INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of _____ __, 1997, between COMPASS
PLASTICS & TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and ____
__ _______, a resident of the State of ____________ (the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Indemnitee
as a Director of the Company;
WHEREAS, as a condition to the Indemnitee's agreement to serve the
Company as such, the Indemnitee requires that he be indemnified from liability
to the fullest extent permitted by law; and
WHEREAS, the Company is willing to indemnify the Indemnitee to the
fullest extent permitted by law in order to retain the services of the
Indemnitee;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
1. Mandatory Indemnification in Proceedings Other than Those by or in
the Right of the Company. Subject to Section 4 hereof, the Company shall
indemnify and hold harmless the Indemnitee from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
settlements, and all other liabilities incurred or paid by him in connection
with the investigation, defense, prosecution, settlement or appeal of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee or agent of the Company, or is
or was serving at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or by reason of anything done
or not done by the Indemnitee in any such capacity or capacities, provided that
the Indemnitee acted in good faith and in a manner he 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 his conduct
was unlawful.
2. Mandatory Indemnification in Proceedings by or in the Right of the
Company. Subject to Section 4 hereof, the Company shall indemnify and hold
harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding by or in the right of the Company to procure a
judgment in its favor, whether civil, criminal, administrative or investigative,
and to which the Indemnitee was or is a party or is threatened to be made a
party by reason of the fact that the Indemnitee is or was an officer, director,
shareholder, employee or agent of the Company, or is or was serving at the
request of the Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that (a) the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and (b) no indemnification
shall be made under this Section 2 in respect of any claim, issue or matter as
to which the Indemnitee shall have been adjudged to be liable to the Company for
misconduct in the performance of his duty 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, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
3. Reimbursement of Expenses Following Adjudication of Negligence. The
Company shall reimburse the Indemnitee for any expenses (including attorneys'
fees) and amounts actually and reasonably incurred or paid by him in connection
with the investigation, defense, settlement or appeal of any action or suit
described in Section 2 hereof that results in an adjudication that the
Indemnitee was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Company; provided,
however, that the Indemnitee acted in good faith and in a manner he believed to
be in the best interests of the Company.
4. Authorization of Indemnification. Any indemnification under Sections
1 and 2 hereof (unless ordered by a court) and any reimbursement made under
Section 3 hereof shall be made by the Company only as authorized in the specific
case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Sections 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(a) first, by the Company's Board of Directors (the "Board")
by majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding;
(b) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors;
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(c) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company) in a written opinion; or
(d) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company's
Common Stock.
4.1 No Presumptions. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner that he 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 reasonable cause to believe
that his conduct was unlawful.
4.2 Benefit Plan Conduct. The Indemnitee's conduct with
respect to an employee benefit plan for a purpose he reasonably believed to be
in the interests of the participants in and beneficiaries of the plan shall be
deemed to be conduct that the Indemnitee reasonably believed to be not opposed
to the best interests of the Company.
4.3 Reliance as Safe Harbor. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (a) the records or books of account of the Company or another enterprise,
including financial statements, (b) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (c) the
advice of legal counsel for the Company or another enterprise, or (d)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
4.4 Success on Merits or Otherwise. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Sections 1 or 2 hereof, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (a) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of
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liability or guilt against him, (b) the expiration of 120 days after the making
of any claim or threat of an action, suit or proceeding without the institution
of the same and without any promise or payment made to induce a settlement, or
(c) the settlement of any action, suit or proceeding under Sections 1, 2 or 3
hereof pursuant to which the Indemnitee pays less than $10,000.
4.5 Partial Indemnification or Reimbursement. If the
Indemnitee is entitled under any provision of this Agreement to indemnification
and/or reimbursement by the Company for some or a portion of the claims,
damages, expenses (including attorneys' fees), judgments, fines or amounts paid
in settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Sections 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
5. Procedures for Determination of Whether Standards have been
Satisfied.
