Option to Purchase
_________ Units
XXXX.XXX.XXX.
UNIT PURCHASE OPTION
Dated: _______, 2001
THIS CERTIFIES that SECURITY CAPITAL TRADING, INC., 000 Xxxxxxxx, Xxx
Xxxx, XX 00000 (hereinafter sometimes referred to as the "Holder"), is entitled
to purchase from XXXX.XXX, INC., a Delaware corporation (hereinafter referred to
as the "Company"), at the prices and during the periods as hereinafter
specified, _____ Units ("Units") consisting of the Company's Common Stock and
Warrants to purchase the Company's Common Stock. Each Unit consists of one (1)
share of the Company's Common Stock, $.0001 par value, as now constituted
("Common Stock"), and two (2) Redeemable Common Stock Purchase Warrants, each to
purchase one (1) share of Common Stock as now constituted at an exercise price
of $7.00 per share ("Warrants"). The Warrants are exercisable until , 2006.
The Units have been registered under a Registration Statement on Form
SB-2 (File No. 333-_____) declared effective by the Securities and Exchange
Commission on __________, 2001 (the "Registration Statement"). This Option (the
"Option") to purchase __________ Units (the "Option Units") was originally
issued pursuant to an underwriting agreement between the Company and Security
Capital Trading, Inc., as underwriter (the "Underwriter"), in connection with a
public offering of up to 300,000 Units (the "Public Units") through the
Underwriter, in consideration of $.001 per Option Unit covered by this Option.
Except as specifically otherwise provided herein, the Common Stock and
the Warrants issued pursuant to this Option shall bear the same terms and
conditions as described under the caption "Description of Securities" in the
Registration Statement, and the Warrants shall be governed by the terms of the
Warrant Agreement dated as of __________, 2001 executed in connection with such
public offering (the "Warrant Agreement"), and except that the holder shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Option, the Common Stock and the Warrants included in the Units, and the
shares of Common Stock underlying the Warrants, as more fully described in
paragraph 6 of this Option. In the event of any reduction of the exercise price
of the Warrants included in the Public Units, the same changes to the Warrants
included in the Option Units shall be simultaneously effected.
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1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option, and
during the periods as follows:
(a) Between __________, 2002 (one (1) year after the effective date
of the Registration Statement) and __________, 2006 (five (5) years after the
effective date of the Registration Statement), inclusive, the Holder shall have
the option to purchase Units hereunder at a price of $7.44 per Unit (subject to
adjustment pursuant to paragraph 8 hereof) (the "Exercise Price").
(b) After __________, 2006, the Holder shall have no right to
purchase any Units hereunder.
At the option of Holder, this Option may be exercised in the following
"cashless exercise" transaction:
Upon written notice of exercise and in exchange for certificates
representing the number of Options being exercised (the "Exchange Right"), the
Company shall deliver to the Holder (without payment by the Holder of the
aggregate Exercise Price) that number of Option Units equal to the quotient
obtained by dividing (x) the value of the portion of the Options being exercised
at that time (determined by subtracting the aggregate Exercise Price for the
number of Options being exercised (in effect immediately prior to the exercise
of the Exchange Right) from the amount obtained by multiplying the number of
Option Units underlying the Options to be exercised by the Fair Market Value of
one Option Unit immediately prior to the exercise of the Exchange Right by (y)
the Fair Market Value of one Option Unit immediately prior to the exercise of
the Exchange Right.
2. The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); (ii) payment to the Company
of the Exercise Price then in effect for the number of Units specified in the
above-mentioned purchase form together with applicable stock transfer taxes, if
any; and (iii) delivery to the Company of a duly executed agreement signed by
the person(s)' designated in the purchase form to the effect that such person(s)
agree(s) to be bound by the provisions of paragraph 6 and subparagraphs (b), (c)
and (d) of paragraph 7 hereof. This Option shall be deemed to have been
exercised, in whole or in part to the extent specified, immediately prior to the
close of business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this paragraph 2, and the person or
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persons in whose name or names the certificates for shares of Common Stock and
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Common Stock and Warrants at that time and date. The Common
Stock and Warrants and the certificates for the Common Stock and Warrants so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Option shall have
been so exercised.
3. For a period of one (1) year from the Effective Date, this Option
shall not be transferred, sold, assigned, or hypothecated, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Holder during such period. Any such
assignment shall be effected by the Holder (i) executing the form of assignment
at the end hereof and (ii) surrendering this Option for cancellation at the
office or agency of the Company referred to in paragraph 2 hereof, accompanied
by a certificate (signed by an officer of the Holder if the Holder is a
corporation), stating that each transferee is a permitted transferee under this
paragraph 3 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Option or Options of like
tenor and representing in the aggregate rights to purchase the same number of
Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Units purchased hereunder and the Common
Stock which may be issued upon exercise of the Warrants will, upon issuance, be
duly and validly issued, fully paid and nonassessable, and no personal liability
will attach to the holder thereof. The Company further covenants and agrees that
during the periods within which this Option may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of this Option and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants included in the Units.
