Document:

Exhibit 4.2

SolarCity Corporation, as Issuer,

-and-

U.S. Bank National Association, as Trustee

 

 

TWENTY-SECOND SUPPLEMENTAL INDENTURE

Dated as of March 30, 2015

to

INDENTURE

Dated as of October 15, 2014

 

 

2.00% Solar Bonds, Series 2015/8-1

 

 

 

 

 

	
 
	
TABLE OF CONTENTS
	
 

	
 
	
 
	
PAGE

	
ARTICLE 1
DEFINITIONS

	
SECTION 1.01
	
Scope of Supplemental Indenture
	
2

	
SECTION 1.02
	
Definitions
	
2

	
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

	
 
	
 
	
 

	
SECTION 2.01
	
Title and Terms
	
3

	
SECTION 2.02
	
Depository Global Securities
	
3

	
SECTION 2.03
	
Payments
	
4

	
ARTICLE 3
MISCELLANEOUS PROVISIONS

 

	
SECTION 3.01
	
Trustee Acceptance
	
4

	
SECTION 3.02
	
Governing Law
	
5

	
SECTION 3.03
	
Trust Indenture Act
	
5

	
SECTION 3.04
	
Execution in Counterparts
	
5

	
SECTION 3.05
	
Severability
	
5

	
SECTION 3.06
	
Appointment of Paying Agent, Security Registrar and Place of Payment
	
5

	
SECTION 3.07
	
Ratification of Original Indenture
	
5

	
EXHIBIT

	
Exhibit A
	
Form of Note
	
A-1

 

 

i

 

TWENTY-SECOND SUPPLEMENTAL INDENTURE, dated as of March 30, 2015 (the “Supplemental Indenture”), between SolarCity Corporation, a Delaware corporation (hereinafter called the “Company”), having its principal executive office located at 3055 Clearview Way, San Mateo, California, 94402, and U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as trustee (in such capacity, the “Trustee”), to the indenture, dated as of October 15, 2014, between the Company and the Trustee (as amended or supplemented from time to time in accordance with the terms thereof, the “Original Indenture”).

RECITALS OF THE COMPANY

WHEREAS, the Company executed and delivered the Original Indenture to the Trustee to provide, among other things, for the issuance, from time to time, of the Company’s Securities, unlimited as to principal amount, in one or more series to be established by the Company under, and authenticated and delivered as provided in, the Original Indenture;

WHEREAS, Section 801(8) of the Original Indenture provides for the Company and the Trustee to enter into a supplemental indenture to the Original Indenture to provide for the issuance of and establish the forms and terms and conditions of Securities as permitted by Sections 201 and 301 of the Original Indenture;

WHEREAS, the Board of Directors and the Offering Committee thereof have duly adopted resolutions authorizing the Company to execute and deliver this Supplemental Indenture;

WHEREAS, pursuant to the terms of the Original Indenture, the Company desires to establish a new series of its Securities to be known as its 2.00% Solar Bonds, Series 2015/8-1 (the “Notes”), the form and substance of such Notes and the terms, provisions and conditions thereof to be set forth as provided in the Original Indenture and this Supplemental Indenture;

WHEREAS, the Form of Note contemplated under the terms of the Notes is to be substantially in the form hereinafter provided; and

WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture, and all requirements necessary to make (i) this Supplemental Indenture a valid instrument in accordance with its terms, and (ii) the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, in each case, have been performed, and the execution and delivery of this Supplemental Indenture have been duly authorized in all respects.

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, for and in consideration of the premises and the purchases of the Notes by the Holders thereof, it is mutually agreed, for the benefit of the Company and the equal and proportionate benefit of all Holders of the Notes, as follows:

 

 

Article 1
DEFINITIONS

SECTION 1.01 Scope of Supplemental Indenture.  The changes, modifications and supplements to the Original Indenture effected by this Supplemental Indenture shall be applicable only with respect to, and shall only govern the terms of (and only the rights of the Holders and the obligations of the Company with respect to), the Notes, which may be issued from time to time, and shall not apply to any other Securities that may be issued under the Original Indenture (or govern the rights of the Holders or the obligations of the Company with respect to any other such Securities) unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements.  The provisions of this Supplemental Indenture shall supersede any corresponding or conflicting provisions in the Original Indenture.

SECTION 1.02 Definitions For all purposes of the Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article 1 shall have the meanings assigned to them in this Article 1 and include the plural as well as the singular;

(ii) all words, terms and phrases defined in the Original Indenture (but not otherwise defined herein) shall have the same meanings as in the Original Indenture;

(iii) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, shall have the meanings assigned to them in the Trust Indenture Act;

(iv) all accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of this instrument; and

(v) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

“Company” has the meaning set forth in the first paragraph of this Supplemental Indenture.

“Form of Note” shall mean the “Form of Note” attached hereto as Exhibit A.

“Indenture” means the Original Indenture, as originally executed and as supplemented from time to time by one or more indentures supplemental thereto, including this Supplemental Indenture, entered into pursuant to the applicable provisions of the Indenture, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern the Original Indenture and this Supplemental Indenture.

2

 

“Initial Notes” has the meaning specified in Section 2.03.

“Interest Payment Date” means February 15 and August 15 of each year, beginning on August 15, 2015.

