AGREEMENT
Exhibit 10.46
AGREEMENT
THIS Agreement made as of the 26th day of February, 2008, by and between, Aqua
America, Inc., a Pennsylvania corporation (“Aqua America”), and Xxxx X. Xxxxxxxx (the
“Executive”).
WHEREAS, the Executive is presently employed as an executive of Aqua America or one of its
Subsidiaries; and
WHEREAS, Aqua America considers it essential to xxxxxx the employment of well-qualified, key
management personnel, and, in this regard, the board of directors of Aqua America recognize that,
as is the case with many publicly-held corporations such as Aqua America, the possibility of a
change of control of Aqua America 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 Aqua America;
WHEREAS, the board of directors of Aqua America have determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of key members of
management of Aqua America and its Subsidiaries to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a change of control of
Aqua America, although no such change is now contemplated; and
WHEREAS, in order to induce the Executive to remain in the employ of Aqua America or its
Subsidiaries, for which the Executive provides key executive services, Aqua America is entering
into this Agreement to provide that the Executive with certain compensation in the event
Executive’s employment is terminated subsequent to a “Change of Control” (as defined in Section 1
hereof) of Aqua America as a cushion against the financial and career impact on the Executive of
any such Change of Control; and
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”).
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(b) “Base Compensation” shall mean the average of the total of cash base salary and annual
bonus paid to, and dividend equivalents under the Equity Compensation Plan accrued for, the
Executive in each calendar year in all capacities with Aqua America, and its Subsidiaries or
Affiliates, as would be reported for Federal income tax purposes on Form W-2 if currently subject
to tax, together with (i) any amounts the payment of which has been deferred by the Executive under
any deferred compensation plan of Aqua America, and its Subsidiaries or Affiliates, or otherwise,
(ii) any and all salary reduction authorized amounts under any of the benefit plans or programs of
Aqua America, and its Subsidiaries or Affiliates, (iii) the value, calculated on the same basis as
the value of stock option grants shown in Aqua America’s Proxy, for each calendar year in which a
grant was made, of the stock option grants made to the Executive under the Equity Compensation
Plan, but excluding any amounts attributable to the exercise of stock options, and (iv) the value,
based on the average value of shares vesting in each year, of any grants of Restricted Stock made
to the Executive under the Equity Compensation Plan, for the three calendar years (or such number
of actual full calendar years of employment, if less than three) 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
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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 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 Aqua America; 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 Aqua America.
(e) “Change of Control” shall mean:
(i) any Person (including any individual, firm, corporation, partnership or other entity
except Aqua America or any employee benefit plan of Aqua America or of any Affiliate or Associate,
any Person or entity organized, appointed or established by Aqua America 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
Aqua America 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 Aqua America’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 Aqua America or its
liquidation is approved by a majority of its shareholders or Aqua America is merged into or is
merged with an unrelated entity such that following the merger the shareholders of Aqua America no
longer own more than 51% of the resultant entity.
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Notwithstanding anything in this subsection 1(e) to the contrary, a Change of Control shall
not be deemed to have taken place under clause (e)(i) above if (i) such Person becomes the
beneficial owner in the aggregate of 20% or more of the Common Stock of Aqua America then
outstanding as a result, in the determination of a majority of those members of the Board of
Directors of Aqua America in office prior to the acquisition, 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, or (ii) such Person becomes the
beneficial owner in the aggregate of 20% or more of the Common Stock of Aqua America outstanding as
a result of an acquisition of common stock by Aqua America which, by reducing the number of common
stock outstanding, increases the proportionate number of shares of common stock beneficially owned
by such Person to 20% or more of the shares of common stock then outstanding; provided, however
that if a Person shall become the beneficial owner of 20% or more of the shares of common stock
then outstanding by reason of common stock purchased by Aqua America and shall, after such share
purchases by Aqua America become the beneficial owner of any additional shares of common stock,
then the exemption set forth in this clause shall be inapplicable.
(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 Aqua America or its Subsidiaries and
Affiliates.
(g) “Equity Compensation Plan” shall mean Aqua America’s 1994 and 2004 Equity Compensation
Plan, and its predecessors and successors.
(h) “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 Aqua America or its successor(s) to comply with and satisfy any of the
terms of this the Agreement;
(ii) any significant involuntary reduction of the authority, duties, responsibilities or
reporting relationships held by the Executive immediately prior to the Change of Control;
(iii) any involuntary removal of the Executive from the employment grade, compensation level
or officer positions which the Executive holds with Aqua America or, if the Executive is employed
by a Subsidiary, with a Subsidiary, 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 Executive’s 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
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(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.
