EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into
to be effective as of the _____ day of __________________, 1999, by and between
Saratoga Holdings I, Inc., a Texas corporation ("Saratoga"), and ______, a Texas
resident ("Indemnitee").
WHEREAS, competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors or in other capacities unless they
are provided with adequate protection through insurance or indemnification (or
both) against claims and actions against them arising out of their service to
and activities on behalf of those corporations;
WHEREAS, the Board of Directors of Saratoga has determined that the
continuation of present trends in litigation will make it more difficult to
attract and retain competent and experienced persons, that this situation is
detrimental to the best interests of the shareholders of Saratoga and that
Saratoga should act to assure its directors and officers that there will be
increased certainty of adequate protection in the future;
WHEREAS, the Articles of Incorporation of Saratoga require Saratoga to
indemnify its directors and officers to the fullest extent permitted by law;
WHEREAS, it is reasonable, prudent, and necessary for Saratoga to obligate
itself contractually to indemnify its directors and officers to the fullest
extent permitted by applicable law in order to induce them to serve or continue
to serve such corporation;
WHEREAS, Indemnitee is willing to serve, continue to serve, and to take on
additional service for or on behalf of Saratoga on the condition that he be
indemnified to the fullest extent permitted by law; and
WHEREAS, concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of Saratoga.
NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's
agreement to serve or continue to serve as a director or officer of Saratoga,
and the covenants contained in this Agreement, the parties hereto hereby
covenant and agree as follows:
1. CERTAIN DEFINITIONS:
(a) ACQUIRING PERSON: any Person other than (i) the Company, (ii)
any of the Company's Subsidiaries, (iii) any employee benefit plan of the
Company or of a Subsidiary of the Company or of a corporation owned directly or
indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or (iv) any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or of a
Subsidiary of the Company or of a corporation owned directly or indirectly by
the shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(b) CHANGE IN CONTROL shall be deemed to have occurred if:
(i) any Acquiring Person, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the then outstanding
Voting Securities of the Company; or
(ii) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors of the Company; or
(iii) a public announcement is made of a tender or exchange
offer by any Acquiring Person for 50% or more of the outstanding Voting
Securities of the Company, and the Board of Directors of the Company approves or
fails to oppose that tender or exchange offer in its statements in Schedule
14D-9 under the Exchange Act; or
(iv) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, partnership or other
entity (or, if no such approval is required, the consummation of such a merger
or consolidation of the Company), other than a merger or consolidation that
would result in the Voting Securities of the Company outstanding immediately
prior to the consummation thereof continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity
or of a parent of the surviving entity) a majority of the combined voting power
of the Voting Securities of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation; or
(v) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets (or, if no such
approval is required, the consummation of such a liquidation, sale, or
disposition in one transaction or series of related transactions) other than a
liquidation, sale, or disposition of all or substantially all the Company's
assets in one transaction or a series of related transactions to a corporation
owned directly or indirectly by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company.
(c) CLAIM: any threatened, pending, or completed action, suit, or
proceeding (including, without limitation, securities laws actions, suits, and
proceedings), or any inquiry or investigation (including discovery), whether
asserted, instituted or conducted, directly or indirectly (including, without
limitation, shareholder derivative suits) by the Company or any other party,
that Indemnitee in good faith believes might lead to the institution of any
action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other.
(d) COMPANY: Saratoga Holdings I, Inc.
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(e) EXPENSES: all costs, expenses (including attorneys' and expert
witnesses' fees), and obligations paid or incurred in connection with
investigating, defending (including affirmative defenses and counterclaims),
being a witness in, or participating in (including on appeal), or preparing to
defend, be a witness in, or participate in, any Claim relating to any
Indemnifiable Event.
(f) INCUMBENT BOARD: individuals who, as of January 1, 1999,
constitute the Board of Directors of the Company and any other individual who
becomes a director of the Company after that date and whose election or
appointment by the Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board.
(g) INDEMNIFIABLE EVENT: any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent, or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent, or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust, or other enterprise,
or by reason of anything done or not done by Indemnitee in any such capacity.
For purposes of this Agreement, the Company agrees that Indemnitee's service on
behalf of or with respect to any Subsidiary of the Company shall be deemed to be
at the request of the Company.