“Issue Date” means, with respect to Notes owned by any Holder, the date upon which such Notes were originally issued to such Holder (or transferor of such Holder), as set forth on the Security Register.

“Note” or “Notes” has the meaning specified in the fourth paragraph of the recitals of this Supplemental Indenture, and shall include any Additional Notes issued pursuant to Section 2.03.

“Noteholder,” “Holder” or “holder” as applied to any Note, or other similar terms (but excluding the term “beneficial holder”), means any Person in whose name at the time a particular Note is registered in the Security Register.

“Original Indenture” has the meaning specified in the first paragraph of this Supplemental Indenture.

“Regular Record Date” for the interest payable on any Interest Payment Date means the fifteenth day prior to such Interest Payment Date (whether or not a Business Day).

“Stated Maturity” means, with respect to the payment of principal on the Notes, March 30, 2016.

“Supplemental Indenture” has the meaning specified in the first paragraph hereof.

Article 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

SECTION 2.01 Title and Terms.  There is hereby established a series of Securities designated the “2.00% Solar Bonds, Series 2015/8-1”.  The aggregate principal amount of the Notes shall not be limited and shall be initially authenticated and delivered from time to time upon delivery to the Trustee of the documents required by Section 303 of the Indenture.  The Notes shall be issued only in fully registered form, in denominations of $1,000 and any integral multiples thereof.

SECTION 2.02 Company Global Securities. The Notes initially shall be represented by one or more permanent Company Global Securities.  The Form of Note shall be substantially as set forth in Exhibit A, which is incorporated into and shall be deemed a part of this Supplemental Indenture, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined to be necessary or appropriate by the Officers of the Company executing such Notes, as evidenced by their execution of the Notes.

3

 

SECTION 2.03 Payments.

The principal amount of Notes then Outstanding shall be payable at the Stated Maturity.  Interest on the Notes shall accrue at a rate of 2.00% per annum, from and including the Issue Date with respect to such Notes, or from the most recent date on which interest has been paid or duly provided for with respect to such Notes, to, but excluding, the next Interest Payment Date, until the principal thereof is paid or made available for payment.  Interest shall be payable in arrears on each Interest Payment Date, beginning on August 15, 2015, to the Persons in whose name a Note is registered on the Security Register at the Close of Business on the Regular Record Date immediately preceding the applicable Interest Payment Date.  If any Stated Maturity or Maturity of, or any other day on which a payment is due shall be a day which is not a Business Day, then such payment may be made on the next succeeding day that is a Business Day with the same force and effect as if made at the Stated Maturity or Maturity or on any such other payment date, as the case may be, and no interest shall accrue on the amount payable on such date or at such time for the period from and after such Stated Maturity, Maturity or other payment date, as the case may be, to the next succeeding Business Day.  Interest will be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any period shorter than a full semi-annual interest period will be computed on the basis of the number of days elapsed in a 180-day semi-annual period of six 30-day months.  Up to $93,000,000 aggregate principal amount of Notes will be authenticated on the date of this Supplemental Indenture (the “Initial Notes”).

The Company may, without the consent of the Holders of the Notes, hereafter issue additional Notes (“Additional Notes”) under the Indenture with the same terms and conditions, except for any difference in the issue price, Issue Date and interest accrued prior to the issue date of the Additional Notes, as the Initial Notes, in an unlimited aggregate principal amount.  Any such Additional Notes shall constitute a single series together with the Initial Notes for all purposes hereunder, including, without limitation, for purposes of any waivers, supplements or amendments to the Indenture requiring the approval of Holders of the Notes and any offers to purchase the Notes.  

The Company shall pay the principal of and interest on any Note in immediately available funds to the Persons in whose name such Note is registered in the Security Register, at the office or agency designated by the Company for that purpose.  All payments on the Notes will be made in US. Dollars or in such other coin or currency of the United States of America as of the time of payment is legal tender for the payment of public and private debts. 

Article 3
MISCELLANEOUS PROVISIONS

SECTION 3.01 Trustee Acceptance.  The Trustee has accepted the amendment of the Original Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Original Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, and without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect of any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Company, 

4

 

or for or with respect to (a) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (b) the proper authorization hereof by the Company by corporate action or otherwise, and (c) the due execution hereof by the Company.

SECTION 3.02 Governing Law.  This Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 3.03 Trust Indenture Act.  This Supplemental Indenture will be subject to, and governed by, the provisions of the Trust Indenture Act that are required to be part of this Supplemental Indenture and shall, to the extent applicable, be governed by such provisions.

SECTION 3.04 Execution in Counterparts.  This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

SECTION 3.05 Severability. In case any provision in this Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 3.06 Appointment of Paying Agent and Security Registrar.  The Company is hereby appointed to act as Paying Agent and Security Registrar subject to and in accordance with the terms and conditions set forth herein and in the Original Indenture and shall have all of the rights, benefits and immunities of a Paying Agent and Security Registrar as set forth herein and therein.

SECTION 3.07 Ratification of Original Indenture.  The Original Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.  For the avoidance of doubt, each of the Company and each Holder of the Notes, by its acceptance of such Notes, acknowledges and agrees that all of the rights, privileges, protections, immunities and benefits afforded to the Trustee and the Agents under the Original Indenture are deemed to be incorporated herein, and shall be enforceable by the Trustee and the Agents hereunder, as if set forth herein in full.

