts or events)   result in any

payment   (whether of severance pay or otherwise)   becoming due from NCRIC,   PRA,

NEWCO,   or any of their   respective   Subsidiaries   to any   director,   officer or

employee thereof;   (iii) which is a "material contract" (as such term is defined

in Item   601(b)(10) of Regulation S-K of the SEC) to be performed after the date

of this   Agreement that has not been filed or   incorporated   by reference in the

NCRIC SEC Reports; (iv) that concerns a partnership or joint venture that is not

consolidated   with NCRIC for financial   reporting   purposes;   (v) the purpose of

which is to limit the ability of NCRIC or any NCRIC   Subsidiary   to compete with

respect to any product,   service or   territory;   (vi) that is in the nature of a

collective bargaining agreement,   employment agreement,   consulting agreement or

severance   agreement   that is not   cancelable   by NCRIC or any NCRIC   Subsidiary

without penalty or   compensation on thirty (30) days notice or less;   (vii) that

provides   for the payment to an employee   of NCRIC or any NCRIC   Subsidiary   any

incentive or bonus compensation based on the productivity or performance of such

employee or of NCRIC or any NCRIC Subsidiary;   (viii) that is with any Insurance

Regulator and restricts (A)   distributions or other payments to the stockholders

of NCRIC or any NCRIC   Subsidiary,   (B) the continued   operation of NCRIC or any

NCRIC   Subsidiary,   or (C) any   other   matter   relating   to NCRIC   or any   NCRIC

Subsidiary   and its affairs;   or (ix)   (including   any stock option plan,   stock

appreciation   rights plan,   restricted stock plan or stock purchase plan) any of

the benefits of which will be increased, or the vesting of the benefits of which

will be accelerated,   by the occurrence of any of the transactions   contemplated

by   this   Agreement,   or the   value   of any of the   benefits   of   which   will be

calculated   on   the   basis   of   any of the   transactions   contemplated   by   this

Agreement. NCRIC has previously made available to PRA true and correct copies of

all employment and deferred compensation   agreements which are in writing and to

which   NCRIC or any   NCRIC   Subsidiary   is a party.   Each   contract,   agreement,

arrangement,   commitment, or understanding (whether written or oral) of the type

described in Sections 3.17(a), (b) and (c) of this Agreement, whether or not set

forth in the NCRIC   Disclosure   Schedule,   is referred to in this Agreement as a

"NCRIC   Contract",   and neither NCRIC nor any NCRIC   Subsidiary knows of, or has

received   notice of, any   violation   of any NCRIC   Contract   by any of the other

parties thereto.

 

                                       28

<PAGE>

 

     (b) Section 3.17(b) of the NCRIC Disclosure   Schedule sets forth a list of,

and NCRIC has made available to PRA correct and complete   copies of, all written

arrangements   (or   group   of   related   written   arrangements)   from or to   third

parties,   for the furnishing of services to, or receipt of services by, NCRIC or

any   NCRIC   Subsidiary   (including   without   limitation,   legal   and   accounting

services,   risk management services,   agency agreements,   managing general agent

agreements,    reinsurance    intermediary    agreements   and   other    distribution

agreements,   and   agreements   relating   to the   sale   or   servicing   of   medical

professional   liability   insurance   products   offered   by   NCRIC   or   any   NCRIC

Subsidiary)   under   which   payments   were made   during any   calendar   year since

December   31, 2001 in excess of $250,000   or that has a   non-cancelable   term in

excess of one year (as to the latter, which is still in effect).

 

      (c) With   respect to each NCRIC   Contract:   Such NCRIC   Contract is in full

force and effect (except for contracts   that have expired   pursuant to the terms

thereof) and is legally valid,   binding and   enforceable in accordance   with its

terms   (except   as   may   be   limited   by   bankruptcy,    insolvency,   moratorium,

reorganization   or similar laws affecting the rights of creditors   generally and

the availability of equitable remedies). There are no material defaults by NCRIC

or any NCRIC Subsidiary,   or, to the knowledge of NCRIC, any other party,   under

such NCRIC Contract.   Neither NCRIC nor any NCRIC Subsidiary has received notice

of any default,   offset,   counterclaim or defense under such NCRIC Contract.   No

condition or event has occurred   which with the passage of time or the giving of

notice   or both   would   constitute   a   default   or   breach by NCRIC or any NCRIC

Subsidiary,   or, to the   knowledge of NCRIC,   any other party under the terms of

such NCRIC Contract.   All security   deposits,   reserve funds, and other sums and

charges   that have become due and payable   under such NCRIC   Contract   have been

paid in full. No party has repudiated any provision of such NCRIC Contract.

