EXHIBIT 10.32
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PLEDGE AGREEMENT
BY
CG MEMBER, INC.
FOR THE BENEFIT OF
COLORADO SPRINGS PRODUCTION CREDIT ASSOCIATION
DATED
AS OF
JANUARY 24, 1997.
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of the 24th day of
January, 1997, is made by CG Member, Inc. ("Grantor") in favor of Colorado
Springs Production Credit Association ("Secured Party").
BACKGROUND
In order to induce Secured Party to make loans and other financial
accommodations available to Colorado Greenhouse, Inc. ("CGI"), a wholly-owned
subsidiary of Colorado Greenhouse Holdings, Inc. ("Holdings"), of which Grantor
is a wholly-owned subsidiary, and for the benefit of Colorado Greenhouse, LLC
("LLC"), a wholly-owned subsidiary of Grantor, and from which loans and other
financial accommodations Grantor expects to profit, this Agreement is hereby
made in favor of Secured Party to secure the payment and performance of the
Secured Obligations (hereinafter defined) of CGI and LLC.
AGREEMENT
NOW, THEREFORE, in order to induce Secured Party to extend credit to CGI,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledge, Grantor hereby represents, warrants, covenants,
agrees and pledges as follows:
SECTION 1. DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings:
LOAN DOCUMENTS shall have the meaning given to that term in the Master Loan
Agreement.
MEMBER INTERESTS shall mean all interests of Grantor in LLC, whether or not
such interests are represented by certificates, and certificates,
instruments or other documents, now or hereafter representing or evidencing
any Pledged Securities.
SECURED OBLIGATIONS shall mean (1) the payment and performance of all
obligations of Holdings, CGI and LLC under the Master Loan Agreement,
Construction Loan Supplement, LLCLoan Supplement, Line of Credit and all of
the Loan Documents (as defined in the Master Loan Agreement) contemplated
in all of the foregoing, whether now existing or hereafter arising; and (2)
the payment of all other indebtedness and the performance of all other
obligations of the Grantor to Secured Party of every type and description,
whether now existing or hereafter arising, fixed or contingent, as primary
obligor or as guarantor or surety, acquired directly or by assignment or
otherwise, or liquidated or unliquidated.
PLEDGED COLLATERAL shall mean the Pledged Securities, the Member Interests
representing or evidencing the same, all right, title, interest,
privileges, benefits, and preferences appertaining or incidental to such
Pledged Securities, and any and all proceeds and products of the Pledged
Securities (including, without limitation, all dividends, distributions,
collections, redemption payments, liquidation payments, cash, and
instruments).
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PLEDGED SECURITIES shall mean: (1) the Member Interests; (2) any and all
warrants, options or other rights to subscribe to or acquire any additional
capital stock or member interests in such entity or entities; and (3) any
and all securities, certificates, agreements, instruments or other
documents now or hereafter issued in substitution, exchange or replacement
of any of the foregoing or with respect thereto.
SECTION 2. CREATION OF SECURITY INTEREST.
(A) PLEDGE OF PLEDGED COLLATERAL. As security for the Secured
Obligations, Grantor hereby pledges and grants to Secured Party a interest in
and to the Pledged Collateral.
(B) DELIVERY OF CERTAIN PLEDGED COLLATERAL. Simultaneously with the
execution hereof, Grantor shall cause to be pledged and delivered to Secured
Party such financing statements as may be necessary, in form and content
satisfactory to Secured Party which, in its reasonable judgment, is necessary
to perfect the security interest in the Pledged Collateral.
(C) NO MERGER. In the event that Secured Party acquires the
ownership of the Pledged Collateral by exercise of the rights granted herein or
otherwise, such ownership interest shall not merge with the Secured Obligations,
and security interests granted in the Loan Documents shall remain in full force,
effectiveness and enforceability at the option of the Secured Party.
(D) CHANGE IN MANAGEMENT OF LLC. Notwithstanding the pledge of the
Pledged Collateral and the other rights granted to Secured Party herein,
Secured Party agrees that in the event of Secured Party's election to exercise
its voting rights under Section 6(A) hereof, Secured Party will not remove or
replace the officers or directors of LLC or change their respective authority to
manage the affairs of LLC unless there shall be any amounts with respect to
Advances (as defined in the Line of Credit), interest or other obligations then
outstanding under the Line of Credit, and an "Event of Default" (as defined in
the Line of Credit) has occurred and is continuing under the LLC's Secured
Obligations with CGI.
