Exhibit 10.21
AGREEMENT
Agreement made as of the 1st day of January, 1997, by and among
Philadelphia Suburban Water Company, a Pennsylvania corporation (the "Company"),
Philadelphia Suburban Corporation, a Pennsylvania corporation ("PSC"), and
Xxxxxxx X. Xxxxxxx (the "Executive").
WHEREAS, the Executive is presently employed by the Company, as its
Senior Vice President - Operations; and
WHEREAS, the Company considers it essential to xxxxxx the employment of
well-qualified, key management personnel, and, in this regard, the boards of
directors of the Company and PSC recognize that, as is the case with many
publicly-held corporations such as PSC, the possibility of a change of control
of PSC may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the boards of directors of the Company and PSC have determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of PSC,
although no such change is now contemplated;
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, the Company and PSC, for which certain of the employees of the
Company, such as the Executive, provide key executive services, agree that the
Executive shall receive the compensation set forth in this Agreement in the
event his employment with the Company is terminated subsequent to a "Change of
Control" (as defined in Section 1 hereof) of PSC as a
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cushion against the financial and career impact on the Executive of any such
Change of Control; and
WHEREAS, PSC is willing to guarantee that such compensation is paid to
the Executive in light of his role in the management of the affairs of PSC or
its subsidiaries;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the average of the total cash base
salary, annual bonus and dividend equivalents (paid under the Company's Equity
Compensation Plan) received by the Executive in all capacities with the Company,
and its Subsidiaries or Affiliates, as reported for Federal income tax purposes
on Form W-2, together with any amounts the payment of which has been deferred by
the Executive under any deferred compensation plan of the Company, and its
Subsidiaries or Affiliates, or otherwise, and any and all salary reduction
authorized amounts under any of the benefit plans or programs of the Company,
and its Subsidiaries or Affiliates, but excluding any amounts attributable to
the exercise of stock options or the receipt of Restricted Stock granted to the
Executive under the Company's Equity Compensation Plan and its predecessors or
successors, for the three calendar years (or such number of actual full calendar
years of employment, if less than three)
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immediately preceding the calendar year in which occurs a Change of Control or
the Executive's Termination Date, whichever period produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of any securities:
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of
securities tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange; (ii) that such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the right to
vote or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of any security under this clause (ii) as a
result of an oral or written agreement, arrangement or understanding to vote
such security if such agreement, arrangement or understanding (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or (iii) that are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
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Associates) has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (ii) above) or disposing
of any voting securities of PSC; provided, however, that nothing in this Section
1(c) shall cause a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Board" shall mean the board of directors of PSC. (e) "Change of
Control" shall mean:
(i) any Person (including any individual, firm, corporation,
partnership or other entity except PSC or the Company or any employee benefit
plan of the PSC or the Company or of any Affiliate or Associate, any Person or
entity organized, appointed or established by PSC or the Company for or pursuant
to the terms of any such employee benefit plan), together with all Affiliates
and Associates of such Person, shall become the Beneficial Owner in the
aggregate of 20% or more of the Common Stock of PSC then outstanding;
(ii) during any twenty-four month period, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute
a majority thereof, unless the election, or the nomination for election by PSC's
shareholders, of at least seventy-five percent of the directors who were not
directors at the beginning of such period was approved by a vote of at least
seventy-five percent of the directors in office at the time of such election or
nomination who were directors at the beginning of such period; or
(iii) there occurs a sale of substantially all of the assets of PSC or
its liquidation is approved by a majority of its shareholders or PSC is merged
into or is merged with an
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unrelated entity such that following the merger the shareholders of PSC no
longer own more than 51% of the resultant entity.
Notwithstanding anything in this Section 1(e) to the contrary, a Change of
Control shall not be deemed to have taken place under clause (e)(i) above if (a)
such Person becomes the beneficial owner in the aggregate of 20% or more of the
Common Stock of the Company then outstanding as a result of an inadvertent
acquisition by such Person if such Person, as soon as practicable, divests
itself of a sufficient amount of its Common Stock so that it no longer owns 20%
or more of the Common Stock then outstanding, as determined by the Board of
Directors of the Company, or (ii) the shares of Common Stock required to be
counted in order to meet the 20% minimum threshold described under such clause
(i) include any of the shares described in subsections (i) through (iv) of
section 2543(b) of the Pennsylvania Business Corporation Law of 1988 (15
Pa.C.S.A. ss.2543(b)) as in effect on the date of adoption of the Plan.
