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EXHIBIT 2.1
CUSTODY AGREEMENT
This CUSTODY AGREEMENT (this "Agreement") is made and entered into as
of February 26, 1998 by and among Chase Bank of Texas, N.A. ("Custodian"),
ViaGrafix Corporation (the "Company"), Southwest Securities, Inc.
("Southwest"), UMB Bank, n.a. ("Transfer Agent"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ together, the "Management
Selling Shareholders"), and Geocapital III, L.P. ("Geocapital," and together
with the Management Selling Shareholders, the "Selling Shareholders").
WHEREAS, the Company has filed its Registration Statement on Form S-1
(No. 333-42633) (as heretofore or hereafter amended, the "Registration
Statement") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "1933 Act"), relating to an underwritten public
offering of up to 2,530,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of the Company, of which (i) 1,750,000 shares are to be sold
by the Company, (ii) 450,000 shares (the "Firm Shares") are to be sold by the
Selling Shareholders, and (iii) up to an additional 330,000 shares (the "Option
Shares") may be sold by the Selling Shareholders upon the exercise of the
overallotment option as provided in the Underwriting Agreement (defined below)
(the Firm Shares and the Option Shares collectively, the "Selling Shareholders
Shares");
WHEREAS, prior to effectiveness of the Registration Statement under
the 1933 Act, the Selling Shareholders intend to enter into an Underwriting
Agreement (the "Underwriting Agreement"), a proof copy of which dated February
9, 1998 has been delivered to the Custodian, with the Company and the several
underwriters (the "Underwriters") to be named therein, for whom Southwest is to
act as representative (the "Representative"), relating to, among other things,
the sale by the Selling Shareholders and the purchase by the several
Underwriters of the Selling Shareholders Shares; and
WHEREAS, the Selling Shareholders have duly executed and delivered a
Selling Shareholders' Power of Attorney (the "Power of Attorney") naming each
of the individuals specified therein as attorney-in-fact (the
"Attorney-In-Fact") for certain purposes, including executing and delivering
the Underwriting Agreement on behalf of the Selling Shareholders, determining
the purchase price to be paid by the Underwriters to the Selling Shareholders
as provided in the Underwriting Agreement, authorizing the delivery of the
Selling Shareholders Shares, and otherwise acting on behalf of the Selling
Shareholders in connection with the transactions contemplated by Underwriting
Agreement and this Custody Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
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1. The Management Selling Shareholders hereby deliver herewith to
the Custodian, as custodian pursuant to this Agreement, and the Custodian
confirms receipt of, certificates in negotiable form representing such number
of shares of Common Stock designated on Schedule I hereto, which number shall
not be less than 686,071 shares of Common Stock in the aggregate. Geocapital
hereby delivers herewith to the Custodian, and the Custodian confirms receipt
of, certificates in negotiable form representing an aggregate of 855,000 shares
of the Series A Convertible Preferred Stock of the Company ("Preferred Stock")
which are convertible into 488,571 shares of Common Stock. The Selling
Shareholders propose to sell pursuant to the Underwriting Agreement (following
the conversion of the Preferred Stock into shares of Common Stock as provided
below) up to an aggregate of 780,000 shares of Common Stock, consisting of
"Firm Shares" and "Option Shares" as designated and in the respective amounts
set forth on Schedule II hereto.
2. Each of the certificates delivered pursuant to Section 1 above
has been duly endorsed in blank by the appropriate Selling Shareholder or is
accompanied by a duly endorsed stock power in blank, and in each case the
signature of the Selling Shareholder on such endorsement or stock power has
been medallion guaranteed by a bank or trust company or by a firm having
membership on the New York Stock Exchange. If the number of shares of Common
Stock represented by the certificates delivered by a Management Selling
Shareholder herewith exceeds the number of shares set forth opposite the name
of such Management Selling Shareholder on Schedule II hereto, the Custodian is
authorized and instructed to cause to be issued in the name of such Management
Selling Shareholder, and to return to such Management Selling Shareholder as
soon as may be practicable following the Custodian's receipt of such shares, a
certificate representing such excess number of shares of Common Stock.
3. Prior to effectiveness of the Registration Statement under the
1933 Act, the Transfer Agent shall deliver to the Custodian, to be held in
custody pursuant to the terms hereof, certificates representing the 488,571
shares of Common Stock issuable upon conversion of the Preferred Stock, some or
all of which will be sold to the Underwriters by Geocapital in accordance with
the terms of the Underwriting Agreement. The Representative may convert all of
the Preferred Stock into 488,571 shares of Common Stock at any time on or after
the "Firm Shares Closing Date" specified in the Underwriting Agreement (the
"Closing Date") by delivery of a notice to the Custodian in substantially the
form attached hereto as Exhibit "A", whereupon all of the Preferred Stock shall
be deemed to have been converted into Common Stock.