U.S. Bank, National Association hereby accepts the trusts in this Supplemental Indenture declared and provided, upon the terms and conditions herein above set forth.

[Remainder of the page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.

SOLARCITY CORPORATION

		
	
By:
	
/s/ Brad Buss

	
 
	
Name: Brad Buss

	
 
	
Title: Chief Financial Officer

 

U.S. BANK, NATIONAL ASSOCIATION, as Trustee 

		
	
By:
	
/s/ K. Wendy Kumar

	
 
	
Name: K. Wendy Kumar

	
 
	
Title: Vice President

 

 

 

Exhibit A

Form of Note

NOTE

 

SOLARCITY CORPORATION
    2.00% Solar Bonds, Series 2015/8-1

	
 
	
 
	
 

	
No. 1
	
 
	
 

 

SolarCity Corporation, a Delaware corporation (herein called the “Company,” which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to each of the Holders listed on Schedule A hereto, or their registered assigns, the principal sum set forth next to such Holder’s name on Schedule A (the aggregate of which principal sums shall not exceed $93,000,000), on March 30, 2016 at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semiannually, on February 15 and August 15 of each year (each, an “Interest Payment Date”), commencing on the Issue Date set forth set forth next to such Holder’s name on Schedule A, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 2.00%, from and including the most recent Interest Payment Date in respect of which interest has been paid (or commencing on the Issue Date set forth set forth next to such Holder’s name on Schedule A if no interest has been paid hereon).  If any Stated Maturity or Maturity of, or any other day on which a payment is due shall be a day which is not a Business Day, then such payment may be made on the next succeeding day that is a Business Day with the same force and effect as if made at the Stated Maturity or Maturity or on any such other payment date, as the case may be, and no interest shall accrue on the amount payable on such date or at such time for the period from and after such Stated Maturity, Maturity or other payment date, as the case may be, to the next succeeding Business Day.  Interest will be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any period shorter than a full semi-annual interest period will be computed on the basis of the number of days elapsed in a 180-day semi-annual period of six 30-day months.

Reference is made to the further provisions of this Note set forth on the reverse hereof.  Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or other duly authorized Authenticating Agent under the Indenture.

 

A-1

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

Dated: March 30, 2015

	
 
	
 
	
SOLARCITY CORPORATION

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
 
	
Name: Brad Buss

	
 
	
 
	
 
	
Title: Chief Financial Officer

 

 

	
ATTEST:
	
 

	
 
	
 

	
 
	
 

	
By
	
 
	
 

	
 
	
Name: Seth Weissman
	
 

	
 
	
Title:  Secretary
	
 

 

 

A-2

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Notes referred to in the within-mentioned Indenture. 

U.S. BANK NATIONAL ASSOCIATION 
as Trustee

	
By:
	
 
	
 

	
 
	
Authorized Signatory 
	
 

 

A-3

REVERSE OF NOTE
SOLARCITY CORPORATION
2.00% Solar Bonds, Series 2015/8-1

This note is one of a duly authorized issue of notes of the Company, designated as its “2.00% Solar Bonds, Series 2015/8-1” (herein called the “Notes”), issued under and pursuant to an Indenture, dated as of October 15, 2014 (the “Original Indenture”), between the Company and U.S. Bank National Association, as trustee (in such capacity, the “Trustee”), as supplemented with respect to the Notes by the Twenty-Second Supplemental Indenture, dated as of March 30, 2015 (the “Supplemental Indenture,” and together with the Original Indenture, the “Indenture”), between the Company, as issuer, paying agent and security registrar (herein called the “ Paying Agent and Security Registrar”), and the Trustee, as trustee, and as the authenticating agent (herein called the “Authenticating Agent”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, Authenticating Agent, Paying Agent, Security Registrar, the Company and the Holders of the Notes.  Capitalized terms used but not otherwise defined in this Note shall have the respective meanings ascribed thereto in the Indenture.

If an Event of Default (other than an Event of Default specified in clauses (4), (5) or (6) of Section 501 of the Indenture) occurs and is continuing with respect to the Notes, then the Trustee, or the Holders of not less than 25% in aggregate principal amount of the Notes may declare the principal of all the Notes, and accrued and unpaid interest, if any, and premium, if any, thereon to be due and payable immediately.  If an Event of Default specified in clauses (4), (5) or (6) of Section 501 occurs, then the principal and accrued and unpaid interest, if any, and premium, if any, on all the Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of the Notes. 

Subject to the provisions of the Indenture, the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding may, on behalf of the Holders of all of the Notes, waive any past default or Event of Default, subject to exceptions set forth in the Indenture.  Upon any such waiver, said default shall for all purposes of this Note and the Indenture be deemed to have been cured and not to be continuing, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, to execute supplemental indentures to modify provisions of the Indenture, subject to exceptions permitting the modification of the Indenture without the consent of any Holder of Notes or requiring the consent of each Holder of a Note affected by such modification all as set forth in the Indenture.

The Notes are issuable in fully registered form, without coupons, in denominations of $1,000 principal amount and any integral multiples thereof.  The Notes may be exchanged for a like aggregate principal amount of Notes of any other authorized denominations, on the terms and subject to the conditions and limitations set forth in the Indenture.