(h) PERSON: any person or entity of any nature whatsoever,
specifically including an individual, a firm, a company, a corporation, a
partnership, a limited liability company, a trust, or other entity. A Person,
together with that Person's Affiliates and Associates (as those terms are
defined in Rule 12b-2 under the Exchange Act), and any Persons acting as a
partnership, limited partnership, joint venture, association, syndicate, or
other group (whether or not formally organized), or otherwise acting jointly or
in concert or in a coordinated or consciously parallel manner (whether or not
pursuant to any express agreement), for the purpose of acquiring, holding,
voting, or disposing of securities of the Company with such Person, shall be
deemed a single "Person."
(i) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (ii) any Acquiring Person becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 15% or more of the combined voting power of the outstanding Voting
Securities of the Company; or (iii) the Board of Directors of the Company adopts
a resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(j) REVIEWING PARTY: any appropriate person or body consisting of a
member or members of the Company's Board of Directors or any other person or
body appointed by the Board (including Special Counsel referred to in Section 3)
who is not a party to the particular Claim for which Indemnitee is seeking
indemnification.
(k) SPECIAL COUNSEL: special, independent counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not
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otherwise performed services for the Company or for Indemnitee within the last
three years (other than as Special Counsel under this Agreement or similar
agreements).
(l) SUBSIDIARY: with respect to any Person, any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by that Person.
(m) VOTING SECURITIES: any securities that vote generally in the
election of directors, in the admission of general partners, or in the selection
of any other similar governing body.
2. BASIC INDEMNIFICATION AND EXPENSE REIMBURSEMENT ARRANGEMENT.
(a) If Indemnitee was, is, or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than 30
days after written demand is presented to the Company, against any and all
Expenses, judgments, fines, penalties, and amounts paid in settlement (including
all interest, assessments, and other charges paid or payable in connection with
or in respect of such Expenses, judgments, fines, penalties, or amounts paid in
settlement) of or with respect to that Claim. Notwithstanding the foregoing, the
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which Special Counsel referred to in Section 3 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law.
Nothing contained in this Agreement shall require any determination under this
Section 2(a) to be made by the Reviewing Party prior to the disposition or
conclusion of the Claim against the Indemnitee; provided, however, that Expense
Advances (defined below) shall continue to be made by the Company pursuant to
and to the extent required by the provisions of Section 2(b).
(b) If so requested by Indemnitee, the Company shall pay any and all
Expenses incurred by Indemnitee (or, if applicable, reimburse Indemnitee for any
and all Expenses incurred by Indemnitee and previously paid by Indemnitee)
within two business days after such request (an "Expense Advance"). The Company
shall be obligated to make or pay an Expense Advance in advance of the final
disposition or conclusion of any Claim. In connection with any request for an
Expense Advance, if requested by the Company, Indemnitee or Indemnitee's counsel
shall submit an affidavit stating that the Expenses incurred were reasonable.
Any dispute as to the reasonableness of any Expense shall not delay an Expense
Advance by the Company, and the Company agrees that any such dispute shall be
resolved only upon the disposition or conclusion of the underlying Claim against
the Indemnitee. If, when, and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be indemnified with respect to a Claim
under applicable law, the Company shall be entitled to be reimbursed by
Indemnitee and Indemnitee hereby agrees to reimburse the Company without
interest (which agreement shall be an unsecured obligation of Indemnitee) for
all related Expense Advances theretofore made or paid by the Company; provided,
however, that if Indemnitee has commenced legal proceedings in a
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court of competent jurisdiction to secure a determination that Indemnitee should
be indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under applicable
law shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance, and the Company shall be obligated to continue
to make Expense Advances, until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been exhausted
or lapsed). If there has not been a Change in Control, the Reviewing Party shall
be selected by the Board of Directors of the Company. If there has been a Change
in Control, the Reviewing Party shall be advised by or shall be Special Counsel
referred to in Section 3 hereof, if and as Indemnitee so requests. If there has
been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation in any court in the State of Texas having subject
matter jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
3. CHANGE IN CONTROL. The Company agrees that, if there is a Change in
Control and if Indemnitee requests in writing that Special Counsel advise the
Reviewing Party or be the Reviewing Party, then the Company shall not deny any
indemnification payments (and Expense Advances shall continue to be paid by the
Company pursuant to Section 2(b)) that Indemnitee requests or demands under this
Agreement or any other agreement or law now or hereafter in effect relating to
Claims for Indemnifiable Events. The Company further agrees not to request or
seek reimbursement from Indemnitee of any related Expense Advances unless, with
respect to a denied indemnification payment, Special Counsel has rendered its
written opinion to the Company and Indemnitee that the Company would not be
permitted under applicable law to pay Indemnitee such indemnification payment.
