Indemnity Agreement - CTI Inc.
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") is entered into as of the
21st day of May, 2002, between CTI, Inc., a Tennessee corporation (the
"Company"), and _____________________ ("Indemnitee"), to be effective as of the
closing date of the initial public offering of the common stock of the Company,
or any successor corporation, pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended.
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available; and
WHEREAS, Indemnitee is an officer of the Company and from time to time
may also serve at the Company's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan, or other entity; and
WHEREAS, both the Company and Indemnitee recognize the risk of
litigation and other claims being asserted against directors and officers of
business corporations in today's environment; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability and in order to enhance Indemnitee's continued
service to the Company and such other entities in an effective manner, the
Company desires to extend to Indemnitee the contractual rights to
indemnification and advancement of expenses as provided herein;
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions for Purposes of this Agreement. The
following terms as used in this Agreement shall have the meanings set forth
below.
(a) "Change in Control" shall have occurred if, during any period
of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company
cease for any reason to constitute at least a majority
thereof, unless the election of each new Director was approved
in advance by a vote of at least a majority of the Directors
then still in office who were Directors at the beginning of
the period.
(b) "Corporation" includes any domestic or foreign predecessor
entity of the Company in a merger or other transaction in
which the predecessor's existence ceased upon consummation of
the transaction.
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(c) "Director" means an individual who is or was a director of the
Company or an individual who, while a director of the Company,
is or was serving at the Company's request as a director,
officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, limited
liability company, joint venture, trust, employee benefit
plan, or other entity. A Director is considered to be serving
an employee benefit plan at the Company's request if his
duties to the Company also impose duties on, or otherwise
involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the
context requires otherwise, the estate or personal
representative of a Director.
(d) "Disinterested Director" or "Disinterested Officer" means a
Director or Officer, respectively, who at the time of a vote
or selection referred to in Section 3(c) or 4(b) is not a
Party to the Proceeding.
(e) "Expenses" includes all reasonable counsel fees, retainers,
court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and
all other disbursements or expenses of the types customarily
incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to
be a witness in, or otherwise participating in, a Proceeding,
including any appeals.
(f) "Independent Legal Counsel" shall mean a law firm, or a member
of a law firm, that is experienced in matters of corporation
law and neither at the time of retention is, nor in the five
years preceding the date of such retention 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 under
this Agreement. Notwithstanding the foregoing, the term
"Independent Legal 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.
(g) "Liability" includes the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), or reasonable
Expenses actually incurred with respect to a Proceeding.
(h) "Officer" means an individual who is or was an officer of the
Company or an individual who, while an officer of the Company,
is or was serving at the Company's request as a director,
officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, limited
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liability company, joint venture, trust, employee benefit
plan, or other entity. An Officer is considered to be serving
an employee benefit plan at the Company's request if his
duties to the Company also impose duties on, or otherwise
involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Officer" includes, unless the
context requires otherwise, the estate or personal
representative of an Officer.
(i) "Party" includes an individual who was, is, or is threatened
to be made a named defendant or respondent in a Proceeding.
(j) "Proceeding" includes any threatened, pending, or completed
action, suit, or other type of proceeding, whether civil,
criminal, administrative, arbitrative or investigative and
whether formal or informal, to which Indemnitee is or may be a
Party because he is or was a Director or Officer.
(k) "Reviewing Party" shall mean the person or persons making the
entitlement determination pursuant to Section 4 of this
Agreement, and shall not include a court making any
determination under this Agreement or otherwise.
(l) "Supporting Documentation" for Expenses means documents or
other evidence of specific Expenses to be reimbursed or
advanced, including any relevant invoice, bill, agreement or
other documentation.
2. Basic Indemnification Arrangement.
(a) Obligation to Indemnify; Standard of Conduct. Except as
provided in Sections 2(e), 2(f), or 2(g) below, the Company
shall indemnify Indemnitee in the event Indemnitee is made a
Party to a Proceeding because he is or was a Director or
Officer against Liability incurred in the Proceeding if:
(1) Indemnitee conducted himself in good faith and in a
manner he reasonably believed to be in, or not
opposed to, the best interests of the Company; and
(2) In the case of any criminal Proceeding, Indemnitee
had no reasonable cause to believe such conduct was
unlawful.
