CHANGE IN CONTROL AGREEMENT
Exhibit
10.26
This
Change
in Control Agreement
(the
“Agreement”) is entered into as of this 20th
day of
December, 2005 by and between NewMil Bancorp, Inc., a Delaware corporation
(hereafter “NewMil Bancorp”), and Xxxxxxxx Xxxxxx, Senior Vice President of
NewMil Bank (the “Executive”).
Whereas,
the
Executive is employed by NewMil Bank, a Connecticut-chartered savings bank
and
subsidiary of NewMil Bancorp, and the Executive has made and is expected to
continue to make major contributions to the profitability, growth, and financial
strength of NewMil Bancorp and its subsidiaries,
Whereas,
NewMil
Bancorp desires to provide additional inducement for the Executive to continue
to remain in the ongoing employ of NewMil Bancorp and subsidiary, and NewMil
Bancorp desires to assure itself of the current and future continuity of
management and establish minimum severance benefits for certain of its officers,
including the Executive, if a Change in Control occurs,
Whereas,
NewMil
Bancorp wishes to ensure that officers and other key employees are not
practically disabled from discharging their duties if a proposed or actual
transaction involving a Change in Control arises, and
Whereas,
none of
the conditions or events included in the definition of the term “golden
parachute payment” contained in section 18(k)(4)(A)(ii) of the Federal Deposit
Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance
Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the
best
knowledge of NewMil Bancorp, is contemplated insofar as either of NewMil Bancorp
or any of its subsidiaries is concerned.
Now
Therefore,
in
consideration of these premises and other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
1. Change
in Control Combined with Employment Termination.
(a)
Termination
of Executive within two years after a Change in Control.
If a
Change in Control occurs during the term of this Agreement and if either of
the
following occurs, the Executive shall be entitled to severance benefits
specified in Section 2 of this Agreement -
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1)
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Termination
by NewMil Bancorp or Subsidiary:
the Executive’s employment with NewMil Bancorp or its Subsidiaries is
involuntarily terminated within two years after a Change in Control,
except for termination under Section 4 of this Agreement. For purposes
of
this Agreement, “Subsidiary” means an entity in which NewMil Bancorp
directly or indirectly beneficially owns 50% or more of the outstanding
voting securities, or
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2)
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Termination
by the Executive for Good Reason:
the Executive terminates employment with NewMil Bancorp or Subsidiaries
for Good Reason (as defined in Section 3) within two years after
a Change
in Control.
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If
the
Executive’s employment terminates after discussions with a third party regarding
a Change in Control commence, and if those discussions ultimately conclude
with
a Change in Control, then for purposes of this Agreement termination of the
Executive’s employment shall be deemed to have occurred after the Change in
Control.
(b) Definition
of Change in Control.
For
purposes of this Agreement, “Change in Control” means -
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1)
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Merger:
NewMil Bancorp merges into or consolidates with another corporation,
or
merges another corporation into NewMil Bancorp, and as a result less
than
50% of the combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were the
holders
of NewMil Bancorp’s voting securities immediately before the merger or
consolidation. For purposes of this Agreement, the term person means
an
individual, corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization
or other
entity, or
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2)
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Acquisition
of Significant Share Ownership:
a
report on Schedule 13D, Schedule TO, or another form or schedule
(other
than Schedule 13G), is filed or is required to be filed under Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule
discloses that the filing person or persons acting in concert has
or have
become the beneficial owner of 25% or more of a class of NewMil Bancorp’s
voting securities (but this clause (2) shall not apply to beneficial
ownership of voting shares held by a Subsidiary in a fiduciary capacity),
or
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3)
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Change
in Board Composition:
during any period of two consecutive years, individuals who constitute
NewMil Bancorp’s board of directors at the beginning of the two-year
period cease for any reason to constitute at least a majority thereof;
provided,
however,
that - for purposes of this clause (3) - each director who is first
elected by the board (or first nominated by the board for election
by
stockholders) by a vote of at least two-thirds (b)
of the directors who were directors at the beginning of the period
shall
be deemed to have been a director at the beginning of the two-year
period,
or
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4)
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Sale
of Assets:
NewMil Bancorp sells to a third party substantially all of NewMil
Bancorp’s assets. For purposes of this Agreement, sale of substantially
all of NewMil Bancorp’s assets includes sale of the shares or assets of
NewMil Bank alone.