The Company agrees to pay the reasonable fees of Special Counsel referred to in
this Section 3 and to indemnify fully Special Counsel against any and all
expenses (including attorneys' fees), claims, liabilities, and damages arising
out of or relating to this Agreement or Special Counsel's engagement pursuant
hereto.
4. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control,
and in the event the Company has not maintained an insurance policy or policies
providing for directors' and officers' liability insurance for the benefit of
Indemnitee with an aggregate policy limit (for all beneficiaries of such policy
or policies) of $5,000,000 or more, the Company shall, upon written request by
Indemnitee, create a trust for the benefit of Indemnitee (the "Trust") and from
time to time upon written request of Indemnitee the Company shall fund the Trust
in an amount sufficient to satisfy any and all Expenses reasonably anticipated
at the time of each such request to be incurred in connection with
investigating, preparing for, and defending any Claim relating to an
Indemnifiable Event, and any and all judgments, fines, penalties, and settlement
amounts of any and all Claims relating to an Indemnifiable Event from time to
time actually paid or claimed, reasonably anticipated, or proposed to be paid;
provided, however, that Indemnitee may not request funding so that the amount in
the Trust exceeds $250,000 without an actual Change in Control. Upon a Change in
Control, the amount or amounts to be deposited in the Trust pursuant
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to the foregoing funding obligation shall be determined by the Reviewing Party.
The terms of the Trust shall provide that, upon a Change in Control, (i) the
Trust shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee; (ii) the trustee of the Trust shall advance, within two
business days of a request by Indemnitee, any and all Expenses to Indemnitee
(and Indemnitee hereby agrees to reimburse the Trust under the circumstances in
which Indemnitee would be required to reimburse the Company for Expense Advances
under Section 2(b) of this Agreement); (iii) the Trust shall continue to be
funded by the Company in accordance with the funding obligation set forth above;
(iv) the trustee of the Trust shall promptly pay to Indemnitee all amounts for
which Indemnitee shall be entitled to indemnification pursuant to this Agreement
or otherwise; and (v) all unexpended funds in that Trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee of the Trust shall be
chosen by Indemnitee. Nothing in this Section 4 shall relieve the Company of any
of its obligations under this Agreement.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall indemnify
Indemnitee against any and all costs and expenses (including attorneys' and
expert witnesses' fees) and, if requested by Indemnitee, shall (within two
business days of that request) advance those costs and expenses to Indemnitee,
that are incurred by Indemnitee in connection with any claim asserted against or
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or provision
of the Company's Articles of Incorporation or Bylaws now or hereafter in effect
relating to Claims for Indemnifiable Events or (ii) recovery under any
directors' and officers' liability insurance policies maintained by the Company,
regardless of whether Indemnitee ultimately is determined to be entitled to that
indemnification, advance expense payment, or insurance recovery, as the case may
be.
6. PARTIAL INDEMNITY. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties, and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
7. CONTRIBUTION.
(a) CONTRIBUTION PAYMENT. To the extent the indemnification provided
for under any provision of this Agreement is determined (in the manner
hereinabove provided) not to be permitted under applicable law, then if
Indemnitee was, is, or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, a Claim
by reason of (or arising in part out of) an Indemnifiable Event, the Company, in
lieu of indemnifying Indemnitee, shall contribute to the amount of any and all
Expenses, judgments,
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fines, or penalties assessed against or incurred or paid by Indemnitee on
account of that Claim and any and all amounts paid in settlement of that Claim
(including all interest, assessments, and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties, or
amounts paid in settlement) for which such indemnification is not permitted
("Contribution Amounts"), in such proportion as is appropriate to reflect the
relative fault with respect to the Indemnifiable Event giving rise to the
Contribution Amounts of Indemnitee, on the one hand, and of the Company and any
and all other parties (including officers and directors of the Company other
than Indemnitee) who may be at fault with respect to such Indemnifiable Event
(collectively, including the Company, the "Third Parties") on the other hand.
(b) RELATIVE FAULT. The relative fault of the Third Parties and the
Indemnitee shall be determined (i) by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency assessing the
Contribution Amount, or (ii) to the extent such court or other governmental
agency does not apportion relative fault, by the Reviewing Party (which shall
include Special Counsel) after giving effect to, among other things, the
relative intent, knowledge, access to information, and opportunity to prevent or
correct the applicable Indemnifiable Event and other relevant equitable
considerations of each party. The Company and Indemnitee agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 7(b).
