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Exhibit 10 (k)




SOUTHSIDE BANK


SPLIT DOLLAR AGREEMENT




     THIS
AGREEMENT is made and entered into this 27th day of August,
2004, by and between SOUTHSIDE BANK, located in Tyler, Texas (the “Company”),
and CHARLES E. DAWSON (the “Executive”).



INTRODUCTION




     WHEREAS, the Executive has contributed substantially to the success of
the Company; and



     WHEREAS, as a result of these contributions, the Company, as a fringe
benefit, is willing to divide the death proceeds of a life insurance policy on
the Executive’s life with the Executive or his designated beneficiary; and



     WHEREAS, the Company will pay the life insurance premiums from its general
assets; and



     WHEREAS, the Company agrees to provide the aforementioned benefit to the
Executive as a current benefit that will continue beyond the date the
Executive’s service to the Company ends upon the terms and conditions specified
in this Agreement;



     NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Executive hereby agree as follows:



ARTICLE 1

Definitions




     Whenever used in this Agreement, the following terms shall have the
meanings specified:




	1.1	 	“Bank’s Interest” means the benefit set forth in Section 3.1.
	 
	1.2	 	“Base Salary” means the Executive’s total base annual salary as of the
date of this Agreement, exclusive of special payments such as bonuses or
commissions, but including any salary reductions made in accordance with
Section 125 or 401(k) of the Code.




 









 






	1.3	 	“Beneficiary” means each designated person, or the estate of the
Executive, entitled to receive any portion of the Net Death Proceeds upon
the death of the Executive.
	 
	1.4	 	“Board” means the Board of Directors of the Bank as from time to time
constituted.
	 
	1.5	 	“Change in Control” shall mean and shall be deemed to have occurred for
purposes of this Agreement if and when:
	 
	 	 	(A) any entity, person or group of persons acting in concert (other than
the current members of the Board of Directors of Southside Bancshares,
Inc. (“BHC”) or any of their descendants) becomes beneficial owner
(within the meaning of Section 13(d) of the Securities and Exchange Act
of 1934), directly or indirectly, of securities of the BHC representing
more than fifty percent (50%) of the combined voting power of the BHC or
any successor corporation;
	 
	 	 	(B) any entity, person or group of persons acting in concert (other than
the Company or the current members of the Board of Directors of the Bank
or any of their descendants) becomes beneficial owner (within the meaning
of Section 13(d) of the Securities and Exchange Act of 1934), directly or
indirectly, of securities of the Bank representing more than fifty
percent (50%) of the combined voting power of the Bank or any successor;
	 
	 	 	(c) the effective date of a merger or consolidation of the BHC or the
Bank with one or more other corporations or banks as a result of which
the holders of the outstanding voting stock of the BHC or the Bank
immediately prior to the merger hold less than fifty percent (50%) of the
combined voting power of the surviving or resulting corporation or bank;
or
	 
	 	 	(D) the effective date of a transfer of all or substantially all of the
property of the BHC or the Bank other than to an entity of which the BHC
or the Bank owns at least eighty percent (80%) of the combined voting
power.





     Notwithstanding the above, no Change in Control shall be deemed to occur
for purposes of this Agreement as a result of any transaction or series of
transactions involving only the BHC, the Bank, any affiliate (within the
meaning of Section 3A of the Federal Reserve Act of 1913, as amended), or any
of them, or any of their successors.




	1.6	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	1.7	 	“Disability” means the Executive’s suffering a sickness, accident or
injury which has been determined by the insurance carrier of any
individual or group disability insurance policy provided by the Bank or
made available by the Bank to its employees and covering the Executive, or
by the Social Security Administration, to be a disability rendering the
Executive totally and permanently disabled. Upon




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	 	 	the request of the Plan Administrator, the Executive must submit proof to the Plan
Administrator of the insurance carrier’s or Social Security Administration’s determination.
	 
	1.8	 	“Executive’s Interest” means the benefit set forth in Section 3.2.
	 