(b) Service with Respect to Employee Benefit Plan. Indemnitee's
conduct with respect to an employee benefit plan for a purpose
he believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that
satisfies the requirement of Section 2(a)(1).
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(c) Reliance as Safe Harbor. For purposes of any determination of
good faith, Indemnitee shall be deemed to have acted in good
faith if Indemnitee's conduct was based primarily on the
records or books of account of the Company or relevant entity,
including financial statements, or on information supplied to
Indemnitee by the officers of the Company or relevant entity
in the course of their duties, or on the advice of legal
counsel for the Company or relevant entity, or on information
or records given or reports made to the Company or relevant
entity by an independent certified public accountant, or by an
appraiser or other expert selected with reasonable care by the
Company or relevant entity. The provisions of this Section
2(c) shall not be deemed to be exclusive or to limit in any
way the other circumstances in which Indemnitee may be deemed
to have met the relevant standard of conduct set forth in this
Agreement.
(d) Termination of Proceeding Not Determinative. The termination
of a Proceeding by judgment, order, settlement, or conviction,
or upon a plea of nolo contendere or its equivalent shall not,
of itself, create a presumption or be determinative that
Indemnitee did not meet the relevant standard of conduct set
forth in Section 2(a).
(e) Limits on Indemnification. Unless, and then only to the extent
that, a court of competent jurisdiction acting pursuant to
Section 5 of this Agreement or Section 145(b) of the Delaware
General Corporation Law, determines that, in view of the
circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnification, the Company shall not indemnify
Indemnitee under this Agreement:
(1) in connection with a Proceeding by or in the right of
the Company, except for reasonable Expenses incurred
in connection with the Proceeding, including any
defense, settlement or appeal thereof;
(2) for any Expenses or other Liability in connection
with a Proceeding by or in the right of the Company
with respect to any claim, issue or matter as to
which Indemnitee shall have been adjudged liable to
the Company; or
(3) for an accounting of profits made from the purchase
and sale (or sale and purchase) by Indemnitee of
securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934,
as amended, or similar provisions of state statutory
law or common law.
(f) Proceeding Brought by Indemnitee. Notwithstanding any other
provision of this Agreement, Indemnitee shall not be entitled
to indemnification or advancement of Expenses hereunder with
respect to any Proceeding or
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claim brought or made by him against the Company, other than a
Proceeding or claim seeking or defending Indemnitee's right to
indemnification or advancement of Expenses pursuant to Section
5 hereof or otherwise.
(g) Settlements. Notwithstanding any other provision of this
Agreement, the Company shall not be liable for any amount paid
by Indemnitee in settlement of any Proceeding that is not
defended by the Company, unless the Company has consented to
such settlement, which consent shall not be unreasonably
withheld. The Company shall not be required to obtain the
consent of Indemnitee to the settlement of any Proceeding
which the Company has undertaken to defend if the Company
assumes full and sole responsibility for such settlement and
the settlement grants Indemnitee a complete and unqualified
release in respect of the potential Liability.
(h) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement or otherwise to indemnification by
the Company for some portion of Liability incurred by him, but
not the total amount thereof, the Company shall indemnify
Indemnitee for the portion of such Liability to which he is
entitled.
(i) Mandatory Indemnification. The Company shall indemnify
Indemnitee to the extent that he has been successful, on the
merits or otherwise, in the defense of any Proceeding to which
he was a Party, or in defense of any claim, issue or matter
therein, because he is or was a Director or Officer, against
reasonable Expenses incurred by him in connection with the
Proceeding.
3. Advances for Expenses.
(a) Obligations and Requirements. The Company shall, before final
disposition of a Proceeding, advance funds to pay for or
reimburse the reasonable Expenses incurred by Indemnitee as a
Party to such Proceeding if Indemnitee delivers to the Company
Indemnitee's written undertaking (meeting the qualifications
set forth below in Section 3(b)) to repay any funds advanced
if it is ultimately determined that Indemnitee is not entitled
to indemnification under this Agreement, the Delaware General
Corporation Law or otherwise.