SECTION 3. FURTHER ASSURANCES. Grantor agrees that at any time, from time
to time, and at the expense of Grantor, Grantor will promptly execute, deliver,
and file or record such financing statements, instruments and documents, and
will take all further actions, that Secured Party may reasonably require in
order to: (A) perfect and protect any pledge or security interest granted
hereby; (B) enable Secured Party to exercise and enforce Secured Party's rights
and remedies hereunder; and (C) preserve, protect, and maintain the Pledged
Collateral and the value thereof, including, without limitation, paying all
taxes, assessments, and other charges imposed on or relating to the Pledged
Collateral.
SECTION 4. WAIVER OF SURETY'S DEFENSES. This Agreement, being in the
nature of an agreement of a surety, may give rise to certain defenses of a
surety or guarantor, which defenses Grantor intends to waive. Wherefore,
Grantor acknowledges and agrees that this Agreement is an absolute and
independent obligation of the Grantor and therefore waives any right to require
that any action be brought against the borrower, another guarantor or any other
Person or entity which is liable for all or any part of the Secured Obligations,
or to require that resort be had at any time to any security for the Secured
Obligations or to any right of setoff or similar right. The Grantor's
obligations hereunder shall be payable on demand and shall be absolute and
unconditional irrespective of (and the Grantor hereby expressly waives any
defense or claim of discharge based on): (i) the alteration or modification from
time to time (whether material or otherwise); (ii) the waiver by Secured Party
of the borrower's
compliance with any of the terms and conditions of the Loan Documents; (iii) the
forbearance by Secured Party from exercising any right or remedy it may have
under the Loan Documents or under law; (iv) any inability, failure, neglect or
omission to obtain, perfect, maintain, enforce, or realize upon any collateral
for the Secured Obligations, or to pursue or obtain any deficiency judgment
against the borrower following any foreclosure of any security interest,
mortgage or deed of trust; (v) the loss or impairment of any collateral, the
subordination or release of Secured Party's Lien thereon, or the sale, pledge,
surrender, exchange or substitution of any collateral; (vi) Secured Party's
releasing, waiving, discharging, or modifying the obligations of one or more
other guarantors (whether a party hereto or to a separate agreement with Secured
Party); (vii) the acceptance by Secured Party of any partial payment on the
Secured Obligations or any collateral therefor, or Secured Party settling,
subordinating, compromising, discharging, or releasing the Secured Obligations
or any collateral therefor; (viii) the unenforceability of the Loan Documents;
(ix) any defenses or counterclaims assertable by the borrower, including any
defense or counterclaim based on failure of consideration, fraud, statute of
frauds, bankruptcy, statute of limitations, lender liability, and accord and
satisfaction; (x) any setoff, counterclaim, recoupment or similar right
assertable by the borrower, the Grantor, or other guarantor (whether a party
hereto or to a separate guarantee); or (xi) any other circumstance which
constitutes a legal or equitable discharge of a guarantor or surety. The Grantor
hereby agrees that all indebtedness and other obligations of the borrower (now
existing or hereafter incurred) to the Grantor are and shall be subordinated in
right of payment to the prior payment in full by the borrower of its obligations
to Secured Party under the Loan Documents. During the existence of a default
under the Loan Documents, no payments by the borrower shall be accepted by the
Grantor with respect to such subordinated obligations and, if any such payments
are inadvertently received, the same shall be held in trust and promptly turned
over to Secured Party. The Grantor hereby waives all claims, rights or remedies
that it may have at law or in equity (including, without limitation, any law
subrogating the Grantor to the rights of Secured Party) to seek contribution,
indemnification, or any other form of reimbursement from the borrower, any
other guarantor, or any other person or entity now or hereafter primarily or
secondarily liable for any obligations of the Grantor to Secured Party for any
disbursement made by the Grantor under or in connection with this Agreement or
otherwise. The Grantor hereby stipulates and agrees that any such disbursement
made by the Grantor shall be a contribution to the equity capital of the
borrower.
SECTION 5. GRANTOR'S VOTING RIGHTS; DIVIDENDS; ETC. So long as no "Event
of Default" (as such term is defined in any Loan Document) occurs and remains
continuing:
(A) VOTING RIGHTS. Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Securities, or any
part thereof, for any purpose not inconsistent with the terms of this
Agreement or the Loan Documents.
(B) DIVIDEND AND DISTRIBUTION RIGHTS. Grantor shall be entitled to
receive and to retain and use any and all dividends or distributions and all
cash or other property paid, payable or otherwise paid or distributed in respect
of the Pledged Securities; PROVIDED, HOWEVER, that any and all such dividends or
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distributions received in the form of Member Interests, and the like shall be
delivered to the Secured Party to hold as Pledged Collateral and shall, if
received by Grantor, be received in trust for the benefit of Secured Party, be
segregated from the other property of the Grantor, and be forthwith delivered to
the Secured Party as Pledged Collateral in the same form as so received (with
any necessary endorsements).