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2. Severance
Benefits.
(a)
Severance
benefits.
The
severance benefits to which the Executive is entitled under Section 1 are as
follows -
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1)
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Lump
Sum Payment:
Within five business days after the Executive’s employment terminates,
NewMil Bancorp shall make a lump sum payment to the Executive in
an amount
in cash equal to 0.5 times the Executive’s annual compensation. For
purposes of this Agreement, annual compensation means (a) the Executive’s
annual base salary on the date of the Change in Control or the Executive’s
termination of employment, whichever amount is greater, plus (b)
any
bonuses or incentive compensation earned for the calendar year immediately
before the year in which the Change in Control occurred or immediately
before the year in which termination of employment occurred, whichever
amount is greater, regardless of when the bonus or incentive compensation
is or was paid. NewMil Bancorp recognizes that the bonus and incentive
compensation earned by the Executive for a particular year’s service might
be paid in the year after the calendar year in which the bonus or
incentive compensation is earned. The amount payable to the Executive
hereunder shall not be reduced to account for the time value of money
or
discounted to present value. If the Executive terminates employment
for
Good Reason, the date of termination shall be the date specified
by the
Executive in the notice of
termination.
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2)
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Benefit
Plans:
NewMil Bancorp shall cause the Executive to become fully vested in
any
qualified and non-qualified plans, programs or arrangements in which
the
Executive participated if the plan, program, or arrangement does
not
address the effect of a change in control. NewMil Bancorp also shall
contribute or cause a Subsidiary to contribute to the Executive’s 401(k)
plan account, if any, the matching and profit-sharing contributions,
if
any, that the Executive is entitled to based upon all W-2 income
earned
for the plan year.
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(b) No
mitigation required.
NewMil
Bancorp hereby acknowledges that it will be difficult and could be impossible
(1) for the Executive to find reasonably comparable employment, and (2) to
measure the amount of damages the Executive will suffer as a result of
employment termination. Additionally, NewMil Bancorp acknowledges that its
general severance pay plans do not provide for mitigation, offset, or reduction
of any severance payment received thereunder. NewMil Bancorp further
acknowledges that the payment of severance benefits by NewMil Bancorp under
this
Agreement is reasonable and will be liquidated damages, and the Executive shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment, nor will any profits, income, earnings,
or other benefits from any source whatsoever create any mitigation, offset,
reduction, or any other obligation on the part of the Executive.
3. Good
Reason.
For
purposes of this Agreement, “Good Reason” means the occurrence of any of the
following events or conditions without the Executive’s express written consent
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(a) Reduced
base salary:
involuntary reduction of the Executive’s base salary, or
(b) Participation
in benefit plans reduced or terminated:
reduction of the Executive’s bonus, incentive, or other compensation award
opportunities under NewMil Bancorp’s or Subsidiaries’ benefit plans, unless a
company-wide reduction of all officers’ award opportunities occurs
simultaneously, or termination of the Executive’s participation in any officer
or employee benefit plan maintained by NewMil Bancorp or Subsidiaries, unless
the plan is terminated because of changes in law or loss of tax deductibility
to
NewMil Bancorp or Subsidiaries for contributions to the plan, or unless the
plan
is terminated as a matter of policy applied equally to all participants in
the
plan, or
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(c) Reduced
responsibilities or status:
assignment to the Executive of duties or responsibilities that are materially
inconsistent with the Executive’s duties and responsibilities immediately before
the Change in Control; any other action by NewMil Bancorp or its successor
that
results in a material reduction or material adverse change in the Executive’s
position, authority, duties or responsibilities; failure to nominate the
Executive as a director of NewMil Bancorp if the Executive shall have been
a
director immediately before the Change in Control; or failure to elect or
reelect the Executive or cause the Executive to be elected or reelected to
the
board of directors of NewMil Bank if the Executive shall have been a director
immediately before the Change in Control, or
(d) Failure
to obtain assumption agreement:
failure
to obtain an assumption of NewMil Bancorp’s obligations under this Agreement by
any successor to NewMil Bancorp, regardless of whether succession is a result
of
a merger, consolidation, sale of assets, or other form of reorganization,
or
(e) Material
breach:
a
material breach of this Agreement by NewMil Bancorp or successor that is not
corrected within a reasonable time, or
(f) Relocation
of the Executive:
relocation of NewMil Bancorp’s principal executive offices, or a change of the
Executive’s principal work location, to any location that is more than 15 miles
from the location of NewMil Bancorp’s principal executive offices on the date of
the Change in Control.
