Contract
EXHIBIT
10.17
THIS
WARRANT AND THE SERIES A PREFERRED STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE CAPITAL STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
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Right
to Purchase 379.6878 shares of Series A Convertible Preferred Stock
of
Capital Growth Systems, Inc. (subject to adjustment as provided
herein)
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SERIES
A CONVERTIBLE PREFERRED STOCK
PURCHASE WARRANT
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No. VEMI-1
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Issue
Date: September 8, 2006
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Name
of Holder:Venture Equities Management, Inc.
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Number
of Shares of Series A Preferred
Stock
Subject to this Warrant:379.6878
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CAPITAL
GROWTH SYSTEMS, INC., a corporation organized under the laws of the State of
Florida (the “Company”), hereby certifies that, for value received, the person
or entity named above as Holder (the “Holder”), or assigns, is entitled, subject
to the terms set forth below, to purchase from the Company from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., central time on the earlier of 30 days following the date of sending
the
“Call Notice” as set forth below, or December 31, 2011 (the “Expiration Date”),
up to the number of shares of fully paid and nonassessable Series A Convertible
Preferred Stock (the “Warrant Amount”) of the Company first set forth above at a
per share purchase price equal to $1000.00 per share (the “Purchase Price”).
Holder acknowledges that effective upon the filing of an amendment to the
Articles of Incorporation of the Company increasing its authorized Common Stock
to not less than 50,000,000 shares (the “Amendment”), each share of Series A
Convertible Preferred Stock shall automatically be converted into 1111.11 shares
of $0.0001 par value Company common stock (“Common Stock”) (subject to rounding
as to each block of shares held by each holder thereof to the nearest whole
share). Notwithstanding anything to the contrary contained herein, effective
as
of the filing of the Amendment, the Warrant Amount hereunder shall be
automatically converted into the right to receive that number of shares of
Common Stock equal to the product of 1111.11 times the number of shares of
Series A Convertible Preferred Stock purchasable hereunder, the Purchase Price
for each share of Common Stock shall be adjusted to $0.90 per share and all
references herein to Series A Convertible Preferred Stock shall thereafter
apply
to the Common Stock into which said Series A Convertible Preferred Stock has
been converted; and provided further in the event that the “Pipe Common Stock
Price” as defined in the Purchase Agreement pursuant to which this Warrant has
been issued is less than $0.90 per share, then the Purchase Price for each
share
of Common Stock shall be adjusted to the Pipe Common Stock Price.
In
the
event that following the date of issuance of this Warrant, the closing price
for
the Company’s Common Stock is $4.00 per share or greater (as equitably adjusted
for stock splits, reverse splits or other recapitalization or reorganization
of
the Company after the date hereof as provided in Section 4 below) for 20
consecutive trading days and within 10 business days following the attainment
of
this trading level, the Company sends a “Call Notice” to the Holder hereof
pursuant to the Notice provisions of this Warrant, and addressed to the Holder
at the Holder’s last known address, and provided further that during the period
from the date of the Call Notice through 30 days following the date of sending
the Call Notice (such last day being the “Outside Date”), Holder has the right
to sell the shares of Common Stock underlying this Warrant pursuant to an
effective registration statement as filed with the Securities & Exchange
Commission (that is not subject to a stop order or suspension—the “Registration
Statement”), then the Holder must exercise this Warrant on or before 5:00 p.m.
CST on the Outside Date or the rights under this Warrant shall lapse as of
the
end of the Outside Date; provided however if at any time from the date of
sending of the Call Notice until the Outside Date the Holder’s right to sell
shares of Common Stock purchased pursuant to the exercise of this Warrant
pursuant to the terms of the Registration Statement is invalid due to either
the
suspension of the Registration Statement or its expiration (without immediate
replacement by a subsequent effective registration statement), then the Call
Notice shall be deemed null and void ab initio and this Warrant shall remain
in
full force and effect subject to a possible subsequent Call Notice which could
be provided in the event the other requirements for the Call Notice to be sent
are met.
1. Exercise
of Warrant.
1.1 Number
of Shares Issuable upon Exercise.