A-4

The Company, the Trustee, Authenticating Agent, Paying Agent and Security Registrar may deem the Persons in whose name this Note shall be registered upon the Security Register to be, and may treat them as, the absolute owners of this Note with respect to the principal sum set forth opposite such Person’s name on Schedule A hereto (whether or not amounts under this Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Security Registrar), for the purpose of receiving payment of or on account of the principal of, and interest on this Note and for all other purposes; and neither the Company or the Trustee nor any Authenticating Agent, Paying Agent or any Security Registrar shall be affected by any notice to the contrary.  All such payments so made to any Holders for the time being, or upon their orders, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon this Note.

No recourse for the payment of the principal of or interest on this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any supplemental indenture or in any Note, or because of the creation of any indebtedness represented hereby, shall be had against any incorporator, stockholder, partner, member, manager, employee, agent, officer, director or subsidiary, as such, past, present or future, of the Company or any of the Company’s subsidiaries or of any successor thereto, either directly or through the Company or any of the Company’s subsidiaries or of any successor thereto, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as consideration for, the execution of the Indenture and the issue of this Note.

In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. The Indenture and this Note shall be governed by, and construed in accordance with, the laws of the State of New York.

A-5

 

Schedule A

 

 

SOLARCITY CORPORATION
2.00% Solar Bonds, Series 2015/8-1

 

			
	
Name of Holder
	
Principal Amount
	
Issue Date 

	
 
	
 
	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal Amount Outstanding:

A-6Exhibit 10.1

 

CHANGE IN CONTROL RETENTION AGREEMENT

 

This Agreement is entered into as of                  2015, by and between Aware, Inc., a Massachusetts corporation with its principal offices located at 40 Middlesex Turnpike, Bedford, Massachusetts 01730 (together with its successors and assigns, the “Company”), and [name of executive], an individual residing at___________________________  (the “Executive”).

 

WHEREAS, the Executive is currently employed by the Company as [specify office]; and

 

WHEREAS, the Board of Directors of the Company (the “Board”), after a recommendation from the Compensation Committee of the Board, has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control, as defined in Section 0 below, of the Company;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:

 

	
  

	
1.

	
Termination of Employment Following a Change in Control.

 

1.1           Definition of Terms

 

(a) For purposes of this Agreement, a “Change of Control” shall mean the occurrence of any of the following:  (i) the acquisition by an individual, entity, group or any other person of beneficial ownership of more than fifty percent (50%) or more of either (x) the then-outstanding shares of common stock of the Company or (y) the combined voting power of the election of directors for the Company; and/or (ii) the sale of substantially all of the Company’s assets or a merger or sale of stock wherein the holders of the Company’s capital stock immediately prior to such sale do not hold at least a majority of the outstanding capital stock of the Company or its successor immediately following such sale; and/or (iii) the Company’s shareholders approve and complete any plan or proposal for the liquidation or dissolution of the Company.

 

(b) The “Severance Amount” shall be an amount equal to eighteen (18) months’ of the Executive’s base annual salary at the highest rate in effect at any time during the twelve (12) months immediately preceding the termination of the Executive’s employment with the Company.

 

(c) “Continuation Benefits” shall consist of the Company paying the difference between the cost of COBRA continuation coverage, should the Executive elect to receive it, for the Executive and any dependent who received health insurance coverage prior to termination of the Executive’s employment with the Company, and any premium contribution amount applicable to the Executive as of such termination, for a period of eighteen months following the date of termination of the Executive’s employment with the Company.  Continuation Benefits otherwise receivable by the Executive will be reduced to the extent benefits of the same type are received by or made available to him during the applicable eighteen-month period (and any such benefits received by or made available to the Executive shall be reported by him to the Company).

 

    	- 1 -

    	 

    
 

 

(d)  An “Event of Constructive Termination” shall mean the occurrence of any of the following events at any time during the eighteen (18) month period following the occurrence of a Change in Control:

 

	
  

	
(i)

	
a relocation of the Executive’s principal workplace to a location more than 50 miles from the location of such workplace immediately prior to the Change in Control without the Executive’s express written consent;

 

	
  

	
(ii)

	
a material diminution in the Executive’s authority or responsibilities, provided that a change in title or reporting relationship or a change in the Executive’s authority or responsibilities from [current title] to a senior [describe function] position shall not be deemed to constitute such a material diminution, or the assignment to the Executive of duties or responsibilities inappropriate to the office of a senior [describe function] executive; or

 

	
  

	
(iii)

	
a material diminution in the Executive’s compensation or benefits without the express written consent of the Executive;

provided, that no such event or occurrence shall constitute an Event of Constructive Termination unless (x) written notice thereof is given by the Executive to the Company within ninety (90) days of its occurrence, (y) the Company shall fail to remedy or cure such event or occurrence within thirty (30) days following its receipt of such notice from the Executive, and (z) the Executive shall within sixty (60) days after the expiration of such 30-day period give written notice to the Company of his election to terminate his employment pursuant to this paragraph by reason of such event or occurrence.

