Exhibit 10.5
PATENT SECURITY AGREEMENT
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This PATENT SECURITY AGREEMENT (this "Agreement"), dated as of October
7, 2003, is executed and delivered by and between XXXXXX RESPIRATORY CARE INC.,
a California corporation ("Debtor"), and XXXXX FARGO FOOTHILL, INC., a
California corporation, as arranger and administrative agent for the Lenders (in
such capacity, together with its successors and assigns, if any, in such
capacity, "Agent"), with reference to the following:
WHEREAS, Debtor, the Lenders (such Lenders, together with Agent,
individually and collectively, the "Lender Group"), and Agent have entered into
that certain Loan and Security Agreement, dated as of even date herewith (as
amended, restated, modified, supplemented, refinanced, renewed, or extended from
time to time, the "Loan Agreement"), pursuant to which the Lender Group has
agreed to make certain financial accommodations to Debtor, and pursuant to which
Debtor has granted to Agent for the benefit of the Lender Group security
interests in (among other things) all general intangibles of Debtor; and
WHEREAS, pursuant to the Loan Documents, and as one of the conditions
precedent to the obligations of the Lenders under the Loan Agreement, Debtor has
agreed to execute and deliver this Agreement to Agent for filing with the PTO
and with any other relevant recording systems in any domestic or foreign
jurisdiction, and as further evidence of and to effectuate Agent's existing
security interests in the patents and other general intangibles described
herein.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which is hereby acknowledged, Debtor hereby agrees in favor of Agent, for the
benefit of the Lender Group, as follows:
1. Definitions; Interpretation.
(a) Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Agent" has the meaning ascribed to such term in the preamble to this
Agreement.
"Agreement" has the meaning ascribed to such term in the preamble to
this Agreement.
"Debtor" has the meaning ascribed to such term in the preamble to this
Agreement.
"Debtor's Patents" has the meaning set forth in Section 4.
"Event of Default" means any Event of Default under the Loan
Agreement.
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"Excluded Collateral" has the meaning ascribed to such term in the
Loan Agreement.
"Lender Group" has the meaning ascribed to such term in the recitals
to this Agreement.
"Lenders" means, individually and collectively, each of the lenders
identified on the signature pages of the Loan Agreement, and any other person
made a party thereto in accordance with the provisions of Section 14 thereof
(together with their respective successors and assigns).
"Loan Agreement" has the meaning ascribed to such term in the recitals
to this Agreement.
"Patent Collateral" has the meaning ascribed to such term in
Section 2.
"Patents" has the meaning ascribed to such term in Section 2.
"Proceeds" means whatever is receivable or received from or upon the
sale, lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Patent Collateral, including "proceeds" as
defined in the UCC, and all proceeds of proceeds. Proceeds shall include (i) any
and all accounts, chattel paper, instruments, general intangibles, cash and
other proceeds, payable to or for the account of Debtor, from time to time in
respect of any of the Patent Collateral, (ii) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to or for the account of
Debtor from time to time with respect to any of the Patent Collateral, (iii) any
and all claims and payments (in any form whatsoever) made or due and payable to
Debtor from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Patent Collateral
by any Person acting under color of governmental authority, and (iv) any and all
other amounts from time to time paid or payable under or in connection with any
of the Patent Collateral or for or on account of any damage or injury to or
conversion of or infringement of rights in any Patent Collateral by any Person.
"PTO" means the United States Patent and Trademark Office and any
successor thereto.
"Secured Obligations" means all liabilities, obligations (including
the Obligations), or undertakings owing by Debtor to the Lender Group of any
kind or description arising out of or outstanding under, advanced or issued
pursuant to, or evidenced by the Loan Agreement, this Agreement, or any of the
other Loan Documents, irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, voluntary or
involuntary, whether now existing or hereafter arising, and including all
interest, costs, fees (including attorneys fees), and expenses (including
interest, costs, fees, and expenses that, but for the provisions of the
Bankruptcy Code, would have accrued) and any and all other amounts which Debtor
is required to pay pursuant to any of the foregoing, by law, or otherwise.
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"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of California.
"United States" and "U.S." shall each mean the United States of
America.
(b) Terms Defined in UCC. Where applicable and except as
otherwise defined herein, terms used in this Agreement shall have the meanings
ascribed to them in the UCC.
(c) Interpretation. In this Agreement, except to the extent the
context otherwise requires:
(i) Any reference to a Section or a Schedule is a
reference to a section hereof, or a schedule hereto, respectively, and to a
subsection or a clause is, unless o therwise stated, a reference to a
subsection or a clause of the Section or subsection in which the reference
appears.
