Worldwide Stock Transfer

Paperless Legals - Project Concept (from STA Website)

The Project goal is the elimination of Transfer Agent examination, approval and retention of documents that accompany requests for non-routine transactions, commonly known as "legals". A change to the existing process will benefit investors and the Securities Industry, as a whole.

Guarantors will be relieved of the tasks of duplicating and mailing supporting documents to separate Transfer Agents for the same customer. They will also be relieved of the necessity of dealing with processing differences caused by variances in individual Transfer Agent requirements and they will experience a reduction in rejects and "reject fees". Transfer Agents will benefit from significant processing efficiencies in their operations, legal/paralegal, and document retention areas. Lastly, investors will no longer be faced with lengthy, sometimes confusing and frustrating, securities transactions.

The basis for changing the current, centuries old process, is the protection afforded Issuers and Transfer Agents within Section 8-306 of Uniform Commercial Code which spells out the warranties of the Guarantor:

... at the time of signing,

(a)the signature was genuine; and
(b)the signer was an appropriate person to indorse; and
(c)the signer had legal capacity to sign.

Counsel for STAMP, Inc. and various Commercial Transfer Agents have determined that the UCC language is protective and sufficient to warrant the proposed change. Furthermore, the New York Stock Exchange, Rule 210 contains almost identical language covering the warranties of members who act as Guarantors. Representatives of the NYSE have been kept up to date with the progress of the Project.

Counsel for STAMP, Inc. has reviewed the language contained in the current Medallion Program Documents and determined that no changes are necessary to accommodate the Project. Furthermore, STAMP, Inc. is aware of a landmark case involving inappropriate documents contained in a "legal transaction". The Transfer Agent clearly erred in its examination and acceptance of supporting documents and a wrongful transaction resulted. Regardless, a claim against the Guarantor was made. After review and discussion with its Surety Company, the Guarantor acknowledged its responsibility and paid the claim, in full. This case did not involve a legal judgment and does not constitute precedence. However, it is a clear indication of the effectiveness of Section 8-306 of the Code and Medallion Guarantee Program Documents.

It is useful to review the two most frequently asked questions about the Project:

What specific transactions are included? Any exclusions?

The amount and nature of all the types of "legal transactions" are too numerous to list in this report. To put things in perspective, a review of the current STA Rule Book would be helpful since 90% of its contents cover these transactions. A good rule of thumb to identify a "legal":

When the registered owner(s)of a security, as indicated on the Transfer Agents records, is (are) unable or unavailable to sign instructions, exactly as registered.

Counsel has advised that transactions involving the sale or transfer of "restricted securities" are not covered. This normally occurs with shares of Corporate Equity Securities. Also, the collection and review of Inheritance Tax Waivers is a Transfer Agent responsibility and will not be included.

Why have Issuers and Transfer Agents taken the burden of reviewing and accepting "legals" when they have protections?

STAMP Inc. has asked the same question and the most plausible answers are rooted in history. A lack of confidence in Guarantor knowledge and ability to review legal documents and the consequent establishment of prudent policies that sought to avoid problems rather than pursue claims against Guarantors. Obviously, these fears bore more credence prior to the establishment of the current Medallion Guarantee Programs in 1992. The existence of Surety Bonds standing behind the Guarantors has changed the landscape and these concerns should not exist.

Furthermore, meetings with Securities Industry Association Members have been instructional and revealed that their internal procedures are much the same as Transfer Agents relevant to the acquisition and approval of supporting documents. Also, since 1998, STAMP Inc. has conducted an aggressive educational program. Thirty-seven Guarantor Workshops, attended by approximately 2,200 professionals from over 1,600 Guarantor firms have been held in 26 States. A Guarantor Handbook, an educational news-fax, SOUND BYTES, and most recently, a training video have been made available to member firms. The results have been positive and Guarantor credibility is at an all time high. One tell tale sign is the inability of investors to obtain a Medallion Guarantee unless they have a relationship with the Guarantor firm. The days of a Notary-Public attitude regarding signature guarantees are over!!

STAMP Inc. has been working with Insurance Industry Consultants to create a Contingent Insurance Policy for the Paperless-Legals Process. We are in the final stages of drafting the policy prior to submitting to our Counsel for review and approval. The intent is to cover all dues paying, Transfer Agent Members of the Securities Transfer Association. The existing Excess Liability Policy will continue to be in effect and the new Policy will provide significant enhancements. It is premature to discuss these features and a description will be available once the policy is ready for implementation. It is our intent to start coverage simultaneously with implementation of the Project.

SURETY/INSURANCE COVERAGES
ISSUERS & TRANSFER AGENTS

SIGNATURE GUARANTEE MEDALLION PROGRAMS (SURETY)

Provided to Issuers and Transfer Agents by the three approved Signature Guarantee
Programs: STAMP, SEMP and MSP (NYSE).
A claim may be made against the Surety Bond when the Guarantor is unwilling or unable to respond to a demand for Indemnity.
Surety Bond amounts range from $100,000 with $200,000 aggregate to as much as $2,000,000 with a $4,000,000 aggregate.
In most cases, amount of Surety Bond for a particular Guarantor institution is determined by its asset size.
Existing Program Documents cover "Legal" transfers.

