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Exhibit 99.1
Execution Copy
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SETTLEMENT AGREEMENT
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SETTLEMENT AGREEMENT, dated August 26, 1998 ("Agreement"), by and
among Xxxxx-Xxxxxx & Co. Inc., a New York corporation, Xxx X. Xxxxx-Xxxxxx, a
natural person, and Xxxx Xxxxxxxx, a natural person (the foregoing Persons (as
defined below) being collectively referred to herein as the "Xxxxx-Xxxxxx
Group"); and Telxon Corporation, a Delaware corporation (the "Company").
WHEREAS, on June 11, 1998, certain members of the Xxxxx-Xxxxxx Group
furnished the Company with a submission dated June 11, 1998 (the "Advance Notice
Submission") of their intention to (i) nominate, and solicit proxies in support
of, one candidate to stand for election (the "Nomination") to the Company's
Board of Directors (the "Board") at the Company's 1998 Annual Meeting of
Shareholders (the "1998 Annual Meeting") and (ii) propose, and solicit proxies
in support of, five binding resolutions (the "Bylaw Proposals") and one
non-binding resolution (the "Expense Proposal" and, together with the Bylaw
Proposals, the "Proposals") at the 1998 Annual Meeting (collectively, the
Nomination and the Proposals referred to herein as the "Proxy Contest");
WHEREAS, the Company commenced an action captioned TELXON CORPORATION
V. XXX X. XXXXX-XXXXXX AND XXXXX-XXXXXX & CO. INC., C.A. No. 98-403, against
certain members of the Xxxxx-Xxxxxx Group in the United States District Court
for the District of Delaware (the "Federal Litigation");
WHEREAS, certain members of the Xxxxx-Xxxxxx Group commenced an action
captioned XXX X. XXXXX-XXXXXX V. TELXON CORPORATION, C.A. No. 16580, against the
Company in the Court of Chancery of the State of Delaware (the "Delaware
Litigation" and, together with the Federal Litigation, the "Pending
Litigation");
WHEREAS, the Pending Litigation arises out of and relates to the Proxy
Contest; and
WHEREAS, the Company and the members of the Xxxxx-Xxxxxx Group have
determined that the interests of the Company and its shareholders, and the
interests of the members of the Xxxxx-Xxxxxx Group, would best be served by
avoiding the substantial expense and disruption that could be expected to result
from the Proxy Contest and the Pending Litigation, subject to the terms and
conditions set forth herein.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and representations set forth herein, and intending to be legally
bound hereby, the parties to this Agreement hereby agree as follows:
1. SETTLEMENT OF PENDING LITIGATION; MUTUAL RELEASE; BOARD
COMPOSITION; RELATED MATTERS.
(a) Promptly after the date of this Agreement, (i) the Company
shall take all steps necessary to dismiss, as to those members of the Xxxxx-
Xxxxxx Group who are defendants therein, the Federal Litigation without
prejudice as to such members of the Xxxxx-Xxxxxx Group, and without costs or
expenses, and (ii) Xxx X. Xxxxx-Xxxxxx shall take all steps necessary to
dismiss, as to the Company, the Delaware Litigation without prejudice, and
without costs or expenses.
(b) (i) Each member of the Xxxxx-Xxxxxx Group, on its or his
behalf, and on behalf of its or his heirs, estates, personal representatives,
directors, officers, successors, predecessors, subsidiaries, principals,
Affiliates and Associates (the "Xxxxx-Xxxxxx Releasors"), hereby releases and
forever discharges and covenants not to xxx, the Company or any of its
successors, subsidiaries, Affiliates, directors, officers, employees, agents,
representatives, attorneys, advisors or consultants (collectively, the
"Company Releasees"), in connection with or with respect to any and all claims,
suits or causes of action, whether based on any foreign, federal or state law
or right of action, direct, indirect or representative in nature, foreseen or
unforeseen, known or unknown (collectively, "Claims"), which any or all of the
Xxxxx-Xxxxxx Releasors has, has had or will have against any or all of the
Company Releasees, of any kind whatsoever arising out of or related to any act
or omission by any Company Releasee from the beginning of the world and prior
to the date of this Agreement, other than such Claims as may arise out of or
relate to the execution, delivery, performance or enforcement of this
Agreement.
