Exhibit 10.1
MAXYGEN, INC.
Form of Change of Control Agreement
     This Change of Control Agreement (the “Agreement”), dated
                    , 20___, is made by and between Maxygen, Inc., a Delaware
corporation (the “Company”), and                      (the “Executive”),
amending and restating in its entirety the Change of Control Agreement
previously entered into by and between the Company and Executive (the “Prior
Agreement”).
     Whereas, the Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel;
     Whereas, the Board of Directors of the Company recognizes that, as is the
case with many publicly-held corporations, the possibility of a Change of
Control (as defined herein) exists and that such possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders; and
     Whereas, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company’s management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change of Control.
     Now, Therefore, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive agree as follows:
1. Introduction; Purposes.
     (a) The purpose of this Agreement is to provide the Executive with
protection of certain benefits in case of a termination of his or her employment
with the Company in connection with a Change of Control of the Company.
     (b) The Company, by means of the Agreement, seeks to (i) secure and/or
retain the services of the Executive and (ii) provide incentives for the
Executive to exert maximum efforts for the success of the Company even in the
face of a potential Change of Control of the Company.
2. Definitions.
     (a) “Accountants” has the meaning given thereto in Section 4.
     (b) “ADEA” has the meaning given thereto in Section 5(c).
     (c) “Agreement” means this Change of Control Agreement.

 

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     (d) “Board” means the Board of Directors of the Company.
     (e) “Cause” means the Executive’s: (i) willful and continued failure to
substantially perform the Executive’s duties with the Company (other than as a
result of physical or mental disability) after a written demand for substantial
performance is deliver to the Executive by the Company, which demand
specifically identifies the manner in which the Company believes that the
Executive has not substantially performed the Executive’s duties and that has
not been cured within fifteen (15) days following receipt by the Executive of
the written demand; (ii) commission of a felony (other than a traffic-related
offense) that in the written determination of the Company is likely to cause or
has caused material injury to the Company’s business; (iii) dishonesty with
respect to a significant matter relating to the Company’s business; or
(iv) material breach of any agreement by and between the Executive and the
Company, which material breach has not been cured within fifteen (15) days
following receipt by the Executive of written notice from the Company
identifying such material breach.
     (f) “Change of Control” means: (i) a dissolution or liquidation of the
Company; (ii) a sale of all or substantially all the assets of the Company;
(iii) a merger, recapitalization, reorganization, consolidation or other similar
transaction (a “Business Combination”) in which beneficial ownership of
securities of the Company representing at least thirty-five percent (35%) of the
combined voting power entitled to vote in the election of directors has changed;
(iv) a reverse merger in which the Company is the surviving corporation but the
shares of the common stock of the Company outstanding immediately before the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, and in which beneficial ownership of
securities of the Company representing at least thirty-five percent (35%) of the
combined voting power entitled to vote in the election of directors has changed;
(v) an acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or subsidiary of the Company or other entity controlled by the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least thirty-five percent (35%) of the combined
voting power entitled to vote in the election of directors; (vi) in the event
that the individuals who are members of the Incumbent Board cease for any reason
to constitute at least fifty percent (50%) of the Board; (vii) a sale of
substantially all the assets of the Company’s protein pharmaceutical business;
or (viii) the consummation by the Company of a Business Combination with respect
to which all or substantially all of the individuals and entities who were the
beneficial owners of the combined voting power of the then outstanding
securities of the Company entitled to vote generally in the election of
directors immediately prior to such Business Combination do not, following
consummation of all transactions intended to constitute part of such Business
Combination, beneficially own, directly or indirectly, at least sixty-five
percent (65%) of the voting securities of the Company (or the corporation,
business trust or other entity resulting from or being the surviving entity in
such Business Combination).
     (g) “Code” means the Internal Revenue Code of 1986, as amended.