(b) Undertaking. The undertaking required by Section 3(a) above
must be an unlimited general obligation of Indemnitee but need
not be secured and shall be accepted without reference to
Indemnitee's financial ability to make repayment. If
Indemnitee seeks to enforce his rights to indemnification in a
court pursuant to Section 5, such undertaking to repay shall
not be applicable or enforceable unless and until there is a
final court
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determination that he is not entitled to indemnification, as
to which all rights of appeal have been exhausted or have
expired.
(c) Evaluation of Reasonableness of Expenses. Evaluation as to
reasonableness of Expenses of Indemnitee in the specific case
shall be made in the same manner as the determination that
indemnification is permissible, as described in Section 4(b)
below, except that if the determination is made by Independent
Legal Counsel, evaluation as to reasonableness of Expenses
shall be made by a majority of the Disinterested Directors, or
if no Disinterested Directors, by a majority of the full Board
of Directors. Notwithstanding the foregoing sentence, any
Expenses claimed by Indemnitee shall be deemed reasonable if
the Reviewing Party fails to make the reasonableness
evaluation within thirty (30) days following the later of (i)
the Company's receipt of the undertaking required by Section
3(a), or (ii) the Company's receipt of Supporting
Documentation for specific Expenses to be reimbursed or
advanced.
(d) Timing of Payments. Subject to Section 3(c) above,
reimbursement or advances for Expenses under this Section 3
shall be made not later than thirty (30) days after the later
of (i) the Company's receipt of the undertaking required by
Section 3(a), or (ii) the Company's receipt of invoices for
specific Expenses to be reimbursed or advanced.
4. Authorization of and Determination of Entitlement to
Indemnification.
(a) Entitlement Determination. The Company and Indemnitee hereby
acknowledge that indemnification of Indemnitee under Section 2
of this Agreement has been pre-authorized by the Company.
Nevertheless, the Company shall not indemnify Indemnitee under
Section 2 unless a separate determination has been made in the
specific case that indemnification of Indemnitee is
permissible in the circumstances because he has met the
relevant standard of conduct set forth in Section 2(a);
provided, however, that (i) no such entitlement decision need
be made prior to the advancement of Expenses, and (ii)
regardless of the result or absence of any such determination,
the Company shall make any indemnification mandated by Section
2(i) above.
(b) Reviewing Party. The determination referred to in Section 4(a)
shall be made (at the election of a majority of the
Disinterested Directors, or if no Disinterested Directors, of
a majority of the full Board of Directors), by any of the
following Reviewing Parties (unless a Change in Control shall
have occurred after Indemnitee first began serving as a
Director or Officer, in which case Indemnitee shall be
entitled to designate that the
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determination shall be made by Independent Legal Counsel
selected in the manner set forth in Section 4(c) below):
(1) By a majority vote of the Disinterested Directors,
even though less than a quorum; or
(2) By a majority vote of a committee of Disinterested
Directors, which committee shall be designated by a
majority vote of the Disinterested Directors, even
though less than a quorum of the Board of Directors;
or
(3) If there are no Disinterested Directors, or if the
Disinterested Directors so direct, by Independent
Legal Counsel; or
(4) By the stockholders of the Company.
(c) Selection of Counsel after Change in Control. If a Change in
Control shall have occurred, Independent Legal Counsel shall
be selected by Indemnitee (unless Indemnitee requests that
such selection be made by a majority of the Disinterested
Directors, or if no Disinterested Directors, by a majority of
the full Board of Directors), and Indemnitee shall give
written notice to the Company advising it of the identity of
the Independent Legal Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within ten
(10) days after such written notice of selection has been
given, deliver to the Company or to Indemnitee, as the case
may be, a written objection to such selection; provided,
however, that such objection may be asserted only on the
ground that such counsel so selected does not meet the
requirements of "Independent Legal Counsel" as defined in
Section 1 of this Agreement, and the objection shall set forth
with particularity the factual basis of such assertion. If
such written objection is so made and substantiated, the
counsel so selected may not serve as Independent Legal Counsel
unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within
twenty (20) days after submission by Indemnitee of a written
request for indemnification, no Independent Legal Counsel
shall have been selected and not objected to, either the
Company or Indemnitee may petition the court conducting the
Proceeding, or another court of competent jurisdiction, for
resolution of any objection which shall have been made by the
Company or Indemnitee to the other's selection of Independent
Legal Counsel and/or for the appointment as Independent Legal
Counsel of a person selected by the court or by such other
person as the court shall designate, and the person with
respect to whom all objections are so resolved or the person
so appointed shall act as Independent Legal Counsel under
Section 4(b).