From
and after the date hereof through and including the Expiration Date, the Holder
hereof shall be entitled to receive, upon exercise of this Warrant in whole
in
accordance with the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, shares of Series A
Convertible Preferred Stock (or as provided in the forepart hereof, shares
of
Common Stock) subject to adjustment pursuant to Section 4.
1.2 Full
Exercise.
This
Warrant may be exercised in full by the Holder hereof by delivery of an original
or facsimile copy of the form of subscription attached as Exhibit A hereto
(the “Subscription Form”) duly executed by such Holder and surrender of the
original Warrant within seven (7) days of exercise, to the Company at its
principal office or at the office of its Warrant Agent (as provided
hereinafter), accompanied by payment, in cash, wire transfer or by certified
or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Series A Convertible Preferred Stock
for
which this Warrant is then exercisable by the Purchase Price then in effect.
1.3 Partial
Exercise.
This
Warrant may be exercised in part (including a fractional share, provided that
following the Amendment, it may only be exercised for whole shares of Common
Stock) by surrender of this Warrant in the manner and at the place provided
in
subsection 1.2 except that the amount payable by the Holder on such partial
exercise shall be the amount obtained by multiplying (a) the number of
shares of Series A Convertible Preferred Stock designated by the Holder in
the
Subscription Form (or Common Stock following the conversion of Series A
Convertible Preferred Stock to Common Stock) by (b) the Purchase Price then
in effect. On any such partial exercise, the Company, at its expense, will
forthwith issue and deliver to or upon the order of the Holder hereof a new
Warrant of like tenor, in the name of the Holder hereof or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may request, the number
of shares of Series A Convertible Preferred Stock (or Common Stock following
the
conversion of the Series A Convertible Preferred Stock to Common Stock) for
which such Warrant may still be exercised.
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1.4 Fair
Market Value.
Fair
Market Value of a share of Series A Convertible Preferred Stock as of a
particular date (the “Determination Date”) shall mean:
(a) If
the
Company’s Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) National
Market System, the NASDAQ SmallCap Market or the American Stock Exchange, Inc.,
then an amount equal to the product of the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date for a share of such Common Stock, multiplied by the
conversion rate then in place for the Series A Convertible Preferred Stock,
as
applicable, or following the Amendment, it shall simply be the aforesaid price
for the Company’s Common Stock.
(b) If
the
Company’s Common Stock is not traded on an exchange or on the NASDAQ National
Market System, the NASDAQ SmallCap Market or the American Stock Exchange, Inc.,
but is traded in the over-the-counter market, then the mean of the closing
bid
and asked prices reported for the last business day immediately preceding the
Determination Date for a share of such Common Stock, multiplied by the
conversion ratio then in place for the Series A Convertible Preferred Stock,
as
applicable, or following the Amendment, it shall simply be the aforesaid price
for the Company’s Common Stock.
(c) Except
as
provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then standing of the American
Arbitration Association, before a single arbitrator to be chosen from a panel
of
persons qualified by education and training to pass on the matter to be
decided.
(d) If
the
Determination Date is the date of a liquidation, dissolution or winding up,
or
any event deemed to be a liquidation, dissolution or winding up pursuant to
the
Company’s charter, then all amounts to be payable per share to holders of the
Series A Convertible Preferred Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Series A Convertible Preferred Stock in
liquidation under the charter, assuming for the purposes of this clause
(d) that all of the shares of Series A Convertible Preferred Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.
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1.5 Company
Acknowledgment.
The
Company will, at the time of the exercise of the Warrant, upon the request
of
the Holder hereof acknowledge in writing its continuing obligation to afford
to
such Holder any rights to which such Holder shall continue to be entitled after
such exercise in accordance with the provisions of this Warrant. If the Holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such rights.
1.6 Trustee
for Warrant Holders.
In the
event that a bank or trust company shall have been appointed as trustee for
the
Holders of the Warrants pursuant to Subsection 3.2, such bank or trust
company shall have all the powers and duties of a warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company
or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.
2.1 Delivery
of Stock Certificates, etc. on Exercise.