4. No
Benefits If Termination Is for Cause.
Anything in this Agreement to the contrary notwithstanding, under no
circumstance shall the Executive be entitled to severance benefits if employment
termination is for Cause. For purposes of this Agreement, “Cause” means the
Executive shall have committed any of the following acts -
(a) Fraud,
embezzlement, theft or other crime:
an act
of fraud, embezzlement, or theft, commission of a felony, or commission of
a
misdemeanor involving moral turpitude, or
(b) Damage
to property:
intentional wrongful damage to the business or property of NewMil Bancorp or
Subsidiaries that, in NewMil Bancorp’s sole judgment, causes material harm to
NewMil Bancorp or Subsidiaries, or
(c) Negligence
and other actions:
gross
negligence, insubordination, disloyalty, or dishonesty in the performance of
the
Executive’s duties as an officer of NewMil Bancorp or Subsidiaries,
or
(d) Violation
of law or policy:
intentional violation of any law or significant policy of NewMil Bancorp or
Subsidiaries committed in connection with the Executive’s employment that, in
NewMil Bancorp’s sole judgment, has an adverse effect on NewMil Bancorp or
Subsidiaries, or
(e) Removal:
removal
of the Executive from office or permanent prohibition from participating in
NewMil Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or
(f) Disclosure
of trade secrets:
intentional wrongful disclosure of secret processes or confidential information
of NewMil Bancorp or a Subsidiary that, in NewMil Bancorp’s sole judgment,
causes material harm to NewMil Bancorp or the Subsidiary, or
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(g) Termination
for cause under an employment agreement:
any
actions that have caused the Executive to be terminated for cause under any
employment agreement existing on the date hereof or hereafter entered into
between the Executive and NewMil Bancorp or a Subsidiary.
For
purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed to have been intentional if it was due primarily
to an
error in judgment or negligence. An act or failure to act on the Executive’s
part shall be considered intentional if it is not in good faith and if it is
without a reasonable belief that the action or failure to act is in the best
interests of NewMil Bancorp or a Subsidiary.
5. Term
of Agreement.
The
initial term of this Agreement shall be for a period of three years, commencing
December 20th, 2005. On the first anniversary of the effective date of this
Agreement and on each anniversary thereafter this Agreement shall be extended
automatically for one additional year unless NewMil Bancorp’s board of directors
gives notice to the Executive in writing at least 90 days before the anniversary
that the term of this Agreement will not be extended. If the board of directors
determines not to extend the term, it shall promptly notify the Executive.
References herein to the term of this Agreement mean the initial term and
extensions of the initial term. Unless terminated earlier, this Agreement shall
terminate when the Executive attains age 65. If the board of directors decides
not to extend the term of this Agreement, this Agreement shall nevertheless
remain in force until its term expires. The board’s decision not to extend the
term of this Agreement shall not - by itself - give the Executive any rights
under this Agreement to claim an adverse change in position, compensation,
or
circumstances or otherwise to claim entitlement to severance or termination
benefits under this Agreement. Except as provided in Section 1(a), this
Agreement shall terminate when the Executive’s employment with NewMil Bancorp
and Subsidiaries terminates, except that the legal fee reimbursement promise
set
forth in this Agreement shall survive termination.
6. This
Agreement Is Not an Employment Contract.
The
parties hereto acknowledge and agree that (a) this Agreement is not a management
or employment agreement and (b) nothing in this Agreement shall give the
Executive any rights or impose any obligations to continued employment by NewMil
Bancorp or any Subsidiary or successor of NewMil Bancorp, nor shall it give
NewMil Bancorp any rights or impose any obligations for the continued
performance of duties by the Executive for NewMil Bancorp or any Subsidiary
or
successor of NewMil Bancorp.