8. BURDEN OF PROOF. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified under
any provision of this Agreement or to receive contribution pursuant to Section 7
of this Agreement, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
9. NO PRESUMPTION. For purposes of this Agreement, the termination of any
claim, action, suit, or proceeding, by judgment, order, settlement (whether with
or without court approval), or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law.
10. NON-EXCLUSIVITY. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Articles of
Incorporation or Bylaws, the Texas Business Corporation Act or otherwise. To the
extent that a change in the Texas Business Corporation Act (whether by statute
or judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Company's Articles of Incorporation or Bylaws and
this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by that change.
11. LIABILITY INSURANCE. Except as otherwise agreed to by the Company and
Indemnitee in a written agreement, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by that policy or those policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
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12. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted, instituted or conducted, directly or indirectly
(including, without limitation, shareholder derivative suits), by or on behalf
of the Company or any affiliate of the Company against Indemnitee or
Indemnitee's spouse, heirs, executors, or personal or legal representatives
after the expiration of three years from the date of accrual of that cause of
action, and any claim or cause of action of the Company or its affiliate shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within that three-year period; provided, however, that, if any
shorter period of limitations is otherwise applicable to any such cause of
action, the shorter period shall govern.
13. TERMINATION. This Agreement, and the obligations of the Company to
indemnify Indemnitee set forth herein, shall terminate automatically six years
after the termination of Indemnitee's status as a director, officer, employee,
trustee, agent or fiduciary of the Company, a Subsidiary of the Company, or any
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise for which Indemnitee was serving at the request of the Company.
Notwithstanding the above, if there is a Claim relating to an Indemnifiable
Event pending against Indemnitee which arose prior to the end of the six-year
period stated above, the Company's obligation to indemnify Indemnitee shall
continue with respect to such Claim until the final resolution of such Claim,
even if such resolution does not occur until after the end of such six-year
period.
14. AMENDMENTS. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall that waiver constitute a continuing waiver.
15. SUBROGATION. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of that payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure those rights, including the execution
of the documents necessary to enable the Company effectively to bring suit to
enforce those rights.
16. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Articles of
Incorporation or Bylaws or otherwise) of the amounts otherwise indemnifiable
hereunder.
17. BINDING EFFECT; MERGER. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns (including any direct or indirect successor by purchase,
merger, consolidation, or otherwise to all or substantially all of the business
or assets of the Company), spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.
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18. SEVERABILITY. If any provision of this Agreement is held by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be severed
from the remainder of this Agreement, and the remainder of this Agreement shall
be enforced. In addition, the invalid, illegal or unenforceable provision shall
be deemed to be automatically modified, and, as so modified, to be included in
this Agreement, such modification being made to the minimum extent necessary to
render the provision valid, legal and enforceable. Notwithstanding the
foregoing, however, if the severed or modified provision concerns all or a
portion of the essential consideration to be delivered under this Agreement by
one party to the other, the remaining provisions of this Agreement shall also be
modified to the extent necessary to equitably adjust the parties' respective
rights and obligations hereunder.
19. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas applicable to
contracts made and to be performed in that state without giving effect to the
principles of conflicts of laws or choice of laws.
20. CONSTRUCTION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Pronouns shall be construed to include the
masculine, feminine, neuter, singular and plural as the contest requires.
21. SUPERSEDING PRIOR AGREEMENTS. This Agreement replaces and supersedes
any prior indemnification agreement or other arrangement, written or oral,
between Saratoga and Indemnitee, expressly excluding, however, Indemnitee's
rights to indemnification under the Articles of Incorporation of the Company,
the Bylaws of the Company, and the Texas Business Corporation Act.
22. NOTICES. Whenever this Agreement requires or permits notice to be
given by one party to the other, such notice must be in writing to be effective
and shall be deemed delivered and received by the party to whom it is sent upon
actual receipt (by any means) of such notice. Receipt of a notice by any officer
of the Company shall be deemed receipt of such notice by the Company.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
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EXECUTED as of the date first written above.
SARATOGA HOLDINGS I, INC.
a Texas corporation
By:
Xxxxxxx Xxxxxxx, President
INDEMNITEE:
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