 

1.2                 Termination for Cause.  In the event of termination of the Executive’s employment for Cause following a Change in Control, all compensation of the Executive and any other rights the Executive may have under this Agreement shall cease upon the termination date of his employment, the Executive shall receive no Severance Amount, no Continuation Benefits and no further payments or benefits shall be paid or payable to the Executive by the Company for any period thereafter, except to the extent that Executive shall have accrued benefits under any retirement plan adopted by the Company for the benefit of its employees and except for all compensation owing hereunder to the Executive as of the date of termination for Cause.  If following termination of the Executive’s employment other than for Cause there shall occur any event that would otherwise constitute Cause for termination of such employment, the Executive will repay any Severance Payment and Continuation Benefits previously paid, and his or her right to receive any future Severance Payments or Continuation Benefits will terminate.

 

    	- 2 -

    	 

    
 

 

For purposes of this Agreement, “Cause” shall mean:

 

(a) the Executive has been charged by the United States or a state or political subdivision thereof with conduct which is a felony or which is a misdemeanor involving moral turpitude, deceit , dishonesty or fraud under the laws of the United States or any state or political subdivision thereof;

 

(b) fraud or embezzlement by the Executive with respect to funds of the Company or dishonest, unethical or improper conduct by the Executive that has had, or is reasonably likely to have, a material adverse impact on the reputation for honesty and fair dealing of the Company;

 

(c) the Executive’s failure to comply with lawful instructions not inconsistent with this Agreement given to the Executive by the Board, which failure is not cured or corrected within thirty (30) days after the Executive’s receipt of written notice from the Company referring to this paragraph and describing with specificity the instructions with which the Executive did not comply;

 

(d) the Executive’s material failure to comply with reasonable policies, directives, standards and regulations adopted by the Company, including, without limitation, the Company’s policies regarding insider trading, except any such failure, that, if capable of cure, is remedied by the Executive within thirty (30) days after the Executive’s receipt of written notice from the Company referring to this paragraph and describing with specificity the failure of the Executive to comply; and

 

(e) material breach by the Executive of the Employee Non-Disclosure, Non-Competition and Intellectual Property Agreement by and between the Executive and the Company (the “Employee Agreement”) or any other written agreement between the Executive and the Company.

 

1.3   Voluntary Termination by Executive.

 

(a) The Executive may voluntarily terminate his employment at any time by written notice to the Company, in which case the Executive shall receive no Severance Amount, no Continuation Benefits and no further payments or benefits shall be paid or payable to the Executive by the Company for any period after such termination of employment, except to the extent that Executive shall have accrued benefits under any plan adopted by the Company for the benefit of its employees generally and except for all compensation owing hereunder to the Executive as of the date of voluntary termination.

 

(b) Notwithstanding the foregoing, upon the occurrence of an Event of Constructive Termination the Executive may, by written notice to the Company pursuant to clause (z) of Section 0 above, voluntarily terminate his employment with the Company, and in such event: (i) within ten (10) days of the date of such termination, the Company shall pay to the Executive in a lump sum the Severance Amount, plus all other compensation, including, without limitation, any commissions earned but not yet paid, owed by the Company to the Executive as of the date of his termination and (ii) the Company shall provide to the Executive the Continuation Benefits for a period of eighteen (18) months following such termination.

 

    	- 3 -

    	 

    
 

 

1.4           Termination by the Company without Cause Following a Change in Control.

 

(a) In the event that the Executive’s employment under this Agreement is terminated by the Company other than for Cause at any time during the eighteen (18) month period following a Change in Control, then: (i), on the date of such termination, the Company shall pay to the Executive in a lump sum the Severance Amount, plus all other compensation, including, without limitation, any commissions earned but not yet paid, owed by the Company to the Executive as of the date of his termination and (ii) the Company shall provide to the Executive the Continuation Benefits for a period of eighteen (18) months following such termination.

 

(b) If during the eighteen (18) month period following the occurrence of a Change in Control the employment of the Executive is terminated by the Company for Cause pursuant to paragraph 1.2(a) above, and if the charges of criminal conduct are subsequently dismissed, or the Executive is acquitted of such charges, then in such event the Executive’s termination shall be deemed to have been made without Cause, and in such event the Company shall pay to the Executive within thirty (30) days of such dismissal or acquittal, in a lump sum (i) the Severance Amount, plus all other compensation, including, without limitation, any commissions earned but not yet paid, owed by the Company to the Executive as of the date of his termination and (ii) an amount equal to the fair value of the Continuation Benefits for a period of eighteen (18) months following the termination of his employment.

 

2.      Other Provisions.

 

2.1 Amounts Payable Less Withholding Taxes.  The amounts payable by the Company hereunder shall be less any federal, state or local withholding taxes and social security.