7. Taxes.
NewMil
Bancorp may withhold from any benefits payable under this Agreement all Federal,
state, local or other taxes as may be required by law, governmental regulation
or ruling. NewMil Bancorp and the Executive intend that their exercise of
authority or discretion under this Change in Control Agreement shall comply
with
section 409A of the Internal Revenue Code of 1986 and Treasury Department
regulations and guidance of general application issued thereunder. To ensure
that the Executive is not subject to interest and penalties that may be imposed
under section 409A, NewMil Bancorp and the Executive agree to amend this Change
in Control Agreement as necessary to avoid application of interest and penalties
imposed under section 409A and the regulations and guidance of general
application issued thereunder. If any provision of this Change in Control
Agreement does not satisfy the requirements of section 409A or the regulations
and guidance of general application issued thereunder, such provision shall
be
applied in a manner consistent with those requirements, notwithstanding any
provision of this Change in Control Agreement.
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8. Successors
and Assigns.
(a)
This
Agreement is binding on NewMil Bancorp’s successors.
This
Agreement shall be binding upon NewMil Bancorp and any successor to NewMil
Bancorp, including any persons acquiring directly or indirectly all or
substantially all of the business or assets of NewMil Bancorp by purchase,
merger, consolidation, reorganization, or otherwise. Any such successor shall
thereafter be deemed to be “NewMil Bancorp” for purposes of this Agreement. But
this Agreement and NewMil Bancorp’s obligations under this Agreement are not
otherwise assignable, transferable, or delegable by NewMil Bancorp. By agreement
in form and substance satisfactory to the Executive, NewMil Bancorp shall
require any successor to all or substantially all of the business or assets
of
NewMil Bancorp expressly to assume and agree to perform this Agreement in the
same manner and to the same extent NewMil Bancorp would be required to perform
if no such succession had occurred.
(b) This
Agreement is enforceable by the Executive and the Executive’s
heirs.
This
Agreement will inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributes, and legatees.
(c) This
Agreement is personal in nature and is not assignable.
This
Agreement is personal in nature. Without written consent of the other party,
neither party shall assign, transfer, or delegate this Agreement or any rights
or obligations under this Agreement except as expressly provided in this Section
8. Without limiting the generality or effect of the foregoing, the Executive’s
right to receive payments hereunder is not assignable or transferable, whether
by pledge, creation of a security interest, or otherwise, except for a transfer
by Executive’s will or by the laws of descent and distribution. If the Executive
attempts an assignment or transfer that is contrary to this Section 8, NewMil
Bancorp shall have no liability to pay any amount to the assignee or
transferee.
9. Notices.
All
notices, requests, demands, and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed, certified or registered mail, return receipt requested, with postage
prepaid, to the following addresses or to such other address as either party
may
designate by like notice. Unless otherwise changed by notice, notice shall
be
properly addressed to the Executive if addressed to the address of the Executive
on the books and records of NewMil Bancorp at the time of the delivery of such
notice, and properly addressed to NewMil Bancorp if addressed to the Board
of
Directors, NewMil Bancorp, Inc., 00 Xxxx Xxxxxx, X.X. Xxx 000, Xxx Xxxxxxx,
Xxxxxxxxxxx 00000-0000.
10. Captions
and Counterparts.
The
headings and subheadings used in this Agreement are included solely for
convenience and shall not affect the interpretation of this Agreement. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute one and
the
same agreement.
11. Amendments
and Waivers.
No
provision of this Agreement may be modified, waived, or discharged unless the
waiver, modification, or discharge is agreed to in a writing or writings signed
by the Executive and by NewMil Bancorp. No waiver by either party hereto at
any
time of any breach by the other party hereto or compliance with any condition
or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same time
or
at any other time.
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12. Severability.
The
provisions of this Agreement are severable. The invalidity or unenforceability
of any provision shall not affect the validity or enforceability of the other
provisions of this Agreement. Any provision held to be invalid or unenforceable
shall be reformed to the extent (and solely to the extent) necessary to make
it
valid and enforceable.
13. Governing
Law.
The
validity, interpretation, construction, and performance of this Agreement shall
be governed by and construed in accordance with the substantive laws of the
State of Connecticut, without giving effect to the principles of conflict of
laws of such State.