The
Company agrees that the shares of Series A Convertible Preferred Stock (or
following the Amendment the corresponding shares of Common Stock) purchased
upon
exercise of this Warrant shall be deemed to be issued to the Holder hereof
as
the record owner of such shares as of the close of business on the date on
which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. As soon as practicable after the exercise of this Warrant in full
or
in part, and in any event within seven (7) days thereafter, the Company at
its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder hereof, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may direct
in compliance with applicable securities laws, a certificate or certificates
for
the number of duly and validly issued, fully paid and nonassessable shares
of
Series A Convertible Preferred Stock (or following the Amendment, shares of
Common Stock) to which such Holder shall be entitled on such exercise, plus,
in
lieu of any fractional share to which such Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one
full
share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
3. Adjustment
for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization,
Consolidation, Merger, etc.
In case
at any time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or
(c) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution of
the
Company, then, in each such case, as a condition to the consummation of such
a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder of this Warrant, on the exercise hereof as provided in
Section 1, at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Series A Convertible Preferred Stock
(or
Common Stock following the Amendment) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if
such
Holder had so exercised this Warrant, immediately prior thereto, all subject
to
further adjustment thereafter as provided in Section 4.
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3.2. Dissolution.
In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock
and
other securities and property (including cash, where applicable) receivable
by
the Holders of the Warrants after the effective date of such dissolution
pursuant to this Section 3 to a bank or trust company selected by the
Company, as trustee for the Holder or Holders of the Warrants.
3.3. Continuation
of Terms.
Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable
to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation
or
merger or the effective date of dissolution following any such transfer, as
the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether
or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full
force and effect after the consummation of the transaction described in this
Section 3, then only in such event will the Company’s securities and
property (including cash, where applicable) receivable by the Holders of the
Warrants be delivered to the Trustee as contemplated by
Section 3.2.
4. Extraordinary
Events Regarding Capital Stock.
In the
event that the Company shall (a) issue additional shares of its capital
stock as a dividend or other distribution on outstanding capital stock,
(b) subdivide its outstanding shares of capital stock or (c) combine
its outstanding shares of capital stock into a smaller number of shares of
its
capital stock, then, in each such event, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by multiplying
the
then Purchase Price by a fraction, the numerator of which shall be the number
of
shares of capital stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of capital stock outstanding
immediately after such event, and the product so obtained shall thereafter
be
the Purchase Price then in effect. The Purchase Price, as so adjusted, shall
be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 4. The number of shares of capital
stock that the Holder of this Warrant shall thereafter, on the exercise hereof
as provided in Section 1, be entitled to receive shall be increased to a
number determined by multiplying the number of shares of capital stock that
would otherwise (but for the provisions of this Section 4) be issuable on
such exercise by a fraction of which (a) the numerator is the Purchase
Price that would otherwise (but for the provisions of this Section 4) be in
effect, and (b) the denominator is the Purchase Price in effect on the date
of such exercise.
5. Certificate
as to Adjustments.
In each
case of any adjustment or readjustment in the shares of Series A Convertible
Preferred Stock (or following the amendment the corresponding shares of Common
Stock) issuable on the exercise of the Warrants, the Company at its expense
will
promptly cause its Chief Financial Officer or other appropriate designee to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is
based, including a statement of (a) the consideration received or
receivable by the Company for any additional shares of Series A Convertible
Preferred Stock issued or sold or deemed to have been issued or sold,
(b) the number of shares of Series A Convertible Preferred Stock
outstanding or deemed to be outstanding and (c) the Purchase Price and the
number of shares of Series A Convertible Preferred Stock to be received upon
exercise of this Warrant, in effect immediately prior to such adjustment or
readjustment and as adjusted or readjusted as provided in this Warrant (subject
to adjustment as to the aforesaid subparagraphs for Common Stock following
the
Amendment). The Company will forthwith mail a copy of each such certificate
to
the Holder of the Warrant and any Warrant Agent of the Company (appointed
pursuant to Section 9 hereof).
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6. Reservation
of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements.
From
and after the Issue Date of this Warrant, the Company will at all times reserve
and keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Series A Convertible Preferred Stock (or following
the
Amendment, all shares of Common Stock) from time to time issuable on the
exercise of the Warrant.