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SECTION 6. GRANTOR'S RIGHTS DURING EVENT OF DEFAULT. When an Event of
Default has occurred and is continuing:
(A) VOTING, DIVIDEND, AND DISTRIBUTION RIGHTS. At the option of
Secured Party, all rights of Grantor to exercise the voting and other consensual
rights which would otherwise be entitled to exercise pursuant to Section 5(A)
above and to receive the dividends and distributions which it would otherwise be
authorized to receive and retain pursuant to Section 5(B) above, shall cease,
and all such rights shall thereupon become vested in Secured Party who shall
thereupon, but subject to Section 2(D), have the sole right to exercise such
voting and other consensual rights and to receive and to hold as Pledged
Collateral such dividends and distributions. Secured Party shall, after
deciding to exercise voting rights with respect to the Pledged Collateral, give
notice thereof to Grantor; PROVIDED, HOWEVER, that: (1) neither the giving of
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such notice nor the receipt thereof by Grantor shall be a condition to exercise
of any rights of Secured Party hereunder; and (2) Secured Party shall incur no
liability for failing to give such notice.
(B) DIVIDENDS AND DISTRIBUTIONS HELD IN TRUST. All dividends and
other distributions which are received by Grantor contrary to the provisions
of this Agreement shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor, and shall be paid over to
Secured Party as Pledged Collateral in the same form as so received (with any
necessary endorsements).
SECTION 7. IRREVOCABLE PROXY. Grantor hereby revokes all previous proxies
with regard to the Pledged Securities and appoints Secured Party as its
proxyholder to attend and vote at any and all meetings of the shareholders,
partners or other owners of the Companies held on or after the date of the
giving of this proxy and prior to the termination of this proxy, and to execute
any and all written consents of shareholders, partners or other owners of the
Companies executed on or after the date of the giving of this proxy and prior to
the termination of this proxy, with the same effect as if Grantor had personally
attended the meetings or had personally voted the Pledged Securities or had
personally signed the written consents; PROVIDED, HOWEVER, that the proxyholder
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shall have rights hereunder only upon the occurrence and during the continuance
of an Event of Default and only in the event the Secured Party, as proxyholder,
has decided to exercise voting rights with respect to the Pledged Securities
or any of them and subject however to Section 2(D). Grantor hereby authorizes
Secured Party to substitute another person as the proxyholder and, upon the
occurrence or during the continuance of any Event of Default, hereby authorizes
and directs the proxyholder to file this proxy and the substitution instrument
with the secretary (or other authorized official) of the Companies. This proxy
is coupled with an interest and is irrevocable until such time as this Agreement
is released in accordance with Section 11 hereof.
SECTION 8. TRANSFERS AND OTHER LIENS. Grantor agrees that it will not:
(A) sell, assign, exchange, transfer or otherwise dispose of, or contract to
sell, assign, exchange, transfer or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral; (B) create or permit to exist
any lien or right of others upon or with respect to any of the Pledged
Collateral; or (C) take any action with respect to the Pledged Collateral which
is inconsistent with the provisions or purposes of this Agreement or any Loan
Document.
SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
irrevocably appoints the Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor,
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and in the name of Grantor, or otherwise, from time to time, in Secured Party's
sole and absolute discretion, to do any of the following acts or things if
Grantor fails to do so promptly after demand by the Secured Party: (A) to do all
acts and things (including without limitation, the execution, filing and/or
recording of all financing statements and other documents) necessary or
advisable to perfect and continue perfected the security interests created by
this Agreement and to preserve, maintain, and protect the Pledged Collateral,
including, without limitation, the authority to pay, purchase, contest, and
compromise any lien or right of others which, in the reasonable judgment of
Secured Party, appears to be prior or superior to Secured Party's security
interests; (B) to do any and every act which Grantor is obligated to do under
this Agreement; and (C) to endorse and transfer the Pledged Collateral upon
foreclosure by the Secured Party; PROVIDED, HOWEVER, that Secured Party shall
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be under no obligation whatsoever to take any of the foregoing actions, and
Secured Party shall have no liability or responsibility for any act (other than
Secured Party's own gross negligence or willful misconduct) or omission taken
with respect thereto. Grantor hereby agrees to repay immediately upon demand all
reasonable costs and expenses incurred or expended by Secured Party in
exercising any right or taking any action under this Agreement, together with
interest at a rate per annum equal at all times to the Prime Rate as defined in
the Loan Documents.