	1.9	 	“Final Year of Employment” means the last calendar year in which the
Executive was actually employed by the Company on a full-time basis.
	 
	1.10	 	“Insured” means the Executive.
	 
	1.11	 	“Insurer” means the insurance company issuing the Policy on the life of
the Insured.
	 
	1.12	 	“Net Death Proceeds” means the total death proceeds of the Policy minus
the cash surrender value.
	 
	1.13	 	“Plan Administrator” means the plan administrator described in Article 13.
	 
	1.14	 	“Policy” means the insurance policy or policies listed on Schedule A
attached hereto or replacement coverage with similar benefits identified
in a supplement to this Agreement.
	 
	1.15	 	“Termination of Employment” means the Executive ceases to be employed by
the Bank for any reason whatsoever other than by reason of a leave of
absence which is approved by the Bank. For purposes of this Agreement, if
there is a dispute over the employment status of the Executive or the date
of the Executive’s Termination of Employment, the Bank shall have the sole
and absolute right to decide the dispute.
	 
	1.16	 	“Vested Insurance Benefit” means the Bank will provide the Executive with
continued insurance coverage from the date of vesting until death, subject
to the forfeiture provisions detailed in Section 4.2 and Article 7.
Article 4 explains how the Executive achieves vested status.
	 
	1.17	 	“Year of Service” means each twelve-month period commencing on the
Executive’s initial date of hire by the Bank, during the entirety of which
time the Executive remains an employee of the Bank. For purposes of this
Agreement, if there is a dispute over the number of years of service of
the Executive or the date of the Executive’s initial hire by the Bank, the
Bank shall have the sole and absolute right to decide the dispute.




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ARTICLE 2

Automatic Termination Of Rights





	2.1	 	Automatic Termination of Rights. The Executive’s rights under this
Agreement shall automatically cease to the extent either of the following
events occur: (i) if the Executive’s employment with the Bank is
terminated for any reason (other than death) prior to meeting any of the
criteria for a Vested Insurance Benefit under Section 4.1, or (ii) this
Agreement or any of the Executive’s rights under the Agreement are
terminated in accordance with Section 4.2 or 12.1. If the Executive’s
rights under the Agreement are wholly terminated and the Bank elects to
maintain the Policy, the Bank shall be the direct beneficiary of the
entire death proceeds of the Policy. If the Executive’s rights under the
Agreement are partially terminated, the Bank, in addition to an amount
equal to the cash surrender value of the Policy, shall become the
beneficiary of such portion of the Net Death Proceeds as to which the
Executive’s rights have been terminated.





ARTICLE 3

Policy Ownership/Interests





	3.1	 	Bank’s Interest. The Bank shall own the Policy and shall have the right
to exercise all incidents of ownership and, subject to Article 6, the Bank
may terminate the Policy without the consent of the Insured. The Bank
shall be the beneficiary of an amount equal to the cash surrender value of
the Policy and any portion of the Net Death Proceeds of the Policy
remaining after the Executive’s Interest is determined according to
Section 3.2.
	 
	3.2	 	Executive’s Interest. The Executive shall have the right to designate the
Beneficiary of an amount of Net Death Proceeds as specified in Section
3.2.1 or 3.2.2. The Executive shall also have the right to elect and
change settlement options with respect to the Executive’s Interest by
providing written notice to the Bank and the Insurer.






	 	3.2.1	 	Death Prior to Termination of Employment. If the Executive
dies while employed by the Bank, the Executive’s Beneficiary shall
be entitled to a benefit equal to $750,000, which amount shall be
increased annually on the anniversary date of this Agreement by an
inflation adjustment factor of five percent, provided the total
benefit shall be prorated from the first day of the year in which
death occurs through the date of the Executive’s death and shall not
exceed the Net Death Proceeds.
	 
