Exhibit D(7)
SECURITY AGREEMENT
1. DEBTOR: Syngistix, Inc.,
a Delaware corporation
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
2. SECURED PARTIES: The persons listed on the attached SCHEDULE 1
c/o Roser Ventures Limited Liability Company,
a Colorado limited liability company,
as Collateral Agent for Secured Parties,
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
3. COLLATERAL: The following property which is now or hereafter owned by
Debtor or in which Debtor now or hereafter has any right, title or interest
(collectively, the "COLLATERAL"):
(a) All of the assets of Debtor, including, but not limited to,
accounts, accounts receivable, chattel paper, inventory, equipment, furniture,
fixtures, general intangibles, documents, instruments, money, contract rights,
franchises, licenses, permits, accreditation and goods, letter of credit rights,
deposit accounts, commercial tort claims and investment property, now owned or
hereafter acquired by the Debtor; and
(b) All additions, renewals and replacements of the items of property
listed herein and all articles in substitution therefor, including, without
limitation, all cash and non-cash proceeds from the sale or other transfer of
any of such items.
4. PRIMARY USE OF COLLATERAL: Business.
5. OBLIGATIONS: All of the following items shall be collectively referred to as
the "OBLIGATIONS":
(a) All obligations to Secured Parties, direct or indirect, absolute or
contingent, now existing or hereafter arising in connection with that financing
in the amount of $10,000,000 made by Secured Parties to Debtor (collectively,
the "LOANS"), including, but not limited to, the performance and observance of
any term or condition of the following:
(1) this Security Agreement;
(2) those certain Notes of even date herewith, executed by
Debtor and payable to the order of Secured Parties (collectively, the "NOTES")
and all sums now or hereafter advanced thereunder;
(3) that certain Note Purchase Agreement of even date herewith
between Debtor and Secured Parties (the "LOAN AGREEMENT"); and
(4) all other documents or instruments now or hereafter
evidencing, securing, guaranteeing and/or relating to the indebtedness evidenced
by the Notes and the Loan Agreement.
All of the documents and instruments referred to in this Section 5(a), as the
same may be amended or replaced from time to time, are hereinafter collectively
referred to as the "LOAN DOCUMENTS."
(b) All expenditures made or incurred by Secured Parties to protect and
maintain the Collateral and to enforce their rights under this Security
Agreement, as more fully set forth herein.
(c) Any and all future advances made under the Notes or any of the
other Loan Documents.
6. SECURITY INTEREST: Debtor hereby grants to Secured Parties a continuing
security interest in the Collateral and all proceeds from the sale of the
Collateral. The security interest granted herein is given to secure payment and
performance of the Obligations.
7. WARRANTIES AND REPRESENTATIONS: Debtor warrants and represents to Secured
Parties that:
(a) Debtor is the sole owner of the Collateral free and clear of all
liens, security interests, adverse claims and encumbrances other than the
security interest created hereby and by the other Loan Documents, except for (i)
licenses granted by Debtor to its customers in the ordinary course of business;
and (ii) any exceptions listed on the Schedule of Exceptions of the Loan
Agreement (collectively, "EXCEPTIONS").
(b) No financing statement covering any of the Collateral is on file in
any public office, other than the financing statement evidencing the security
interest created hereby.
(c) Those parts of the Collateral that are general intangibles are or
will be enforceable in accordance with their respective terms, and Debtor has
the authority and capacity to contract and be bound thereunder.
(d) The execution and delivery of this Security Agreement will not
violate any agreement or document to which Debtor is a party.
(e) Debtor is not in default under any of the Collateral.
(f) The Collateral will be used primarily for the purpose set forth in
Section 4 above.
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(g) The principal place of business of Debtor is 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000.
(h) Debtor is incorporated under the laws of the State of Delaware.
8. COVENANTS OF DEBTOR: Except for the Exceptions and as may otherwise be set
forth in or allowed under the terms of any of the other Loan Documents, Debtor
covenants and agrees that unless and until Secured Parties expressly agree to
another course of action:
(a) Debtor shall not sell, pledge, hypothecate, transfer, lease,
assign, abandon or otherwise dispose of any of the Collateral or any interest
therein except in the ordinary course of business.
(b) Debtor shall keep the Collateral in good condition and repair,
subject to ordinary wear and tear, and properly maintained and free of liens,
security interests and encumbrances other than the security interest created
hereby.
(c) Debtor shall promptly notify Secured Parties of any Event of
Default (as defined in Section 9 hereof).
(d) Debtor shall not use the Collateral in violation of any applicable
statute, ordinance or insurance policy.
(e) Debtor shall defend the Collateral against the claims and demands
of all persons.
(f) Debtor shall pay promptly and before delinquency all taxes and
assessments with respect to the Collateral and shall deliver to Secured Parties,
on demand, a receipt or other evidence satisfactory to Secured Parties of the
payment thereof.
(g) Debtor shall, at any time upon reasonable request of Secured
Parties, exhibit to and allow inspection by Secured Parties of the Collateral
and shall, promptly upon request from Secured Parties, deliver to Secured
Parties an accurate, current inventory of the Collateral in such detail as
Secured Parties shall reasonably require.
(h) Debtor shall keep the Collateral insured to the extent such
Collateral, or part thereof, is reasonably insurable.
(i) Secured Parties, at their option, may discharge taxes, liens,
security interests and other encumbrances against the Collateral and may pay for
the repair of any damage to the Collateral, the maintenance and preservation
thereof and insurance thereon if not otherwise paid or performed by Debtor.
Debtor shall reimburse Secured Parties on demand for any payments as made, plus
interest thereon at the interest rate specified in the Notes from the date of
such payment. Any such payments made by Secured Parties, together with interest
thereon, shall be secured by the Collateral as provided herein and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Notes.