SECTION 10. REASONABLE CARE. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which Secured Party accords its own property.
Notwithstanding the foregoing and whether or not an Event of Default has
occurred or is continuing, Secured Party shall be under no duty or obligation
to: (A) exercise any voting or other rights with respect to the Pledged
Collateral; (B) make or give notices of default, presentments, demands for
performance, notices of nonperformance or dishonor, protests, notices of protest
or notices of any other nature whatsoever in connection with the Pledged
Collateral on behalf of Grantor or any other person having any interest therein;
(c) ascertain or take action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged; or (D) take any
necessary steps to preserve rights against the Companies or any other person
with respect to any Pledged Collateral. In addition, Secured Party does not
assume and shall not be obligated to perform the obligations of Grantor, if any,
with respect to the Pledged Collateral.
SECTION 11. EVENTS OF DEFAULT AND REMEDIES.
(A) RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Secured Party shall have, in any
jurisdiction where enforcement is sought, in addition to all other rights and
remedies that Secured Party may have under this Agreement and under applicable
law or in equity, all rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any such jurisdiction, and in addition to the
following rights and remedies, all of which may be exercised with or without
further notice to Grantor, subject however to Section 2(D):
(1) (a) to notify any issuer of any Pledged Securities, and any and
all other obligors on, or partners, joint ventures or other interested parties
with respect to, any Pledged Collateral, that the same has been pledged,
and/or that a security interest in the same has been granted, to Secured Party,
and that all dividends, distributions, and other payments thereon are to be made
directly and exclusively to Secured Party, and that all dividends,
distributions, and other payments thereon are to be made directly and
exclusively to Secured Party; (b) to renew, extend, modify, amend, accelerate,
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accept partial payments on, make allowances and adjustments and issue credits
with respect to, release, settle, compromise, compound, collect or otherwise
liquidate, on terms acceptable to Secured Party, in whole or in part, the
Pledged Collateral and any amounts owing thereon or any guaranty or security
therefor; (c) to enter into any other agreement relating to or affecting the
Pledged Collateral; and (d) to give all consents, waivers, and ratifications
with respect to the Pledged Collateral and exercise all other rights (including
voting rights), powers and remedies and otherwise act with respect thereto as if
Secured Party were the owner thereof;
(2) to enforce payment and prosecute any action or proceeding with
respect to any and all of the Pledged Collateral and take or bring, in Secured
Party's name or in the name of Grantor, all steps, actions, suits or proceedings
deemed by Secured Party necessary or desirable to effect collection of or to
realize upon the Pledged Collateral;
(3) in accordance with applicable laws, to take possession of any
Pledged Collateral (with or without judicial process) that has not previously
been delivered to Secured Party;
(4) to endorse, in the name of Grantor, all checks, notes, drafts,
money orders, instruments and other evidences of payment relating to the Pledged
Collateral;
(5) to transfer any or all of the Pledged Collateral into the name of
Secured Party or its nominee or nominees; and
(6) in accordance with applicable laws, to foreclose the liens and
security interests created under this Agreement or under any other agreement
relating to the Pledged Collateral by any available judicial procedure or
without judicial process, and to sell, assign or otherwise dispose of the
Pledged Collateral or any part thereof, either at public or private sale or at
any broker's board or securities exchange, in lots or in bulk, for cash, on
credit or for future delivery, or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to Secured Party, all at
the sole option of and in the sole discretion of Secured Party, provided that
any purchaser of the Pledged Collateral shall take such Pledged Collateral
subject to limitations set forth in Section 2(D).
(B) NOTICE OF SALE. Secured Party shall give Grantor at least five
(5) days' prior written notice of sale of all or any party of the Pledged
Collateral. Any sale of the Pledged Collateral shall be held at such time or
times and at such place or places as Secured Party may determine in the exercise
of its sole and absolute discretion. Secured Party may bid (which bid may be,
in whole or in part, in the form of cancellation of the Secured Obligations) and
purchase for the account of Secured Party or any nominee of Secured Party the
whole or any part of the Pledged Collateral. Secured Party shall not be
obligated to make any sale of the Pledged Collateral if it shall determine not
to do so regardless of the fact that notice of sale of the Pledged Collateral
may have been given. Secured Party may, without notice or publication, adjourn
the same from time to time by announcement at the time and place fixed for sale,
and such sale may, without further notice, be made at the time and place to
which the same was so adjourned.