STA TRANSFER AGENTS MEDALLION LIABILITY POLICY (EXCESS INSURANCE)

Provided exclusively to dues paying Transfer Agent members of the Securities Transfer Association ("STA").
Claims covered under this Policy may be made against the insurance carrier in circumstances where the Guarantor is unwilling or unable to honor its obligation under the Program Indemnity Agreement and the claim exceeds the Guarantor's Surety Bond limit and any other valid and collectable insurance.
Amount (Limit) of Coverage: $4,000,000 each insured, each loss; $40,000,000 all insured, all losses in the annual aggregate.
Deductible Amount: $5,000.
STA Insurance Policy relates to the Program Documents and therefore, will respond in cases involving "Legal" transfers.

PROPOSED - TRANSFER AGENTS CONTINGENT LIABILITY POLICY FOR PAPERLESS LEGALS (INSURANCE)

Designed exclusively for dues paying Transfer Agent members of the STA.
Claims may be made against this Policy when a Program Guarantor is unwilling or unable to honor its obligation in cases involving "Legal" transfers.
Amounts of insurance currently under consideration: $1,000,000 each insured; $10,000,000 for all insured's (aggregate).
Deductible Amount: $5,000.
Insurance will only respond in cases involving "Legal" transfers.
Scheduled to get underway with implementation of the "Paperless Legals" Project.

SECTION 3
TRANSFER TO AND BY CORPORATIONS, PARTNERSHIPS,
ASSOCIATIONS AND OTHER ENTITIES

Transfer by a Corporation
Secretary's Certificate
Transfer to Individual Name of Officer or Director
Transfer by Sole Officer of Corporation
Change of Corporate Name
Transfer by Partnership
Transfer to Individual Name of Partner
Change of Partnership Name
Transfer by Non-Partner or where General Partners are Deceased

SECTION 4
TRANSFERS TO AND BY EXECUTORS AND ADMINISTRATORS

Transfer from Decedent to Executor or Administrator in their Fiduciary
Transfer from Decedent to a Transferee other than the Fiduciary
Transfer from Executor or Administrator to Third Party
Transfer from Decedent to Heirs or Beneficiaries under Small Estate Acts
Transfer by Co�Executor or Co�Administrator
Transfer by Successor to an Executor or Administrator
Transfer of Security Owned by Decedent but Registered in Name of Another
Transfer of Security Owned by Another but Registered in Name of Decedent
Transfer from Fiduciary Capacity to Individual Name of Executor or Administrator (or to Nominee)
Transfer from a Closed Estate

SECTION 5
TRANSFER TO AND BY TRUSTEES

Registration Without Naming Trustee
Transfer to Trustee of Testamentary Trust
Transfer by Trustee to Third Person
Transfer from Decedent Claimed to Be Trustee
Transfer from Deceased Trustee Claimed to be Beneficial Owner
Transfer by Co-Trustee
Transfer by Successor Trustee
Transfer from Fiduciary Capacity to Individual Name of Trustee (or to Nominee)

SECTION 6
TRANSFER TO AND BY MINORS OR INCOMPETENTS

Transfer to Minor or Incompetent
Transfer to Guardian or Committee by Third Person
Transfer by Minor or Incompetent to Guardian or Committee
Transfer by Minor or Incompetent to Third Person
Transfer by Guardian or Committee to Third Person
Transfer by Guardian or Committee to Incompetent who's Disability has ended
Transfer of Securities by the Custodian of a Minor who has not reached their majority
Transfer of Securities to a Former Minor
Transfer to Executor or Administrator of Deceased Minor or Incompetent
Deceased Guardian or Committee
Transfer by Joint Guardians or Members of Committee
Transfer from Fiduciary Capacity to Individual Name of Guardian or Committee (or to Nominee)

Appendix VI
State Inheritance Tax Waiver List

The information in this Appendix is based on information published as of June 27, 2005 in the Securities Transfer Guide, a publication of CCH Incorporated, or obtained from the applicable state tax agency. For current information, please consult your legal counsel or, to the extent you subscribe to the Securities Transfer Guide or similar publication, please contact the publisher. This STA publication is published with the understanding that neither the authors nor the publisher is engaged in rendering legal advice or other professional services. The information contained in this publication is provided as a reference resource with the understanding that it does not constitute and should not be construed as legal advice. You should seek the guidance of your attorney and other advisors with regard to your individual situation. The STA disclaims any responsibility for the accuracy and completeness of the information contained herein.