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     (h) “Committee” means the Finance Committee of the Board or such other
committee as appointed by the Board to administer this Agreement.
     (i) “Company” means Maxygen, Inc., a Delaware corporation.
     (j) “Company-Paid Coverage” has the meaning given thereto in Section 3(a).
     (k) “Confidential Information, Secrecy and Invention Agreement” has the
meaning given thereto in Section 5(b).
     (l) “Disability” means Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, or (ii) is, by
reason of any medically determinable physical or mental impairment which can be
expected to last for a continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than three
(3) months under an accident and health plan covering Company employees.
     (m) “Effective Date” means the date first above written.
     (n) “Employee Agreement and Release” has the meaning given thereto in
Section 5(c).
     (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     (p) “Excise Tax” has the meaning given thereto in Section 4.
     (q) “Executive” means the person identified in the introductory paragraph
of this Agreement.
     (r) “Good Reason” means: (i) any material reduction of the Executive’s
duties, authority or responsibilities relative to the Executive’s duties,
authority, or responsibilities as in effect immediately before such reduction,
except if agreed to in writing by the Executive; (ii) a reduction by the Company
in the base salary of the Executive, or of twenty-five percent (25%) or more in
the Target Bonus opportunity of such Executive, as in effect immediately before
such reduction, except if agreed to in writing by the Executive; (iii) the
relocation of the Executive to a facility or a location more than thirty
(30) miles from the Executive’s then present business location, except if agreed
to in writing by the Executive; (iv) a material breach by the Company of any
provision of this Agreement or (v) any failure of the Company to obtain the
assumption of this Agreement by any successor or assign of the Company;
provided, however, that such events shall not constitute grounds for a Good
Reason termination unless the Executive has provided notice to the Company of
the existence of the one or more of the above conditions within ninety (90) days
of its initial existence and the Company has been provided at least thirty
(30) days to remedy the condition.

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     (s) “Incumbent Board” means the individuals who, as of the Effective Date,
are members of the Board. If the election, or nomination for election by the
Company’s stockholders, of any new director is approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board.
     (t) “Section 16 Officer” means an “officer” of the Company, as defined in
Rule 16a-1(f) promulgated under the Exchange Act, designated as such by action
of the Board.
     (u) “Target Bonus” means the Executive’s target bonus for the then current
fiscal year, as set by the Board or the appropriate committee thereof.
3. Severance Benefits in the Event of a Change of Control.
     (a) If within eighteen (18) months following the date of a Change of
Control of the Company either (A) the Company terminates the Executive’s
employment other than for Cause, death or Disability or (B) the Executive
terminates his or her employment with the Company voluntarily with Good Reason,
then in each case, subject to Section 4 and Section 5: (i) the Executive shall
be entitled to receive, within ten (10) days following the effectiveness of the
release of claims referred to in Section 5, a lump sum payment equal to three
times the Executive’s yearly base salary in effect on the date of termination
(without giving effect to any reduction in base salary subsequent to a Change of
Control that constitutes Good Reason), (ii) each of the Executive’s outstanding
stock options, all stock subject to repurchase or forfeiture, including without
limitation, restricted stock, restricted stock units and performance shares
awards, and any options, stock subject to repurchase or forfeiture, awards or
purchases held in the name of an estate planning vehicle for the benefit of the
Executive or his or her immediate family, shall have their vesting and
exercisability schedule accelerate in full (or, as applicable, the corresponding
repurchase or forfeiture right shall lapse in full) as of the date of
termination; (iii) if on the date of termination the Executive is covered by any
Company-paid health, disability, accident and/or life insurance plans or
programs, the Company shall provide to the Executive benefits substantially
similar to those that the Executive was receiving immediately prior to the date
of termination (the “Company-Paid Coverage”), with any premiums related to such
coverage paid by the Company no later than thirty (30) days following the
premium due date; and (iv) the post-termination exercise period of Executive’s
outstanding stock option and stock appreciation right awards shall automatically
be extended to the later of (A) the fifteenth day of the third month following
the date at which the stock option or stock appreciation right would otherwise
have expired but for this extension, based on the terms of the stock option or
stock appreciation right on its grant date, or (B) December 31 of the calendar
year in which the stock option or stock appreciation right would otherwise have
expired but for this extension, based on the terms of the stock option or stock
appreciation right on its grant date; provided, however, that in the event Code
Section 409A permit a longer extension without resulting in the imposition of an
additional tax under Code Section 409A, the stock option or stock appreciation
right shall provide for such greater post-termination exercise period; provided,
further, that in no event shall the term of the stock option or stock
appreciation right be extended longer than its original maximum term. If such

