EXHIBIT 10.13
FOUNDER STOCK REPURCHASE AND VESTING AGREEMENT
AGREEMENT, dated February 12, 1998, between PARADIGM GENETICS INC., a North
Carolina corporation (the "Company"), and Xxxx X. Xxxxx (the "Founder").
BACKGROUND
Founder is the a founder of the Company and a holder of 1,193,181 shares of
the Common Stock, par value $0.01 per share, of the Company (after giving effect
to a stock dividend referred to in Section 1.1 below). On the date hereof,
certain investors are purchasing shares of the Company's Series A Preferred
Stock in exchange for financial considerations. As a condition to such
purchase, the investors require certain personnel of the Company, including
Founder, to enter into this Agreement, pursuant to which, among other things,
Founder will agree to sell his shares of the Company's Common Stock to the
Company upon the occurrence of certain events.
SECTION 1. PURCHASE OF SHARES.
1.1 Purchase. On September 9, 1997 and October 13, 1997, Founder
purchased from the Company, and the Company sold to the Founder, 1,400 shares in
the aggregate of the Company's Common Stock at a purchase price of $1.00 per
share. On or about the date of this Agreement the Company is effecting a stock
dividend on the Common Stock (of 851.2727 shares for each outstanding share of
Common Stock) with the effect that the Founder will hold 1,193,181 shares of
Common Stock (collectively, the "Purchased Stock") and will, in effect, have
paid a purchase price of $0.001 per share (the "Purchase Price").
1.2 Payment. The Founder paid the Purchase Price for the Purchased Shares
in cash. Concurrently with the execution of this Agreement, Founder shall
deliver to the Secretary of the Company additional documents, if any, that may
be required by the Company as a condition to Founder's obligations under this
Agreement.
SECTION 2. SECURITIES LAW COMPLIANCE.
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act" or
"Act"), and were issued to Founder in reliance upon an exemption from such
registration.
2.2 Restricted Securities. Founder hereby confirms that Founder has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under such Act or unless an exemption from such registration is
available. Accordingly, Founder hereby acknowledges that Founder is prepared to
hold the Purchased Shares for an indefinite period and that Founder is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act. Founder is aware of the adoption
of Rule 144 by the Commission which permits limited public resales of securities
acquired in a nonpublic
offering, subject to the satisfaction of certain conditions. Founder understands
that under Rule 144, the conditions include, among other things: the
availability of certain current public information about the issuer; the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being through a broker in an unsolicited
"broker's transaction"; and the amount of securities being sold during any
three-month period not exceeding specified limitations. Founder acknowledges and
understands that the Company may not satisfy the current public information
requirement of Rule 144 at the time Founder wishes to sell the Purchased Shares
or other conditions under Rule 144 that are required of the Company. If so,
Founder understands that Founder may be precluded from selling the securities
under Rule 144 even if the holding period of the Rule has been satisfied. Prior
to Founder's acquisition of the Purchased Shares, Founder acquired sufficient
information about the Company to reach an informed, knowledgeable decision to
acquire the Purchased Shares. Founder has such knowledge and experience in
financial and business matters so as to make Founder capable of utilizing such
information to evaluate the risks of the prospective investment and to make an
informed investment decision. Founder is able to bear the economic risk of
Founder's investment in the Purchased Shares.
SECTION 3. SPECIAL PROVISIONS.
3.1 Stockholder Rights. Until such time as the Company actually exercises
its repurchase rights under this Agreement, Founder shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the
Purchased Shares, including any Purchased Shares held in escrow under Section 6,
subject, however, to the transfer restrictions of Section 4 and any restrictions
contained in the Company's Articles of Incorporation.
