INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this “Agreement”), dated as of , 2007, is
made by and between Directed Electronics, Inc., a Florida corporation (the “Company”), and
the undersigned who is either a director, an officer, or both a director and officer of the Company
(the “Indemnitee”).
RECITALS
A. The Company is aware that competent and experienced persons are reluctant to serve as
directors or officers of corporations unless they are protected by comprehensive liability
insurance and/or indemnification, due to the exposure to litigation costs and risks resulting from
their service to such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors and officers;
B. The Board of Directors of the Company (the “Board”) has concluded that, to retain
and attract talented and experienced individuals to serve as officers and directors of the Company,
it is necessary for the Company contractually to indemnify officers and directors and to assume for
itself maximum liability for expenses and damages in connection with claims against such officers
and directors in connection with their service to the Company;
C. Section 607.0850 of the Florida Business Corporation Act (“Section 607”) empowers
the Company to indemnify by agreement its present and former officers, directors, employees, and
agents and persons who serve, at the request of the Company, as directors, officers, employees, or
agents of other corporations, partnerships, joint ventures, trusts, or other enterprises and
expressly provides that the indemnification provided by Section 607 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or continue to serve as a
director or officer of the Company free from undue concern for claims for damages arising out of or
related to such services to the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions
1.1 Agent. For the purposes of this Agreement, “agent” of the Company means
any person who is or was a director or officer of the Company or a subsidiary of the Company; or is
or was serving at the request of, for the convenience of, or to represent the interest of the
Company or a subsidiary of the Company as a director or officer of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise or an affiliate of the Company;
or was a director or officer of another enterprise or affiliate of the Company at the request of,
for the convenience of, or to represent the interests of such predecessor corporation. The term
“enterprise” includes any employee benefit plan of the Company, its subsidiaries,
affiliates, and predecessor corporations.
1.2 Expenses. For the purposes of this Agreement, “expenses” includes all
direct and indirect costs of any type or nature whatsoever (including, without limitation, all
attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably
incurred by the Indemnitee in connection with the investigation, defense, or appeal of a proceeding
or establishing or enforcing a right to indemnification or advancement of expenses under this
Agreement, Section 607 or otherwise; provided, however, that expenses shall not
include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a
proceeding.
1.3 Proceeding. For the purposes of this Agreement, “proceeding” means any
threatened, pending, or completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, investigative, or any other type whatsoever.
1.4 Subsidiary. For purposes of this Agreement, “subsidiary” means any
corporation of which more than 50% of the outstanding voting securities is owned directly or
indirectly by the Company, by the Company and one or more of its subsidiaries, or by one or more of
the Company’s subsidiaries.
1.5 Company. For purposes of this Agreement, the “Company” shall include, in
addition to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any person who is or was a director,
officer, employee, or agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, shall stand in the same position under this
Agreement with respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
1.6 Other Enterprises. For purposes of this Agreement, “other enterprises”
shall include employee benefit plans.
1.7 Fines. For purposes of this Agreement, references to “fines” shall
include any excise taxes assessed on a person with respect to any employee benefit plan.
1.8 Serving at the Request of the Company. For purposes of this Agreement,
“serving at the request of the Company” shall include any service as a director, officer,
employee, or agent of the Company that imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to
in this Agreement.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of
the Company, at the will of the Company (or under separate agreement, if such agreement exists), in
the capacity the Indemnitee currently serves as an agent of the Company, faithfully and to the best
of the Indemnitee’s ability, so long as the Indemnitee is duly appointed or elected and qualified
in accordance with the applicable provisions of the charter documents of the Company or any
subsidiary of the Company; provided, however, that the Indemnitee may at any time
and for any reason resign from such position (subject to any contractual obligation that the
Indemnitee may have assumed apart from this Agreement), and the Company and any subsidiary shall
have no obligation under this Agreement to continue the Indemnitee in any such position.
3. Directors’ and Officers’ Insurance. The Company shall, to the extent that the Board
determines it to be economically reasonable, maintain a policy of directors’ and officers’
liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by
the Board.
4. Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify
the Indemnitee pursuant to this Section 4.