 

     3.18 INVESTMENTS AND INTEREST RATE RISK MANAGEMENT INSTRUMENTS.

 

     (a)   Except   as set   forth   in   Section   3.18(a)   of the   NCRIC   Disclosure

Schedule,   NCRIC and each NCRIC Subsidiary have good and marketable title to all

securities   held by it (except   securities sold under   repurchase   agreements or

held in any fiduciary or agency capacity), free and clear of any Lien, except to

the extent   such   securities   are   pledged in the   ordinary   course of   business

consistent with prudent business practices to secure obligations of NCRIC or any

NCRIC   Subsidiary.    Such   securities   are   permissible   investments   under   all

applicable laws and are valued on the books of NCRIC in accordance with GAAP and

SAP. None of the securities are in default in the payment of principal, interest

or dividends   or is impaired to any extent.   NCRIC has provided to PRA a copy of

the investment   policies of NCRIC and the NCRIC   Subsidiaries as of December 31,

2004.   There has been no material   change in investment   policy of NCRIC and the

NCRIC   Subsidiaries   or in the   composition of the   investments of NCRIC and the

NCRIC Subsidiaries since December 31, 2004.

 

     (b) All interest rate swaps,   caps,   floors and option agreements and other

interest rate risk management arrangements entered into for the account of NCRIC

or its Subsidiaries were entered into in the ordinary course of business and, to

the best knowledge of NCRIC,   in accordance with prudent   business   practice and

applicable   rules,   regulations and policies of any   Governmental   Authority and

with counterparties   believed to be financially   responsible at the time. All of

such interest rate swaps,   caps, floors and option agreements and other interest

rate risk management   arrangements are legal,   valid and binding   obligations of

NCRIC or its Subsidiaries   enforceable in accordance with their terms (except as

may be limited by bankruptcy, insolvency, moratorium,   reorganization or similar

laws   affecting   the   rights of   creditors   generally   and the   availability   of

equitable   remedies),   and are in full   force and   effect.   NCRIC and each NCRIC

Subsidiary   have duly   performed in all material   respects all of their material

obligations   thereunder   to the extent   that such   obligations   to perform   have

accrued;   and, to the best knowledge of NCRIC,   there are no material   breaches,

violations   or   defaults   or   allegations   or   assertions   of such by any   party

thereunder.

 

 

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<PAGE>

 

     3.19 INTELLECTUAL PROPERTY.

 

(a)   NCRIC   or a NCRIC   Subsidiary   owns or has the   right to use,   pursuant   to

license,    sublicense,    agreement   or   permission,   all   Intellectual   Property

necessary   for   the   operation   of   the    businesses   of   NCRIC   and   the   NCRIC

Subsidiaries as presently   conducted and as presently   proposed to be conducted.

As used in this Agreement, "INTELLECTUAL PROPERTY" means all trademarks, service

marks,   logos,   domains and domain names,   trade names and   corporate   names and

registrations   and   applications   for   registration    thereof,    copyrights   and

registrations   and   applications   for registration   thereof,   computer   software

(including   computer   software used in insurance   operations   or for   accounting

operations),   data and   documentation,   trade secrets and confidential   business

information (including financial,   marketing and business data, pricing and cost

information,   business and marketing   plans, and customer and supplier lists and

information),   other   proprietary   rights,   and copies and tangible   embodiments

thereof (in whatever form or medium).   Section   3.19(a) of the NCRIC   Disclosure

Schedule lists all trademarks,   service marks, logos,   domains and domain names,

trade names and corporate names owned by NCRIC and each NCRIC Subsidiary.

 

     (b) To the knowledge of NCRIC:   Neither NCRIC nor any NCRIC   Subsidiary has

interfered with, infringed upon, misappropriated or otherwise come into conflict

with any   Intellectual   Property   of third   parties.   None of   NCRIC,   the NCRIC

Subsidiaries,    and   any   of   the    directors,    officers   or    employees    with

responsibility   for   intellectual    property   matters   of   NCRIC   or   any   NCRIC

Subsidiary has ever received any charge, complaint, claim or notice alleging any

such interference,   infringement,   misappropriation or violation. No third party

has interfered   with,   infringed   upon,   misappropriated   or otherwise come into

conflict with any intellectual property rights of NCRIC or any NCRIC Subsidiary.

 

     (c) Section 3.19(c) of the NCRIC Disclosure   Schedule   identifies each item

of   Intellectual   Property that any third party owns and that NCRIC or any NCRIC

Subsidiary uses, or intends to use, pursuant to license, sublicense,   agreement,

or permission.   NCRIC has made correct and complete copies of all such licenses,

sublicenses,   agreements and   permissions (as amended to date) available to PRA.

With respect to each such item of such Intellectual   Property:   (i) the license,

sublicense,   agreement or permission covering the item is legal, valid, binding,

enforceable   and in full force and   effect;   (ii) except as set forth in Section

3.5(b)(ii)(y)   of   the   NCRIC   Disclosure   Schedule,   the   license,   sublicense,

agreement   or   permission   will   continue   to   be   legal,   valid,    binding   and

enforceable   and in full   force and effect on   identical   terms on and after the

Merger   and the   Closing   Date;   (iii)   no   party   to the   license,   sublicense,

agreement   or   permission