	 	3.2.2	 	Death After Termination of Employment. If after termination
of employment the Executive has a Vested Insurance Benefit pursuant
to Article 4 at the date of the Executive’s death, the Executive’s
Beneficiary shall be entitled to a benefit equal to two times the
Executive’s Base Salary for the Executive’s Final Year of
Employment, provided the total benefit shall not exceed the Net
Death Proceeds. If the Executive has not




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	 	 	 	achieved a Vested Insurance Benefit prior to the Executive’s
termination of employment, the Executive’s Beneficiary will not
be entitled to a benefit under this Section 3.2.2.





ARTICLE 4

Vesting





	4.1	 	Vested Insurance Benefit. The Executive shall have a Vested Insurance
Benefit equal to the amount specified in Section 3.2.2 at the earliest of
the following events:






	 	4.1.1	 	Remaining in the continuous employ of the Bank until age sixty-five
(65);
	 
	 	4.1.2	 	Remaining in the continuous employ of the Bank until the
Executive’s age plus Years of Service equals sixty-five (65);
	 
	 	4.1.3	 	Termination of Employment due to Disability;
	 
	 	4.1.4	 	Being employed by the Bank at the date a Change in Control
occurs, followed by a termination of the Executive’s employment, or
	 
	 	4.1.5	 	At the discretion of the Board, the Executive may be deemed
to have a Vested Insurance Benefit sooner than provided in Sections
4.1.1 through 4.1.4 above if there are other circumstances not
addressed in such sections.






	4.2	 	Forfeiture of Benefit. Notwithstanding the provisions of Section 4.1, the
Executive will forfeit his or her Vested Insurance Benefit: (i) if and to
the extent the Executive violates any of the provisions detailed in
Article 7; (ii) in the case of a disabled Executive who vested pursuant to
Section 4.1.3, if such Executive becomes gainfully employed by a financial
services provider other than the Bank; or (iii) the Executive provides
written notice to the Bank voluntarily declining further participation in
the split dollar arrangement.





ARTICLE 5

Premiums And Imputed Income





	5.1	 	Premium Payment. The Bank shall pay all premiums due on the Policy.
	 
	5.2	 	Economic Benefit. The Plan Administrator shall determine the economic
benefit attributable to the Executive based on the life insurance premium
factor for the Executive’s age multiplied by the aggregate death benefit
payable to the Executive’s Beneficiary. The “life insurance premium
factor” is the minimum amount required to be imputed under IRS Reg. §
1.61-22(d)(3)(ii) or any subsequent applicable authority.




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	5.3	 	Imputed Income. The Bank shall impute the economic benefit to the
Executive on an annual basis, by adding the economic benefit to the
Executive’s W-2, or if applicable, Form 1099. Before and after the
Executive’s retirement, the Bank also shall pay an annual gross-up bonus
to the Executive in an amount sufficient to enable the Executive to pay
the federal income tax on both the economic benefit and on the gross-up
bonus.





ARTICLE 6

Comparable Coverage





	6.1	 	Insurance Policies. If the Executive has a Vested Insurance Benefit, the
Bank may provide such benefit through the existing Policy owned by the
Bank on the Executive’s life, or may provide comparable insurance coverage
to the Executive through whatever means the Bank deems appropriate. If the
Executive waives or forfeits his or her right to the Vested Insurance
Benefit, the Bank may choose to cancel the Policy on the Executive, or may
continue such coverage and become the direct beneficiary of the entire
death proceeds. Otherwise, the Bank shall retain in force a Policy as
defined in Section 1.14.
	 
	6.2	 	Offer to Purchase. If the Bank discontinues the Policy while the
Executive is employed by the Bank or when the Executive has a Vested
Insurance Benefit that has not been forfeited, the Bank shall give the
Executive at least thirty (30) days to purchase such Policy. The purchase
price shall be the cash surrender value of the Policy. Such notification
shall be in writing.