 

2.2 Parachute Payments.  It is the intention of the parties that no payment or benefit arising out of or in connection with a Change of Control that is made or provided, or to be made or provided, by the Company to the Executive, whether pursuant to the terms of this Agreement or any other plan, agreement, or arrangement (any such payment or benefit, a “Parachute Payment”) shall be non-deductible to the Company by reason of the operation of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) relating to parachute payments.  Accordingly, and notwithstanding any other provision of this Agreement or any such agreement or plan, if by reason of the operation of said Section 280G, any such Parachute Payments exceed the amount which can be deducted by the Company, such Parachute Payments shall be reduced to the maximum amount which can be deducted by the Company.  To the extent that Parachute Payments exceeding such maximum deductible amount have been made to the Executive or his beneficiary, he or his beneficiary shall refund such excess payments to the Company with interest thereon at the Applicable Federal Rate determined under Section 1274(d) of the Code, compounded annually, or at such other rate as may be required in order that no such payments shall be non-deductible to the Company by reason of the operation of said Section 280G.  Any reduction in Parachute Payments required to be made pursuant to this Section 2.2 shall be made in inverse order of the scheduled dates or times for the payment or provision of such Parachute Payments.

 

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2.3 Section 409A. It is intended that this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code and the Treasury Regulations and IRS guidance thereunder (collectively referred to as “Section 409A”).  Notwithstanding anything to the contrary in this Agreement, this Agreement shall, to the maximum extent possible, be administered, interpreted, and construed in a manner consistent with Section 409A.  If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Agreement on account of termination of the Executive’s employment shall be made unless and until the Executive has a “separation from service” within the meaning of Section 409A.  In the case of any amounts payable under this Agreement that may be treated as payable in the form of “a series of installment payments,” as defined in Treasury Regulation Section 1.409A-2(b)(2)(iii), the right to receive such payments shall be treated as a right to receive a series of separate payments for purposes of such Treasury Regulation.  If the Executive is a “specified employee” as determined pursuant to Section 409A as of the date of  termination of employment and if any payment or benefit provided for in this Agreement or otherwise both (x) constitutes a “deferral of compensation” within the meaning of Section 409A and (y) cannot be paid or provided in the manner otherwise provided without subjecting the Executive to additional tax, interest, or penalties under Section 409A, then any such payment or benefit shall be delayed until the earlier of (i) the date which is six (6) months after the Executive’s “separation from service” within the meaning of Section 409A for any reason other than death, or (ii) the date of the Executive’s death.  Any payment or benefit otherwise payable or to be provided to the Executive upon or in the six (6) month period following “separation from service” that is not so paid or provided by reason of this Section 2.2 shall be accumulated and paid or provided to the Executive in a single lump sum, as soon as practicable (and in all events within 15 days) after the date that is six (6) months after the Executive’s “separation from service” (or, if earlier, as soon as practicable, and in all events within fifteen (15) days, after the date of the Executive’s death).  All subsequent payments or benefits, if any, shall be payable or provided in accordance with the payment schedule applicable to each payment or benefit.  It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder shall be subject to the additional tax imposed under Section 409A, and any ambiguities herein shall be interpreted to so comply.  The Company and the Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions that are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to the Executive under Section 409A.

 

2.4 Noncompetition Agreement and Release.  It shall be a condition to the receipt by the Executive of any payment or benefit pursuant to this Agreement that the Executive shall have executed and delivered to the Company a noncompetition agreement (the “Noncompetition Agreement”) in substantially the form attached as Exhibit A hereto, and a general release (the “Release”) in substantially the form attached as Exhibit B hereto. The Executive acknowledges and agrees that the Employee Agreement, except to the extent superseded by the Noncompetition Agreement, is a binding and enforceable obligation of the Executive that inures to the benefit of the Company’s successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business in a Change of Control.  The timing of any payment or benefit pursuant to this Agreement shall be governed by the following provisions.  The Executive must execute and deliver the Release within 21 days after termination of employment.  If the Executive has revocation rights, such rights must be exercised, if at all, not later than seven days after execution of the Release. The Executive shall not receive the Severance Amount nor the  Continuation Benefits unless and until any revocation period has expired and the Release is effective.

 

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2.5 Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed given when delivered personally (including by overnight courier) or, if sent by regular mail, three days after the date of deposit in the United States mails addressed as follows:

 

if to the Company, to:

 

Aware, Inc.

40 Middlesex Turnpike

Bedford, Massachusetts  01730

Attention:  Chair of the Compensation Committee

 

if to the Executive, to:

 

or to such other address as either party may from time to time provide to the other by notice as provided in this section.

 

2.6 Entire Agreement.  This Agreement constitutes the entire agreement and understanding between the Company and the Executive, and supersedes all prior negotiations, agreements, arrangements, and understandings, both written or oral, between the Company and the Executive with respect to the subject matter of this Agreement.

 

2.7 Waiver or Amendment.

 

(a)  The waiver by either party of a breach or violation of any term or provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach or violation of any provision of this Agreement or of any other right or remedy.

 

(b)  No provision in this Agreement may be amended unless such amendment is set forth in a writing that specifically refers to this Agreement and is signed by the Executive and the Company.

 

2.8 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to its conflict of laws rules.

 

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2.9 Successors; Assignment.  The Company shall require any successor via a Change in Control (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. This Agreement shall inure to the benefit of, and shall be binding upon, each of the Company and the Executive and their respective heirs, personal representatives, legal representatives, successors and assigns.

 

2.10  Severability.  The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part hereof.  If any part of this Agreement shall be declared invalid by a court of competent jurisdiction, this Agreement shall be construed as if such invalid part had not been inserted.

 

2.11  Section Headings.  The section and subsection headings contained in this Agreement are for reference purposes only and shall not affect any way the meaning, construction or interpretation of any or all of the provisions of this Agreement.