4. The Transfer Agent shall cancel and reissue the certificates
deposited pursuant to Sections 1 and 3 hereof, together with the certificates
evidencing the shares deposited hereunder by the Management Selling
Shareholders, from time to time in such names and in such denominations as may
be specified in the written instructions of the Custodian or the
Representative; provided, however, that such certificates, upon reissuance,
shall be held by the Custodian until delivered in accordance with the terms
hereof.
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5. On or after the Closing Date and otherwise in accordance with
written instructions delivered to the Custodian from the Representative, the
Custodian shall deliver the certificates representing the Firm Shares (and the
Option Shares, if instructed by the Representative) to be sold to the
Underwriters, against delivery by the Representative to the Custodian of a
notice (the "Payment Notice"), substantially in the form attached hereto as
Exhibit "B", that payment for the Selling Shareholders Shares has been made to
the Selling Shareholders of the total purchase price for the Firm Shares (and
the Option Shares, if applicable) in the manner specified in the Underwriting
Agreement. The proceeds from the sale of the Firm Shares (and the Option
Shares, if applicable) shall be deposited via wire transfer into such accounts
as specified in written instructions to the Representative from the respective
Selling Shareholders. Notwithstanding the foregoing, the Custodian is hereby
authorized and empowered to deposit the Selling Shareholders Shares with the
Depository Trust Corporation ("DTC") and to take such additional actions with
respect to such Selling Shareholders Shares (including, without limitation, to
deliver instructions to the DTC with respect to the delivery or transfer of the
Selling Shareholders Shares) as the Custodian may deem necessary or desirable
to fulfill its obligations under this Agreement.
6. At any time or times on or before 30 days following the
Closing Date, at the place specified in the Underwriting Agreement, upon
receipt of instructions from the Representative, the Custodian shall deliver
(if not previously delivered) the certificates representing the Option Shares
to be sold to the Underwriters, against payment by the Underwriters to the
Selling Shareholders of the purchase price for the Option Shares, in the
manner specified in the Underwriting Agreement. Upon the earlier of (i)
delivery of the certificates representing the Option Shares and (ii) the date
that is 31 days following the Closing Date, the Custodian shall deliver any
remaining shares of Common Stock (including shares of Common Stock issued upon
the conversion of Preferred Stock) to the appropriate Selling Shareholders.
7. Until the Payment Notice is delivered to the Custodian or
this Agreement is otherwise terminated in accordance with the provisions of
Section 17 hereof and except as set forth in Section 5 hereof, the Custodian
shall hold the certificates representing the Selling Shareholders Shares in its
custody. The Selling Shareholders shall be entitled to receive all dividends
(whether cash or otherwise) on and other distributions in respect of the
Selling Shareholders Shares deposited hereunder and to exercise all voting and
consensual rights pertaining to the Selling Shareholders Shares owned by the
Selling Shareholders.
8. Each of the Selling Shareholders severally represents and
warrants to the Custodian, with respect to himself or itself only and not with
respect to any other Selling Shareholder, that:
(a) the Common Stock and Preferred Stock deposited by the
respective Selling Shareholders have been duty and validly authorized and
issued and are fully paid and nonassessable;
(b) all consents, approvals, authorizations and orders necessary
for the execution and delivery by the Selling Shareholder of this Custody
Agreement, the Power of Attorney and the Underwriting Agreement, and for the
sale and delivery of the Selling Shareholders Shares have been
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obtained; and the Selling Shareholder has full right, power and authority to
enter into this Custody Agreement, the Underwriting Agreement and the Power of
Attorney and to sell, assign, transfer and deliver the number of Selling
Shareholders Shares set forth opposite the name of the Selling Shareholder on
Schedule II hereto;
(c) the performance of this Custody Agreement, the Power of
Attorney and the Underwriting Agreement and the consummation of the
transactions herein and therein contemplated, will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Selling Shareholder is a party or by which
the Selling Shareholder is bound, or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Selling Shareholder
or the property of the Selling Shareholder; and
(d) the Selling Shareholder has, and immediately prior to the
Closing Date the Selling Shareholder will have, good and marketable title to
its Selling Shareholders Shares, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Selling Shareholders Shares and
payment therefor pursuant to the Underwriting Agreement, good and marketable
title to the number of Selling Shareholders Shares set forth opposite the name
of the Selling Shareholder on Schedule II hereto, free and clear of all liens,
encumbrances, equities or claims, will pass to the several Underwriters.
