EMPLOYMENT AGREEMENT
Exhibit 10.1
This Employment Agreement (“Agreement”) is entered into as of this 2nd day of February, 2010,
by and between Princeton National Bancorp, Inc., a Delaware corporation (“Bancorp”), and Xxxxxx X.
Xxxxxx (“Executive”).
WITNESSETH:
WHEREAS, Bancorp and Executive desire Executive to serve as its President and Chief Executive
Officer; and,
WHEREAS, Bancorp and Executive desire Executive to serve as President and Chief Executive
Officer of Citizens First National Bank, a National banking association (the “Bank”); and,
WHEREAS, the Bank is a wholly-owned subsidiary of Bancorp; and
WHEREAS, Executive and Bancorp desire to enter into this Agreement pertaining to the terms of
the employment of Executive with Bancorp and the Bank and the security Bancorp is providing to
Executive with respect to his employment;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and
other good and valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. Employment. Bancorp hereby agrees to employ Executive as its President and Chief
Executive Officer, and to cause the Bank to employ Executive as its President Chief Executive
Officer and Executive hereby accepts such employment by Bancorp and the Bank upon the terms and
conditions herein set forth. The primary place of employment shall be at Bancorp’s and the Bank’s
principal offices, located at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
2. Term and Automatic Renewal. The term of this Agreement and Executive’s employment
hereunder will be one (1) year commencing as of the date first written above. On each day
following the date first written above, this Agreement and the term of Executive’s employment
hereunder will automatically renew for one (1) additional day until such time as: (i) the board of
directors of Bancorp or Executive elects not to extend the term of this Agreement by providing
written notice to the other of such party’s election not to extend the term beyond the
then current termination date; or (ii) Executive’s employment is terminated in accordance with
Section 7 of this Agreement.
| 3. | Duties. Executive will, during the term hereof: | ||
| (a) | faithfully and diligently do and perform all such acts and duties and furnish such services as the Boards of Directors of Bancorp or the Bank shall direct; | ||
| (b) | do and perform all acts in the ordinary course of Bancorp’s or the Bank’s businesses (with such limits as the Boards of Directors of Bancorp or the Bank may prescribe) necessary and conducive to Bancorp’s and the Bank’s best interests; | ||
| (c) | execute all duties attendant to his office; and | ||
| (d) | devote his full time, energy, and skill to the business of Bancorp and the Bank and to the promotion of Bancorp’s and the Bank’s best interests, except for vacations, absences made necessary because of illness, authorized leaves of absence, holidays, professional meetings and seminars. |
During the term of this Agreement, Executive shall not, without the consent of the Board of
Directors of Bancorp or the Bank, accept other employment or perform other services for
compensation, or have any direct or indirect ownership interest in any business in competition with
the Bank or otherwise engage in any activity which constitutes a conflict of interest with Bancorp
or the Bank. Notwithstanding anything to the contrary contained herein, the expenditure of
reasonable amounts of time on personal investments and charitable activities shall not be deemed a
breach of this Agreement, provided that such activities do not materially interfere with the
performance by Executive of his obligations under this Agreement. The Board of Directors of the
Bank shall not unreasonably withhold consent to Executive’s service as a member of the board of
directors of other companies.
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4. Compensation. Bancorp shall cause Bank to pay to Executive for all services to be
performed by Executive during the term of this Agreement;
| (a) | A Base Salary at the rate of $300,000 per annum, payable in substantially equal periodic monthly payments in accordance with Bancorp’s and the Bank’s practices for other executives, managerial, and supervisory employees, as such practices may be determined from time to time (the “Base Salary”); and | ||
| (b) | Any annual increase in Base Salary, additional or special compensation, such as incentive pay or other bonuses, based upon Executive’s performance, as the Board of Directors of the Bank, in its discretion, may from time to time determine, based upon annual incentive opportunities made available to Executive by the Bank and upon other discretionary criteria deemed appropriate by the Board of Directors of the Bank. |
All such payments will be subject to such deductions as may be required to be made pursuant to law,
government regulation or order, or by agreement with, or consent of, Executive.
