PACIFIC ETHANOL, INC. INDEMNITY AGREEMENT
Exhibit
10.2
This
Indemnity Agreement (this “Agreement”) dated as of
January 2, 2008, is made by and between Pacific Ethanol, Inc.,
a Delaware corporation (the “Company”), and Xxxxxx
X.
Xxxxxx (“Indemnitee”).
Recitals
A. The
Company desires to attract and retain the services of highly qualified
individuals as directors, officers, employees and agents.
B. The
Company’s bylaws (the “Bylaws”) require that the Company
indemnify its directors, and empowers the Company to indemnify
its officers, employees and agents, as authorized by the
Delaware General Corporation Law, as amended (the “Code”),
under which the Company is organized and such Bylaws expressly provide that
the
indemnification provided therein is not exclusive and contemplates that the
Company may enter into separate agreements with its directors, officers and
other persons to set forth specific indemnification provisions.
C. Indemnitee
does not regard the protection currently provided by applicable law, the
Company’s governing documents and available insurance as adequate under the
present circumstances, and the Company has determined that Indemnitee and other
directors, officers, employees and agents of the Company may not be willing
to
serve or continue to serve in such capacities without additional
protection.
D. The
Company desires and has requested Indemnitee to serve or continue to serve
as a
director, officer, employee or agent of the Company, as the case may be, and
has
proferred this Agreement to Indemnitee as an additional inducement to serve
in
such capacity.
E. Indemnitee
is willing to serve, or to continue to serve, as a director, officer, employee
or agent of the Company, as the case may be, if Indemnitee is furnished the
indemnity provided for herein by the Company.
Agreement
Now
Therefore, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto, intending to be legally bound, hereby agree
as
follows:
1. Definitions.
(a) Agent. For
purposes of this Agreement, the term “agent” of the Company means any person
who: (i) is or was a director, officer,
employee or other fiduciary of the Company or a subsidiary of the Company;
or
(ii) is or was serving at the request or for the convenience of, or
representing the interests of, the Company or a subsidiary of the Company,
as a
director, officer, employee or other fiduciary of a foreign or domestic
corporation, partnership, joint venture, trust or other
enterprise.
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(b) Expenses. For
purposes of this Agreement, the term “expenses” shall be broadly construed and
shall include, without limitation, all direct and indirect costs of any type
or
nature whatsoever (including, without limitation, all attorneys’, witness, or
other professional fees and related disbursements, and other out-of-pocket
costs
of whatever nature), actually and reasonably incurred by Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
the
Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee,
but shall not include any judgments, fines or penalties actually levied against
Indemnitee for such individual’s violations of law. The term “expenses” shall
also include reasonable compensation for time spent by Indemnitee for which
he
is not compensated by the Company or any subsidiary or third party (i) for
any
period during which Indemnitee is not an agent, in the employment of, or
providing services for compensation to, the Company or any subsidiary; and
(ii)
if the rate of compensation and estimated time involved is approved by the
directors of the Company who are not parties to any action with respect to
which
expenses are incurred, for Indemnitee while an agent of, employed by, or
providing services for compensation to, the Company or any
subsidiary.
(c) Proceedings. For
purposes of this Agreement, the term “proceeding” shall be broadly construed and
shall include, without limitation, any threatened, pending, or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened or completed
proceeding, whether brought in the right of the Company or otherwise and whether
of a civil, criminal, administrative or investigative nature, and whether formal
or informal in any case, in which Indemnitee was, is or will be involved as
a
party or otherwise by reason of: (i) the fact that Indemnitee is or
was a director or officer of the Company; (ii) the fact that any action taken
by
Indemnitee or of any action on Indemnitee’s part while acting as director,
officer, employee or agent of the Company; or (iii) the fact that Indemnitee
is
or was serving at the request of the Company as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, and in any such case described above, whether
or not serving in any such capacity at the time any liability or expense is
incurred for which indemnification, reimbursement, or advancement of expenses
may be provided under this Agreement.