(f) "Cause" shall mean 1) misappropriation of funds, 2) habitual
insobriety or substance abuse, 3) conviction of a crime involving moral
turpitude, or 4) gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
(g) "Good Reason Termination" shall mean a Termination of Employment
initiated by the Executive upon one or more of the following occurrences:
(i) any failure of the Company to comply with and satisfy any of
the terms of this the Agreement;
(ii) any significant involuntary reduction of the authority, duties
or responsibilities held by the Executive immediately prior to the
Change of Control;
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(iii) any involuntary removal of the Executive from the employment
grade, compensation level or officer positions which the Executive
holds with the Company or, if the Executive is employed by a
Subsidiary, with a Subsidiary, held by him immediately prior to the
Change of Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the Executive's target level of
annual and long-term compensation as in effect immediately prior to the
Change of Control;
(v) any transfer of the Executive, without his express written
consent, to a location which is outside the Bryn Mawr, Pennsylvania
area by more than 50 miles, other than on a temporary basis (less than
6 months); or
(vi) the Executive being required to undertake business travel to
an extent substantially greater than the Executive's business travel
obligations immediately prior to the Change of Control.
(h) "Normal Retirement Date" shall mean the first day of the calendar
month coincident with or next following the Executive's 65th birthday.
(i) "Subsidiary" shall mean any corporation in which the Company,
directly or indirectly, owns at least a 50% interest or an unincorporated entity
of which the Company, directly or indirectly, owns at least 50% of the profits
or capital interests.
(j) "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
(k) "Termination of Employment" shall mean the termination of the
Executive's actual employment relationship with the Company and any of it
Subsidiaries that actually employs the Executive.
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2. Notice of Termination. Any Termination of Employment following a
Change of Control shall be communicated by a Notice of Termination to the other
party hereto given in accordance with Section 14 hereof. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific provision in this Agreement relied upon, (ii) briefly summarizes
the facts and circumstances deemed to provide a basis for the Executive's
Termination of Employment under the provision so indicated, and (iii) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
3. Severance Compensation upon Termination.
(a) Subject to the provisions of Section 11 hereof, in the event of the
Executive's involuntary Termination of Employment for any reason other than
Cause or in the event of a Good Reason Termination, in either event within two
years after a Change of Control, the Company shall pay to the Executive, upon
the execution of a release in the form required by the Company of its
terminating executives prior to the Change of Control, within 15 days after the
Termination Date (or as soon as possible thereafter in the event that the
procedures set forth in Section 11(b) hereof cannot be completed within 15
days), an amount in cash equal to two times the Executive's Base Compensation,
subject to required employment taxes and deductions. PSC hereby guarantees the
obligations of the Company and, in the event that the Company does not satisfy
its obligation hereunder within the required time period, PSC shall pay or cause
to be paid all compensation, benefits and other amounts remaining due to the
Executive upon prompt written notice to PSC that the Company has not satisfied
its obligation (or a portion thereof) to the Executive.
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(b) In the event the Executive's Normal Retirement Date would occur
prior to 12 months after the Termination Date, the aggregate cash amount
determined as set forth in (a) above shall be reduced by multiplying it by a
fraction, the numerator of which shall be the number of days from the
Termination Date to the Executive's Normal Retirement Date and the denominator
of which shall be 365 days. In the event the Termination Date occurs after the
Executive's Normal Retirement Date, no payments shall be made under this Section
3.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Executive
under any other plan, policy or program of the Company, and its Subsidiaries or
Affiliates. In addition, the Executive shall be entitled to a continuation of
health, dental, life and welfare benefits, excluding disability benefits,
otherwise provided to senior level executives or employees generally, as the
same may be amended for all such individuals from time to time, for the period
of two (2) years.
5. Trust Fund. PSC sponsors an irrevocable trust fund pursuant to a
trust agreement to hold assets to satisfy its obligations to the Executive under
this Agreement. Funding of such trust fund shall be subject to the discretion of
PSC's President, as set forth in the agreement pursuant to which the fund has
been established.
6. Enforcement.
(a) In the event that the Company (or PSC, as appropriate) shall fail
or refuse to make payment of any amounts due the Executive under Sections 3 and
4 hereof within the respective time periods provided therein, the Company shall
pay to the Executive, in addition to the payment of any other sums provided in
this Agreement, interest, compounded daily, on any amount remaining unpaid from
the date payment is required under Section 3 or 4, as
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appropriate, until paid to the Executive, at the rate from time to time
announced by PNC Bank as its "prime rate" plus 1%, each change in such rate to
take effect on the effective date of the change in such prime rate.
(b) It is the intent of the parties that the Executive not be required
to incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, the Company shall pay the
Executive on demand the amount necessary to reimburse the Executive in full for
all reasonable expenses (including all attorneys' fees and legal expenses)
incurred by the Executive in enforcing any of the obligations of the Company
under this Agreement.
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in or rights under
any benefit, bonus, incentive or other plan or program provided by the Company,
or any of its Subsidiaries or Affiliates, and for which the Executive may
qualify.
9. No Set-Off. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or others.
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10. Taxes. Any payment required under this Agreement shall be subject
to all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the aggregate present value of amounts payable or distributable to
or for the benefit of the Executive pursuant to this Agreement (such payments or
distributions pursuant to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be subject to the loss of deduction under Section 280G of the Code.