(ii) The Company, on its behalf, and on behalf of its directors,
officers, successors, predecessors, subsidiaries, principals, Affiliates and
Associates (the "Company Releasors"), hereby releases and forever discharges
and covenants not to xxx, each member of the Xxxxx-Xxxxxx Group, and their
respective successors, subsidiaries, Affiliates, directors, officers,
employees, agents, representatives, attorneys, advisors and consultants
(collectively, the "Xxxxx-Xxxxxx Releasees"), in connection with or with
respect to any and all Claims which any or all of the Company Releasors has,
has had or will have against any or all of the Xxxxx-Xxxxxx Releasees, of any
kind whatsoever arising out of or related to any act or omission by any
Xxxxx-Xxxxxx Releasee from the beginning of the world and prior to the date of
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this Agreement, other than such Claims as may arise out of or relate to the
execution, delivery, performance or enforcement of this Agreement.
(c) Promptly after the date of this Agreement, the Company may
submit to the Xxxxx-Xxxxxx Group, and the Xxxxx-Xxxxxx Group may submit to the
Company, a list of candidates proposed by it to fill the one existing vacancy
on the Board (the "Vacancy"). Promptly after such candidates have been
submitted, the Company and the Xxxxx-Xxxxxx Group shall consult with each
other to select from among such candidates one new director to fill the
Vacancy by no later than October 31, 1998 (the "Xxxxx-Xxxxxx Group Nominee").
In the event that the Company and the Xxxxx-Xxxxxx Group shall fail to agree
on a candidate to fill the Vacancy in the manner set forth above on or before
October 31, 1998, the Board shall promptly take all actions necessary to cause
Xxxxxxxx X. Xxxxx to be appointed to fill the Vacancy by such date. Each
member of the Xxxxx-Xxxxxx Group acknowledges that (i) to the best of its or
his knowledge, there are no circumstances that would preclude Xx. Xxxxx from
serving as a member of the Board and (ii) he believes Xx. Xxxxx is a suitable
nominee for election to the Company's Board.
(d) Effective the date of this Agreement, each member of the
Xxxxx-Xxxxxx Group hereby irrevocably withdraws the Advance Notice Submis-
sion, the Nomination and each Proposal and hereby irrevocably terminates the
Proxy Contest. Each member of the Xxxxx-Xxxxxx Group shall abstain from voting
any shares owned by him or it in the election of directors at the 1998 Annual
Meeting; and no member of the Xxxxx-Xxxxxx Group shall grant or otherwise give
his or its proxy to any Person with respect to any such shares.
(e) During the period commencing on September 1, 1998 and ending
on May 31, 1999, the Company shall take all corporate actions necessary to
declare the terms and conditions of the Rights Agreement dated as of August
25, 1987, as amended and restated as of July 31, 1996, between the Company and
KeyBank National Association, as rights agent, and the rights granted
thereunder, inapplicable to any Qualifying Offer (as defined below) from and
after the day that is 31 business days after the commencement (as such term is
used in Rule 14d-2 promulgated by the SEC (as defined below) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such
offer through and until the earliest to occur of (i) the date on which such
offer no longer constitutes a Qualifying Offer as a result of any amendment to
such offer, (ii) the date on which such offer is with drawn and (iii) May 31,
1999. As used in this Agreement, the term "Qualifying Offer" means any fully
financed, all-cash tender offer to purchase all of the outstanding shares of
Common Stock, par value $.01 per share, of the Company ("Common
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Stock"), on a fully diluted basis: (i) that is subject to Section 14(d)(1) of
the Exchange Act; (ii) that is first proposed on or after September 1, 1998;
(iii) that is subject to no condition other than (A) the tender to the offeror
of at least a majority of the fully diluted shares of Common Stock, (B) the
expiration of any waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 applicable to the purchase of Common Stock pursuant to
the offer, (C) satisfaction of the offeror with the results of due diligence
performed in accordance with this Agreement and (D) other customary conditions
dealing with the following subjects: (1) pending or threatened legal or
administrative proceedings, (2) governmental action or enactment or application
of statutes or regulations, (3) extraordinary changes in economic or political
conditions, (4) extraordinary actions or transactions by the Company with
respect to its capitalization and (5) agreement with the Company on an
alternative transaction; and (iv) pursuant to which, the holder of each share of
Common Stock will receive in cash for such share upon consummation of such offer
the greater of (A) an amount in excess of $40 (before giving effect to any
reclassification, share combination, share subdivision, share dividend, share
exchange or similar transaction) and (B) an amount equal to the product of (1)
1.4 multiplied by (2) the average closing price per share of Common Stock on the
Nasdaq National Market System, as quoted in The Wall Street Journal, during the
twenty trading day period ending on the day before the fifth trading day
immediately preceding the date on which the first public announcement of such
offer is made. If a Qualified Offer is amended one or more times (other than to
decrease the price to be paid for shares of Common Stock), such amendments shall
not be deemed to result in a new offer for purposes of the calculation provided
for in subparagraph (iv) or determining the 31 business day period referred to
above. If prior to making a cash tender offer, an offeror publicly announces a
proposal to acquire all the outstanding shares of Common Stock for cash, the
first public announcement of such cash tender offer shall be deemed to have been
made when such proposal is publicly announced, for purposes of the calculation
provided for in subparagraph (iv). For so long as any offer shall constitute a
Qualifying Offer, the Company shall permit the offeror to conduct such due
diligence as the Board reasonably determines to be necessary to allow such
offeror to determine whether to consummate such offer, subject to the terms and
conditions of a customary confidentiality agreement not including standstill
provisions.