| 5. | Fringe Benefits. During the term of this Agreement: | ||
| (a) | Automobile. Bancorp shall cause the Bank to provide to Executive a full-size automobile for the exclusive use of Executive and payment of all proper company-related expenses related to such automobile, including insurance costs. Executive shall maintain the records relating to personal use as are required by Bank policy. To the extent that the expenses described in this subsection are not paid directly by Bancorp, Bancorp shall reimburse Executive in accordance with its expense reimbursement policies, but in no event later than March 15 of the calendar year following the calendar year in which the expenses are incurred. | ||
| (b) | Memberships. Bancorp will cause the Bank to pay or reimburse Executive for the following: |
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| (i) | all reasonable annual dues and membership expenses in one club selected and joined by Executive in which memberships are used for or necessary to the performance of Executive’s duties hereunder and all reasonable expenses incurred in furtherance of or in connection with the transaction of the business of Bancorp or the Bank hereunder at such club; and | ||
| (ii) | all reasonable annual dues and membership expenses in such civic and lunch clubs selected by Executive as are necessary or useful to the performance of Executive’s duties hereunder and all reasonable expenses incurred in furtherance of or in connection with the transaction of the business of Bancorp or the Bank hereunder at such civic and lunch clubs. |
All of the aforementioned amounts subject to reimbursement by the Bank to Executive shall be
subject to an accounting by Executive and approval by the Bank. To the extent that the expenses
described in this Section 5 are not paid directly by Bancorp, Bancorp shall reimburse Executive in
accordance with its expense reimbursement policies, but in no event later than March 15 of the
calendar year following the calendar year in which the expenses are incurred.
6. Additional Benefits. Bancorp shall cause the Bank to provide the following
additional benefits to Executive during the term of this Agreement:
| (a) | Executive shall be eligible to participate in any incentive plans or arrangements (“Incentive Plans”) that Bancorp or the Bank may establish or practices it may follow for the benefit of its executives as in effect from time to time, and shall be entitled to receive any other bonus or discretionary compensation payments as Bancorp or the Bank may determine from time to time. |
| (b) | Executive shall be entitled to paid vacations in accordance with the Bank’s customary vacation practice or a total of 4 weeks paid vacation per year, whichever is greater. Executive shall also be entitled to all paid holidays given by the Bank to its other executives. |
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| (c) | Executive and his dependents shall be entitled to participate in and receive benefits under any qualified or supplemental employee pension plan, including any defined benefit retirement plan or defined contribution retirement plan (“Retirement Plans”), health and dental plan, disability plan, survivor income plan, and life insurance plan or arrangement (“Welfare Plans”) made available by the Bank in which Executive is currently eligible to participate, and any additional or substitute Retirement or Welfare Plans Bancorp or the Bank may make available in the future to its executives, subject to and on a basis consistent with the terms, conditions, and overall administration of such Retirement or Welfare Plans. |