3.2 Section 83(b) Election. Founder understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price paid for the Purchased Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Purchased Shares pursuant to its Repurchase Right under Section 5 of this
Agreement. Founder understands that, assuming the Purchased Shares were subject
to forfeiture restrictions when acquired, Founder may elect to be taxed at the
time the Purchased Shares were acquired (to the extent the fair market value of
the Purchased Shares differs from the Purchase Price rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions), by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service (the "I.R.S.") within 30 days after such date, such filing to be made by
registered or certified mail, return receipt requested. Founder understands
that Founder must retain two copies of the completed form for filing with
Founder's state and federal tax returns for the current tax year and one
additional copy for Founder's records. If the fair market value of the
Purchased Shares at the date of purchase equals the Purchase Price paid (and
thus no tax is payable), the election can be made to avoid potential adverse tax
consequences in the future, assuming again that the Purchased Shares were
subject to forfeiture restrictions when acquired. The form for making this
election may be obtained from I.R.S. or the Company. Founder understands that
failure to make a permitted filing within the 30 day period results in the
recognition of ordinary income by the Founder (in the event the fair market
value of the Purchased Shares increases after the date of purchase) as the
forfeiture restrictions lapse.
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Founder acknowledges that it is Founder's sole responsibility, and not the
Company's, to file a timely election under Section 83(b), even if Founder
requests the Company or its representatives to make this filing on Founder's
behalf. Founder is relying solely on Founder's advisors with respect to the
decision as to whether or not to file an 83(b) election, recognizing that the
Purchased Shares did not become subject to forfeiture provisions until the date
hereof.
SECTION 4. TRANSFER RESTRICTIONS.
4.1 Restriction on Transfer. Founder shall not transfer, assign,
encumber, or otherwise dispose of any of the Purchased Shares except in
accordance with the terms and conditions of the Investors' Rights Agreement (the
"Investors' Rights Agreement"), dated as of the date hereof, to which Founder is
a party.
4.2 Definition of Owner. For purposes of Sections 5 and 6 of this
Agreement, the term "Owner" shall include the Founder and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a permitted
transfer from the Founder in accordance with Section 4.1.
SECTION 5. REPURCHASE RIGHT.
5.1 Grant. The Company is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the 90 day period (or such longer period
mutually agreed to by the parties) following the date the Founder ceases to be a
"Service Provider" (as defined below) to the Company for any reason (including
death), to repurchase at the Purchase Price all or (at the discretion of the
Company and with the consent of the Founder) any portion of the Purchased Shares
in which the Founder has not acquired a vested interest in accordance with the
vesting provisions of Section 5.3 (such shares called the "Unvested Shares").
For purposes of this Agreement, the Founder shall be deemed to be a "Service
Provider" to the Company for so long as the Founder renders periodic services to
the Company (or one or more of its parent or subsidiary corporations), whether
as an employee, non-employee member of the board of directors, or an
independent, non-employee consultant and whether pursuant to an employment
agreement or otherwise.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable 90 day period specified in Section
5.1. The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be not more
than 45 days after the date of notice. The Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Company the certificates representing the Unvested Shares to be repurchased
(unless already held by the Secretary in escrow under this Agreement), each
certificate to be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with Section 6.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares that are to be repurchased.
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5.3 Termination of the Repurchase Right.
(a) The Repurchase Right shall terminate with respect to any Unvested
Shares for which it is not timely exercised under Section 5.2. In addition, the
Repurchase Right shall terminate, and cease to be exercisable, with respect to
any and all Purchased Shares in which the Founder is vested in accordance with
the schedule below. Accordingly, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Purchased Shares in
accordance with the following provisions:
(i) During the initial 12 month period measured the date of
this Agreement (the "Vesting Measurement Date"), the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, (A)
6.25% of the Purchased Shares three months after the Vesting Measurement Date,
(B) an additional 6.25% of the Purchased Shares six months after the Vesting
Measurement Date, (C) an additional 6.25% of the Purchased Shares nine months
after the Vesting Measurement Date, and (D) an additional 6.25% of the Purchased
Shares twelve months after the Vesting Measurement Date. Accordingly, upon the
expiration of the initial 12 month period measured from the Vesting Measurement
Date, the Founder shall have acquired a vested interest in, and the Repurchase
Right shall have lapsed with respect to, 25% of the Purchased Shares.