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2. ADDITIONAL COVENANTS OF THE XXXXX-XXXXXX GROUP.
(a) The covenants and agreements contained in this Section 2
shall terminate on January 1, 2000 (the "Standstill Termination Date").
(b) Each member of the Xxxxx-Xxxxxx Group jointly and severally
agrees that during the period commencing on the date hereof and ending on the
Standstill Termination Date, without the prior written consent of the Board
specifically expressed in a resolution adopted by a majority of the entire
Board (other than any Xxxxx-Xxxxxx Nominee), it or he will not, and will cause
each of its or his Affiliates and Associates not to, directly or indirectly,
take any of the following actions with respect to a shareholders meeting held,
or shareholder consent delivered, on or before January 1, 2000:
(i) acquire, offer or propose to acquire, or agree to acquire
(except, in any case, by way of stock dividends or other distributions or
rights to purchase Voting Securities authorized by the Board and made
available to holders of Voting Securities (as defined below) generally or to
the Company's non-employee directors pursuant to any compensatory plan of the
Company, provided, that any such securities so received shall be subject to
the provisions hereof), directly or indirectly, whether by purchase, tender
offer or exchange offer, through the acquisition of control of another Person,
by joining a partnership, limited partnership, syndicate, association or other
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) or
otherwise, any Voting Securities;
(ii) whether in connection with the 1998 Annual Meeting, the
Proxy Contest or otherwise, make, or in any way participate, directly or
indirectly, in any "solicitation" (as such term is defined in Rule 14a-1(l)
promulgated by the Securities and Exchange Commission ("SEC") under the
Exchange Act ("Rule 14a-1(l)")) of proxies or consents (whether or not
relating to the election or removal of directors), seek to advise, encourage
or influence any Person with respect to the voting of any Voting Securities,
initiate, propose or otherwise "solicit" (as such term is defined in Rule
14a-1(l)) shareholders of the Company for the approval of shareholder
proposals whether made pursuant to Rule 14a-8 promulgated by the SEC under the
Exchange Act or otherwise, induce or attempt to induce any other Person to
initiate any such shareholder proposal, or otherwise communicate with the Com-
pany's shareholders or others pursuant to the rules governing the solicitation
of proxies promulgated by the SEC under the Exchange Act with respect to any
such proposal;
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(iii) subject to Section 5 hereof, make any public announcement
with respect to any proposal or offer involving any merger, consolidation,
business combination, tender offer or exchange offer, sale or purchase of
assets, sale or purchase of securities, dissolution, liquidation,
restructuring, recapitalization or similar transactions of or involving the
Company or any of its Affiliates;
(iv) form, join or in any way participate in any "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to
any Voting Securities;
(v) deposit any Voting Securities in any voting trust or
subject any Voting Securities to any agreement or other arrangement with
respect to the voting of any Voting Securities;
(vi) execute any written consent as shareholders with respect
to the Company or its Voting Securities;
(vii) otherwise act, alone or in concert with others, to
control or seek to control, or influence or seek to influence, the Board, the
management or the policies of the Company, other than through non-public
communications with the directors of the Company, including the Xxxxx-Xxxxxx
Nominee acting in his capacity as a director of the Company;
(viii) seek, alone or in concert with others, (A) to call a
meeting of shareholders, (B) representation on the Board, except as
specifically set forth in paragraph (b) of Section 1 hereof, or (C) the
removal of any member of the Board;
(ix) make any publicly disclosed proposal regarding any of the
foregoing;
(x) publicly disclose any request to amend, waive or terminate
any provision of this Agreement; or
(xi) take or cause others to take any action inconsistent with
any of the foregoing.