7. Termination.
(a) Good Cause. The Board of Directors of Bancorp may terminate the employment of
Executive with Bancorp and the Bank at any time for “Good Cause.” For purposes of the
preceding sentence, “Good Cause” shall be deemed to exist if:
| (i) | Executive engages in acts or omissions constituting dishonesty, willful misconduct, breach of fiduciary obligation or intentional wrongdoing or malfeasance that results in harm to the business, operations, reputation or property of Bancorp or the Bank; | ||
| (ii) | Executive is convicted of a felony or other crime involving fraud or dishonesty; | ||
| (iii) | Executive continues to not perform his assigned duties for a period of thirty (30) days after the Bank has given written notice to Executive of such non-performance and its intention to terminate the employment of Executive with Bancorp and the Bank because of such non-performance | ||
| (iv) | Executive engages in any conduct in the course of his employment and the Bancorp determines in good faith, after investigation that |
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| such conduct constitutes a violation of law or Bank policy or exposes the Bank to liability under the laws of the United States or the State of Illinois; |
| (v) | For purposes of Section (a)(i) of this Section, the term “harm” shall be interpreted to mean any quantifiable injury, whether monetary or otherwise, that exceeds a de minimis injury. |
Without limiting the generality of the foregoing, the following shall not constitute
cause for the termination of the employment of Executive or the modification or diminution
of any of his authority hereunder:
| (i) | any personal or policy disagreement between Executive and Bancorp or the Bank or any member of the Board of Directors of Bancorp or the Bank, or | ||
| (ii) | any action taken by Executive in connection with his duties hereunder if Executive acted in good faith and in a manner he reasonably believed to be in, and not opposed to, the best interest of Bancorp or the Bank and had no reasonable cause to believe his conduct was unlawful. |
Notwithstanding anything herein to the contrary, in the event Bancorp shall terminate
the employment of Executive for cause hereunder, Bancorp shall give at least thirty (30)
days prior written notice to Executive specifying the reason or reasons for Executive’s
termination. Bancorp may, at its sole discretion, remove the Executive from the performance
of his duties during the 30-day notice period. Such removal will not impact any duty on
behalf of Bancorp to compensate Executive during such 30-day period.
(b) Voluntary Termination. Executive shall have the right at any time during the term
of this Agreement to terminate his employment with Bancorp upon giving ninety (90) days
written notice of said termination to Bancorp. Upon receipt of such notice, Bancorp may, at
its sole discretion, remove the Executive from the performance of his
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duties. Such removal will not impact any duty on behalf of Bancorp to compensate
Executive during such 90-day period.
(c) Good Reason. Executive may terminate his employment with Bancorp and the Bank at
any time for “Good Reason.” “Good Reason” shall be deemed to exist if Executive terminates
his employment because, without his express written consent, (i) Bancorp breaches any of the
terms of this Agreement, (ii) he is assigned duties materially inconsistent with the duties
and responsibilities stated in the by-laws of Bancorp and the Bank for his positions, (iii)
the duties and responsibilities for the President stated in the by-laws of Bancorp and the
Bank, respectively, are amended to be materially inconsistent with the duties and
responsibilities that would typically be expected of a President of Bancorp and the Bank,
respectively, or (iv) Bancorp or the Bank changes by 100 miles or more the principal
location in which Executive is required to perform services. Upon the occurrence of any
event referenced in (i) through (iv) above, Executive shall, within ninety (90) days of such
occurrence, provide Bancorp notice of the existence of the condition. Upon receiving
notice, Bancorp shall have no more than thirty (30) days to remedy the condition. Executive
shall have six months from the date of the initial existence of one of the above events to
terminate his employment under this section.
(d) Change in Control. A “Change in Control” shall be deemed to occur on the earliest
of:
| (i) | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership, as that term is defined in Rule 13d-3 under the Exchange Act, of capital stock of Bancorp entitled to exercise more than 25% or more of the outstanding voting power of all capital stock of Bancorp entitled to vote for the election of directors (“Voting Stock”); |
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| (ii) | The effective time of (A) a merger or consolidation of Bancorp with one or more other corporation as a result of which the holders of the outstanding Voting Stock of Bancorp immediately prior to such merger or consolidation hold 50% or less of the Voting Stock of the surviving or resulting corporation or (B) a transfer of more than 50% of the Voting Stock, or substantially all of the property of Bancorp, other than to an entity of which Bancorp owns more than 50% of the Voting Stock; or | ||
| (iii) | The effective time of (A) a merger or consolidation of the Bank with one or more other corporations as a result of which the holders of the outstanding Voting Stock of the Bank immediately prior to such merger or consolidation hold 50% or less of the Voting Stock of the surviving or resulting corporation or (B) a transfer of more than 50% of the Voting Stock, or substantially all of the property of the Bank, other than to an entity of which Bancorp or the Bank owns more than 50% of the Voting Stock. |
(e) Benefits Upon Termination. The following provisions will apply during the term of
this Agreement (i) if the employment of Executive with Bancorp or the Bank is terminated by
Bancorp or the Bank for any reason other than Good Cause, (ii) if Executive terminates his
employment with Bancorp or the Bank for Good Reason, or (iii) if the employment of Executive
with Bancorp or the Bank is terminated by Bancorp or the Bank during the twelve month period
following a Change in Control:
(A) An amount equal to Executive’s aggregate Base Salary (at the rate most
recently determined) for a period equal to the greater of (x) twelve months, or (y)
the balance of the term of this Agreement pursuant to Paragraph 2 (the “Severance
Period”), shall be paid to Executive in a lump sum within thirty (30) days after the
date of termination.