4.1 Third-Party Actions. If the Indemnitee is a person who was or is a party to any
proceeding (other than an action by or in the right of the Company) by reason of the fact that the
Indemnitee is or was a director, officer, employee, or agent of the Company, or by reason of
anything done or not done by the Indemnitee in any such capacity, against any and all expenses and
liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) actually and reasonably incurred by the
Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceeding
if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in,
or not opposed to, the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful; and
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4.2 Derivative Actions. If the Indemnitee is a person who was or is a party to any
proceeding by or in the right of the Company to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was a director, officer, employee, or agent of the Company, or by
reason of anything done or not done by the Indemnitee in any such capacity, against any amounts
paid in settlement of any such proceeding and all expenses actually and reasonably incurred by the
Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceeding,
not exceeding, in the judgment of the Board, the estimated expense of litigating the proceeding to
conclusion, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Company; except that no
indemnification under this subsection shall be made in respect of any claim, issue, or matter as to
which such person shall have been finally adjudged to be liable to the Company unless, and only to
the extent that, the court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amount which such court shall deem proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the
Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) to the extent such have been paid to the Indemnitee by D&O Insurance.
5. Partial Indemnification and Contribution.
5.1 Partial Indemnification. If the Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of any expenses or
liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) incurred by the Indemnitee in the
investigation, defense, settlement, or appeal of a proceeding but is not entitled, however, to
indemnification for all of the total amount thereof, then the Company shall nevertheless indemnify
the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is
not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the indemnification provided
in Section 4 for any reason other than the statutory limitations set forth in the Florida
Business Corporation Act, then in respect of any threatened, pending, or completed proceeding in
which the Company is jointly liable with the Indemnitee (or would be if joined in such proceeding),
the Company shall contribute to the amount of expenses (including attorneys’ fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred and paid or payable by the
Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Indemnitee on the other hand from the transaction from which
such proceeding arose and (ii) the relative fault of the Company on the one hand and of the
Indemnitee on the other hand in connection with the events that resulted in such expenses,
judgments, fines, or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the Indemnitee on the other hand shall be
determined by reference to, among other things, the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines, or settlement amounts. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing equitable
considerations.
6. Mandatory Advancement of Expenses.
6.1 Advancement. Subject to Section 9 below, the Company shall advance all
expenses incurred by the Indemnitee in connection with the investigation, defense, settlement, or
appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by
reason of the fact that the Indemnitee is or was a director, officer, employee, or agent of the
Company or by reason of anything done or not done by the Indemnitee in any such capacity. The
Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the extent
that, it shall ultimately by determined that the Indemnitee is not entitled to be indemnified by
the Company under the provisions of this
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Agreement, the Articles of Incorporation or Bylaws of the Company, the Florida Business
Corporation Act, or otherwise. The advances to be made hereunder shall be paid by the Company to
the Indemnitee within thirty (30) days following delivery of a written request therefor by the
Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this Section 6,
the Company shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit
filed directly by the Company against the Indemnitee if an absolute majority of the members of the
Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request to
be advanced expenses, that the facts known to them at the time such determination is made
demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a
determination is made, the Indemnitee may have such decision reviewed in the manner set forth in
Section 8.5 hereof, with all references therein to “indemnification” being deemed to refer
to “advancement of expenses,” and the burden of proof shall be on the Company to demonstrate
clearly and convincingly that, based on the facts known at the time, the Indemnitee acted in bad
faith. The Company may not avail itself of this Section 6.2 as to a given lawsuit if, at
any time after the occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a change in control
shall mean a given person or group of affiliated persons or groups increasing their beneficial
ownership interest in the Company by at least twenty (20) percentage points without advance Board
approval.
7. Notice and Other Indemnification Procedures.
7.1 Notification. Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the
Indemnitee believes that indemnification with respect thereto may be sought from the Company under
this Agreement, notify the Company of the commencement or threat of commencement thereof.
7.2 Insurance. If, at the time of the receipt of a notice of the commencement of a
proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in effect, the
Company shall give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee,
all amounts payable as a result of such proceeding in accordance with the terms of such D&O
Insurance policies.