(C) PRIVATE SALES. Whether or not any of the Pledged Collateral has
been effectively registered under the Securities Act of 1933 or other applicable
laws, Secured Party may, in its sole and absolute discretion, sell all or any
part of the Pledged Collateral at private sale in such manner and under such
circumstances as Secured Party may deem necessary or advisable in order that the
sale
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may be lawfully conducted. Without limiting the foregoing, Secured Party may:
(1) approach and negotiate with a limited number of potential purchasers; and
(2) restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Collateral for their
own account for investment and not with a view to the distribution or resale
thereof. In the event that any of the Pledged Collateral is sold at private
sale, Grantor agrees that if the Pledged Collateral is sold for a price which
Secured Party in good faith believes to be reasonable, then: (a) the sale shall
be deemed to be commercially reasonable in all respects; (b) Grantor shall not
be entitled to a credit against the Secured Obligations in an amount in excess
of the purchase price (less all expenses contemplated in Subsection (E)
hereof); and (c) Secured Party shall incur no liability or responsibility to
Grantor in connection therewith; notwithstanding the possibility that a
substantially higher price might have been realized at a public sale. Grantor
recognizes that a ready market may not exist for Pledged Collateral which is not
regularly traded on a recognized securities exchange, and that a sale by Secured
Party of any such Pledged Collateral for an amount substantially less than a pro
rata share of the fair market value of the issuer's assets minus liabilities may
be commercially reasonable in a view of the difficulties that may be encountered
in attempting to sell a large amount of Pledged Collateral that is privately
traded.
(D) TITLE OF PURCHASERS. Upon consummation of any sale of Pledged
Collateral pursuant to this Section, Secured Party shall have the right to
assign, transfer, and deliver to the purchaser or purchasers thereof the
Pledged Collateral so sold. Each such purchaser at any such sale shall hold the
Pledged Collateral sold absolutely free from any claim or right on the part of
Grantor, and Grantor hereby waives (to the extent permitted by applicable laws)
all rights of redemption, stay, and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted, provided that any purchaser of the Pledged Collateral shall
take such Pledged Collateral subject to limitations set forth in Section 2(D).
If the sale of all or any part of the Pledged Collateral is made on credit or
for future delivery, Secured Party shall not be required to apply any portion of
the sale price to the Secured Obligations until such amount actually is received
by Secured Party, and any Pledged Collateral so sold may be retained by Secured
Party until the sale price is paid in full by the purchaser or purchasers
thereof. Secured Party shall not incur any liability in case any such purchaser
or purchasers shall fail to pay for the Pledged Collateral so sold, and, in case
of any such failure, the Pledged Collateral may be sold again upon like notice.
(E) DISPOSITION OF PROCEEDS OF SALE. The net cash proceeds resulting
from the collection, liquidation, sale or other disposition of the Pledged
Collateral shall be applied: (1) first, to the reasonable costs and expenses
(including reasonable attorneys' fees) of collecting, liquidating, selling or
otherwise disposing of the Pledged Collateral including, without limitation, all
costs and expenses of retaking, holding, storing, and preparing the Pledged
Collateral for sale; (2) second, to the satisfaction of all Secured Obligations
in such order and manner as Secured Party in its sole and absolute discretion
may determine; and (3) to whomever shall be entitled thereto.
SECTION 12. RELEASE OF GRANTOR. This Agreement and all obligations of
Grantor hereunder shall be released when all Secured Obligations have been paid
in full in cash or otherwise performed in full and when all Loan Documents have
expired or have otherwise been terminated. Upon such release, Secured Party
shall return all Certificates representing the Pledged Collateral to the Grantor
and shall endorse, execute, deliver, record, and file all instruments and
documents and do all other acts and things, reasonably required for the return
of the Pledged Collateral to Grantor and to evidence or document the release of
Secured Party's interests arising under this Agreement, all as requested by,
and/or at the expense of Grantor.
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SECTION 13. EVIDENCE OF AUTHORITIES. Grantor hereby consents and agrees
that the issuers of, or obligors on, or the partners or joint ventures with
respect to, the Pledged Collateral, or any registrar or transfer agent or
trustee for any of the Pledged Collateral, shall be entitled to accept the
provisions of this Agreement as conclusive evidence of the right of Secured
Party to effect any transfer or exercise any right hereunder, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
Grantor or any other person to such issuers or such obligors or such partners or
joint venturers or to any such registrar or transfer agent or trustee.
SECTION 14. GOVERNING LAW. Except to the extent governed by applicable
Federal law, this Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly executed
as of the date first above written.
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CG MEMBER, INC. PLEDGE AGREEMENT
SIGNATURE PAGE
GRANTOR:
CG MEMBER, INC.
By: /s/ Xxxxxx Xxxxxxxxx
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Title: Chief Executive Officer
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