5. This Option shall not entitle the Holder to any voting, dividend, or
other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the
Company shall advise the Holder or its transferee, whether the Holder holds the
Option or has exercised the Option and holds Units or any of the securities
underlying the Units, by written notice at least 20 days prior to the filing of
any post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Act
covering any securities of the Company, for its own account or for the account
of others (other than a registration statement on Form S-4 or S-8 or any
successor forms thereto), and will for a period of five (5) years from the
effective date of the Registration Statement, upon the request of the Holder,
include in any such post-effective amendment or registration statement, such
information as may be required to permit a public offering of the Option, all or
any of the Units underlying the Option, the Common Stock, or Warrants included
in the Units or the Common Stock issuable upon the exercise of the Warrants (the
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"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its reasonable efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a general
consent to service of process in any jurisdiction in any action and do any and
all other acts and things which may be reasonably necessary or desirable to
enable such Holders to consummate the public sale or other disposition of the
Registrable Securities, and furnish indemnification in the manner provided in
paragraph 7 hereof. The Holder shall furnish information and indemnification as
set forth in paragraph 7 except that the maximum amount which may be recovered
from the Holder shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Securities requested
to be included in the registration to include such securities in such
underwritten offering on the same terms and conditions as any similar securities
of the Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering advises the holders of Registrable
Securities that the total amount of securities which they intend to include in
such offering is such as to materially and adversely affect the success of such
offering, then the amount of securities to be offered for the accounts of
holders of Registrable Securities shall be eliminated, reduced, or limited to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount, if any, recommended by such managing underwriter or
underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
holders of Registrable Securities proposed to be included therein pro rata). The
Holder will pay its own legal fees and expenses and any underwriting discounts
and commissions on the securities sold by such Holder and shall not be
responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to the
Company at any time during the period set forth in paragraph l(a) hereof to the
effect that such holder desires to register under the Act this Option, the
Units, or any of the underlying securities contained in the Units underlying the
Option under such circumstances that a public distribution (within the meaning
of the Act) of any such securities will be involved, then the Company will
promptly, but no later than 45 days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option, the
Units and/or any of the securities underlying the Units may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
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best efforts to cause such registration to become and remain effective for a
period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% holder (which for
purposes hereof shall mean any direct or indirect transferee of such holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only one occasion during the term
of this Option. The Holder may at its option request the registration of the
Option and/or any of the securities underlying the Option in a registration
statement made by the Company as contemplated by Section 6(a) or in connection
with a request made pursuant to this Section 6(b) prior to acquisition of the
Units issuable upon exercise of the Option and even though the Holder has not
given notice of exercise of the Option. The 50% holder may, at its option,
request such post-effective amendment or new registration statement during the
described period with respect to the Option, the Units as a unit, or separately
as to the Common Stock and/or Warrants included in the Units and/or the Common
Stock issuable upon the exercise of the Warrants, and such registration rights
may be exercised by the 50% holder prior to or subsequent to the exercise of the
Option. Within 20 business days after receiving any such notice pursuant to this
subsection (b) of paragraph 6, the Company shall give notice to the other
holders of the Options, advising that the Company is proceeding with such
post-effective amendment or registration statement and offering to include
therein the securities underlying the Options of the other holders. Each holder
electing to include its Registrable Securities in any such offering shall
provide written notice to the Company within twenty (20) days after receipt of
notice from the Company. The failure to provide such notice to the Company shall
be deemed conclusive evidence of such holder's election not to include its
Registrable Securities in such offering. Each holder electing to include its
Registrable Securities shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection therewith
as the Company shall reasonably request in writing. All costs and expenses of
the first such post-effective amendment or new registration statement shall be
borne by the Company, except that the holders shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by them.
In addition to the rights granted to 50% holders pursuant to this
section 6(b), any holder(s) shall have such rights, however, all expenses shall
be borne by such holder(s).
The Company shall be entitled to postpone the filing of any
registration statement pursuant to this Section 6(b) otherwise required to be
prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
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statement would cause a violation of Regulation M under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten public offering and such underwriter has refused in writing,
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this Section 6(b), within 60 days of the consummation of the event requiring
such postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested by the
Holder) from the effective date thereof. The Company shall supply prospectuses,
and such other documents as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its best efforts to register and qualify any of the Registrable Securities
for sale in such states as such holder designates, provided that the Company
shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and furnish indemnification in the manner provided in
paragraph 7 hereof. The demand registration rights granted hereunder will expire
no later than five (5) years from the effective date of this offering.