7. Assignment;
Exchange of Warrant.
Subject
to compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) with respect to any or all of the Shares. On the surrender for
exchange of this Warrant, with the Transferor’s endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form”) and together
with evidence reasonably satisfactory to the Company demonstrating compliance
with applicable securities laws, the Company at its expense, but with payment
by
the Transferor of any applicable transfer taxes) will issue and deliver to
or on
the order of the Transferor thereof a new Warrant or Warrants of like tenor,
in
the name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a “Transferee”), calling in the aggregate on the face or
faces thereof for the number of shares of Series A Convertible Preferred Stock
(or following the Amendment, the shares of Common Stock) called for on the
face
or faces of the Warrant so surrendered by the Transferor.
8. Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant,
the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
9. Warrant
Agent.
The
Company may, by written notice to the each Holder of the Warrant, appoint an
agent for the purpose of issuing Series A Convertible Preferred Stock (or
following the Amendment, shares of Common Stock) on the exercise of this Warrant
pursuant to Section 1, exchanging this Warrant pursuant to Section 7,
and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may
be,
shall be made at such office by such agent.
10. Transfer
on the Company’s Books.
Until
this Warrant is transferred on the books of the Company, the Company may treat
the registered Holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
11. Notices.
All
notices and other communications from the Company to the Holder of this Warrant
shall be mailed by first class registered or certified mail, postage prepaid,
or
sent via Federal Express or other bonded overnight courier, at such address
as
may have been furnished to the Company in writing by such Holder or, until
any
such Holder furnishes to the Company an address, then to, and at the address
of,
the last Holder of this Warrant who has so furnished an address to the Company.
12. Miscellaneous.
This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against whom enforcement
of
such change, waiver, discharge or termination is sought. This Warrant shall
be
construed and enforced in accordance with and governed by the laws of Illinois.
Any dispute with respect to this Warrant shall be litigated: (i) in the state
or
federal courts situated in Xxxx County, Illinois, to which jurisdiction and
venue all parties consent; and (ii) by bench trial, with each party waiving
his,
her or its right to trial by jury.
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IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
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CAPITAL
GROWTH SYSTEMS, INC.
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By:
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Xxxxx
X. Xxxx
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Its:
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Chief
Financial Officer
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Exhibit A
FORM
OF
SUBSCRIPTION
(to
be
signed only on exercise of Warrant)
TO:
CAPITAL GROWTH SYSTEMS, INC.
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.VEMI-1), hereby irrevocably elects to purchase (check applicable
box):
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shares
of the Series A Convertible Preferred Stock covered by such Warrant
if
this exercise is prior to the Amendment; or
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shares
of Common Stock covered by such Warrant if this exercise is following
the
Amendment.
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The
undersigned herewith makes payment of the full purchase price for
such
shares at the price per share provided for in such Warrant, which
is
$___________. Such payment takes the form of cash.
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The
undersigned requests that the certificates for such shares be issued
in
the name of, and delivered to
______________________________________________________ whose address
is
_________________________________________________________________________________________________________________________________________
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The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock underlying this Warrant under
the
Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an
exemption from registration under the Securities Act.
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Dated:
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Signature
must conform to name of holder as specified on the face of the
Warrant)
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(Address)
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A-1
Exhibit B
FORM
OF
TRANSFEROR ENDORSEMENT
(To
be
signed only on transfer of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Series
A
Convertible Preferred Stock (if prior to the “Amendment” as defined in the
within Warrant) or of Common Stock (if following the date of the “Amendment:”)
of Capital Growth Systems, Inc. to which the within Warrant relates specified
under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Capital Growth
Systems, Inc. with full power of substitution in the premises.
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Transferees
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Percentage
Transferred
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Number
Transferred
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Dated:
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(Signature
must conform to name of holder as specified on the face of the
warrant)
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Signed
in the presence of:
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(Name)
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(Address)
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ACCEPTED
AND AGREED:
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[TRANSFEREE]
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(Address)
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(Name)
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B-1