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3. REPRESENTATIONS AND WARRANTIES OF THE XXXXX-XXXXXX GROUP.
(a) Each member of the Xxxxx-Xxxxxx Group which is not a
natural person represents and warrants on its own behalf that it has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of this Agreement and to consummate the transactions contemplated
hereby.
(b) Each member of the Xxxxx-Xxxxxx Group which is not a
natural person represents and warrants on its own behalf that this Agreement
has been duly authorized, executed, and delivered by it and constitutes its
valid and binding obligation, enforceable against it in accordance with its
terms.
(c) Each member of the Xxxxx-Xxxxxx Group who is a natural
person represents and warrants on his own behalf that he has the power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby.
(d) Each member of the Xxxxx-Xxxxxx Group who is a natural
person represents and warrants on his own behalf that this Agreement has been
duly executed and delivered and constitutes his valid and binding obligation,
enforceable against him in accordance with its terms.
(e) The members of the Xxxxx-Xxxxxx Group represent and warrant
that (i) together with their Affiliates and Associates, such members benefi-
cially own an aggregate of 800,000 shares of Voting Securities as set forth
by beneficial owner and amount on Exhibit A attached hereto and (ii) such
Voting Securities constitute all of the Voting Securities of the Company
beneficially owned by the members of the Xxxxx-Xxxxxx Group and such
Affiliates and Associates.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants as follows:
(a) The Company has the corporate power and authority to
execute, deliver and carry out the terms and provisions of this Agreement and
to consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.
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5. PRESS RELEASE; CONFIDENTIALITY. Upon execution of this Agree-
ment, the Company and the Xxxxx-Xxxxxx Group shall issue a joint press release
in the form attached as Exhibit B hereto (the "Joint Press Release"). None of
the parties hereto will make any public statement (including any statement in
any filing with the SEC or any other governmental agency) regarding this
Agreement or any event occurring prior to the date hereof that is inconsistent
with, or otherwise contrary to, the statements in the Joint Press Release or
that is critical of any other such party or its actions. Nothing herein shall
limit, preclude or prevent either the Company or any member of the Xxxxx-Xxxxxx
Group from making any public statement regarding this Agreement or any event
occurring prior to the date hereof that is neither inconsistent with, nor
otherwise contrary to, the statements in the Joint Press Release, nor critical
of any other party hereto or its actions, provided that all such public
statements shall be in compliance with applicable securities laws and consistent
with any such party's fiduciary duties to the Company. All parties hereto shall
maintain confidential all information, including documents and other written
materials, disclosed to it by any other party as the result of discovery
provided in connection with the Pending Litigation, except (i) as required by
applicable law (including federal and state securities laws) or (ii) as required
in any action by or before any court or other governmental agency.
6. EXPENSES. The Company shall reimburse the Xxxxx-Xxxxxx Group
for their reasonable, documented, out-of-pocket expenses incurred in connec-
tion with the Proxy Contest, the Pending Litigation (notwithstanding Section
1(a) hereof) and the negotiation of this Agreement (the "Xxxxx-Xxxxxx Expenses")
in an aggregate amount not to exceed $250,000. The Company shall pay the
Xxxxx-Xxxxxx Expenses by check or wire transfer within ten business days after
receipt by the Company of an invoice with respect to the same, together with
supporting documentation (such as law firm billing statements), from the
Xxxxx-Xxxxxx Group.
7. SPECIFIC PERFORMANCE. Each of the members of the Xxxxx-
Xxxxxx Group, on the one hand, and the Company on the other hand, hereby ac
knowledges and agrees that irreparable injury to the other party or parties
(as the case may be) hereto would occur in the event any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached and that such injury would not be compensable in
damages. It is accordingly agreed that (a) each party hereto (the "Moving
Party") shall be entitled to specific enforcement of the terms hereof and (b)
the other parties hereto will not take action, directly or indirectly, in
opposition to the Moving Party seeking such relief on the grounds that any
other remedy or relief is available at law or in equity.