(c) The term "50% holder" as used in this paragraph 6 shall mean the
holder of more than 50% of the Common Stock and the Warrants underlying the
Option and all other Options issued to Security Capital or its designees in
connection with the public offering (considered in the aggregate) and shall
include any owner or combination of owners of such securities, which ownership
shall be calculated by determining the number of shares of Common Stock held by
such owner or owners as well as the number of shares then issuable upon exercise
of the Warrants. Such calculation is based on the total number of securities
initially underlying all of such Options.
(d) The demand and piggyback registration rights granted hereunder
shall expire on the date such Registrable Securities have been sold or the date
that, in the opinion of counsel to the Company, such shares may be sold pursuant
to Rule 144 without volume limitations.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any shares or warrants issued or issuable upon the
exercise of any Options, is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the securities covered
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by such registration statement, amendment, or supplement (such holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages, or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) which arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement or any preliminary prospectus
or final prospectus constituting a part thereof or any amendment or supplement
thereto, or which arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement
in reliance upon and in conformity with written information furnished by such
Distributing Holder or any other Distributing Holder, for use in the preparation
thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder for
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use in the preparation thereof; and will reimburse the Company or any such
director, officer, or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. Notwithstanding anything to the contrary contained in the
Warrant Agreement, in the event an adjustment to the Exercise Price is effected
pursuant to this Subsection (a) (and a corresponding adjustment to the number of
Option Units is made pursuant to Subsection (d) below), the exercise price of
the Warrants shall be adjusted so that it shall equal the price determined by
multiplying the
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exercise price of the Warrants by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding immediately after giving effect
to such action and the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such action. In such event, there
shall be no adjustment to the number of shares of Common Stock or other
securities issuable upon exercise of the Warrants. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) Intentionally omitted.
(c) Intentionally omitted.
(d) Whenever the Exercise Price payable upon exercise of this Option
is adjusted pursuant to Subsection (a) above, the number of Option Securities
purchasable upon exercise of this Option shall simultaneously be adjusted by
multiplying the number of Option Securities initially issuable upon exercise of
this Option by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(e) For the purpose of any computation under Section 1(b) above, the
fair market value per share of Common Stock at any date shall be deemed to be
the average of the daily closing prices for 20 consecutive business days before
such date. The closing price for each day shall be the last sale price regular
way or, in case no such reported sale takes place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on such exchange, the
average of the highest reported bid and lowest reported asked prices as reported
by NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(f) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least ten cents
($0.10) in such price; provided, however, that any adjustments which by reason
of this Subsection (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-tenth of a share, as the case may be. Anything in this Section 8
to the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
9
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal income tax liability to the
holders of Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly, but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Units issuable upon exercise of this Option
and, if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Holder, at the address set forth herein, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(h) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of this Option shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Subsections (a) to (f), inclusive above.
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9. This Agreement shall be governed by and in accordance with the laws
of the State of New York.
IN WITNESS WHEREOF, XXXX.xxx, Inc. has caused this Option to be signed
by its duly authorized officers under its corporate seal, and this Option to be
dated as of the date and year above written.
XXXX.XXX, INC.
By: ______________________________
Its
(Corporate Seal)
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PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
Units of XXXX.xxx, Inc., each Unit consisting of one share of $.0001
Par Value Common Stock, and two (2) Redeemable Common Stock Purchase Warrants,
and herewith [MAKES PAYMENT BY INSTRUCTING XXXX.XXX, INC. TO DEDUCT FROM THE
ENCLOSED OPTION A NUMBER OF OPTION UNITS HAVING AN AGGREGATE FAIR MARKET VALUE
EQUAL TO $ AS OF THE DATE HEREOF, WHICH AMOUNT REPRESENTS THE PURCHASE PRICE FOR
THE OPTION UNITS FOR WHICH THE WITHIN OPTION IS HEREBY EXERCISED, AND WHICH IS
EQUAL TO OPTIONS] [MAKES PAYMENT OF $______________ THEREFOR,] and requests that
the Warrants and certificates for shares of Common Stock be issued in the
name(s) of, and delivered to ________________________ whose address(es) is
(are)_________________________________________.
Dated:
---------------------
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TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right to purchase Units
represented by the foregoing Option to the extent of _____ Units, and appoints
_________________________________ attorney to transfer such rights on the books
of XXXX.xxx, Inc., with full power of substitution in the premises.
Dated:
---------------------
By: ______________________________
Address:
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In the presence of:
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