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(B) Executive or any other person entitled to receive benefits with respect to
Executive under any Incentive Plan, Retirement Plan, or any other plan or program
maintained by Bancorp or the Bank shall receive any and all benefits accrued under
such Plan or other plan or program, to the date of termination of employment, the
amount, form and time of payment of such benefits to be determined by the terms of
such Incentive Plan and Retirement Plan and other plan or program, and Executive’s
employment shall be deemed to have terminated by reason of retirement under each
such Plan or other plan or program under circumstances that have the most favorable
result for Executive thereunder. Payment shall be made at the earliest date
permitted under any such Plan or other plan or program. Notwithstanding the
foregoing, this subsection (B) shall be interpreted in a manner that is consistent
with Code Section 409A and the timing of payments to the Executive shall be not be
changed to the extent that doing so would cause another plan or program to violate
the requirements of Code Section 409A and for the Executive to incur excise taxes,
interest costs or both.
(C) During the Severance Period, Executive and his spouse and other dependents
will continue to be covered by all Welfare Plans in which he and his spouse and
other dependents were participating immediately prior to the date of his
termination as if he continued to be an employee of Bancorp or the Bank, and Bancorp
will, or will cause the Bank to, continue to pay the costs of coverage of Executive
and his spouse and other dependents under such Welfare Plans on the same basis as is
applicable to active employees covered thereunder; provided that, if participation
in any one or more of such Welfare Plans is not possible under the terms thereof,
Bancorp will, or will cause the Bank to, provide substantially similar benefits; and
provided further that a change in the Welfare Plans of Bancorp or the Bank that is
generally applicable to Bancorp and Bank executive employees will apply to
Executive, his spouse and other dependents. If the Company determines that coverage
under the Company’s Welfare Plans can not continue without jeopardizing the tax
favored status of such plans or that value of such benefits to Executive, his spouse
and other dependents exceeds the amount
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eligible for exemption as separation pay under Treas. Reg. 1.409-1(b)(9) then,
no later than the March 15 of the calendar year following the calendar year in which
Executive’s employment terminates, the Company may make a lump sum cash payment to
Executive equal to the value of such benefits.
(f) If the employment of Executive with Bancorp or the Bank is terminated by Bancorp or
the Bank for Good Cause or by the voluntary action of Executive without Good Reason, other
than due to a Change in Control, Executive’s Base Salary (at the rate most recently
determined) and a bonus (a pro rata portion of the bonus paid for the most recent calendar
year) shall be paid through the date of his termination, and Bancorp shall have no further
obligation to Executive or any other person under this Agreement. Such termination shall
have no effect upon Executive’s other rights, including but not limited to rights under any
Incentive, Retirement or Welfare Plan.
8. Death. If Executive dies during the term of this Agreement, Bancorp agrees to
cause the Bank for a period or one year following Executive’s death, (the “Death Benefit Period”),
to cover the spouse and other dependants of Executive under all Welfare Plans in which Executive
and his spouse and other dependents were participating immediately prior to the date of his death
as if he continued to be an employee of Bancorp or the Bank; provided that, if participation in any
one or more of such plans and arrangements is not possible under the terms thereof, Bancorp will,
or will cause the Bank to, provide substantially similar benefits. Any death benefits payable
under this Paragraph 8 are in addition to any other benefits due to Executive or his beneficiaries
or dependents from Bancorp, including, but not limited to, payments under any of the Incentive,
Retirement and Welfare Plans.