(d) Subsidiary. For
purposes of this Agreement, the term “subsidiary” means any corporation or
limited liability company of which more than 50% of the outstanding voting
securities or equity interests are owned, directly or indirectly, by the Company
and one or more of its subsidiaries, and any other corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan
or
other enterprise of which Indemnitee is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary.
(e) Independent
Counsel. For purposes of this Agreement, the term
“independent counsel” means a law firm, or a partner (or, if applicable, member)
of such a law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past five (5) years has
been, retained to represent: (i) the Company or Indemnitee in any matter
material to either such party, or (ii) any other party to the proceeding giving
rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term “independent counsel” shall not include any person who,
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee
in
an action to determine Indemnitee’s rights under this Agreement.
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2. Agreement
to Serve. Indemnitee will serve, or continue to serve, as a
director, officer, employee or agent of the Company or any subsidiary, as the
case may be, faithfully and to the best of his or her ability, at the will
of
such corporation (or under separate agreement, if such agreement exists), in
the
capacity Indemnitee currently serves as an agent of such corporation, so long
as
Indemnitee is duly appointed or elected and qualified in accordance with the
applicable provisions of the bylaws or other applicable charter documents of
such corporation, or until such time as Indemnitee tenders his or her
resignation in writing; provided, however, that nothing contained in this
Agreement is intended as an employment agreement between Indemnitee and the
Company or any of its subsidiaries or to create any right to continued
employment of Indemnitee with the Company or any of its subsidiaries in any
capacity.
The
Company acknowledges that it has entered into this Agreement and assumes the
obligations imposed on it hereby, in addition to and separate from its
obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve,
or
continue to serve, as a director, officer, employee or
agent of the Company, and the Company acknowledges that Indemnitee is relying
upon this Agreement in serving as a director, officer, employee or agent of
the
Company.
3. Indemnification.
(a) Indemnification
in Third Party Proceedings. Subject to Section 10
below, the Company shall indemnify Indemnitee to the fullest extent permitted
by
the Code, as the same may be amended from time to time (but, only to the extent
that such amendment permits Indemnitee to broader indemnification rights than
the Code permitted prior to adoption of such amendment), if Indemnitee is a
party to or threatened to be made a party to or otherwise involved in any
proceeding, for any and all expenses, actually and reasonably incurred by
Indemnitee in connection with the investigation, defense, settlement or appeal
of such proceeding.
(b) Indemnification
in Derivative Actions and Direct Actions by the
Company. Subject to Section 10 below, the Company shall
indemnify Indemnitee to the fullest extent permitted by the Code, as the same
may be amended from time to time (but, only to the extent that such amendment
permits Indemnitee to broader indemnification rights than the Code permitted
prior to adoption of such amendment), if Indemnitee is a party to or threatened
to be made a party to or otherwise involved in any proceeding by or in the
right
of the Company to procure a judgment in its favor, against any and all expenses
actually and reasonably incurred by Indemnitee in connection with the
investigation, defense, settlement, or appeal of such proceedings.
4. Indemnification
of Expenses of Successful Party. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any proceeding or in defense of any
claim, issue or matter therein, including the dismissal of any action without
prejudice, the Company shall indemnify Indemnitee against all expenses actually
and reasonably incurred in connection with the investigation, defense or appeal
of such proceeding.
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5. Partial
Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses actually and reasonably incurred by Indemnitee in the
investigation, defense, settlement or appeal of a proceeding, but is precluded
by applicable law or the specific terms of this Agreement to indemnification
for
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled.