(i) “Normal Retirement Date” shall mean the first day of the calendar month coincident with or
next following the Executive’s 65th birthday.
(j) “Subsidiary” shall mean any corporation in which Aqua America, directly or indirectly,
owns at least a 50% interest or an unincorporated entity of which Aqua America, directly or
indirectly, owns at least 50% of the profits or capital interests.
(k) “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.
(l) “Termination of Employment” shall mean the termination of the Executive’s actual
employment relationship with Aqua America and any of it Subsidiaries that actually employs the
Executive.
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, Aqua America shall
pay to the Executive, upon the execution of a release in the form required by Aqua America 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 (2) times the
Executive’s Base Compensation, subject to required employment taxes and deductions.
(b) In the event the Executive’s Normal Retirement Date would occur prior to 24 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 730 days. In the event the Termination Date occurs after the
Executive’s Normal Retirement Date, no payments shall be made under this Section 3.
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4. Other Payments and Benefits. 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 Aqua America, and its Subsidiaries or Affiliates. In addition, the Executive
shall be entitled to (i) 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 years, (ii)
continued use of the automobile furnished to the Executive, if any, for the lesser of (1) two years
after the Termination Date or (2) the balance of the applicable lease term, if any, in either case
to the same extent as was provided to the Executive, if any, in the calendar year immediately
preceding the Change of Control and the ability to purchase such automobile at its book value at
the completion of such period and (iii) fully-paid executive level outplacement services from the
provider or the Executive’s choice for six (6) months following the Termination Date.
5. Trust Fund. Aqua America 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 Aqua America’s President, as set forth in
the agreement pursuant to which the fund has been established.
6. Enforcement.
(a) In the event that Aqua America 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, Aqua
America 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 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, Aqua America 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 Aqua America under this Agreement.
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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 Aqua America, or any of its Subsidiaries or Affiliates, and for
which the Executive may qualify.
9. No Set-Off. Aqua America’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 Aqua America, or any of its Subsidiaries or Affiliates may have against the
Executive or others.
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 Aqua America 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 Aqua America 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.
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(b) All determinations to be made under this Section 11 shall be made by Aqua America’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 Aqua America
and the Executive within 10 days of the Termination Date. Any such determination by the Accounting
Firm shall be binding upon Aqua America and the Executive. The Executive shall then have the right
to determine which of the Agreement 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, Aqua America 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 Aqua America which should not have been made
(“Overpayment”) or that additional Agreement Payments which have not been made by Aqua America
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 Aqua America 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 Aqua America 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 Aqua America 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 Aqua America to or for the benefit of the Executive together with
interest from the date of payment under this Agreement at the Federal Rate.
(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 Aqua America. Aqua America
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.
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12. Term of Agreement. The term of this Agreement shall be indefinite until Aqua
America 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 Aqua America and
its Subsidiaries, as the case may be, shall terminate for any reason; provided, however, that if a
Change of Control occurs within 18 months after (a) the Executive’s termination incurred for any
reason other than a voluntary resignation or retirement (a Good Reason Termination shall not be
deemed voluntary) or termination for Cause or (b) the termination of this Agreement, the Executive
shall be entitled to all of the terms and conditions of this Agreement as if the Executive’s
termination had occurred on the date of the Change of Control.
13. Successor Company. Aqua America 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 Aqua America, 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 with Aqua America to perform this Agreement in the same manner and to the same extent
that Aqua America would be required to perform if no such succession or successions had taken
place. Failure of Aqua America 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, Aqua America Aqua America and any successor
or successors to its 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 Aqua America, to:
Aqua America, Inc.
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chairman, Executive Compensation Committee
000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Chairman, Executive Compensation Committee
If to the Executive, to:
Xxxx X. Xxxxxxxx
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or to such other names or addresses as Aqua America 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 Aqua America following a Change of Control, notice at
the last address of Aqua America 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 Aqua America. 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 Aqua
America.
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 Aqua America or any of its
Subsidiaries.
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 Aqua America hereunder shall not be assignable in whole or in part.
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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 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. Aqua America 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).
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as of the date first above written.
| ATTEST: | AQUA AMERICA, INC. | |||
/s/
Xxx X. Xxxxx
|
By | /s/ Xxxxxxxx XxXxxxxxxxxx | ||
Secretary |
||||
| EXECUTIVE | ||||
| /s/ Xxxxx Xxxxxxxx | /s/ Xxxx X. Xxxxxxxx | |||
Witness |
||||
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