9. Disability. If Executive incurs a Disability during the term of this Agreement,
Executive’s obligation to perform such services hereunder will terminate and in such event Bancorp
agrees to cause the Bank:
(a) to continue to pay Executive his aggregate Base Salary (at the rate most recently
determined) from the date of onset of such Disability until such time as
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Executive is eligible to receive disability benefits under the Bank’s disability plan,
as presently or hereafter in effect (the “Disability Period”); and
(b) during the Disability Period and such period of time as Executive is eligible to
receive disability benefits under the Bank’s disability plan, to continue to cover Executive
and his dependents under all Welfare Plans in which Executive and his spouse and other
dependents were participating immediately prior to the date of onset of such Disability as
if Executive continued to be an employee of Bancorp or the Bank; provided that, if
participating in any one or more of such plans and arrangements is not possible under the
terms thereunder, Bancorp will provide, or cause the Bank to provide, substantially similar
benefits.
Notwithstanding the foregoing, any payments to Executive pursuant to this Paragraph 9 shall be
reduced by the amount of any disability benefits otherwise payable to Executive under any
disability program maintained by Bancorp or the Bank. Amounts payable to Executive under this
Paragraph 9 shall continue to be paid to a beneficiary designated in writing by him if he dies
during the Disability Period. If Executive is receiving benefits hereunder and his disability
ceases, his benefits under this Paragraph 9 shall terminate, provided that if his employment with
Bancorp and the Bank does not recommence (because no offer of re-employment in the same position is
made), the benefits he is then receiving under this Paragraph 9 shall continue for a period of
twelve additional months. For purposes of this Agreement, the term “Disability” shall mean a
physical or mental disability, as determined by an independent physician selected with the approval
of both Bancorp and Executive, which will render Executive incapable of performing his duties under
this Agreement for six consecutive months.
10. Indemnity. Bancorp shall indemnify Executive to the extent provided in Article
VIII, Sections 1, 2, 3, 4 and 5 of the by-laws of Bancorp, as may be amended from time-to-time.
11. No Duty to Mitigate/Setoff. In the event of the termination of Executive’s
employment hereunder for any reason, Executive shall have no obligation to mitigate damages and
amounts received in accordance with this Agreement shall not be reduced. The absence of a duty to
mitigate shall not prevent Bancorp or the Bank from asserting a right to set-off of
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amounts payable pursuant to this Agreement following the Executive’s breach of the
Non-Competition and Non-Solicitation Agreement executed by and between the Executive and the Bank
on August 4, 2009, (the “Non-Compete Agreement”) or other actions by the Executive that are
damaging to Bancorp or the Bank.
12. Confidentiality. Executive acknowledges that the terms and conditions of the
Non-Compete Agreement remain in full force and effect and the terms and conditions of the
Non-Compete Agreement shall survive the termination of this Agreement. Executive further
acknowledges that preservation of a continuing business relationship between Bancorp, the Bank and
their respective customers, representatives and employees is of critical importance to the
continued business success of Bancorp and the Bank and that it is the active policy of Bancorp and
the Bank to guard as confidential certain information not available to the public and relating to
the business affairs of Bancorp and the Bank. In view of the foregoing, Executive agrees that he
shall not during the term of this Agreement and at any time thereafter, without the prior written
consent of Bancorp, disclose to any person or entity any such confidential information that was
obtained by Executive in the course of his employment with Bancorp or the Bank. This section shall
not be applicable if and to the extent Executive is required to testify in a legislative, judicial
or regulatory proceeding pursuant to an order of Congress, any state or local legislature, a judge,
or an administrative law judge or is otherwise required by law to disclose such information.
13. Bancorp Assignment. Neither Bancorp nor Executive may assign this Agreement
without the other party’s prior written consent, except that Bancorp’s obligations hereunder shall
be binding legal obligations of any successor to all or substantially all of Bancorp’s business by
purchase, merger, consolidation or otherwise.