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coverage included the Executive’s spouse and/or dependents immediately prior to
the date of termination, such spouse and/or dependents shall also be covered at
Company expense. Company-Paid Coverage shall continue until the earlier of
(x) three (3) years from the date of termination, or (y) the date that the
Executive and his or her spouse and/or dependents become covered under another
employer’s health, disability, accident and/or life insurance plans or programs
that provides the Executive and his or her spouse and/or dependents with
comparable benefits and levels of coverage; provided, however that such
coverage, premium payments, or reimbursements (to the extent Employee pays the
premiums in the interim) shall be delayed six months and one day from Employee’s
termination date (and then paid in full in arrears) to the extent required to
avoid the imposition of additional tax under Code Section 409A.
     (b) If within eighteen (18) months following the date of a Change of
Control of the Company the Executive’s employment with the Company is terminated
as a result of death or Disability, then in each case, subject to Section 4 and
Section 5: (i) each of the Executive’s outstanding stock options, all stock
subject to repurchase or forfeiture, including without limitation restricted
stock, restricted stock units, performance shares awards, and any options, stock
subject to repurchase or forfeiture, awards or purchases held in the name of an
estate planning vehicle for the benefit of the Executive or his or her immediate
family, shall have their vesting and exercisability schedule accelerated such
that vesting (or, as applicable, the corresponding repurchase or forfeiture
right lapsing) shall occur as if the vesting (or lapsing) had occurred on a
monthly basis from the last date of vesting (or lapse) to the date of
termination; and (ii) the Company will provide the Executive with health,
disability, accident and/or life insurance benefits as described in
Section 3(a)(iii).
     (c) In no event shall the Executive be obligated to seek other employment
or take any other action to mitigate the amounts payable or benefits provided to
the Executive under this Agreement, nor shall any such payments or benefits be
reduced by any earnings or benefits that the Employee may receive from any other
source.
     (d) The Executive’s employment shall be deemed to have been terminated
following a Change of Control by the Company without Cause or by the Executive
with Good Reason if the Executive’s employment is terminated prior to a Change
of Control without Cause at the direction of a person who has entered into an
agreement with the Company the consummation of which will constitute a Change of
Control or if the Executive terminates his or her employment with Good Reason
prior to a Change of Control if the circumstances or event that constitutes Good
Reason occurs at the direction of such person.
     (e) If the Change of Control is the result of the circumstances described
in subsection (vii) of Section 2(f) then, subject to Section 4 and 5 hereof, the
benefits described in Section 3(a) shall be payable to the Executive upon
cessation of employment with the Company (for any reason) that occurs after the
earlier to occur of (x) twelve (12) months after the Change of Control and
(y) disposition of all or substantially all the remaining assets of the Company.

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     (f) If the Executive is eligible for severance benefits pursuant to this
Article 3, then the Executive shall be eligible for and considered for a bonus
for the calendar year in which the Executive’s employment terminates at the same
time other employees are considered for a bonus for such calendar year even
though the Executive will no longer be an employee of the Company at that time;
provided, however, any such bonus shall be pro-rated based on the effective date
of the Executive’s termination.
     (g) Notwithstanding any contrary provision of the Agreement, if the Company
determines, in its good faith judgment, that Section 409A of the Code shall
result in the imposition of additional tax on any payment or benefit otherwise
due to the Executive under the Agreement during the six (6) month period
following the Executive’s termination date, all such payments or benefits shall
accrue during the six (6) month period and shall become payable in a lump sum
payment on the date six (6) months and one (1) day following the Executive’s
termination date. All subsequent payments or benefits, if any, shall be paid as
provided in the Agreement.
4. Parachute Payments; Excise Tax.
          In the event that the severance, acceleration of stock options and
other benefits payable to the Executive as a result of a Change of Control of
the Company (i) constitute “parachute payments” within the meaning of
Section 280G (as it may be amended or replaced) of the Code and (ii) but for
this Section 4, would be subject to the excise tax imposed by Section 4999 (as
it may be amended or replaced) of the Code (the “Excise Tax”), then the
Executive’s benefits payable in connection therewith shall be either be
     (a) delivered in full, or
     (b) delivered as to such lesser extent that would result in no portion of
such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by the
Executive on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be taxable under
the Excise Tax. Unless the Company and the Executive otherwise agree in writing,
any determination required under this Section 4 shall be made in writing in good
faith by a “Big Four” national accounting firm selected by the Company (the
“Accountants”). In the event of a reduction in benefits hereunder, the Executive
shall be given the choice of which benefits to reduce. For purposes of making
the calculations required by this Section 4, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of the Code.
     The Company and the Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 4. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.
5. Limitations and Conditions on Benefits.

