QKL STORES INC. INDEPENDENT DIRECTOR AGREEMENT
This
AMENDED AND RESTATED INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made
and entered into as of this ___ day of ________, 2009, effective as of
______________ (the “Effective Date”), by and between QKL Stores Inc., a Delaware corporation whose
shares are publicly traded (the “Company”), and ___________________, a citizen
of [the United States], with a permanent residence at
________________________________________________________________ (the
“Independent Director”).
WHEREAS,
the Company desires to engage the Independent Director, and the Independent
Director desires to serve, as a non-employee director of the Company, subject to
the terms and conditions contained in this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the receipt of which is hereby acknowledged, the Company and the
Independent Director, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS.
(a) “Corporate
Status” describes the capacity of the Independent Director with respect to the
Company and the services performed by the Independent Director in that
capacity.
(b) “Entity”
shall mean any corporation, partnership, limited liability company, joint
venture, trust, foundation, association, organization or other legal
entity.
(c) “Proceeding”
shall mean any threatened, pending or completed claim, action, suit,
arbitration, alternate dispute resolution process, investigation, administrative
hearing, appeal, or any other proceeding, whether civil, criminal,
administrative or investigative, whether formal or informal, including a
proceeding initiated by the Independent Director pursuant to Section 12 of this
Agreement to enforce the Independent Director’s rights hereunder.
(d) “Expenses”
shall mean all reasonable fees, costs and expenses, approved by the Company in
advance and reasonably incurred in connection with any Proceeding, including,
without limitation, attorneys’ fees, disbursements and retainers, fees and
disbursements of expert witnesses, private investigators, professional advisors
(including, without limitation, accountants and investment bankers), court
costs, transcript costs, fees of experts, travel expenses, duplicating, printing
and binding costs, telephone and fax transmission charges, postage, delivery
services, secretarial services, and other disbursements and
expenses.
(e) “Liabilities”
shall mean judgments, damages, liabilities, losses, penalties, excise taxes,
fines and amounts paid in settlement.
(f) “Parent”
shall mean any corporation or other entity (other than the Company) in any
unbroken chain of corporations or other entities ending with the Company, if
each of the corporations or entities, other than the Company, owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.
(g) “Subsidiary”
shall mean any corporation or other entity (other than the Company) in any
unbroken chain of corporations or other entities beginning with the Company, if
each of the corporations or entities, other than the last corporation or entity
in the unbroken chain, owns stock or other interests possessing 50% or more of
the economic interest or the total combined voting power of all classes of stock
or other interests in one of the other corporations or entities in the
chain.
2. SERVICES
OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent
Director shall perform duties as an independent director and/or a member of the
committees of the Board, be compensated for such and be reimbursed expenses in
accordance with the Schedule A attached to this Agreement, subject to the
following.
(a) The
Independent Director will perform services as is consistent with Independent
Director’s position with the Company, as required and authorized by the By-Laws
and Articles of Incorporation of the Company, and in accordance with high
professional and ethical standards and all applicable laws and rules and
regulations pertaining to the Independent Director’s performance hereunder,
including without limitation, laws, rules and regulations relating to a public
company.
(b) The
Independent Director is solely responsible for taxes arising out of any
compensation paid by the Company to the Independent Director under this
Agreement, and the Independent Director understands that he/she will be issued a
U.S. Treasury form 1099 for any compensation paid to him/her by the
Company. The Independent Director acknowledges and agrees that
because he is not an employee of the Company the Company will not withhold any
amounts for taxes from any of his payments under the Agreement.
(c) The
Company may offset any and all monies payable to the Independent Director to the
extent of any monies owing to the Company from the Independent
Director.
(d) The
rules and regulations of the Company notified to the Independent Director, from
time to time, apply to the Independent Director. Such rules and regulations are
subject to change by the Company in its sole discretion. Notwithstanding the
foregoing, in the event of any conflict or inconsistency between the terms and
conditions of this Agreement and rules and regulations of the Company, the terms
of this Agreement control.
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3. REQUIREMENTS
OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services
to the Company hereunder, Independent Director shall observe all applicable laws
and regulations relating to independent directors of a public company as
promulgated from to time, and shall not: (1) be an employee of the Company or
any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the Company other than as a director
and/or a member of a committee of the Board; (3) be an affiliated person of the
Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17
CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of
a committee of the Board; (4) possess an interest in any transaction with the
Company or any Parent or Subsidiary, for which disclosure would be required
pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a
member of a committee of the Board committees; (5) be engaged in a business
relationship with the Company or any Parent or Subsidiary, for which disclosure
would be required pursuant to 17 CFR 229.404(b), except that the required
beneficial interest therein shall be modified to be 5% hereby.