(ii) The words "hereof," "herein," "hereto," "hereunder"
and the like mean and refer to this Agreement as a whole and not merely to
the specific Section, subsection, paragraph or clause in which the
respective word appears.
(iii) The meaning of defined terms shall be equally
applicable to both the singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall
be deemed to be followed by the words "without limitation."
(v) References to agreements and other contractual
instruments shall be deemed to include all subsequent permitted amendments,
restatements, supplements, refinancings, renewals, extensions, and other
modifications thereto and thereof.
(vi) References to statutes or regulations are to be
construed as including all statutory and regulatory provisions
consolidating, amending or replacing the statute or regulation referred to.
(vii) Any captions and headings are for convenience of
reference only and shall not affect the construction of this Agreement.
(viii) Capitalized words not otherwise defined herein shall
have the respective meanings assigned to them in the Loan Agreement.
(ix) In the event of a direct conflict between the terms
and provisions of this Agreement and the Loan Agreement, it is the
intention of the parties hereto that such documents shall be read together
and construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict between this
Agreement and the Loan Agreement, that cannot be resolved as aforesaid, the
terms and provisions of the Loan Agreement shall control and govern;
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provided, however, that the inclusion herein of additional obligations on
the part of the Debtor and supplemental rights and remedies in favor of
Agent (whether under federal law or applicable California law), in each
case in respect of the Patent Collateral, shall not be deemed a conflict
with the Loan Agreement.
2. Security Interest.
(a) Assignment and Grant of Security Interests. As security for
the prompt payment and performance of the Secured Obligations, Debtor hereby
grants, assigns, transfers, and conveys to Agent, for the benefit of the Lender
Group, continuing security interests in all of such Debtor's right, title and
interest in, to and under the following property, whether now existing or
hereafter acquired or arising and whether registered or unregistered
(collectively, the "Patent Collateral"):
(i) all letters patent of the U.S. or any other country,
all registrations and recordings thereof, and all applications for letters
patent of the U.S. or any other country, owned, held, or used by Debtor in
whole or in part, including all existing U.S. patents and patent
applications of Debtor which are described on Schedule A hereto, as the
same may be amended or supplemented pursuant hereto from time to time, and
together with and including all patent licenses held by Debtor, including
such patent licenses which are described on Schedule A hereto, together
with all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof and the inventions disclosed therein, and all
rights corresponding thereto throughout the world, including the right to
make, use, lease, sell and otherwise transfer the inventions disclosed
therein, and all proceeds thereof, including all license royalties and
proceeds of infringement suits (collectively, the "Patents");
(ii) all claims, causes of action and rights to xxx for
past, present and future infringement or unconsented use of any of the
Patents and all rights arising therefrom and pertaining thereto;
(iii) all general intangibles and all intangible
intellectual or other similar property of Debtor of any kind or nature,
whether now owned or hereafter acquired or developed, associated with or
arising out of any of the Patents and not otherwise described above; and
(iv) all products and Proceeds of any and all of the
foregoing; provided, however, that Patent Collateral shall not include Excluded
Collateral.
(b) Continuing Security Interests. Debtor agrees that this
Agreement shall create continuing security interests in the Patent Collateral
which shall remain in effect until terminated in accordance with Section 17.
(c) Incorporation into Loan Agreement. This Agreement shall be
fully incorporated into the Loan Agreement and all understandings, agreements
and provisions contained in the Loan Agreement shall be fully incorporated into
this Agreement. Without
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limiting the foregoing, the Patent Collateral described in this Agreement shall
constitute part of the Collateral in the Loan Agreement.
(d) Licenses. Debtor may grant licenses of the Patent Collateral
in the ordinary course of business in accordance with the terms of the Loan
Agreement.