5.1 Costs. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (a) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (b) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
5.2 Timing of the Determination. The Company shall use its
best efforts to make the Determination contemplated by Section 4 hereof
promptly. In addition, the Company agrees:
(a) if the Determination is to be made by the Board
or a committee thereof, such Determination shall be made not later than 15 days
after a written request for a Determination (a "Request") is delivered to the
Company by the Indemnitee;
(b) if the Determination is to be made by independent
legal counsel, such Determination shall be made not later than 30 days after a
Request is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the
shareholders of the Company, such Determination shall be made not later than 90
days after a Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding
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anything herein to the contrary, a Determination may be made in advance of (a)
the Indemnitee's payment (or incurring) of expenses with respect to which
indemnification or reimbursement is sought, and/or (b) final disposition of the
action, suit or proceeding with respect to which indemnification or
reimbursement is sought.
5.3 Reasonableness of Expenses. The evaluation and finding as
to the reasonableness of expenses incurred by the Indemnitee for purposes of
this Agreement shall be made (in the following order of preference) within 15
days after the Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by a majority vote of a
quorum consisting of Disinterested Directors;
(b) next, if a quorum cannot be obtained under
paragraph (a), by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate), consisting solely of two or more Disinterested
Directors; or
(c) next, if a finding cannot be obtained under
either subparagraph (a) or (b), by vote or consent of the holders of a majority
of the Company's Common Stock that are represented in person or by proxy at a
meeting called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 Payment of Indemnified Amount. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 Shareholder Vote on Determination. The Indemnitee and any
other shareholder who is a party to the proceeding for which indemnification or
reimbursement is sought shall be entitled to vote on any Determination to be
made by the Company's shareholders, including a Determination made pursuant to
Section 5.7 hereof. In addition, in connection with each meeting at which a
shareholder Determination will be made, the Company shall solicit proxies that
expressly include a proposal to indemnify or reimburse the Indemnitee. The
Company proxy statement
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relating to the proposal to indemnify or reimburse the Indemnitee shall not
include a recommendation against indemnification or reimbursement.
5.6 Selection of Independent Legal Counsel. If the
Determination required under Section 4 is to be made by independent legal
counsel, such counsel shall be selected by the Indemnitee with the approval of
the Board, which approval shall not be unreasonably withheld. The fees and
expenses incurred by counsel in making any Determination (including
Determinations pursuant to Section 5.8 hereof) shall be borne solely by the
Company regardless of the results of any Determination and, if requested by
counsel, the Company shall give such counsel an appropriate written agreement
with respect to the payment of their fees and expenses and such other matters as
may be reasonably requested by counsel.
5.7 Right of Indemnitee to Appeal an Adverse Determination by
Board. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Sections
1, 2 or 3 hereof, upon the written request of the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's shareholders at the next regular or
special meeting of shareholders. Subject to Section 8 hereof, such Determination
by the Company's shareholders shall be binding and conclusive for all purposes
of this Agreement.
5.8 Right of Indemnitee to Select Forum for Determination. If,
at any time subsequent to the date of this Agreement, "Continuing Directors" do
not constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of subparagraph (c) of Section 4 hereof. If none of the legal
counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Company shall cause the Determination to be made by a
majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
5.9 Access by Indemnitee to Determination. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a shareholder Determination.
5.10 Judicial Determinations in Derivative Suits. In each
action or suit described in Section 2 hereof, the Company shall cause its
counsel to use its best efforts to obtain from the
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Court in which such action or suit was brought (a) an express adjudication
whether the Indemnitee is liable for negligence or misconduct in the performance
of his duty to the Company, and, if the Indemnitee is so liable, (b) a
determination whether and to what extent, despite the adjudication of liability
but in view of all the circumstances of the case (including this Agreement), the
Indemnitee is fairly and reasonably entitled to indemnification.