 

2.12  Counterparts.  This Agreement may be executed in any number of counterparts and by the separate parties hereto in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to be one and the same instrument.

 

2.13  Authority to Execute.  The undersigned representative of the Company represents and warrants that he has full power and authority to enter into this Agreement on behalf of the Company, and that the execution, delivery and performance of this Agreement have been authorized by the Board.  Upon the Executive’s acceptance of this Agreement by signing and returning it to the Company, this Agreement will become binding upon the Executive and the Company.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

 

	

EXECUTIVE

	 	
AWARE, INC.

	 
	 	 	 	 	 
	
 

	 	
By: 

	 	 

 

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Exhibit A

NONCOMPETE AGREEMENT

 

This NONCOMPETE AGREEMENT (the “AGREEMENT”), made as of the [    ]     day of [       ], is entered into between Aware, Inc., a Massachusetts corporation with offices at 40 Middlesex Turnpike, Bedford, Massachusetts 01730 (the “Company”) and [                    ], an individual residing at [                       ] (the “Employee”).

RECITALS:

A.           The Company is willing to grant certain severance and other benefits to the Employee, under the circumstances specified in that certain Change in Control Retention Agreement dated [   ], 2015 between the Company and the Employee (the “Change in Control Agreement”); and

B.           As set forth in the Change in Control Agreement, the Employee’s execution of this Agreement is a condition to his receipt of such benefits;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

	
1.

	
NON-COMPETITION COVENANTS.

 

(a)           NON-COMPETITION COVENANTS. The Employee agrees that he will not, during the Non-Competition Period (as hereinafter defined), directly or indirectly:

 

(i)           as owner, employee, officer, director, partner, sales representative, agent, stockholder, capital investor, lessor, consultant or advisor, either alone or in association with others (other than as a holder of not more than one percent of the outstanding shares of any series or class of securities of a company, which securities of such class or series are publicly traded in the securities markets), develop, design, produce, market, sell or render (or assist any other person or entity in developing, designing, producing, marketing, selling or rendering), products or services which are competitive with the Business of the Company (as hereinafter defined) anywhere in the world;

 

(ii)           solicit, divert or take away, or attempt to solicit, divert or take away, the business or patronage of any of the customers, prospective customers or referral sources of the Company with whom the Company has had a relationship during the period of the Employee’s employment by the Company; or

 

(iii)           recruit, solicit or hire any employee of the Company, or induce or attempt to induce any employee of the Company to terminate his or her employment with, or otherwise cease his or her relationship with, the Company.

 

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(b)           DEFINITIONS. For the purposes of this Section 1, the following terms shall have the respective meanings indicated below:

 

(i)           “NON-COMPETITION PERIOD” shall mean the period during which the Employee is employed by the Company and the one-year period commencing on the last day of the Employee’s employment by the Company, regardless of whether the Employee’s termination was at the election of the Company, with or without cause, or at the election of the Employee, with or without good reason.

 

“BUSINESS OF THE COMPANY” shall mean the development, manufacture, marketing and/or distribution of (A) biometric technologies or wavelet compression technologies or (B) any other products or services which the Company sells, has under development or which are subject to active planning at any time during the term of the Employee’s employment with the Company.

 

	
2.

	
INJUNCTIVE AND OTHER EQUITABLE RELIEF.

 

(a)           The Employee consents and agrees that if he violates any of the provisions of Section 1 hereof, the Company shall be entitled, in addition to any other remedies it may have at law, to the remedies of injunction, specific performance and other equitable relief for a breach by the Employee of Section 1 of this Agreement.  This Section 2(a) shall not, however, be construed as a waiver of any of the rights which the Company may have for damages or otherwise.

 

(b)           Any waiver by the Company of a breach of any provision of Section 1 hereof shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision hereof.

 

(c)           The Employee agrees that each provision of Section 1 shall be treated as a separate and independent clause, and the unenforceability of any one clause shall in no way impair the enforceability of the other clauses herein. Moreover, if one or more of the provisions contained in Section 1 shall for any reason be held to be excessively broad as to scope, activity or subject so as to be unenforceable at law, such provision or provisions shall be construed by the appropriate judicial body by limiting and reducing it or them so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear.

 

(d)           If the Company shall prevail in any action, suit or other proceeding (whether at law, in equity or otherwise) instituted concerning or arising out of this Agreement, it shall recover, in addition to any other remedy granted to it therein, all its costs and reasonable attorneys’ fees incurred in connection with the prosecution or defense of such action, suit or other proceeding.

 

3.            OTHER AGREEMENTS. The Employee represents and warrants that his performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any other agreement by which he is bound.

 

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4.            NOT A CONTRACT OF EMPLOYMENT. The Employee understands that this Agreement does not constitute a contract of employment or give the Employee rights to employment or continued employment by the Company.

 

5.            ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.  In particular, this Agreement supersedes Section 10 of the Employee Agreement, but the rest of the Employee Agreement remains in full force and effect.