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          The benefits and payments provided under this Agreement shall be
subject to the following terms and limitations:
     (a) Withholding Taxes. The Company shall withhold required foreign,
federal, state and local income and employment taxes from any payments
hereunder.
     (b) Confidential Information, Secrecy and Invention Agreement Prior to
Receipt of Benefits. The Executive shall have executed and delivered to the
Company, a standard form of the Company’s confidential information, secrecy and
invention agreement, a copy of the current form of which is attached as
Exhibit A (the “Confidential Information, Secrecy and Invention Agreement”),
prior to the receipt or provision of any benefits (including the acceleration
benefits) under this Agreement. Additionally, the Executive agrees that all
documents, records, apparatus, equipment and other physical property that is
furnished to or obtained by the Executive in the course of his or her employment
with the Company shall be and shall remain the sole property of the Company. The
Executive agrees not to make or retain copies, reproductions or summaries of any
such property, except as otherwise necessary while acting in the normal course
of business. In the event of any material breach by the Executive of the
Confidential Information, Secrecy and Invention Agreement that is not cured
within thirty (30) days of notice of such breach to the Executive, all benefits
payable under Section 4 of this Agreement shall immediately terminate.
     (c) Employee Agreement and Release Prior to Receipt of Benefits. If the
Executive’s employment with the Company terminates involuntarily other than for
Cause, death or Disability, or the Executive terminates his or her employment
with the Company voluntarily with Good Reason, then prior to, and as a condition
of the receipt of any benefits (including the acceleration benefits) under this
Agreement on account of such termination, the Executive shall, as of the date of
such termination, execute an employee agreement and release in the form attached
as Exhibit B (the “Employee Agreement and Release”) prior to receipt of
benefits. Such Employee Agreement and Release shall specifically relate to all
the Executive’s rights and claims in existence at the time of such execution and
shall confirm the Executive’s obligations under the Company’s standard form of
Confidential Information, Secrecy and Invention Agreement. If and only if the
Executive is covered by the federal Age Discrimination in Employment Act of
1967, as amended (“ADEA”) (currently all those 40 years of age or over on the
date of termination), the Executive has twenty-one (21) days to consider whether
to execute such Employee Agreement and Release and the Executive may revoke such
Employee Agreement and Release within seven (7) days after execution of such
Employee Agreement and Release. In the event the Executive is covered by ADEA
and does not execute such Employee Agreement and Release within the twenty-one
(21) days specified above, or if the Executive revokes such Employee Agreement
and Release within the seven (7) day period specified above, no benefits
(including the acceleration benefits) under Section 3 of this Agreement shall be
payable or made available to the Executive on account of a termination.
     6. Termination. Prior to a Change of Control of the Company, this Agreement
shall automatically terminate on the date the Executive ceases to be a
Section 16 Officer,

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as evidenced by action of the Board removing the Executive as a Section 16
Officer or otherwise; provided, however, that if the Executive ceases to be a
Section 16 Officer prior to a Change of Control at the direction of a person who
has entered into an agreement with the Company the consummation of which will
constitute a Change of Control, this Agreement shall not terminate due to the
change in status of the Executive.
     7. At-Will Employment. The Company and the Executive acknowledge that the
Executive’s employment is and shall continue to be at-will, as defined under
applicable law. This Agreement shall not be construed as creating an express or
implied contract of employment between the Executive and the Company. The
Executive shall not have any right to be retained in the employment of the
Company.
     8. Notices. Any notice provided under this Agreement shall be in writing
and shall be deemed to have been effectively given (i) upon receipt when
delivered personally, (ii) one day after sending when sent by express mail
service (such as Federal Express), or (iii) five (5) days after sending when
sent by regular mail to the following address:
In the case of the Company:
Maxygen, Inc.
515 Galveston Drive
Redwood City, CA 94063
Attn: General Counsel
In the case of the Executive:
The last personal residence
address known by the Company
or to such other address as the Company or the Executive hereafter designates by
written notice in accordance with this Section 8.
     9. Litigation/Arbitration Expenses. Reasonable litigation and/or
arbitration costs and expenses shall be paid by the Company, win or lose, in
connection with any dispute between the Company (and its successors) and the
Executive concerning this Agreement; provided, however, that if the litigation
or arbitration is found to have been commenced in bad faith by the Executive,
the Executive shall bear all of his or her own costs and expenses in connection
with such litigation or arbitration.
     10. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by the Executive, and the Company, and any
surviving entity resulting from a Change of Control and upon any other person
who is a successor by merger, acquisition, consolidation or otherwise to the
business formerly carried on by the Company, and their respective successors,
assigns, heirs, executors and administrators, without regard to whether or not
such person actively assumes any rights