14. Entire
Agreement.
This
Agreement constitutes the entire agreement between NewMil Bancorp and the
Executive concerning the subject matter. No rights are granted to the Executive
under this Agreement other than those specifically set forth. No agreements
or
representations, oral or otherwise, expressed or implied concerning the subject
matter hereof have been made by either party that are not set forth expressly
in
this Agreement.
15. Payment
of Legal Fees after a Change in Control Occurs.
NewMil
Bancorp is aware that after a Change in Control management could cause or
attempt to cause NewMil Bancorp to refuse to comply with the obligations under
this Agreement, or could institute or cause or attempt to cause NewMil Bancorp
to institute litigation seeking to have this Agreement declared unenforceable,
or could take or attempt to take other action to deny the Executive the benefits
intended under this Agreement. In these circumstances the purpose of this
Agreement would be frustrated. It is NewMil Bancorp’s intention that the
Executive not be required to incur the expenses associated with the enforcement
of the Executive’s rights under this Agreement, whether by litigation or other
legal action, because the cost and expense thereof would substantially detract
from the benefits intended to be granted to the Executive hereunder. It is
NewMil Bancorp’s intention that the Executive not be forced to negotiate
settlement of the Executive’s rights under this Agreement under threat of
incurring expenses. Accordingly, if after a Change of Control occurs it appears
to the Executive that (a) NewMil Bancorp has failed to comply with any of its
obligations under this Agreement, or (b) NewMil Bancorp or any other person
has
taken any action to declare this Agreement void or unenforceable, or instituted
any litigation or other legal action designed to deny, diminish, or to recover
from the Executive the benefits intended to be provided to the Executive
hereunder, NewMil Bancorp irrevocably authorizes the Executive from time to
time
to retain counsel of the Executive’s choice, at NewMil Bancorp’s expense as
provided in this section 15, to represent the Executive in connection with
the
initiation or defense of any litigation or other legal action, whether by or
against NewMil Bancorp or any director, officer, stockholder, or other person
affiliated with NewMil Bancorp, in any jurisdiction. Notwithstanding any
existing or previous attorney-client relationship between NewMil Bancorp and
any
counsel chosen by the Executive under this section 15, NewMil Bancorp
irrevocably consents to the Executive entering into an attorney-client
relationship with that counsel, and NewMil Bancorp and the Executive agree
that
a confidential relationship shall exist between the Executive and that counsel.
The fees and expenses of counsel selected from time to time by the Executive
as
provided in this section shall be paid or reimbursed to the Executive by NewMil
Bancorp on a regular, periodic basis upon presentation by the Executive of
a
statement or statements prepared by such counsel in accordance with such
counsel’s customary practices, up to a maximum aggregate amount of $20,000,
whether suit be brought or not, and whether or not incurred in trial,
bankruptcy, or appellate proceedings. NewMil Bancorp’s obligation to pay the
Executive’s legal fees provided by this section 15 operates separately from and
in addition to any legal fee reimbursement obligation NewMil Bancorp may have
with the Executive under any separate severance, employment, salary
continuation, or other agreement. Anything in this section 15 to the contrary
notwithstanding however, NewMil Bancorp shall not be required to pay or
reimburse the Executive’s legal expenses if doing so would violate section 18(k)
of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of
the
Federal Deposit Insurance Corporation [12 CFR 359.3].
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In
Witness Whereof,
the
parties have executed this Change in Control Agreement as of the date first
written above. Xxxxxxxx Xxxxxx
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Executive
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NewMil
Bancorp, Inc.
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/s/
Xxxxxxxx Xxxxxx
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By:
/s/
Xxxxxxx X. Xxxxx
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Xxxxxxxx
Xxxxxx
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Xxxxxxx
X. Xxxxx
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Senior
Vice President
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Its:
Chairman, President and Chief
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Executive
Officer
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County
of
Litchfield )
)
ss:
State
of
Connecticut )
Before
me
this 20th
day of
December, 2005, personally appeared the above named Xxxxxxx X. Xxxxx and
Xxxxxxxx Xxxxxx, who acknowledged that they did sign the foregoing instrument
and that the same was their free act and deed.
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________________________________
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(Notary
Seal)
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Notary
Public
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My
Commission Expires:
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