3. Further Assurances; Appointment of Agent as Attorney-in-Fact.
Debtor at its expense shall execute and deliver, or cause to be executed and
delivered, to Agent any and all documents and instruments, in form and substance
satisfactory to Agent, and take any and all action, which Agent, in the exercise
of its discretion, may request from time to time, to perfect and continue
perfected, maintain the priority of or provide notice of Agent's security
interests in the Patent Collateral and to accomplish the purposes of this
Agreement. If Debtor refuses to execute and deliver, or fails timely to execute
and deliver, any of the documents it is requested to execute and deliver by
Agent in accordance with the foregoing, Agent shall have the right to, in the
name of Debtor, or in the name of Agent or otherwise, without notice to or
assent by Debtor, and Debtor hereby irrevocably constitutes and appoints Agent
(and any of Agent's officers or employees or agents designated by Agent) as
Debtor's true and lawful attorney-in-fact with full power and authority, (i) to
sign the name of Debtor on all or any of such documents or instruments, and
perform all other acts, that Agent, in its reasonable discretion, deems
necessary or advisable in order to perfect or continue perfected, maintain the
priority or enforceability of or provide notice of Agent's security interests
in, the Patent Collateral, and (ii) to execute any and all other documents and
instruments, and to perform any and all acts and things for and on behalf of
Debtor, which Agent, in its reasonable discretion, may deem necessary or
advisable to maintain, preserve and protect the Patent Collateral and to
accomplish the purposes of this Agreement, including (A) upon the occurrence and
during the continuance of any Event of Default, to defend, settle, adjust or
institute any action, suit or proceeding with respect to any Patent Collateral,
(B) upon the occurrence and during the continuance of any Event of Default, to
assert or retain any rights under any license agreement for any Patent
Collateral, including any rights of Debtor arising under Section 365(n) of the
Bankruptcy Code, and (C) upon the occurrence and during the continuance of any
Event of Default, to execute any and all applications, documents, papers and
instruments for Agent to use any Patent Collateral, to grant or issue any
exclusive or non-exclusive license with respect to any Patent Collateral, and to
assign, convey or otherwise transfer title in or dispose of the Patent
Collateral. The power of attorney set forth in this Section 3, being coupled
with an interest, is irrevocable so long as this Agreement shall not have
terminated in accordance with Section 17; provided that the foregoing power of
attorney shall terminate when all of the Secured Obligations have been fully and
finally repaid and performed and the Lender Group's obligation to extend credit
under the Loan Agreement is terminated.
4. Representations and Warranties. Debtor represents and warrants to
each member of the Lender Group, in each case, to the best of its knowledge,
information, and belief, as follows:
(a) No Other Patents. A true and correct list of all Patents
owned by Debtor, in whole or in part, is set forth on Schedule A (collectively,
the "Debtor's Patents").
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Schedule A also sets forth a true and correct list of all of the Patents that
Debtor holds (by reason of license or otherwise) from a third party.
(b) Validity. Each of the Debtor's Patents listed on Schedule A
is subsisting and has not been adjudged invalid or unenforceable, in whole or in
part, all maintenance fees required to be paid on account of any Patents have
been timely paid for maintaining such Patents in force, and, to the best of
Debtor's knowledge, each of the Patents is valid and enforceable.
(c) Title. (i) Debtor has rights in and good and defensible
title to the Patent Collateral in respect of the Patents it owns, (ii) Debtor is
the sole and exclusive owner of such Patent Collateral, free and clear of any
Liens and rights of others (other than Permitted Liens), including licenses
(other than licenses entered into as permitted herein), shop rights and
covenants by Debtor not to xxx third persons and (iii) with respect to any
Patent for which Debtor is either a licensor or a licensee pursuant to a license
or licensee agreement regarding such Patent, each such license or licensing
agreement is in full force and effect, such Debtor is not in material default of
any of its obligations thereunder and no other Person is known by such Debtor to
have any rights in or to any of the Patent Collateral, other than (A) the
parties to such licenses or licensing agreements, or (B) in the case of any
non-exclusive license or license agreement entered into by Debtor or any such
licensor regarding such Patent Collateral, the parties to any other such
non-exclusive licenses or license agreements entered into by Debtor or any such
licensor with any other Person.
(d) No Infringement. To the best of Debtor's knowledge, (i) no
material infringement or unauthorized use presently is being made of any of the
Patent Collateral by any Person, and (ii) neither the past nor the present use
of the Patent Collateral by Debtor has infringed or does infringe upon or
violate any right, privilege or license agreement of or with any other Person or
give such Person the right to terminate any such license agreement.
(e) Powers. Debtor has the unqualified right, power and
authority to pledge and to grant to Agent, for the benefit of the Lender Group,
security interests in all of the Patent Collateral pursuant to this Agreement,
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other Person except as
already obtained.