14. Executive Assignment. No interest of Executive or his spouse or other beneficiary
under this Agreement, or any right to receive any payment or distribution hereunder, shall be
subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment or other
alienation or encumbrance of any kind, nor may such interest or right to receive payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of the obligations or
debts
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of, or other claims against, Executive or his spouse or other beneficiary, including claims
for alimony, support, separate maintenance and claims in bankruptcy proceedings.
15. Benefits Unfunded. All rights under this Agreement of Executive and his spouse or
other beneficiary, shall at all times be entirely unfunded, and no provision shall at any time be
made with respect to segregating any assets of Bancorp or the Bank for payment of any amounts due
hereunder. Neither Executive, nor his spouse or other beneficiary shall have any interest in or
rights against any specific assets of Bancorp or the Bank, and Executive and his spouse and other
beneficiaries shall have only the rights of a general unsecured creditor of Bancorp and the Bank.
16. Waiver. No waiver by any party at any time of any breach by the other party of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of any other provisions or conditions at the same time or at any
prior or subsequent time.
17. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original.
18. Severability. In the event any provision of this Agreement is held illegal or
invalid, the remaining provisions of this Agreement shall not be affected thereby.
19. Successors. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, representatives and successors.
20. Notice. Notices required under this Agreement shall be in writing and sent by
registered mail, return receipt requested, to the following addresses or to such other address as
the party being notified may have previously furnished to the other party by written notice.
| If to Bancorp: | Princeton National Bancorp, Inc. | |||
| 000 Xxxxx Xxxx Xxxxxx | ||||
| Xxxxxxxxx, Xxxxxxxx 00000 | ||||
| Attention: Chairman of the Board |
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| If to Executive: | Xxxxxx X. Xxxxxx | |||
| c/o Princeton National Bancorp, Inc. | ||||
| 000 Xxxxx Xxxx Xxxxxx | ||||
| Xxxxxxxxx, Xxxxxxxx 00000 |
21. Applicable Law. This Agreement shall be construed and interpreted pursuant to the
laws of the State of Illinois.
22. Entire Agreement. With the exception of the Non-Compete Agreement, this Agreement
contains the entire agreement between Bancorp and Executive and supersedes any and all previous
employment agreements, written or oral, between the parties relating to the subject matter hereof.
No amendment or modification of the terms of this Agreement shall be binding upon the parties
hereto unless reduced to writing and signed by Bancorp and Executive.
23. Withholding. Bancorp or the Bank may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy applicable withholding
requirements under any federal, state or local law.
24. Headings. The headings contained herein are for reference purposes only and shall
not in any way affect the meaning or interpretation of any provision of this Agreement.
25. Compliance with Section 409A. Notwithstanding anything contained herein to the
contrary, if at the time of a termination of employment, (i) Executive is a “specified employee” as
defined in Section 409A of the Internal Revenue Code of 1986 (the “Code) , and the regulations and
guidance thereunder in effect at the time of such termination (“409A”), and, (ii) any of the
payments or benefits provided hereunder may constitute “deferred compensation” under 409A, then,
and only to the extent required by such provisions, the date of payment of such payments or
benefits otherwise provided shall be delayed for a period of up to 6 months following the date of
termination. The parties intend, however, that this Agreement shall be exempt from the 409A as
either a separation pay arrangement under Treas. Reg. 1.409A-1(b)(9) or a short term deferral of
compensation under 1.409A-1(b)(4).
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IN WITNESS WHEREOF, Executive has hereunto set his hand, and Bancorp has caused this Agreement
to be executed in its name and on its behalf, all as of the day and year first written above.
| PRINCETON NATIONAL BANCORP, INC. |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx, | ||||
| Chairman of the Board of Directors | ||||
| /s/ Xxxxxx X. Xxxxxx | ||||
| Xxxxxx X. Xxxxxx, Executive | ||||
January 25, 2010
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