9. The Selling Shareholders agree that:
(a) the Custodian's obligations and duties in this connection are
confined to those specifically enumerated in this Custody Agreement;
(b) the Custodian shall not be in any manner liable or responsible
for the sufficiency, correctness, genuineness or validity of any instruments
deposited with the Custodian, or the form of execution thereof or the identity,
authority or rights of any person executing or depositing them;
(c) the Custodian is under no obligation to ascertain the terms or
conditions of any such instruments or to comply in any respect with the terms
thereof;
(d) the Custodian shall not be liable for any loss which may occur
by reason of forgeries, false representations, or the exercise of discretion by
the Custodian in any particular manner, or for any other reason except gross
negligence or willful misconduct. The Company and the Management Selling
Shareholders further agree to indemnify and hold the Custodian harmless against
all costs, damages, attorneys' fees, expenses and liabilities, which the
Custodian may incur or sustain in connection with this Custody Agreement or any
claim or court action arising hereunder, and will pay such items upon demand;
(e) the Selling Shareholders Shares represented by the
certificates deposited herewith are subject to the interests of the
Underwriters under the Underwriting Agreement, the arrangements
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made by the Selling Shareholders for such custodial account and the appointment
by the Selling Shareholders of the Attorney-In-Fact by the Power of Attorney
are to that extent irrevocable; and
(f) the obligations of the Selling Shareholders under this Custody
Agreement and the Underwriting Agreement shall not be terminated by operation
of law or the occurrence of any event, including the death or incapacity of any
of the Selling Shareholders, or the termination of any trust or estate for
which the undersigned is acting as a fiduciary, and that if any such event
should occur before the delivery of the Selling Shareholders Shares as provided
in the Underwriting Agreement, certificates for the Selling Shareholders Shares
shall be delivered by the Custodian as Custodian in accordance with the terms
and conditions of the Underwriting Agreement, and the actions by the Attorney-
In-Fact pursuant to the Power of Attorney shall be as valid as if such event
had not occurred, regardless of whether or not the Custodian or the
Attorney-In-Fact shall have received notice of such event.
10. The Custodian shall not be bound in any way by any other
agreement or contract to which any of the Selling Shareholders or the
Underwriters are parties (whether or not the Custodian has knowledge thereof)
and the Custodian's only duties or responsibilities shall be to hold the
Selling Shareholders Shares and to dispose of them in accordance with the terms
of this Agreement.
11. This Agreement may be altered or amended only with the consent
of the Custodian, the Company, the Transfer Agent, the Selling Shareholders and
the Representative. Should any attempt be made to change this Custody
Agreement in a manner that would either increase the Custodian's duties or
responsibilities, or which in the Custodian's sole and absolute discretion the
Custodian deem undesirable, the Custodian may resign by notifying the other
parties hereto in writing and, until a successor custodian is appointed by the
other parties hereto and accepts such appointment, the Custodian's only duty
shall be to hold the Selling Shareholders Shares pending delivery thereof to
such successor custodian accompanied by an assignment or stock power
transferring such Selling Shareholders Shares to such successor custodian
without recourse or warranty.
12. Any notice or other communication or delivery required or
permitted to be given or made under this Agreement shall be delivered or made
by messenger, or forwarded by registered or certified mail, as follows:
(a) if to the Selling Shareholders:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ViaGrafix Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ViaGrafix Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Geocapital III, L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Partner
(b) if to the Representative:
Southwest Securities, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., Senior Vice President
(c) if to the Custodian:
Chase Bank of Texas, N.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Vice President
(d) if to UMB:
UMB Bank, n.a.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
(e) if to the Company:
ViaGrafix Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Any time limit applicable to such notice shall be calculated from the date the
Custodian make such delivery by messenger or from the date the Custodian mail
such notice. Any notice to the Custodian will be addressed to the Custodian's
office as set forth on the first page hereof, and will be delivered by
messenger or registered or certified mail.
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13. The Custodian shall be entitled to act and rely upon any
statement, request or notice arising from this Custody Agreement given to the
Custodian on behalf of the Selling Shareholders, if the same shall have been
made or given to the Custodian by the Attorney-In-Fact; provided, however, that
any statement or notice to the Custodian with respect to the Closing Date under
the Underwriting Agreement or with respect to the non-effectiveness or
termination of the Underwriting Agreement shall have been confirmed in writing
to the Custodian by the Representative.
14. The Custodian hereby agrees to act as custodian for the
Selling Shareholders as provided herein. The Custodian shall be reimbursed by
the Company (with reimbursal to the Company by the Selling Shareholders to the
extent provided in the Underwriting Agreement) for any reasonable expenses or
disbursements incurred by the Custodian in performing its duties hereunder,
including, but not limited to, the actual cost for legal services if the
Custodian should deem it necessary to retain an attorney. The Custodian may
exercise any of its duties hereunder by or through agents or employees and
shall be entitled to retain counsel regarding all matters pertaining to its
duties hereunder. The Custodian shall not be liable for any action taken or
omitted to be taken by the Custodian hereunder except for its willful
misconduct or gross negligence.