4. REPORT
OBLIGATION. While this Agreement is in effect, the Independent Director shall
immediately report to the Company in the event: (1) the Independent Director
knows or has reason to know or should have known that any of the requirements
specified in Section 3 hereof is not satisfied or is not going to be satisfied;
and (2) the Independent Director simultaneously serves on an audit committee of
any other public company.
5. TERM
AND TERMINATION. The term of this Agreement and the Independent Director’s
services hereunder shall be for three (3) years from the Effective Date, unless
terminated as provided for in this Section 5. This Agreement and the Independent
Director’s services hereunder shall terminate upon the earlier of the
following:
(a) Removal
of the Independent Director as a director of the Company, upon proper Board or
stockholder action in accordance with the By-Laws and Articles of Incorporation
of the Company and applicable law;
(b) Resignation
of the Independent Director as a director of the Company upon written notice to
the Board of Directors of the Company; or
(c) Termination
of this Agreement by the Company, in the event any of the requirements specified
in Section 3 hereof is not satisfied, as determined by the Company in its sole
discretion.
6. LIMITATION
OF LIABILITY. In no event shall the Independent Director be individually liable
to the Company or its shareholders for any damages for breach of fiduciary duty
as an independent director of the Company, unless the Independent Director’s act
or failure to act involves intentional misconduct, fraud or a knowing violation
of law.
7. AGREEMENT
OF INDEMNITY. The Company agrees to indemnify the Independent Director as
follows:
(a) Subject
to the exceptions contained in Section 8(a) below, if the Independent Director
was or is a party or is threatened to be made a party to any Proceeding (other
than an action by or in the right of the Company) by reason of the Independent
Director’s Corporate Status, the Independent Director shall be indemnified by
the Company against all Expenses and Liabilities incurred or paid by the
Independent Director in connection with such Proceeding (referred to herein as
“INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and
collectively as “INDEMNIFIABLE AMOUNTS”).
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(b) Subject
to the exceptions contained in Section 8(b) below, if the Independent Director
was or is a party or is threatened to be made a party to any Proceeding by or in
the right of the Company, to procure a judgment in its favor by reason of the
Independent Director’s Corporate Status, the Independent Director shall be
indemnified by the Company against all Indemnifiable Expenses.
(c) For
purposes of this Agreement, the Independent Director shall be deemed to have
acted in good faith in conducting the Company’s affairs as an independent
director of the Company and/or a member of a committee of the Board of the
Company, if the Independent Director: (i) exercised or used the same degree of
diligence, care, and skill as an ordinarily prudent man would have exercised or
used under the circumstances in the conduct of his own affairs; or (ii) took, or
omitted to take, an action in reliance upon advise of counsels or other
professional advisors for the Company, or upon statements made or information
furnished by other directors, officers or employees of the Company, or upon a
financial statement of the Company provided by a person in charge of its
accounts or certified by a public accountant or a firm of public accountants,
which the Independent Director had reasonable grounds to believe to be
true.
8. EXCEPTIONS
TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections
7(a) and 7(b) above in all circumstances other than the following:
(a) If
indemnification is requested under Section 7(a) and it has been adjudicated
finally by a court or arbitral body of competent jurisdiction that, in
connection with the subject of the Proceeding out of which the claim for
indemnification has arisen, (i) the Independent Director failed to act in good
faith and in a manner the Independent Director reasonably believed to be in or
not opposed to the best interests of the Company, (ii) the Independent Director
had reasonable cause to believe that the Independent Director’s conduct was
unlawful, or (iii) the Independent Director’s conduct constituted willful
misconduct, fraud or knowing violation of law, then the Independent Director
shall not be entitled to payment of Indemnifiable Amounts
hereunder.