6. Scope of Indemnity. The actions, suits and proceedings described in
Sections 1 and 2 hereof shall include, for purposes of this Agreement, any
actions that involve, directly or indirectly, activities of the Indemnitee both
in his official capacities as a Company director or officer and actions taken in
another capacity while serving as director or officer, including, but not
limited to, actions or proceedings involving (a) compensation paid to the
Indemnitee by the Company, (b) activities by the Indemnitee on behalf of the
Company, including actions in which the Indemnitee is plaintiff, (c) actions
alleging a misappropriation of a "corporate opportunity," (d) responses to a
takeover attempt or threatened takeover attempt of the Company, (e) transactions
by the Indemnitee in Company securities, and (f) the Indemnitee's preparation
for and appearance (or potential appearance) as a witness in any proceeding
relating, directly or indirectly, to the Company. In addition, the Company
agrees that, for purposes of this Agreement, all services performed by the
Indemnitee on behalf of, in connection with or related to any subsidiary of the
Company, any employee benefit plan established for the benefit of employees of
the Company or any subsidiary, any corporation or partnership or other entity in
which the Company or any subsidiary has a 5% ownership interest, or any other
affiliate shall be deemed to be at the request of the Company.
7. Advance for Expenses.
7.1 Mandatory Advance. Expenses (including attorneys' fees)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Sections 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2 Undertaking to Repay. The Indemnitee hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 7 if
and to the extent that it shall ultimately be found that the Indemnitee is not
entitled to be indemnified by the Company for such amounts.
7.3 Miscellaneous. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
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8. Court-Ordered Indemnification. Regardless whether the Indemnitee has
met the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case
may be, and notwithstanding the presence or absence of any Determination whether
such standards have been satisfied, the Indemnitee may apply for indemnification
(and/or reimbursement pursuant to Sections 3 or 12 hereof) to the court
conducting any proceeding to which the Indemnitee is a party or to any other
court of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification
(and/or reimbursement) if it determines the Indemnitee is fairly and reasonably
entitled to indemnification (and/or reimbursement) in view of all the relevant
circumstances (including this Agreement).
9. Nondisclosure of Payments. Except as expressly required by Federal
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
10. Covenant Not to Xxx, Limitation of Actions and Release of Claims.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Company (or any of its subsidiaries) against the Indemnitee,
his spouse, heirs, executors, personal representatives or administrators after
the expiration of two years from the date the Indemnitee ceases (for any reason)
to serve as either an officer or a director of the Company, and any claim or
cause of action of the Company (or any of its subsidiaries) shall be
extinguished and deemed released unless asserted by filing of a legal action
within such two-year period.
11. Indemnification of Indemnitee's Estate. Notwithstanding any other
provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively, the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Sections 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
12. Reimbursement of All Legal Expenses. Notwithstanding any other
provision of this Agreement, and regardless of the presence or absence of any
Determination, the Company promptly (but not later than 30 days following the
Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action
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described in Sections 1 or 2 hereof (including, but not limited to, the matters
specified in Section 6 hereof).
13. Miscellaneous.
13.1 Notice Provision. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth below
opposite their signatures to this Agreement.
13.2 Entire Agreement. Except for the Company's Restated
Certificate of Incorporation, this Agreement constitutes the entire
understanding of the parties and supersedes all prior understandings, whether
written or oral, between the parties with respect to the subject matter of this
Agreement.
13.3 Severability of Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
13.4 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
13.5 Execution in Counterparts. This Agreement and any
amendment may be executed simultaneously or in counterparts, each of which
together shall constitute one and the same instrument.
13.6 Cooperation and Intent. The Company shall cooperate in
good faith with the Indemnitee and use its best efforts to ensure that the
Indemnitee is indemnified and/or reimbursed for liabilities described herein to
the fullest extent permitted by law.
13.7 Amendment. No amendment, modification or alteration of
the terms of this Agreement shall be binding unless in writing, dated subsequent
to the date of this Agreement, and executed by the parties.
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13.8 Binding Effect. The obligations of the Company to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
13.9 Nonexclusivity. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of shareholders or otherwise.
13.10 Effective Date. The provisions of this Agreement shall
cover claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
ADDRESS: THE COMPANY:
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Compass Plastics & Technologies, Inc. COMPASS PLASTICS & TECHNOLOGIES, INC.
00000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer By: _______________________________
Name:
Title:
ADDRESS: THE INDEMNITEE:
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_______________
_______________
______________________________ _______________
Name:
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