6. Advancement
of Expenses. To the extent not prohibited by law, the
Company shall advance the expenses incurred by Indemnitee in
connection with any proceeding, and such advancement shall be made within twenty
(20) days after the receipt by the Company of a statement or statements
requesting such advances (which shall include invoices received by Indemnitee
in
connection with such expenses but, in the case of invoices in connection with
legal services, any references to legal work performed or to expenditures made
that would cause Indemnitee to waive any privilege accorded by applicable law
shall not be included with the invoice) and upon request of the Company, an
undertaking to repay the advancement of expenses if and to the extent that
it is
ultimately determined by a court of competent jurisdiction in a final judgment,
not subject to appeal, that Indemnitee is not entitled to be indemnified by
the
Company. Advances shall be unsecured, interest free and without
regard to Indemnitee’s ability to repay the expenses. Advances shall include any
and all expenses actually and reasonably incurred by Indemnitee pursuing an
action to enforce Indemnitee’s right to indemnification under this Agreement, or
otherwise and this right of advancement, including expenses incurred preparing
and forwarding statements to the Company to support the advances
claimed. Indemnitee acknowledges that the execution and delivery of
this Agreement shall constitute an undertaking providing that Indemnitee shall,
to the fullest extent required by law, repay the advance if and to the extent
that it is ultimately determined by a court of competent jurisdiction in a
final
judgment, not subject to appeal, that Indemnitee is not entitled to be
indemnified by the Company. The right to advances under this Section
shall continue until final disposition of any proceeding, including any appeal
therein. This Section 6 shall not apply to any claim made by
Indemnitee for which indemnity is excluded pursuant to Section
10(b).
7. Notice
and Other Indemnification Procedures.
(a) Notification
of Proceeding. Indemnitee will notify the Company in writing
promptly upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any proceeding or matter
which may be subject to indemnification or advancement of expenses covered
hereunder. The failure of Indemnitee to so notify the Company shall
not relieve the Company of any obligation which it may have to Indemnitee under
this Agreement or otherwise.
(b) Request
for Indemnification and Indemnification Payments. Indemnitee
shall notify the Company promptly in writing upon receiving notice of nay
demand, judgment or other requirement for payment that Indemnitee reasonably
believes to the subject to indemnification under the terms of this Agreement,
and shall request payment thereof by the Company. Indemnification
payments requested by Indemnitee under Section 3 hereof shall be made by
the Company no later than sixty (60) days after receipt of the written request
of Indemnitee. Claims for advancement of expenses shall be made under
the provisions of Section 6 herein.
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(c) Application
for Enforcement. In the event the Company fails to make
timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall
have
the right to apply to any court of competent jurisdiction for the purpose of
enforcing Indemnitee’s right to indemnification or advancement of expenses
pursuant to this Agreement. In such an enforcement hearing or
proceeding, the burden of proof shall be on the Company to prove by that
indemnification or advancement of expenses to Indemnitee is not required under
this Agreement or permitted by applicable law. Any determination by
the Company (including its Board of Directors, stockholders or independent
counsel) that Indemnitee is not entitled to indemnification hereunder, shall
not
be a defense by the Company to the action nor create any presumption that
Indemnitee is not entitled to indemnification or advancement of expenses
hereunder.
(d) Indemnification
of Certain Expenses. The Company shall indemnify Indemnitee
against all expenses incurred in connection with any hearing or proceeding
under
this Section 7 unless the Company prevails in such hearing or proceeding on
the merits in all material respects.
8. Assumption
of Defense. In the event the Company shall be requested by
Indemnitee to pay the expenses of any proceeding, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, or to participate
to
the extent permissible in such proceeding, with counsel reasonably acceptable
to
Indemnitee. Upon assumption of the defense by the Company and the
retention of such counsel by the Company, the Company shall not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred
by
Indemnitee with respect to the same proceeding, provided that Indemnitee shall
have the right to employ separate counsel in such proceeding at Indemnitee’s
sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s
counsel delivers a written notice to the Company stating that such counsel
has
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or the Company shall
not, in fact, have employed counsel or otherwise actively pursued the defense
of
such proceeding within a reasonable time, then in any such event the fees and
expenses of Indemnitee’s counsel to defend such proceeding shall be subject to
the indemnification and advancement of expenses provisions of this
Agreement.