 

6.            AMENDMENT. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.

 

7.            GOVERNING LAW. This Agreement shall be construed, interpreted and enforced in accordance with the laws of The Commonwealth of Massachusetts, without regard to its choice of law principles. The Employee hereby consents to (a) service of process, and to be sued, in The Commonwealth of Massachusetts and (b) to the jurisdiction of the courts of The Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any of Employee’s obligations hereunder, and Employee expressly waives any and all objections he or she may have as to venue in any such courts.

 

8.            SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation with which or into which the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of the Employee are personal and shall not be assigned by him.

 

9.            MISCELLANEOUS.

 

(a)           No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

 

(b)           The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.

 

(c)           This Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited or invalid under any such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating or nullifying the remainder of such provision or any other provisions of this Agreement. If any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provisions shall be construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by applicable law.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.

	 	 	 
	 	
AWARE, INC.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name: 	 
	 	 	Title: 	 

	 	 	 
	 	

EMPLOYEE

	 
	
 

	 	 	 
	 	Name: 	 

 

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Exhibit B

 

GENERAL RELEASE AND WAIVER OF ALL CLAIMS

(INCLUDING OLDER WORKER BENEFITS PROTECTION ACT CLAIMS)

 

For
good and valuable consideration, including without limitation the compensation and benefits set forth in the Change
in Control Retention Agreement dated [   ], 20__ (the “Agreement”)
between the undersigned and Aware, Inc. (the “Company”),
to which this General Release and Waiver of All Claims is attached, the terms of which Agreement shall survive this
General Release and Waiver of Claims, the undersigned, on behalf of and for himself or herself and his or her heirs,
administrators, executors, representatives, estates, attorneys, insurers, successors and assigns (hereafter referred to
separately and collectively as the “Releasor”),
hereby voluntarily releases and forever discharges the Company, and its subsidiaries (direct and indirect),
affiliates, related companies, divisions, predecessor and successor companies, and each of its and their present, former, and
future shareholders, officers, directors, employees, agents, representatives, attorneys, insurers and assigns (collectively
as “Releasees”), jointly
and individually, from any and all actions, causes of action, claims, suits, charges, complaints, contracts,
covenants, agreements, promises, debts, accounts, damages, losses, sums of money, obligations, demands, and judgments all of
any kind whatsoever, known or unknown, at law or in equity, in tort, contract, by statute, or on any other basis, for
contractual, compensatory, punitive or other damages, expenses (including attorney’s fees and cost), reimbursements, or
costs of any kind, which the undersigned employee ever had, now has, or may have, from the beginning of the world to the date
of this Release, known or unknown, in law or equity, whether statutory or common law, whether federal, state, local or
otherwise, including but not limited to any and all claims arising out of or in any way related to the undersigned’s
engagement by the Company (including the hiring or termination of that engagement), or any related matters including, but not
limited to claims, if any arising under the Age Discrimination in Employment Act of 1967, as amended by the Older Worker
Benefits Protection Act; the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991, as amended; the Family and
Medical Leave Act of 1993, as amended; the Immigration Reform and Control Act of 1986; the Americans with Disabilities Act of
1990, as amended; the Employee Retirement Income Security Act (ERISA), as amended; the Massachusetts laws against
discrimination and harassment (including Mass. Gen. L. c. 151B), protecting equal rights or concerning the payment of wages
(including Mass. Gen. L. c. 149, section 148 et seq. and Mass. Gen. L. c. 151, section 1A, et seq.), and federal, state or
local common law, laws, statutes, ordinances or regulations. Notwithstanding the foregoing, nothing contained in
this General Release and Waiver of Claims shall be construed to bar any claim by the undersigned to enforce the terms of
the Agreement.

 

[For employees aged 40 and older:

Releasor represents and acknowledges the following:

	
  

	
(a)

	
that Releasor understands the various claims Releasor could have asserted under federal or state law, including but not limited to the Age Discrimination in Employment Act, Mass. Gen. L. c. 151B, the Massachusetts Wage Act and Massachusetts overtime pay law and other similar laws;

 

    	- 12 -

    	 

    
 

 

	
  

	
(b)

	
that Releasor has read this General Release carefully and understands all of its provisions;

 

	
  

	
(c)

	
that Releasor understands that Releasor has the right to and is advised to consult an attorney concerning this General Release and in particular the waiver of rights Releasor might have under the laws described herein and that to the extent, if any, that Releasor desired, Releasor availed himself or herself of this right;

 

	
  

	
(d)

	
that Releasor has been provided at least twenty-one (21) days to consider whether to sign this General Release and that to the extent Releasor has signed this General Release before the expiration of such twenty-one (21) day period Releasor has done so knowingly and willingly;

 

	
  

	
(e)

	
that Releasor enters into this General Release and waives any claims knowingly and willingly; and

 

	
  

	
(f)

	
that this General Release shall become effective seven (7) days after it is signed.  Releasor may revoke this General Release within seven (7) days after it is signed by delivering a written notice of rescission to Chair, Compensation Committee of the Board of Directors at Aware, Inc., 40 Middlesex Turnpike, Bedford, Massachusetts 01730.  To be effective, the notice of rescission must be hand delivered, or postmarked within the seven (7) day period and sent by certified mail, return receipt requested, to the referenced address.]

 

Signed and sealed this  ____ day of _____________, 20__.

	 	 	 
	Signed:	 	 
	 	 	 
	Name (print):	 	 

 

    	- 13 -

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