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(d) Cooperation by Indemnitee. Indemnitee shall cooperate with the
Reviewing Party with respect to its determination of
Indemnitee's entitlement to indemnification, including
providing to the Reviewing Party upon reasonable advance
request any documentation or information which is not
privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to
such determination. Any Expenses incurred by Indemnitee in so
cooperating with the Reviewing Party shall be borne by the
Company (irrespective of the determination as to Indemnitee's
entitlement to indemnification).
(e) Other.
(1) The Reviewing Party, however chosen, shall make the
requested determination as promptly as reasonably
practicable after a request for indemnification is
presented.
(2) Any determination by Independent Legal Counsel under
this Section 4 shall be delivered in the form of a
written option to the Board of Directors with a copy
to Indemnitee.
(3) The Company shall pay any and all reasonable fees and
expenses of Independent Legal Counsel incurred by
such counsel in connection with acting pursuant to
Section 4(b), and the Company shall pay all
reasonable fees and expenses incident to the
procedures of Section 4(d), regardless of the manner
in which such Independent Legal Counsel was selected
or appointed.
(4) Upon the due commencement of any action to seek
court-ordered indemnification pursuant to Section 5
of this Agreement, Independent Legal Counsel shall be
discharged and relieved of any further responsibility
in such capacity (subject to the applicable standards
of professional conduct then prevailing).
5. Court-Ordered Indemnification and Advances for Expenses.
(a) Procedure. If Indemnitee is a Party to a Proceeding, he may
apply for indemnification or for advances for Expenses to the
court conducting the Proceeding or to another court of
competent jurisdiction. For purposes of this Agreement, the
Company hereby consents to personal jurisdiction and venue in
any court in which is pending a Proceeding to which Indemnitee
is a Party. Regardless of any determination by the Reviewing
Party that Indemnitee is not entitled to indemnification or to
advancement of Expenses or as to the reasonableness of
Expenses, and regardless of any failure by the Reviewing Party
to make a determination as to such entitlement or the
reasonableness of Expenses, such court's review shall be
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a de novo review. After receipt of an application and after
giving any notice it considers necessary, the court may:
(1) Order indemnification or the advance for Expenses if
it determines that Indemnitee is entitled to
indemnification or to advance for Expenses under this
Agreement, the Delaware General Corporation Law or
otherwise; or
(2) Order indemnification or the advance for Expenses if
it determines that, in view of all the relevant
circumstances, it is fair and reasonable to indemnify
Indemnitee, or to advance Expenses to Indemnitee,
regardless of whether Indemnitee has met the relevant
standard of conduct, complied with the requirements
for advancement of Expenses, or been adjudged liable
in a Proceeding referred to in Section 2(e) above (in
which case any court-ordered indemnification need not
be limited to Expenses incurred by Indemnitee, but
may include penalties, fines, amounts paid in
settlement, judgments and any other amounts ordered
by the court to be indemnified or advanced).
(b) Payment of Expenses to Seek Court-Ordered Indemnification. If
the court determines that Indemnitee is entitled to
indemnification or to advance for Expenses, the Company shall
pay Indemnitee's reasonable Expenses to obtain such
court-ordered indemnification or advance for Expenses.
6. Vested Rights; Specific Performance. No amendment to the
Certificate of Incorporation or Bylaws of the Company or any other corporate
action shall in any way limit Indemnitee's rights under this Agreement. In any
Proceeding brought by or on behalf of Indemnitee to specifically enforce the
provisions of this Agreement, the Company hereby waives the claim or defense
therein that the plaintiff or claimant has an adequate remedy at law, and the
Company shall not urge in any such Proceeding the claim or defense that such
remedy at law exists. The provisions of this Section 6, however, shall not
prevent Indemnitee from seeking a remedy at law in connection with any breach of
this Agreement.
7. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing directors' or officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage provided under
such policy or policies in effect for any other Director or Officer of the
Company, as the case may be.
8. Witness Fees. Nothing in this Agreement shall limit the
Company's power to pay or reimburse Expenses incurred by Indemnitee in
connection with his appearance as a witness in a Proceeding at a time when he
has not been made a named defendant or respondent in the Proceeding.
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9. Security for Indemnification Obligations. The Company may at
any time and in any manner, at the discretion of the Board of Directors, secure
the Company's obligations to indemnify or advance Expenses to Indemnitee
pursuant to this Agreement.
10. Non-exclusivity, No Duplication of Payments. The rights of
Indemnitee hereunder shall be in addition to any other rights with respect to
indemnification, advancement of Expenses or otherwise that Indemnitee may have
under the Company's Certificate of Incorporation or Bylaws, the Delaware General
Corporation Law or otherwise; provided, however, that the Company shall not be
liable under this Agreement to make any payment to Indemnitee hereunder to the
extent Indemnitee has otherwise actually received payment (under any insurance
policy, provision of the Certificate of Incorporation or Bylaws, or otherwise)
of the amounts otherwise payable hereunder. The Company's obligation to
indemnify or advance Expenses hereunder to Indemnitee who is or was serving at
the request of the Company as a director, officer, partner, trustee, employee or
agent of any other entity shall be reduced by any amount Indemnitee has actually
received as indemnification or advancement of Expenses from such other entity.
11. Amendments. To the extent that the provisions of this
Agreement are held to be inconsistent with the provisions of the Delaware
General Corporation Law (including Section 145(f) thereof), such provisions of
such statute shall govern. To the extent that the Delaware General Corporation
Law is hereafter amended to permit a Delaware business corporation, without the
need for stockholder approval, to provide to its directors greater rights to
indemnification or advancement of Expenses than those specifically set forth
hereinabove, this Agreement shall be deemed amended to require such greater
indemnification or more liberal advancement of Expenses to Indemnitee, in each
case consistent with the Delaware General Corporation Law as so amended from
time to time. Otherwise, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the Company and
Indemnitee.
12. 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 shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
13. Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
14. Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors or assigns (including any direct or indirect successor or
assign by purchase, merger, consolidation or otherwise to all or substantially
all of the business and/or assets of the Company), spouses, heirs, and personal
and legal representatives.
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15. Applicability of Agreement. This Agreement shall apply
retroactively with respect to acts or omissions of Indemnitee occurring since
the date that Indemnitee first became a Director or Officer, and this Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a Director or Officer, but only in respect of acts or omissions occurring prior
to the termination of Indemnitee's service as a Director or Officer.
16. Severability. If any provision or provisions 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 this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal, or unenforceable, that is not itself invalid, illegal, or
unenforceable) shall not in any way be affected or impaired thereby; (b) such
provision or provisions shall be deemed reformed to the extent necessary to
conform to applicable law and to give the maximum effect to the intent of the
parties hereto; and (c) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal, or
unenforceable, that is not itself invalid, illegal, or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
17. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
18. 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 thereof.
19. Inducement. The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on it hereby
in order to induce Indemnitee to serve or continue to serve as a Director and/or
Officer, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving as a director, officer, employee or agent of the Company
or, at the request of the Company, as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan, or other
entity.
20. Notice by the Indemnitee. Indemnitee agrees promptly to notify
the Company in writing 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 so to notify the Company shall not
relieve the Company of any obligation which it may have to Indemnitee 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 if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed if to the Company, to the principal
office address of the Company, or if to Indemnitee, to the address of Indemnitee
last on file with the Company, or to such other address as may have been
furnished to Indemnitee by the Company or to the Company by Indemnitee, as the
case may be.
Executed as of the date first above written.
CTI, Inc.:
By:
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INDEMNITEE:
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