5. Covenants. Debtor covenants that so long as this Agreement shall
be in effect, Debtor shall:
(a) comply with all of the covenants, terms and provisions of
this Agreement, the Loan Agreement, and the other Loan Documents;
(b) promptly give Agent written notice of the occurrence of any
event that could have a material adverse effect on any of the Patents or the
Patent Collateral (except as to such Patent or Patents, which alone or in the
aggregate, the absence of which would not reasonably be expected to materially
impair the conduct of the business), including any petition under the Bankruptcy
Code filed by or against any licensor of any of the Patents for which Debtor is
a licensee, provided, however, that Debtor shall not be required to preserve,
protect and
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maintain, and may abandon, in whole or in part, any Patent as Debtor deems
appropriate in the exercise of Debtor's reasonable business judgment, so long as
the absence of such Patent or Patents, alone or in the aggregate, would not
reasonably be expected to materially impair the conduct of Debtor's business or
the Patent Collateral;
(c) on a continuing basis, make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places, all such
instruments and documents, including appropriate financing and continuation
statements and security agreements, and take all such action as may be necessary
or advisable or may be requested by Agent, in the exercise of its Permitted
Discretion, to carry out the intent and purposes of this Agreement, or for
assuring, confirming or protecting the grant or perfection of the security
interests granted or purported to be granted hereby, to ensure Debtor's
compliance with this Agreement or to enable Agent to exercise and enforce its
rights and remedies hereunder with respect to the Patent Collateral. Without
limiting the generality of the foregoing sentence, Debtor:
(i) hereby authorizes Agent in its sole discretion if
Debtor refuses to execute and deliver, or fails timely to execute and
deliver, any of the documents it is requested to execute and deliver by
Agent, to modify this Agreement without first obtaining Debtor's approval
of or signature to such modification by amending Schedule A hereof to
include a reference to any right, title or interest in any existing Patent
Collateral or Patent Collateral acquired or developed by Debtor after the
execution hereof, or to delete any reference to any right, title or
interest in any Patent Collateral in which Debtor no longer has or claim
any right, title or interest; and
(ii) hereby authorizes Agent, in its sole discretion, to
file one or more financing or continuation statements, or if Debtor refuses
to execute and deliver, or fails timely to execute and deliver, any such
amendment thereto it is requested to execute and deliver by Agent, any
amendments thereto, relative to all or any portion of the Patent
Collateral, without the signature of Debtor where permitted by law;
(d) comply, in all material respects, with all applicable
statutory and regulatory requirements in connection with any and all Patent
Collateral and give such notice of patent, prosecute such material claims, and
do all other acts and take all other measures which, in Debtor's reasonable
business judgment, may be necessary or desirable to preserve, protect and
maintain Patent Collateral and all of Debtor's rights therein, including the
diligent prosecution of any patent application pending as of the date of this
Agreement or thereafter;
(e) comply with each of the terms and provisions of this
Agreement, and not enter into any agreement (for example, a license agreement)
which is inconsistent with the obligations of Debtor under this Agreement
without Agent's prior written consent, which consent shall not be unreasonably
withheld or delayed; and
(f) not permit the inclusion in any contract to which Debtor
becomes a party of any provision that could or might impair or prevent the
creation of a security interest in favor of Agent (for the benefit of the Lender
Group) in Debtor's rights and interest in any property included within the
definition of Patent Collateral acquired under such contracts.
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6. Future Rights. If and when Debtor shall obtain rights to any new
patentable inventions, or become entitled to the benefit of any Patent, or any
reissue, division, continuation, renewal, extension or continuation-in-part of
any Patent or Patent Collateral or any improvement thereof (whether pursuant to
any license or otherwise), the provisions of this Agreement shall automatically
apply thereto and Debtor shall give to Agent prompt notice thereof, within 20
days after obtaining such rights, reissuance, division, continuation, renewal,
extension or any improvement thereof. Debtor shall do all things deemed
necessary or advisable by Agent, in its discretion, to ensure the validity,
perfection, priority and enforceability of the security interests of Agent in
such future acquired Patent Collateral. Debtor hereby authorizes Agent to
modify, amend or supplement the Schedules hereto and to re-execute this
Agreement from time to time on Debtor's behalf and as its attorney-in-fact to
include any future patents which are or become Patent Collateral and to cause
such re-executed Agreement or such modified, amended or supplemented Schedules
to be filed with the PTO.
7. Events of Default. The occurrence of any "Event of Default" under
the Loan Agreement shall constitute an Event of Default hereunder.