7.3 Defense. In the event the Company shall be obligated to advance the expenses for
any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by the Indemnitee (which approval shall not be
unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election to do
so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of
such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement
for any fees of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (a) the Indemnitee shall have the right to employ the Indemnitee’s own
counsel in any such proceeding at the Indemnitee’s expense; (b) the Indemnitee shall have the right
to employ the Indemnitee’s own counsel in connection with any such proceeding, at the expense of
the Company, if such counsel serves in a review, observer, advice, and counseling capacity and does
not otherwise materially control or participate in the defense of such proceeding; and (c) if (i)
the employment of counsel by the Indemnitee has been previously authorized by the Company, (ii) the
Indemnitee shall have reasonably concluded that there may be a conflict of interest between the
Company and the Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of
the Indemnitee’s counsel shall be at the expense of the Company.
8. Determination of Right to Indemnification.
8.1 Success on Merits. To the extent the Indemnitee has been successful on the merits
or otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this
Agreement or in the defense of any claim, issue, or matter described therein, the Company shall
indemnify the Indemnitee
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against expenses actually and reasonably incurred by the Indemnitee in connection with the
investigation, defense, or appeal of such proceeding, or such claim, issue, or matter, as the case
may be.
8.2 Proof by Company. In the event that Section 8.1 is inapplicable, or does
not apply to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee unless
the Company shall prove by clear and convincing evidence to a forum listed in Section 8.3
below that the Indemnitee has not met the applicable standard of conduct required to entitle the
Indemnitee to such indemnification.
8.3 Applicable Forums. The Indemnitee shall be entitled to select the forum in which
the validity of the Company’s claim under Section 8.2 hereof that the Indemnitee is not
entitled to indemnification will be heard from among the following, except that the Indemnitee can
select a forum consisting of the shareholders of the Company only with the approval of the Company
and, if the Indemnitee is a director or officer at the time of such determination, the
determination shall be made in accordance with (a), (b), (c) or (d) below at the election of the
Company:
(a) A majority vote of a quorum consisting of directors who are not parties to the proceeding
for which indemnification is being sought;
(b) If such a quorum is not obtainable, or even if obtainable, by majority vote of a committee
of directors designated by the Board who are not parties to the proceeding for which
indemnification is being sought;
(c) By independent legal counsel (i) selected by the Board described in subsection (a) above
or the committee described in subsection (b) above, or (ii) if the conditions of either
subparagraph (a) or (b) cannot be satisfied, selected by the full Board;
(d) The majority vote of the shareholders of the Company; or
(e) The court having jurisdiction of subject matter and the parties.
8.4 Submission. As soon as practicable, and in no event later than thirty (30) days
after the forum has been selected pursuant to Section 8.3 above, the Company shall, at its
own expense, submit to the selected forum its claim that the Indemnitee is not entitled to
indemnification, and the Company shall act in the utmost good faith to assure the Indemnitee a
complete opportunity to defend against such claim.
8.5 Appeals. If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the Company or the Indemnitee
shall have the right to apply to the court in which the proceeding giving rise to the Indemnitee’s
claim for indemnification is or was pending, or any other court of competent jurisdiction, for the
purpose of appealing the decision of such forum, provided that such right is executed within sixty
(60) days after the final decision of such forum is rendered. If the forum selected in accordance
with Section 8.3 hereof is a court, then the rights of the Company or the Indemnitee to
appeal any decision of such court shall be governed by the applicable laws and rules governing
appeals of the decision of such court.
8.6 Expenses for Interpretation. Notwithstanding any other provision in this
Agreement to the contrary, the Company shall indemnify the Indemnitee against all expenses incurred
by the Indemnitee in connection with any hearing or proceeding under this Section 8
involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any
other proceeding between the Company and the Indemnitee involving the interpretation or enforcement
of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such proceeding was
frivolous or not made in good faith.
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9. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall
not be obligated pursuant to the terms of this Agreement for the following:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses to the
Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee
and not by way of defense, except with respect to proceedings specifically authorized by the Board
or brought to establish or enforce a right to indemnification and/or advancement of expenses
arising under this Agreement, the charter documents of the Company or any subsidiary, or any
statute or law or otherwise, but such indemnification or advancement of expenses may be provided by
the Company in specific cases if the Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts
paid in settlement of a proceeding unless the Company consents in advance in writing to such
settlement, which consent shall not be unreasonably withheld; or
9.3 Securities Law Actions. To indemnify the Indemnitee on account of any suit in
which judgment is rendered against the Indemnitee for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state, or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a
court having jurisdiction in the mater shall determine that such indemnification is not lawful. In
this respect, the Company and the Indemnitee have been advised that the Securities and Exchange
Commission takes the position that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication.