(ii) From and after the expiration of the initial 12 month
period measured from the Vesting Measurement Date, the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of successive monthly installments each
equal to 1/48th of the Purchased Shares. Accordingly, upon the expiration of 48
months after the Vesting Measurement Date, the Founder shall have acquired a
vested interest in, and the Repurchase Right shall have lapsed with respect to
all of the Purchased Shares.
(iii) Upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits and the like effected
after the date of this Agreement) and an aggregate offering price to the public
of not less than $20,000,000, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Unvested Shares as of
such closing.
(iv) The Company acknowledges and agrees that, during the
period beginning on the date of this Agreement and ending 48 months thereafter,
the Founder's relationship with the Company as a Service Provider may not be
terminated by the Company without Cause except with the consent of Xxxx Xxxxx
(or, if Xxxx Xxxxx is not the Chief Executive Officer of the Company, the then
current Chief Executive Officer) and at least one of Xxxx Xxxxxxx, Xxxxx
Xxxxxxx, or Xxxxx Xxxxx (excluding any of these three persons that is not then a
Service Provider to the Company). In the event that the Founder's relationship
with the Company as a Service Provider is terminated by the Company without
Cause during such 48-month period, then the Founder shall, upon the date of such
termination, acquire a vested interest in, and the Purchase Right shall lapse
with respect to, 25% of the Purchased Shares, in
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addition to any other Purchased Shares for which the Founder shall have acquired
a vested interest in, and the Repurchase Right shall have lapsed with respect
to, prior to such termination date. For purposes of this Section 5.3, "Cause"
shall have the meaning given such term in the Founder Employment Agreement
between the Company and the Founder, dated on or about the date hereof, or any
successor or replacement agreement between the Company and the Founder, as a
Service Provider.
(b) All Purchased Shares as to which the Repurchase Right lapses
shall, however, continue to be subject to the applicable terms and conditions of
the Investors' Rights Agreement.
5.4 Fractional Shares. No fractional shares shall be repurchased by the
Company. Accordingly, should the Repurchase Right extend to a fractional share
(in accordance with the vesting computation provisions of Section 5.3) at the
time the Founder ceases to be a Service Provider, then such fractional share
shall be added to any fractional share in which the Founder is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares hereunder and to the price per share to
be paid upon the exercise of the Repurchase Right in order to reflect the effect
of any such transaction upon the Company's capital structure; provided, however,
that the aggregate Purchase Price shall remain the same.
5.6 Corporate Transaction.
(a) In the event of any of the following transactions (a "Corporate
Transaction"), the Repurchase Right shall automatically lapse in its entirety,
and the Founder shall acquire a vested interest in all the Purchased Shares,
upon the consummation of such Corporate Transaction:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
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(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction in accordance with Section 5.6(a), it shall apply to
the new capital stock or other property received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Company's
capital structure; provided, however, that the aggregate Purchase Price shall
remain the same.
5.7 Legend. All certificates representing Purchased Shares subject to the
Company's Right of Repurchase shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF,
EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT
BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR
THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS
CERTAIN REPURCHASE RIGHTS TO THE COMPANY UPON TERMINATION OF
SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE."
SECTION 6. ESCROW.
6.1 Deposit. Upon request of the Company (which request the Company may
make at any time and from time to time), the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Secretary of the Company to be held in accordance with the provisions
of this Section 6. Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit A. The
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deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 6.4. Upon delivery of the certificates
(or other assets and securities) to the Company, the Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow to the Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Secretary of the Company to be
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held in escrow under this Section 6, but only to the extent the Purchased Shares
are at the time subject to the escrow requirements of Section 6.1.
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6.3 Release Surrender. The Purchased Shares, to the extent, and together
with any other assets or securities, held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Company for repurchase and cancellation:
(a) Should the Company elect to exercise a purchase right with
respect to any Unvested Shares, then the escrowed certificates for such Unvested
Shares (together with any other assets or securities issued with respect
thereto) shall be delivered to the Company for cancellation, concurrently with
the payment to the Owner, in cash or cash equivalent (including the cancellation
of any purchase-money indebtedness), of an amount equal to the aggregate
Purchase Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities).