For purposes of this Section 11, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section 11 shall be made
by the Company's independent public accountant immediately prior to the Change
of Control (the "Accounting Firm"), which firm shall provide its determinations
and any supporting calculations both to the Company and the Executive within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. The Executive shall then
have the right to determine which of the Agreement
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Payments shall be eliminated or reduced in order to produce the Reduced Amount
in accordance with the requirements of this Section. Within five days after this
determination, the Company shall pay (or cause to be paid) or distribute (or
cause to be distributed) to or for the benefit of the Executive such amounts as
are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments, as the case may be, will have
been made by the Company which should not have been made ("Overpayment") or that
additional Agreement Payments which have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. Within two years after the Termination of
Employment, the Accounting Firm shall review the determination made by it
pursuant to the preceding paragraph and the Company shall cooperate and provide
all information necessary for such review. In the event that the Accounting Firm
determines that an Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive which the Executive shall
repay to the Company together with interest from the date of payment under this
Agreement at the applicable Federal rate provided for in Section 7872(f)(2) of
the Code (the "Federal Rate"); provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the limit on the amount that is deductible under Section 280G of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive together with interest from the date of payment
under this Agreement at the Federal Rate.
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(d) All of the fees and expenses of the Accounting Firm in performing
the determinations referred to in subsections (b) and (c) above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections (b) and (c)
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement shall be indefinite
until the Company notifies the Executive in writing that this Agreement will not
be renewed at least sixty days prior to the proposed termination; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Executive with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason; provided, however, that if a Change of Control occurs within 6
months after the Executive's Termination of Employment other than for Cause, the
Executive shall be entitled to all of the terms and conditions of this Agreement
as if the Termination Date had occurred on the date of the Change of Control.
13. Successor Company. PSC shall require any successor or successors
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business and/or assets of PSC or the Company, or of any
of their Subsidiaries that actually employ the Executive, by agreement in form
and substance satisfactory to the Executive, to acknowledge expressly that this
Agreement is binding upon and enforceable against the successor or successors,
in accordance with the terms hereof, and to become jointly and severally
obligated
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with PSC and the Company to perform this Agreement in the same manner and to the
same extent that PSC and the Company would be required to perform if no such
succession or successions had taken place. Failure of PSC or the Company to
notify the Executive in writing as to such successorship, to provide the
Executive the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this Agreement,
PSC and the Company shall mean PSC and the Company, respectively, and their
Subsidiaries as hereinbefore defined and any such successor or successors to
their business and/or assets, jointly and severally.
14. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to PSC or to the Company, to:
Philadelphia Suburban Corporation
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: President
If to the Executive, to:
Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of
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Control, notice at the last address of the Company or to any successor pursuant
to Section 13 hereof shall be deemed sufficient for the purposes hereof. Any
such notice shall be deemed delivered and effective when received in the case of
personal delivery, five days after deposit, postage prepaid, with the U.S.
Postal Service in the case of registered or certified mail, or on the next
business day in the case of overnight express courier service.
15 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment. This Agreement
supersedes all prior agreements, sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment executed by the
Executive and the Company's Chairman of the Company's Executive Compensation and
Employee Benefits Committee, or its successor. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Executive. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this Agreement shall
be construed as giving the Executive any right to be retained in the employ of
the Company.
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18. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of PSC and the Company
hereunder shall not be assignable in whole or in part.
19. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right conferred upon the
Executive by this Agreement is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Executive in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
22. Arbitration. In the event of any dispute under the provisions of
this Agreement other than a dispute in which the sole relief sought is an
equitable remedy such as an injunction, the parties shall be required to have
the dispute, controversy or claim settled by arbitration in Bryn Mawr,
Pennsylvania, in accordance with the National Rules for the
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Settlement of Employment Disputes of the American Arbitration Association,
before one arbitrator who shall be an executive officer or former executive
officer of a publicly traded corporation, selected by the parties. Any award
entered by the arbitrator shall be final, binding and nonappealable and judgment
may be entered thereon by either party in accordance with applicable law in any
court of competent jurisdiction. This arbitration provision shall be
specifically enforceable. The arbitrator shall have no authority to modify any
provision of this Agreement or to award a remedy for a dispute involving this
Agreement other than a benefit specifically provided under or by virtue of the
Agreement. The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.
ATTEST: PHILADELPHIA SUBURBAN CORPORATION
[Seal]
/s/ Xxxxxxxx X. Xxxxx By: /s/ Xxx X. Xxxxx
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Secretary
ATTEST: PHILADELPHIA SUBURBAN WATER COMPANY
[Seal]
/s/ Xxxxxxxx X. Xxxxx By: /s/ Xxx X. Xxxxx
--------------------------------- ---------------------------------
Secretary
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
--------------------------------- ------------------------------------
Witness Executive
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