(b) If
indemnification is requested under Section 7(b) and
(i) it
has been adjudicated finally by a court or arbitral body of competent
jurisdiction that, in connection with the subject of the Proceeding out of which
the claim for indemnification has arisen, the Independent Director failed to act
in good faith and in a manner the Independent Director reasonably believed to be
in or not opposed to the best interests of the Company, including without
limitation, the breach of Section 4 hereof by the Independent Director, the
Independent Director shall not be entitled to payment of Indemnifiable Expenses
hereunder; or
(ii) it
has been adjudicated finally by a court or arbitral body of competent
jurisdiction that the Independent Director is liable to the Company with respect
to any claim, issue or matter involved in the Proceeding out of which the claim
for indemnification has arisen, including, without limitation, a claim that the
Independent Director received an improper benefit or improperly took advantage
of a corporate opportunity, the Independent Director shall not be entitled to
payment of Indemnifiable Expenses hereunder with respect to such claim, issue or
matter.
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9. WHOLLY
OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and
without limiting any such provision, to the extent that the Independent Director
is, by reason of the Independent Director’s Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Independent
Director shall be indemnified in connection therewith. If the Independent
Director is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify the Independent Director
against those Expenses reasonably incurred by the Independent Director or on the
Independent Director’s behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this section, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
10. ADVANCES
AND INTERIM EXPENSES. The Company may pay to the Independent Director all
Indemnifiable Expenses incurred by the Independent Director in connection with
any Proceeding, including a Proceeding by or in the right of the Company, in
advance of the final disposition of such Proceeding, if the Independent Director
furnishes the Company with a written undertaking, to the satisfaction of the
Company, to repay the amount of such Indemnifiable Expenses advanced to the
Independent Director in the event it is finally determined by a court or
arbitral body of competent jurisdiction that the Independent Director is not
entitled under this Agreement to indemnification with respect to such
Indemnifiable Expenses.
11. PROCEDURE
FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to
the Company a written request specifying the Indemnifiable Amounts, for which
the Independent Director seeks payment under Section 7 hereof and the Proceeding
of which has been previously notified to the Company and approved by the Company
for indemnification hereunder. At the request of the Company, the Independent
Director shall furnish such documentation and information as are reasonably
available to the Independent Director and necessary to establish that the
Independent Director is entitled to indemnification hereunder. The Company shall
pay such Indeminfiable Amounts within thirty (30) days of receipt of all
required documents.
12. REMEDIES
OF INDEPENDENT DIRECTOR.
(a) RIGHT
TO PETITION COURT. In the event that the Independent Director makes a request
for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the
Company fails to make such payment or advancement in a timely manner pursuant to
the terms of this Agreement, the Independent Director may petition the
appropriate judicial authority to enforce the Company’s obligations under this
Agreement.
(b) BURDEN
OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the
Company shall have the burden of proving that the Independent Director is not
entitled to payment of Indemnifiable Amounts hereunder.
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(c) EXPENSES.
The Company agrees to reimburse the Independent Director in full for any
Expenses incurred by the Independent Director in connection with investigating,
preparing for, litigating, defending or settling any action brought by the
Independent Director under Section 12 (a) above, or in connection with any claim
or counterclaim brought by the Company in connection therewith.
(d) VALIDITY
OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding,
including, without limitation, an action under Section 12 (a) above, that the
provisions of this Agreement are not valid, binding and enforceable or that
there is insufficient consideration for this Agreement and shall stipulate in
court that the Company is bound by all the provisions of this
Agreement.
(e) FAILURE
TO ACT NOT A DEFENSE. The failure of the Company (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders)
to make a determination concerning the permissibility of the payment of
Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this
Agreement shall not be a defense in any action brought under Section 12 (a)
above.
13. PROCEEDINGS
AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent
Director shall not be entitled to payment of Indemnifiable Amounts or
advancement of Indemnifiable Expenses with respect to any Proceeding brought by
the Independent Director against the Company, any Entity which it controls, any
director or officer thereof, or any third party, unless the Company has
consented to the initiation of such Proceeding. This section shall not apply to
counterclaims or affirmative defenses asserted by the Independent Director in an
action brought against the Independent Director.