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or duties hereunder; provided, however, that the Executive may not assign any
duties hereunder without the prior written consent of the Company.
     11. Miscellaneous.
     (a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing by each of
the parties.
     (b) No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party that are not expressly set forth in this Agreement. This Agreement
replaces and supersedes in its entirety the Prior Agreement.
     (c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
     12. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, regardless of the law that
might be applied under applicable principles of conflicts of law.

            Maxygen, Inc.
      By:           Louis Lange        Chairman, Compensation Committee       
The Executive
            [Name and Title]              

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Exhibit A
to Change of Control Agreement
MAXYGEN, INC.
CONFIDENTIAL INFORMATION, SECRECY AND
INVENTION AGREEMENT

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Exhibit B
to Change of Control Agreement
MAXYGEN, INC.
AGREEMENT AND RELEASE
     I hereby confirm my obligations under the Confidential Information, Secrecy
and Invention Agreement that I have previously entered into with the Company.
     I acknowledge that I have read and understand Section 1542 of the
California Civil Code that reads as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with debtor.
I hereby expressly waive and relinquish all rights and benefits under that
section and any law of any jurisdiction of similar effect with respect to my
release of any claims I may have against the Company.
     Except as otherwise set forth in this Agreement and Release (the “Release”)
and except for obligation of the Company set forth in the Change of Control
Agreement entered into between the Company and me, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to and including the
Effective Date of this Release (as defined below), including but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with my employment with the Company or the termination of that
employment, including but not limited to, claims of intentional and negligent
infliction of emotional distress, any and all tort claims for personal injury,
claims or demands related to salary, bonuses, commissions, stock, stock options,
or any other ownership interests in the Company, vacation pay, fringe benefits,
expense reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law or cause of action including, but
not limited to, the federal Civil Rights Act of 1964, as amended; the federal
Age Discrimination in Employment Act of 1967, as amended (“ADEA”); the federal
Americans with Disabilities Act of 1990; the California Fair Employment and
Housing Act, as amended; tort law; contract law; wrongful discharge;
discrimination;

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fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing; provided, however, that nothing in this paragraph
shall be construed in any way to release the Company from its obligation to
(i) indemnify me pursuant to any applicable indemnification agreement and to
provide me with continued coverage under the Company’s directors and officers
liability insurance policy to the same extent that it has provided such coverage
to previously departed officers and directors of the Company or (ii) provide the
benefits to me set forth in the Change of Control Agreement entered into between
the Company and me.
     I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. If and only if I am covered
by ADEA, I further acknowledge that I have been advised by this writing, as
required by the ADEA, that: (A) my waiver and release do not apply to any rights
or claims that may arise after the Effective Date of this Release; (B) I have
the right to consult with an attorney prior to executing this Release; (c) I
have twenty-one (21) days to consider this Release (although I may choose to
voluntarily execute this Release earlier); (D) I have seven (7) days following
the execution of this Release to revoke the Release; and (E) this Release shall
not be effective until the date upon which the revocation period has expired,
which shall be the eighth day after this Release is executed by me (the
“Effective Date”). If I am not covered by ADEA, I acknowledge that this
Agreement shall be effective as of the date upon which this Release has been
executed by me (the “Effective Date”).

             
 
  By:        
 
     
 
     THE EXECUTIVE    
 
           
 
  Date:        
 
           

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