ARTICLE 7

General Limitations





	7.1	 	Excess Parachute or Golden Parachute Payment. If the payments and
benefits pursuant to this Agreement, either alone or together with other
payments and benefits which the Executive has the right to receive from
the Bank, would constitute an “excess parachute payment” under Section
280G of the Code, or would be a prohibited golden parachute payment
pursuant to 12 C.F.R. §359.2 and for which the appropriate federal banking
agency has not given written consent to pay pursuant to 12 C.F.R. §359.4,
the payments and benefits pursuant to this Agreement shall be reduced, in
the manner determined by the Bank and the Executive (or the Executive’s
representative) in the case of the application of Section 280G of the
Code, by the amount, if any, which is the minimum necessary to result in
(i) no portion of the payments and benefits under this Agreement being
non-deductible to the Bank pursuant to Section 280G of the Code and
subject to the excise tax imposed under Section 4999 of the Code, and (ii)
no adverse consequence to the Bank under or pursuant to such banking
regulations. All benefits payable under this Agreement shall also be
subject to limitations or prohibitions imposed by subsequent changes or
amendments to the cited laws and regulations except to the extent that any
benefits payable under this




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	 	 	Agreement are grandfathered or otherwise exempt or excluded from the
change or amendment.
	 
	7.2	 	Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Executive shall forfeit any right to a benefit under
this Agreement if the Bank terminates the Executive’s employment for
cause. Termination of the Executive’s employment for “Cause” shall mean
termination because of gross negligence, willful misconduct, breach of
fiduciary duty involving personal profit, willful violation of any law or
final cease-and-desist order or material breach of any provision of the
Agreement. For purposes of this paragraph, no act or failure to act on the
Executive’s part shall be considered “willful” unless done, or omitted to
be done, by the Executive not in good faith and without reasonable belief
that the Executive’s action or omission was in the best interest of the
Bank.
	 
	7.3	 	Removal. Notwithstanding any provision of this Agreement to the contrary,
the Executive’s rights under the Agreement shall terminate if the
Executive is subject to a final removal or prohibition order issued by an
appropriate federal banking agency pursuant to Section 8(e) of the Federal
Deposit Insurance Act (“FDIA” ).
	 
	7.4	 	Suicide or Misstatement. No benefits shall be payable if the Executive
commits suicide within two years after the date of this Agreement, or if
the insurance company denies coverage (i) for material misstatements of
fact made by the Executive on any application for life insurance purchased
by the Bank, or (ii) for any other reason; provided, however that the Bank
shall evaluate the reason for the denial, and upon advice of legal counsel
and in its sole discretion, consider judicially challenging any denial.





ARTICLE 8

Beneficiaries





	8.1	 	Beneficiary. The Executive shall have the right, at any time, to
designate a Beneficiary or Beneficiaries of the Executive’s Interest under
Section 3.2 of this Agreement.
	 
	8.2	 	Beneficiary Designation. The Executive’s designation of a Beneficiary,
and the respective interests of the Bank and the Executive in the Policy,
shall be reflected on an endorsement signed by the Bank and the Executive
and filed with the Insurer.





ARTICLE 9

Assignment




     The Executive may assign without consideration all or part of the
Executive’s Interest under this Agreement to any person, entity or trust. In
the event the Executive shall transfer all or part of such Executive’s
Interest, then all or part of the Executive’s



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Interest under this Agreement shall be vested in his or her transferee, subject
to such transferee executing agreements binding them to the provisions of this
Agreement, who shall be substituted as a party hereunder, and the Executive
shall have no further interest under this Agreement.




ARTICLE 10

Insurer




     The Insurer shall be bound only by the terms of and all endorsements to
the Policy. Any payments the Insurer makes or actions it takes in accordance
with the Policy shall fully discharge it from all claims, suits and demands of
all entities or persons. The Insurer shall not be bound by or deemed to have
notice of the provisions of this Agreement. The Insurer shall have the right to
rely on the Plan Administrator’s representations, as approved by the Committee
(defined in Section 13.1), with regard to any definitions, interpretations or
Policy interests as specified under this Agreement.