14. INSURANCE.
The Company may, at its discretion, obtain and maintain a policy or policies of
director and officer liability insurance, in an amount not less than $3,000,000,
of which the Independent Director will be named as an insured, providing the
Independent Director with coverage for Indemnifiable Amounts and/or
Indemnifiable Expenses in accordance with said insurance policy or policies
(“D&O INSURANCE”); provided that:
(a) The
Independent Director agrees that, while the Company has valid and effective
D&O Insurance, and except as provided in (c) of this section, Sections 7-13
of this Agreement shall not apply, and the Company’s indemnification obligation
to the Independent Director under this Agreement shall be deemed fulfilled by
virtue of purchasing and maintaining such insurance policy or policies, in
accordance with the terms and conditions thereof and subject to exclusions
stated thereon. The Independent Director agrees that the Company shall have no
obligation to challenge the decisions made by the insurance carrier(s)
(“INSURANCE CARRIER”) relating to any claims made under such insurance policy or
policies;
(b) The
Independent Director agrees that the Company’s indemnification obligation to the
Independent Director under (a) of this section shall be deemed discharged and
terminated, in the event the Insurance Carrier refused payment for any
Proceedings against the Independent Director due to the acts or omissions of the
Independent Director;
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(c) While
the D&O Insurance is valid and effective, the Company agrees that it shall
indemnify the Independent Director for the Indemnifiable Amounts and
Indemnifiable Expenses, to the extent that any Proceedings are coverable by
D&O Insurance, but in excess of the policy amount, in accordance with
Sections 7-13 of this Agreement; and
(d) While
the D&O Insurance is valid and effective, this Section 14 states the entire
and exclusive remedy of the Independent Director with respect to the
indemnification obligation of the Company to the Independent Director under this
Agreement.
15. SUBROGATION.
In the event of any payment of Indemnifiable Amounts under this Agreement or the
D&O Insurance, the Company or its Insurance Carrier, as the case may be,
shall be subrogated to the extent of such payment to all of the rights of
contribution or recovery of the Independent Director against other persons, and
the Independent Director shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
16. AUTHORITY.
Each party has all necessary power and authority to enter into, and be bound by
the terms of, this Agreement, and the execution, delivery and performance of the
undertakings contemplated by this Agreement have been duly authorized by each
party hereto:
17. SUCCESSORS
AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the
benefit of all successors and assigns of the Company (including any transferee
of all or a substantial portion of the business, stock and/or assets of the
Company and any direct or indirect successor by merger or consolidation or
otherwise by operation of law), and (b) be binding on and shall inure to the
benefit of the heirs, personal representatives, executors and administrators of
the Independent Director. The Independent Director has no power to assign this
Agreement or any rights and obligations hereunder.
18. CHANGE
IN LAW. To the extent that a change in applicable law (whether by statute or
judicial decision) shall mandate broader or narrower indemnification than is
provided hereunder, the Independent Director shall be subject to such broader or
narrower indemnification and this Agreement shall be deemed to be amended to
such extent.
19. SEVERABILITY.
Whenever possible, each provision of this Agreement shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of this Agreement, or any clause thereof, shall be determined by a court of
competent jurisdiction to be illegal, invalid or unenforceable, in whole or in
part, such provision or clause shall be limited or modified in its application
to the minimum extent necessary to make such provision or clause valid, legal
and enforceable, and the remaining provisions and clauses of this Agreement
shall remain fully enforceable and binding on the parties.
20. MODIFICATIONS
AND WAIVER. Except as provided in Section 18 hereof with respect to changes in
applicable law which broaden or narrow the right of the Independent Director to
be indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No delay in exercise or non-exercise by the Company of any right under
this Agreement shall operate as a current or future waiver by it as to its same
or different rights under this Agreement or otherwise.
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21. NOTICES.
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered by hand,
(b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed
by certified or registered mail with postage prepaid, on the third business day
after the date en which it is so mailed:
If to
Independent Director, to: _________________________.
If to the
Company, to: Xxxxxxxx Xxxx, CEO, QKL Stores Inc., 00 Xxxxxx Xxxxxx, Xxxxxxxx
Xincun, Sartu District, Daqing, Heilongjiang Province, China 163311, or to such
other address as may have been furnished in the same manner by any party to the
others.
22. GOVERNING
LAW. This Agreement shall be governed by and construed and enforced under the
laws of the State of New York.
23. CONSENT
TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts
having jurisdiction over matters arising in New York County, New York for any
proceeding arising out of or relating to this Agreement. The parties agree that
in any such proceeding, each party shall waive, if applicable, inconvenience of
forum and right to a jury.
24. AGREEMENT
GOVERNS. This Agreement is to be deemed consistent wherever possible with
relevant provisions of the By-Laws and Articles of Incorporation of the Company;
however, in the event of a conflict between this Agreement and such provisions,
the provisions of this Agreement shall control.