8. Remedies. Upon the occurrence and during the continuance of an
Event of Default, and subject to the Intercreditor Agreement, Agent shall have
all rights and remedies available to it under the Loan Agreement and applicable
law (which rights and remedies are cumulative) with respect to the security
interests in any of the Patent Collateral or any other Collateral. Debtor agrees
that such rights and remedies include the right of Agent as an Agent to sell or
otherwise dispose of its Collateral after default, pursuant to the UCC. Debtor
agrees that Agent shall at all times have such non-exclusive, royalty free
licenses, to the extent permitted by law, for any Patent Collateral that is
reasonably necessary to permit the exercise of any of Agent's rights or remedies
upon the occurrence and during the continuation of an Event of Default with
respect to (among other things) any tangible asset of Debtor in which Agent has
a security interest, including Agent's rights to sell inventory, tooling or
packaging which is acquired by Debtor (or its successor, assignee or trustee in
bankruptcy). In addition to and without limiting any of the foregoing, upon the
occurrence and during the continuance of an Event of Default, Agent shall have
the right but shall in no way be obligated to bring suit, or to take such other
action as Agent, in its discretion, deems necessary or advisable, in the name of
Debtor or Agent, to enforce or protect any of the Patent Collateral, in which
event Debtor shall, at the request of Agent, do any and all lawful acts and
execute any and all documents required by Agent in aid of such enforcement. To
the extent that Agent shall elect not to bring suit to enforce such Patent
Collateral, upon the occurrence and during the continuation of an Event of
Default, Debtor, in the exercise of its reasonable business judgment, agrees to
use all reasonable measures and diligent efforts, whether by action, suit,
proceeding or otherwise, to prevent the infringement, misappropriation or
violations thereof by others and for that purpose agrees diligently to maintain
any action, suit or proceeding against any Person necessary to prevent such
infringement, misappropriation or violation.
9. Binding Effect. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by Debtor and Agent for the benefit of the
Lender Group and their respective successors and assigns.
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10. Notices. All notices and other communications hereunder shall be
in writing and shall be mailed, sent or delivered in accordance with the Loan
Agreement.
11. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, except to
the extent that the validity or perfection of the security interests hereunder
in respect of the Patent Collateral are governed by federal law, in which case
such choice of California law shall not be deemed to deprive Agent of such
rights and remedies as may be available under federal law.
12. Entire Agreement; Amendment. This Agreement and the other Loan
Documents, together with the Schedules hereto and thereto, contain the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior drafts and communications relating to such subject matter.
Neither this Agreement nor any provision hereof may be modified, amended or
waived except by the written agreement of the parties, as provided in the Loan
Agreement. Notwithstanding the foregoing, Agent may re-execute this Agreement or
modify, amend or supplement the Schedules hereto as provided in Section 6
hereof.
13. Severability. If one or more provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any respect in any
jurisdiction or with respect to any party, such invalidity, illegality or
unenforceability in such jurisdiction or with respect to such party shall, to
the fullest extent permitted by applicable law, not invalidate or render illegal
or unenforceable any such provision in any other jurisdiction or with respect to
any other party, or any other provisions of this Agreement.
14. Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement
15. Loan Documents. Debtor acknowledges that the rights and remedies
of Agent with respect to the security interests in the Patent Collateral granted
hereby are more fully set forth in the Loan Agreement and the other Loan
Documents and all such rights and remedies are cumulative.
16. No Inconsistent Requirements. Debtor acknowledges that this
Agreement and the other Loan Documents may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and Debtor
agrees that all such covenants, terms and provisions are cumulative and all
shall be performed and satisfied in accordance with their respective terms.
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17. Termination. Upon the indefeasible payment in full of the Secured
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Loan Agreement, this Agreement shall terminate and
Agent shall execute and deliver such documents and instruments and take such
further action reasonably requested by Debtor and at Debtor's expense as shall
be necessary to evidence termination of the security interests granted by Debtor
to Agent for the benefit of the Lender Group hereunder, including cancellation
of this Agreement by written notice from Agent to the PTO.
18. Duties of Agent and the Lender Group. Notwithstanding any
provision contained in this Agreement, none of Agent or any other member of the
Lender Group shall have any duty to exercise any of the rights, privileges or
powers afforded to it and shall not be responsible to Debtor for any failure to
do so or delay in doing so. Except for the accounting for moneys actually
received by Agent, any other member of the Lender Group, hereunder or in
connection herewith, none of Agent or any other member of the Lender Group,
shall have any duty to exercise or preserve any rights, privileges or powers
pertaining to the Patent Collateral.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, as
of the date first above written.
XXXXXX RESPIRATORY CARE INC.,
a California corporation
By:
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Name:
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Title:
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XXXXX FARGO FOOTHILL, INC.,
a California corporation, as Agent
By:
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Name:
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Title:
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[Signature Page to Patent Security Agreement]
S-1
SCHEDULE A
[See Attached]
A-1