ARTICLE 11

Claims And Review Procedure





	11.1	 	Claims Procedure. The Executive, the Executive’s assignee, or any other
party who claims a right to an benefits under this Agreement (“claimant”)
shall make a claim for such benefits as follows:






	 	11.1.1	 	Written Claim. The claimant initiates a claim by submitting to the
Plan Administrator a written claim for the benefits.
	 
	 	11.1.2	 	Timing of Plan Administrator Response. The Plan Administrator
shall respond to such claimant within 30 days after receiving the
claim. If the Plan Administrator determines that special
circumstances require additional time for processing the claim, the
Plan Administrator can extend the response period by an additional
30 days by notifying the claimant in writing, prior to the end of
the initial 30-day period, that an additional period is required.
The notice of extension must set forth the special circumstances and
the date by which the Plan Administrator expects to render its
decision.
	 
	 	11.1.3	 	Notice of Decision. If the Plan Administrator denies part or all
of the claim, the Plan Administrator shall notify the claimant in
writing of such denial. The Plan Administrator shall write the
notification in a manner calculated to be understood by the
claimant. The notification shall set forth:






	 	(a)	 	The specific reasons for the denial;
	 
	 	(b)	 	A reference to the specific provisions of the
Agreement on which the denial is based;




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	 	(c)	 	A description of any additional information or
material necessary for the claimant to perfect the claim and
an explanation of why it is needed;
	 
	 	(d)	 	An explanation of the applicable review
procedures and the time limits applicable to such procedures;
and
	 
	 	(e)	 	A statement of the claimant’s right to bring a
civil action under ERISA Section 502(a) following an adverse
benefit determination on review.






	11.2	 	Review Procedure. If the Plan Administrator denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review
by the Plan Administrator of the denial, as follows:






	 	11.2.1	 	Written Request. To initiate the review, the claimant, within 60
days after receiving the Plan Administrator’s notice of denial, must
file with the Plan Administrator a written request for review.
	 
	 	11.2.2	 	Additional Submissions — Information Access. The claimant shall
then have the opportunity to submit written comments, documents,
records and other information relating to the claim. The Plan
Administrator shall also provide the claimant, upon request and free
of charge, reasonable access to, and copies of, all documents,
records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.
	 
	 	11.2.3	 	Considerations on Review. In considering the review, the Plan
Administrator shall take into account all materials and information
the claimant submits relating to the claim, without regard to
whether such information was submitted or considered in the initial
benefit determination.
	 
	 	11.2.4	 	Timing of Plan Administrator’s Response. The Plan Administrator
shall respond in writing to such claimant within 30 days after
receiving the request for review. If the Plan Administrator
determines that special circumstances require additional time for
processing the claim, the Plan Administrator can extend the response
period by an additional 30 days by notifying the claimant in
writing, prior to the end of the initial 30-day period, that an
additional period is required. The notice of extension must set
forth the special circumstances and the date by which the Plan
Administrator expects to render its decision.
	 
	 	11.2.5	 	Notice of Decision. The Plan Administrator shall notify the
claimant in writing of its decision on review. The Plan
Administrator shall write the notification in a manner calculated to
be understood by the claimant. The notification shall set forth:




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	 	(a)	 	The specific reasons for the denial;
	 
	 	(b)	 	A reference to the specific provisions of the
Agreement on which the denial is based;
	 
	 	(c)	 	A statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access
to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits; and
	 
	 	(d)	 	A statement of the claimant’s right to bring a
civil action under ERISA Section 502(a).





ARTICLE 12

Amendments And Termination





	12.1	 	Non-Vested Insurance Benefit. Unless the Executive has a Vested Insurance
Benefit pursuant to Section 4.1, the Bank may amend or terminate this
Agreement at any time, or may amend or terminate the Executive’s rights
under the Agreement at any time prior to the Executive’s death, by
providing written notice of such to the Executive.
	 
	12.2	 	Vested Insurance Benefit. If the Executive has a Vested Insurance
Benefit, the Bank may amend or terminate this Agreement for the Executive
only if (i) the Executive agrees to such action, or (ii) the Bank’s
banking regulators issue a written directive to amend or terminate the
Agreement.