States Without Inheritance Tax Waiver Requirements
(34 States and District of Columbia)

Alabama
Alaska
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Idaho
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi

Nebraska
Nevada
New Hampshire
New Mexico
North Carolina
Oregon
South Carolina
Texas
Utah
Vermont
Virginia
Washington
Wisconsin
Wyoming

States For Which You Need To Check Date Of Death
(8 states)

Arizona Not required if decedent died after 8/20/98
Hawaii Not required if decedent died on or after 7/1/83; required if decedent died before 7/1/83 and was a legal resident of Hawaii and stock is of a corporation incorporated in Hawaii
Illinois Not required if the decedent died on or after 1/1/83; required if decedent died before 1/1/83 and was a legal resident of Illinois
Missouri Not required if decedent died after 1/1/81; required if decedent died before 1/1/81 and was a legal resident of Missouri. Also not required if assets were held jointly with Rights of Survivorship, except for transfer of joint property of decedents who died prior to 8-13-74.
Montana Not required if decedent died on or after 1/1/01; required if decedent died prior to 1/1/01 and was a legal resident of Montana.
North Dakota Not required if decedent died on or after 8/1/97
South Dakota Not required if decedent died on or after 7/1/01
West Virginia Not required if decedent died on or after 7/1/85; required if decedent died prior to 7/1/85 and was a legal resident of West Virginia

States With Other Qualifications
(8 States and Puerto Rico)

Indiana Waiver required if decedent was a legal resident of Indiana. BUT, no waiver or consent to transfer is required if the stock is being transferred to the surviving spouse.
New Jersey Waiver required if (1) the decedent was a legal resident of New Jersey, and (2) stock is of a corporation incorporated in New Jersey. BUT, an affidavit of waiver should be used in the following situations:
- When the transfer is to the surviving spouse and the death occurred after 7/1/87; and
- When transfer is to be a beneficiary who is a kin and death occurred after 7/1/88.
New York Not required if decedent died on or after 2/1/00; required for assets belonging to or jointly owned with decedent if decedent died before 2/1/00 and was a resident of New York and assets valued over $30,000. BUT, no waiver required if stock is held in the name of decedent and decedent's surviving spouse as tenants by the entirety or joint tenants WROS and is transferred to the surviving spouse.
Ohio Waiver required if decedent was a legal resident of Ohio. BUT, no waiver is required for any property passing to the surviving spouse either through the estate of the decedent or by joint tenancy, or for assets valued at $25,000.00 or less.
Oklahoma Waiver required if decedent was a legal resident of Oklahoma. BUT, no waiver is required for any property passing to the surviving spouse either through the estate of the decedent or by joint tenancy.
Pennsylvania Waiver only required if shares are registered in TOD, POD or other type of beneficiary designated registration (where shares go directly to the beneficiary at death of owner and beneficiary is not a surviving spouse).
Rhode Island Waiver required if (1) decedent was a legal resident of Rhode Island, and (2) stock was issued by a Rhode Island corporation.
Puerto Rico Required if decedent was a legal resident of Puerto Rico. For non-residents of Puerto Rico, may be required.
Tennessee Waiver required if decedent was a legal resident of Tennessee. BUT, no tax waiver or consent is required for property passing to the surviving spouse, tenant by entirety or joint tenant with rights of survivorship.

SECTION 7
TRANSFER TO AND BY NOMINEES

Transfer by Nominee
Transfer to Nominee by Fiduciary
Deceased Individual Nominee

SECTION 8
TRANSFER TO AND BY RECEIVERS AND
TRUSTEES IN BANKRUPTCY

Transfer to Receiver or Trustee in Bankruptcy
Transfer by Receiver or Trustee to Third Person
Transfer by Security Owner in Receivership or Bankruptcy

SECTION 9
TRANSFER TO AND BY AGENTS AND ATTORNEYS�IN�FACT

Transfer to Agent or Attorney-in-Fact
Revocation of Agency
Transfer by Agent or Attorney-in-Fact to Third Party
Deceased Principal
Transfer by Agent to Individual Name of Agent

SECTION 10
TRANSFER TO AND BY MULTIPLE OWNERS

Designation of Tenancy
Transfer by Joint Tenants
Deceased Joint Tenant
Last Deceased Joint Tenant
Transfer by Tenants by the Entireties
Deceased Tenants by the Entireties
Both Deceased Tenants by the Entireties
Transfer by Tenants in Common
Deceased Tenant in Common

SECTION 11
TRANSFER TO AND BY LIFE TENANTS

Transfer to Life Tenant
Transfer by Life Tenant to Person Other than Remainderman
Transfer by Life Tenant to Remainderman
Deceased Life Tenant
Louisiana Resident Small Estate
Deceased Usufruct

SECTION 12
TRANSFER ON DEATH

Authorization for Transfer on Death
Registration in TOD Form
Permitted TOD Beneficiaries
Change or Revocation of TOD Registration
Deceased Co-Owner
Transfer to Designated TOD Beneficiary on Notice of Death of Owner
Beneficiary Does Not Survive the Owner
Dividends, Interest and other Distributions After the Owner's Death