9. Insurance.
To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
or
agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage available for any such director,
officer, employee or agent under such policy or policies. If, at the
time of the receipt of a notice of a claim pursuant to the terms 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 Indemnitee, all amounts payable as a result of such proceeding
in
accordance with the terms of such policies.
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10. Exceptions.
(a) Certain
Matters. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee on account of any proceeding with respect
to (i) remuneration paid to Indemnitee if it is determined by final
judgment or other final adjudication that such remuneration was in violation
of
law (and, in this respect, both the Company and Indemnitee have been advised
that the Securities and Exchange Commission believes 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, as indicated in Section 10(d)
below); (ii) a final judgment rendered against Indemnitee for an
accounting, disgorgement or repayment of profits made from the purchase or
sale
by Indemnitee of securities of the Company against Indemnitee or in connection
with a settlement by or on behalf of Indemnitee to the extent it is acknowledged
by Indemnitee and the Company that such amount paid in settlement resulted
from
Indemnitee's conduct from which Indemnitee received monetary personal profit,
pursuant to the provisions of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or other provisions of any federal, state or local statute
or rules and regulations thereunder; (iii) a final judgment or other final
adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or
deliberately dishonest or constituted willful misconduct (but only to the extent
of such specific determination); or (iv) on account of conduct that is
established by a final judgment as constituting a breach of Indemnitee’s duty of
loyalty to the Company or resulting in any personal profit or advantage to
which
Indemnitee is not legally entitled. For purposes of the foregoing
sentence, a final judgment or other adjudication may be reached in either the
underlying proceeding or action in connection with which indemnification is
sought or a separate proceeding or action to establish rights and liabilities
under this Agreement.
(b) Claims
Initiated by Indemnitee. Any provision herein to the
contrary notwithstanding, the Company shall not be obligated to indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought by Indemnitee against the Company or its directors, officers,
employees or other agents and not by way of defense, except (i) with respect
to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or under any other agreement, provision in the Bylaws or
Certificate of Incorporation or applicable law, or (ii)
with respect to any other proceeding initiated by Indemnitee that is either
approved by the Board of Directors or Indemnitee’s participation is required by
applicable law. However, indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board of Directors
determines it to be appropriate.
(c) Unauthorized
Settlements. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee under this Agreement for any amounts
paid
in settlement of a proceeding effected without the Company’s written
consent. Neither the Company nor Indemnitee shall unreasonably
withhold consent to any proposed settlement; provided, however, that the Company
may in any event decline to consent to (or to otherwise admit or agree to any
liability for indemnification hereunder in respect of) any proposed settlement
if the Company is also a party in such proceeding and determines in good faith
that such settlement is not in the best interests of the Company and its
stockholders.
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(d) Securities
Act Liabilities. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee or otherwise act in violation of any
undertaking appearing in and required by the rules and regulations promulgated
under the Securities Act of 1933, as amended (the “Act”), or in any registration
statement filed with the SEC under the Act. Indemnitee acknowledges
that paragraph (h) of Item 512 of Regulation S-K currently generally
requires the Company to undertake in connection with any registration statement
filed under the Act to submit the issue of the enforceability of Indemnitee’s
rights under this Agreement in connection with any liability under the Act
on
public policy grounds to a court of appropriate jurisdiction and to be governed
by any final adjudication of such issue. Indemnitee specifically
agrees that any such undertaking shall supersede the provisions of this
Agreement and to be bound by any such undertaking.
11. Nonexclusivity
and Survival of Rights. The provisions for indemnification
and advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which Indemnitee may at any time be entitled
under
any provision of applicable law, the Company’s Certificate of Incorporation,
Bylaws or other agreements, both as to action in Indemnitee’s official capacity
and Indemnitee’s action as an agent of the Company, in any court in which a
proceeding is brought, and Indemnitee’s rights hereunder shall continue after
Indemnitee has ceased acting as an agent of the Company and shall inure to
the
benefit of the heirs, executors, administrators and assigns of
Indemnitee. The obligations and duties of the Company to Indemnitee
under this Agreement shall be binding on the Company and its successors and
assigns until terminated in accordance with its terms. The Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required
to
perform if no such succession had taken place.