15. The Custodian agrees that it will hold the certificates
representing the Selling Shareholders Shares delivered to it herewith solely as
a custodian and that the Custodian waives any liens, claims or security
interests that the Custodian may have with respect thereto.
16. Geocapital shall cause to be delivered herewith to the
Representative an opinion of Geocapital's counsel reasonably acceptable to the
Representative to the effect that this Agreement has been duly authorized,
executed and delivered by Geocapital and is enforceable against Geocapital in
accordance with its terms, subject to applicable insolvency laws and equity
principles and other qualifications which are standard in opinions of this
nature.
17. If the Closing Date shall not occur prior to April 30, 1998,
or if prior thereto the Custodian have received notice from the Representative
that the transactions contemplated in the Underwriting Agreement have been
abandoned by mutual consent of the Company, the Selling Shareholders and the
Representative, then the custodial account shall thereupon terminate and the
Custodian shall return (a) to the Transfer Agent all certificates deposited by
it pursuant to the terms hereof and (b) to each of the Selling Shareholders all
certificates and other documents deposited by him or it along with any stock
powers for the transfer of the Selling Shareholders Shares to the appropriate
Selling Shareholder; provided, however, that the Selling Shareholders shall be
liable to the Custodian for the payment of the Custodian's reasonable charges
and disbursements as Custodian hereunder.
18. This Custody Agreement and the rights and duties of the
parties hereto shall be governed by the laws of the State of Texas.
19. This Custody Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective personal representatives,
successors and assigns.
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20. This Custody Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument.
The undersigned have executed this Custody Agreement effective as of
the date first set forth above.
GEOCAPITAL III, L.P.
By:
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General Partner
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
UMB BANK, N.A.
By:
----------------------------------
Authorized Signature
SOUTHWEST SECURITIES, INC.
By:
----------------------------------
Authorized Signature
VIAGRAFIX CORPORATION
By:
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Authorized Signature
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Receipt of the Selling Shareholders Shares described in the foregoing Custody
Agreement is acknowledged and the instructions set forth herein are noted.
CHASE BANK OF TEXAS, N.A.
By:
--------------------------------------
▇▇▇▇ ▇▇▇▇▇
Vice President
Dated: Effective February 26, 1998
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SCHEDULE I
SHARES DEPOSITED WITH CUSTODIAN
From Shares
---- ------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 2,144,643 shares of Common Stock
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,423,928 shares of Common Stock
Geocapital III, L.P 855,000 shares of Series A Convertible Preferred Stock
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SCHEDULE II
SHARES OF COMMON STOCK TO BE SOLD
Firm Shares Option Shares Total
----------- ------------- -----
Geocapital III, L.P. 54,190* 39,739* 93,929*
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 240,525 174,441 414,966
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 155,285 115,820 271,105
------- ------- -------
450,000 330,000 780,000
* Following conversion from Series A Convertible Preferred Stock
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EXHIBIT A
CONVERSION NOTICE TO CUSTODIAN
Chase Bank of Texas, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Custody Agreement dated February 26, 1998, by and among Chase
Bank of Texas, N.A., ViaGrafix Corporation ("ViaGrafix"),
Southwest Securities, Inc., UMB Bank, n.a. ("Transfer Agent"),
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Geocapital III,
L.P.
Gentlemen:
You are hereby notified that the 855,000 shares of Series A
Convertible Preferred Stock of ViaGrafix which are in your custody pursuant to
the terms of the above-referenced Custody Agreement are converted, effective
immediately, into 488,571 shares of Common Stock of ViaGrafix. Pursuant to the
terms of the Custody Agreement, you are hereby instructed to ▇▇▇▇ the
certificates evidencing the Preferred Stock as "Canceled" and to return the
canceled certificates to the Transfer Agent promptly.
Thank you for your assistance.
Very truly yours,
SOUTHWEST SECURITIES, INC.
By:
-----------------------------------
Authorized Signature
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EXHIBIT B
PAYMENT NOTICE TO CUSTODIAN
Chase Bank of Texas, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Custody Agreement dated February 26, 1998, by and among Chase
Bank of Texas, N.A., ViaGrafix Corporation, Southwest
Securities, Inc., UMB Bank, n.a., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and Geocapital III, L.P ("Geocapital").
Gentlemen:
Pursuant to the terms of the above-referenced Custody Agreement, you
are hereby notified that payment to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
Geocapital of $_______, $_______ and $_______, respectively, has been made in
consideration for the delivery of ______, _______ and _______ shares of the
Common Stock of ViaGrafix from the shares of Common Stock deposited with you by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Geocapital, respectively.
Thank you for your assistance.
Very truly yours,
SOUTHWEST SECURITIES, INC.
By:
----------------------------------
Authorized Signature