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8. NO WAIVER. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party hereto to insist upon
strict adherence to any term of this Agreement on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement.
9. CERTAIN DEFINITIONS. As used in this Agreement, (a) the term
"Person" shall mean any natural person, partnership, corporation, group,
syndicate, trust, government or agency thereof, or any other association or
entity; (b) the terms "Affiliates" and "Associates" shall have the respective
meanings set forth in Rule 12b-2 promulgated by the SEC under the Exchange
Act and shall include Persons who are Affiliates or Associates of any Person
on the date hereof and who become Affiliates or Associates of any Person
subsequent to the date hereof; and (c) the term "Voting Securities" shall
mean the shares of Common Stock and any other securities of the Company
entitled to vote in the election of directors, or securities convertible
into, or exercisable or exchangeable for, such Common Stock or such other
securities, whether or not subject to the passage of time or other
contingencies. When used in this Agreement, the word "including" shall be
deemed to be followed by the words "without limitation."
10. SUCCESSORS AND ASSIGNS. All the terms and provisions of
this Agreement shall inure to the benefit of and shall be enforceable by the
respective successors and permitted assigns of the parties hereto; provided
that neither the Company, on the one hand, nor any member of the Xxxxx-Xxxxxx
Group, on the other hand, may assign or otherwise transfer its rights, duties
or other interests hereunder without the prior written consent of the other
party hereto.
11. SURVIVAL OF REPRESENTATIONS. All representations,
warranties, covenants, agreements and understandings made by the parties in
this Agreement or pursuant hereto shall survive the date hereof until the
Standstill Termination Date, provided that Section 5 hereof shall survive
indefinitely.
12. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire understanding of the parties hereto with respect to its subject
matter. There are no representations, warranties, agreements, covenants or
undertakings other than those expressly set forth herein. This Agreement may
be amended only by a written instrument duly executed by the parties hereto
or their respective successors or permitted assigns.
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13. HEADINGS. The captions and section headings contained in
this Agreement are for reference purposes only and shall not effect in any
way the meaning or interpretation of this Agreement.
14. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
given on the day when delivered by hand, on the day when sent by telecopy and
confirmed and on the fifth business day after being deposited in the mail
(registered or certified, postage prepaid, return receipt requested) to the
respective parties hereto as follows:
If to the Company:
Telxon Corporation
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Attention: Legal Department
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esquire
Telecopy: (000) 000-0000
If to one or more members of the Xxxxx-Xxxxxx Group:
Xxxxx-Xxxxxx & Co. Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxx X. Xxxxx-Xxxxxx
Telecopy: (000) 000-0000
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with a copy to:
Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Esquire
Telecopy: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above,
provided that any change of address or addressee shall be deemed given only upon
receipt.
15. GOVERNING LAW; FORUM; SERVICE OF PROCESS. This Agreement
shall be governed by, and construed and enforced in accordance with, the laws
of the State of Delaware, without reference to conflicts of law principles.
16. COUNTERPARTS. This Agreement may be executed in counter
parts, each of which shall be deemed an original, but each of which together
shall constitute one and the same Agreement.
17. XXXXX-XXXXXX GROUP REPRESENTATIVE. Each member of the
Xxxxx-Xxxxxx Group hereby irrevocably appoints Xxx X. Xxxxx-Xxxxxx, as such
member's attorney-in-fact and representative (the "Representative"), to act
in such member's place and stead, to do any and all things and to execute any
and all documents and give and receive any and all notices or instructions
in connection with this Agreement and the transactions contemplated hereby.
Notwithstanding any provision hereof to the contrary, the Company shall be
entitled to rely upon, as being binding on each member of the Xxxxx-Xxxxxx
Group, any action taken by the Representative or upon any document, notice,
instruction or other writing given or executed by the Representative, and any
such act, document, notice, instruction or other writing shall bind each
member of the Xxxxx-Xxxxxx Group.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the undersigned parties has executed and delivered, or caused to be
executed and delivered, this Settlement Agreement on the date first above
written.
TELXON CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Senior Vice President
XXXXX-XXXXXX & CO. INC.
By: /s/ Xxx X. Xxxxx-Xxxxxx
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Xxx X. Xxxxx-Xxxxxx
President
/s/ Xxx X. Xxxxx-Xxxxxx
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Xxx X. Xxxxx-Xxxxxx
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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