25. INDEPENDENT
CONTRACTOR. The parties understand, acknowledge and agree that the Independent
Director’s relationship with the Company is that of an independent contractor
and nothing in this Agreement is intended to or should be construed to create a
relationship other than that of independent contractor. Nothing in this
Agreement shall be construed as a contract of employment/engagement between the
Independent Director and the Company or as a commitment on the part of the
Company to retain the Independent Director in any capacity, for any period of
time or under any specific terms or conditions, or to continue the Independent
Director’s service to the Company beyond any period.
26. ARBITRATION.
Any dispute, controversy or claim arising out of or relating to this Agreement
or the breach thereof, shall be settled by arbitration, before one arbitrator in
accordance with the rules of the American Arbitration Association then in effect
and judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The arbitrator will be selected, by the parties, from
a panel of attorney arbitrators. The parties agree that any arbitration shall be
held in New York, New York. The language of the arbitration shall be in English.
The arbitrator will have no authority to make any relief, finding or award that
does not conform to the terms and conditions of this Agreement. Each party shall
bear its own attorneys’ or expert fees and any and all other party specific
costs. Either party, before or during any arbitration, may apply to a court
having jurisdiction for a restraining order or injunction where such relief is
necessary to protect its interests. Prior to initiation of arbitration, the
aggrieved party will give the other party written notice, in accordance with
this Agreement, describing the claim as to which it intends to initiate
arbitration.
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27. ENTIRE
AGREEMENT. This Agreement constitutes the entire agreement between the Company
and the Independent Director with respect to the subject matter hereof, and
supersedes all prior understandings and agreements with respect to such subject
matter.
IN
WITNESS WHEREOF, the parties hereto have executed this Independent Director
Indemnification Agreement as of the day and year first above
written.
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AGREED
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AGREED
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Independent
Director
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||||
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Name:
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Xxxxxxxx
Xxxx
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Name:
[name]
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Title:
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Chairman
and CEO
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SCHEDULE
A
I POSITION:
INDEPENDENT
DIRECTOR.
II. COMPENSATION:
FEES. For
all services rendered by the Independent Director pursuant to this Agreement,
both during and outside of normal working hours, including but not limited to,
attending all required meetings of the Board or applicable committees thereof,
executive sessions of the independent directors, reviewing filing reports and
other corporate documents as requested by the Company, providing comments and
opinions as to business matters as requested by the Company, the Company agrees
to pay to the Independent Director a fee in cash of Fifteen Thousand Dollars
($15,000) per year during the Term (the “Base Fee”). The Base Fee shall be paid
in cash to the Independent Director on a quarterly basis in equal installments
on the last day of each calendar quarter. I
STOCK.
During the term of the Independent Director’s service as a director or member of
any committee of the Board, the Independent Director shall be granted an option
to purchase Twenty Thousand and One (20,000) shares of common stock of the
Company on the date of execution of this Agreement, with an exercise price equal
to the fair market value of a share of the Company’s common stock on the date of
the grant of the option and vesting in three installments of 6,667, 6,667 and
6,666 shares on the anniversary date of this Agreement, over the 36-month period
during which this Agreement is performed by the Independent
Director. Any such stock grant shall be in accordance with the equity
incentive plans as may be adopted by the Company, from time to time and shall
expire 5 years from the date of the grant. The Independent Director’s rights in
respect to any grant shall be determined solely by the Compensation Committee of
the Company and are subject to execution by Independent Director of any
applicable agreements as established and requested by the Company pursuant to
the equity incentive plans.
EXPENSES.
During the term of the Independent Director’s service as a director of the
Company, the Company shall promptly reimburse the Independent Director for all
expenses approved by the Company in advance and incurred by him/her in
connection with attending (a) all meetings of the Board or applicable committees
thereof, (b) executive sessions of the independent directors, and (c)
stockholder meetings, as a director or a member of any committee of the Board ,
which are approved by the Company in advance. In addition, the
Independent Director shall rely on the Company to arrange all hotel
accommodations in connection with any such meetings the Independent Director
must attend. The amount of such expenses eligible for reimbursement by the
Company during a calendar year shall not affect such expenses eligible for
reimbursement by the Company in any other calendar year, and the reimbursement
of any such eligible expenses shall be made on or before the last day of the
calendar year next following the calendar year in which the expense was
incurred.
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NO OTHER
BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that
he/she is not granted and is not entitled to any other benefits or compensation
from the Company for the services provided under this Agreement except expressly
provided for in this Schedule A.
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AGREED
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AGREED
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Independent
Director
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Name:
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Xxxxxxxx Xxxx |
Name: [Name]
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Title:
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Chairman and CEO | |||
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