No
amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his or her corporate status
prior to such amendment, alteration or repeal. To the extent that a
change in the Code, whether by statute or judicial decision, permits greater
indemnification or advancement of expenses than would be afforded currently
under the Company’s Certificate of Incorporation, 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 such
change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder
or
now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, by
Indemnitee shall not prevent the concurrent assertion or employment of any
other
right or remedy by Indemnitee.
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12. Term. This
Agreement shall continue until and terminate upon the later of: (a) five (5)
years after the date that Indemnitee shall have ceased to serve as a director
or
and/or officer, employee or agent of the Company; or (b) one (1) year after
the
final termination of any proceeding, including any appeal then pending, in
respect to which Indemnitee was granted rights of indemnification or advancement
of expenses hereunder.
No
legal
action shall be brought and no cause of action shall be asserted by or in the
right of the Company against an Indemnitee or an Indemnitee's estate, spouse,
heirs, executors or personal or legal representatives after the expiration
of
five (5) years from the date of accrual of such cause of action, and any claim
or cause of action of the Company shall be extinguished and deemed released
unless asserted by the timely filing of a legal action within such five-year
period; provided, however, that if any shorter period of limitations is
otherwise applicable to such cause of action, such shorter period shall
govern.
13. Subrogation. In
the event of payment under this Agreement, the Company shall be subrogated
to
the extent of such payment to all of the rights of recovery of Indemnitee,
who,
at the request and expense of the Company, shall execute all papers required
and
shall do everything that may be reasonably necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
14. Interpretation
of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to Indemnitee to the fullest extent now or hereafter permitted
by law.
15. Severability. If
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever, (a) the validity, legality and
enforceability of the remaining provisions of the 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 paragraph 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 14
hereof.
16. Amendment
and Waiver. No supplement, modification, amendment, or
cancellation 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.
17. Notice. Except
as otherwise provided herein, any notice or demand which, by the provisions
hereof, is required or which may be given to or served upon the parties hereto
shall be in writing and, if by telegram, telecopy or telex, shall be deemed
to
have been validly served, given or delivered when sent, if by overnight
delivery, courier or personal delivery, shall be deemed to have been validly
served, given or delivered upon actual delivery and, if mailed, shall be deemed
to have been validly served, given or delivered three (3) business days after
deposit in the United States mail, as registered or certified mail, with proper
postage prepaid and addressed to the party or parties to be notified at the
addresses set forth on the signature page of this Agreement (or such other
address(es) as a party may designate for itself by like notice). If
to the Company, notices and demands shall be delivered to the attention of
the
Secretary of the Company.
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18. Governing
Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of California, as applied to
contracts between California residents entered into and to be performed entirely
within California.
19. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall for
all purposes be deemed to be an original but all of which together shall
constitute but one and the same Agreement. Only one such counterpart
need be produced to evidence the existence of this Agreement.
20. Headings. The
headings of the sections of this Agreement are inserted for convenience only
and
shall not be deemed to constitute part of this Agreement or to affect the
construction hereof.
21. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all
prior agreements, understandings and negotiations, written and oral, between
the
parties with respect to the subject matter of this Agreement; provided, however,
that this Agreement is a supplement to and in furtherance of the Company’s
Certificate of Incorporation, Bylaws, the Code and any
other applicable law, and shall not be deemed a substitute therefor, and does
not diminish or abrogate any
rights of Indemnitee thereunder.
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In
Witness Whereof, the parties hereto have entered into this Agreement
effective as of the date first above written.
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By:
/s/ Xxxx X. Xxxxxxx
Xxxx
X. Xxxxxxx
President
and Chief Executive Officer
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|
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INDEMNITEE
/s/
Xxxxxx X. Xxxxxx
Signature
of Indemnitee
Xxxxxx
X. Xxxxxx
Print
or Type Name of Indemnitee
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