ARTICLE 13

Administration





	13.1	 	Plan Administrator Duties. This Agreement shall be administered by the
Bank’s Chief Financial Officer as Plan Administrator, who shall consult as
necessary with the Compensation Committee (the “Committee”) of the Board.
The Committee shall also have the discretion and authority to (i) make,
amend, interpret and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and all
questions including interpretations of this Agreement.






	13.2	 	Agents. In the administration of this Agreement, the Plan Administrator
may employ agents and delegate to them such administrative duties as it
sees fit, (including acting through a duly appointed representative), and
may from time to time consult with counsel who may be counsel to the Bank.






	13.3	 	Binding Effect of Decisions. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive
and binding upon all persons having any interest under the Agreement.




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	13.4	 	Indemnity of Plan Administrator. The Bank shall indemnify and hold
harmless the Committee and the Plan Administrator against any and all
claims, losses, damages, expenses or liabilities arising from any action
or failure to act with respect to this Agreement, except in the case of
willful misconduct by the Plan Administrator, the Committee, or any of its
members.






	13.5	 	Information. To enable the Plan Administrator to perform its functions,
the Bank shall supply full and timely information to the Plan
Administrator on all matters relating to the Base Salary of the Executive,
the date and circumstances of the retirement, Disability, death or
Termination of Employment of the Executive, and such other pertinent
information as the Plan Administrator may reasonably require.





ARTICLE 14

Miscellaneous





	14.1	 	Binding Effect. This Agreement shall bind and inure to the benefit of the
Bank and its successors and assigns; the Executive and his heirs,
executors, administrators and assigns; and any Beneficiary.






	14.2	 	No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an Employee
of the Bank, nor does it interfere with the Bank’s right to discharge the
Executive. It also does not require the Executive to remain an Employee
nor interfere with the Executive’s right to terminate employment at any
time.






	14.3	 	Applicable Law. This Agreement and all rights hereunder shall be governed
by and construed according to the laws of the State of Texas, except to
the extent preempted by the laws of the United States of America.






	14.4	 	Reorganization. The Bank shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing
company, firm or person agrees to assume and discharge the obligations of
the Bank under this Agreement. Upon the occurrence of such event, the
term “Bank” as used in this Agreement shall be deemed to refer to the
successor or survivor company.






	14.5	 	Notice. Any notice or filing required or permitted to be given to the
Plan Administrator under this Agreement shall be sufficient if in writing
and hand-delivered, or sent by registered or certified mail, to the
address below:





	 	 	 
	

	 	Split-Dollar Plan Administrator
	

	 	Southside Bank
	

	 	PO Box 1079
	

	 	Tyler, Texas 75710-1079







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	 	1201 S. Beckham Avenue
	

	 	Tyler, TX 75701-3320








	 	 	Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark or the
receipt for registration or certification.
	 
	 	 	Any notice or filing required or permitted to be given to the Executive
under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Executive.
	 
	14.6	 	Entire Agreement. This Agreement constitutes the entire agreement between
the Bank and the Executive as to the subject matter hereof. No rights are
granted to the Executive under this Agreement other than those
specifically set forth herein.





     IN WITNESS WHEREOF, the Bank and the Executive execute this Agreement as
of the date indicated above.



	 	 	 	 	 
	 	 	SOUTHSIDE BANK
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	/s/ B.G. HARTLEY

	

	 	Title:	 	 
	

	 	 	 	CHAIRMAN/CEO

	 
	 	 	 	 
	 	 	/s/ CHARLES E. DAWSON

	 	 	CHARLES E. DAWSON, EXECUTIVE







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SCHEDULE A




	 	 	 	 	 
	Insurance Company
	 	Policy Number

	CNA — Valley Forge

	 	VIDA005014

	 	 	 
	CNA — Valley Forge

	 	 	22014400	 
	 	 	 
	SUNLIFE

	 	 	20041069	 








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