(b) Should a stockholder exercise a purchase right under the
Investors' Rights Agreement, then the escrowed certificates for Purchased Shares
subject to such purchase right (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
concurrently with the payment to the Owner of the purchase price provided for in
the Investors' Rights Agreement, and the Owner shall cease to have any further
rights or claims with respect to such Purchased Shares (or other assets or
securities).
(c) As the interest of the Founder in the Purchased Shares (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 5, the certificates for such vested shares (as well as
all other vested assets and securities) held in escrow hereunder shall be
released from escrow and delivered to the Owner in accordance with the following
schedule:
(i) The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected in increments of 6.25% of
the Purchased Shares within 30 days following the expiration of the initial 3,
6, 9 and 12 month periods measured from the Vesting Measurement Date.
(ii) Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at monthly intervals at the
rate of 1/48th of the Purchased Shares each month thereafter, with the first
such monthly release to occur 13 months after the Vesting Measurement Date.
(iii) Upon the Founder's cessation of Service Provider status,
any escrowed Purchased Shares (or other assets or securities) in which the
Founder is at the time vested shall be promptly released from escrow.
(iv) Upon any earlier termination of the Company's Repurchase
Right in accordance with the applicable provisions of Section 5, the Purchased
Shares (or other assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully vested shares or other
property.
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(d) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of Section 6.3(c) above shall
nevertheless remain subject to the applicable terms and conditions of the
Investors' Rights Agreement until such provisions terminate in accordance
therewith.
SECTION 7. GENERAL PROVISIONS.
7.1 Assignment. The Company may assign its Repurchase Rights under
Section 5 to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more stockholders of the Company other
than the Founder.
If the assignee of the Repurchase Right is neither a parent nor a
subsidiary of the Company, then such assignee must make a cash payment to the
Company, upon the assignment of the Repurchase Right, in an amount equal to the
excess (if any) of the fair market value of the Unvested Shares at the time
subject to the Repurchase Right (as determined by the Company's Board of
Directors) and the aggregate Purchase Price payable for such Unvested Shares.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Founder any right to continue in the service of the Company (or
any parent or subsidiary of the Company employing or retaining Founder) for any
period of time or interfere with or otherwise restrict in any way the rights of
the Company (or any parent or subsidiary of the Company employing or retaining
Founder) or the Founder, which rights are hereby expressly reserved by each, to
terminate the Service Provider status of Founder at any time for any reason
whatsoever, with or without cause.
7.3 Notices. Any notice required in connection with (i) the Repurchase
Right or (ii) the disposition of any Purchased Shares covered thereby shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States mail, registered or certified postage prepaid and
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten days' advance written notice under this Section 7.3
to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
instance to exercise the rights granted under this Agreement shall not
constitute a waiver of any other right that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and the
Founder. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement), and such shares
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shall be deemed purchased in accordance with the applicable provisions hereof
and the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates have been delivered as required by this
Agreement.
7.6 Founder Undertaking. Founder hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Founder or the
Purchased Shares pursuant to the express provisions of this Agreement.
7.7 Agreement Is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
7.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.10 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Founder and the Founder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Founder Stock Repurchase
and Vesting Agreement on the day and year first set forth above.
PARADIGM GENETICS INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Name: Xxxx X. Xxxxx
Title: CEO/President
Address: 00 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxxx Xxxx, XX 00000
FOUNDER
/s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx
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Address: 00 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx Xxxxxxxx Xxxx, XX 00000
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EXHIBIT A
Assignment Separate From Certificate
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto Paradigm Genetics Inc., a North Carolina corporation (the
"Company"), ____________ (_____) shares of the ________________ Capital Stock of
_____________________________standing in _____________________ name on the books
of said corporation represented by Certificate No._____________ herewith and
does hereby irrevocably constitute and appoint the Secretary of the Company
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated: ___________________
Signature_____________________________
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