10. Non-Exclusivity. The provisions for indemnification and advancement of expenses set forth
in this Agreement shall not be deemed exclusive of any other rights that the Indemnitee may have
under any provision of law, the Company’s Articles of Incorporation or Bylaws, the vote of the
Company’s shareholders or disinterested directors, other agreements, or otherwise, both as to
action in the Indemnitee’s official capacity and to action in another capacity while occupying the
Indemnitee’s position as an agent of the Company, and the Indemnitee’s rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the
benefit of the heirs, executors, and administrators of the Indemnitee.
11. General Provisions.
11.1 Interpretation of Agreement. It is understood that the parties hereto intend
this Agreement to be interpreted and enforced so as to provide indemnification and advancement of
expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as
expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement shall be held to
be invalid, illegal, or unenforceable for any reason whatsoever, then: (a) the validity, legality,
and enforceability of the remaining provisions of this Agreement (including, without limitation,
all portions of any paragraphs of this Agreement containing any such provision held to be invalid,
illegal, or unenforceable that are not themselves invalid, illegal, or unenforceable) shall not in
any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal, or unenforceable, that are not
themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to
Section 11.1 hereof.
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11.3. Entire Agreement. This Agreement contains the entire understanding among the
parties hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions, express or implied, oral
or written, except as herein contained.
11.4 Modification and Waiver. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.
11.5 Subrogation. In the event of full payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of recovery of the
Indemnitee, who shall execute all documents required and shall do all acts that may be necessary or
desirable to secure such rights and to enable the Company effectively to bring suit to enforce such
rights.
11.6 Counterparts. This Agreement may be executed in one or more counterparts, which
shall together constitute one agreement.
11.7 Successors and Assigns. The terms of this Agreement shall bind, and shall inure
to the benefit of, the successors and assigns of the parties hereto. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Agreement shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
11.8 Notice. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed duly given (a) if delivered by hand and receipted
for by the party addressee, or (b) if mailed by certified or registered mail, with postage prepaid,
on the third business day after the mailing date. Addresses for notice to either party are as
shown in the records of the Company or as subsequently modified by written notice.
11.9 Governing Law. This Agreement shall be governed exclusively by and construed
according to the laws of the state of Florida, as applied to contracts between Florida residents
entered into and to be performed entirely within Florida.
11.10 Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the state of Florida for all purposes in connection
with any action or proceeding which arises out of or relates to this Agreement.
11.11 Attorneys’ Fees. In the event the Indemnitee is required to bring any action to
enforce rights under this Agreement (including, without limitation, the expenses of any proceeding
described in Section 4), the Indemnitee shall be entitled to all reasonable fees and
expenses in bringing and pursuing such action, unless a court of competent jurisdiction finds each
of the material claims of the Indemnitee in any such action was frivolous and not made in good
faith.
IN WITNESS WHEREOF, the parties hereto have entered into this Indemnification Agreement
effective as of the date first written above.
| DIRECTED ELECTRONICS, INC., a Florida corporation | INDEMNITEE: | |||||
By:
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By: | |||||
Name:
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Name: | |||||
Title: |
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Schedule to Exhibit 10.22: The form of Indemnification Agreement was executed by the following
persons:
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
XX Xxxx
Xxxxxx X. Xxxx
Xxx Xxxxxx Xxxx
Xxxx X. Xxxxxxxxx
Xxx X. Xxxxx
Xxxxxxx X. Xxxx
Xxxxxx X. Xxxxxxxxx
S. Xxxxx Xxxxxxx
Xxxxx X. XxXxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxx X. Xxxxxxx
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
XX Xxxx
Xxxxxx X. Xxxx
Xxx Xxxxxx Xxxx
Xxxx X. Xxxxxxxxx
Xxx X. Xxxxx
Xxxxxxx X. Xxxx
Xxxxxx X. Xxxxxxxxx
S. Xxxxx Xxxxxxx
Xxxxx X. XxXxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxx X. Xxxxxxx