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(j) Debtor shall from time to time execute financing statements and
other documents in form satisfactory to Secured Parties and pay the cost of
filing or recording them in whatever public offices Secured Parties reasonably
deem necessary and perform such other acts as Secured Parties may reasonably
request to perfect and maintain a valid security interest in the Collateral.
(k) Debtor shall not move its principal place of business or its books
and records relating to the Collateral without 30 days' prior written notice
thereof to Secured Parties.
(l) Debtor shall not change its name, its state of incorporation or
otherwise do anything which would make the information set forth in the
financing statements relating to the Collateral materially misleading without
immediately notifying Secured Parties of the same.
(m) Debtor shall not default under any Collateral and shall preserve
and maintain all Debtor's rights thereunder.
(n) Debtor shall take all reasonable steps that the Secured Parties
request to obtain releases of the Terminated Liens and cause termination
statements to be filed in all appropriate offices.
9. EVENTS OF DEFAULT: The happening of any of the following events or conditions
shall be a default under this Security Agreement (each, an "EVENT OF DEFAULT" or
collectively, the "EVENTS OF DEFAULT"):
(a) Breach or violation by Debtor of any covenant, term or condition of
this Security Agreement or under any of the other Loan Documents not cured
within any applicable notice and grace period provided herein or therein;
(b) Default by Debtor under this Security Agreement or any of the other
Loan Documents unless cured within any applicable grace or cure period provided
herein or therein;
(c) Any warranty, representation or statement of Debtor contained in
this Security Agreement, in any of the other Loan Documents or otherwise made or
furnished to Secured Parties by or on behalf of Debtor proves to have been false
in any material respect when made or furnished; or
(d) The seizure or taking of any of the Collateral by any governmental
or similar authority or the issuance of a writ, order of attachment or
garnishment with respect thereto.
Any default under this Security Agreement not cured within any applicable grace
or cure period, if any, shall be a default under each of the other Loan
Documents.
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10. RIGHTS AND REMEDIES:
(a) Upon the occurrence of any Event of Default, which Event of Default
has not been cured within any applicable grace or cure period, Secured Parties
may, without further notice or demand, including, without limitation, notice of
intent to accelerate and notice of acceleration, declare any of the Obligations
immediately due and payable and this Security Agreement in default, and
thereafter, Secured Parties shall have the remedies of a secured party under the
Uniform Commercial Code as then in effect in the State of Colorado and all other
rights and remedies at law or in equity available to secured creditors in the
State of Colorado, including, without limitation, the right to take possession
of the Collateral and any proceeds thereof. To take possession, Secured Parties
may enter upon any premises where the Collateral is kept and remove the
Collateral or any proceeds therefrom. If notice is required by law, 10 days'
prior written notice of the time and place of any public sale of the Collateral
or of the time of or after which any private sale or any other intended
disposition of the Collateral is to be made given to Debtor pursuant to the
provisions of Section 12(f) hereof shall be reasonable notice to Debtor. No such
notice is necessary if the Collateral is perishable, threatens to decline
speedily in value, or is of a type customarily sold on a recognized market.
(b) During the time that Secured Parties are in possession of the
Collateral, and to the extent permitted by law, Secured Parties shall have the
right to hold, use, operate, manage and control all or any part of the
Collateral. Upon the occurrence of an Event of Default, Secured Parties may
notify account debtors to make payment directly to Secured Parties and collect
and retain all proceeds and other sums due or to become due with respect to the
Collateral, accounting only for the net proceeds arising from such use and
charging against receipts from such use all costs, expenses, charges, damage or
loss by reason of such use. Notwithstanding the foregoing, Secured Parties shall
also be entitled, without further notice or demand and to the extent permitted
by law, to have a receiver appointed to take charge of all or any part of the
Collateral, exercising all of the rights specified in the immediately preceding
sentence.
(c) Debtor shall pay to Secured Parties on demand all expenses
(including, without limitation, attorneys' fees) incurred by Secured Parties
incidental to taking, holding, preparing for sale, selling and the like or
otherwise dealing with the Collateral, or incurred by Secured Parties in
otherwise enforcing any term or condition of this Security Agreement, together
with interest thereon at the interest rate specified in the Notes, and all such
expenses and interest shall be secured by the Collateral as provided herein and
by all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Notes.
(d) Secured Parties may require Debtor to assemble the Collateral and
make it available at a place Secured Parties designate which is mutually
convenient to allow Secured Parties to take possession or dispose of the
Collateral.
(e) Any and all statements of fact or other recitals made in any xxxx
of sale or assignment or other instrument evidencing any foreclosure sale
hereunder as to nonpayment of indebtedness or as to the occurrence of any
default, or as to Secured Parties having declared all of such indebtedness to be
due and payable, or as to notice of time, place and terms of sale and of the
properties to be sold having been duly given by Secured Parties, shall be taken
as prima facie evidence of the truth of the facts so stated and recited.
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(f) Secured Parties may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale of the
Collateral held by Secured Parties, including the sending of notices and the
conduct of the sale, in the name and on behalf of Secured Parties.
(g) Nothing herein contained is intended, nor shall be construed, to
preclude Secured Parties from pursuing any other remedy provided by law for the
collection or enforcement of any of the Obligations. Any and all rights and
remedies herein expressly conferred upon Secured Parties shall be deemed
cumulative with, and not exclusive of, any other remedy conferred hereby, by the
other Loan Documents or by law or equity on Secured Parties, and the exercise of
any one remedy shall not preclude the exercise of any other.
11. COLLATERAL AGENT:
(a) No individual Secured Party hereunder shall have the right to take
any legal action or bring any suit in respect of any provision of this Security
Agreement. Additionally, no action arising from or in connection with an event
of default shall be made, unless Secured Parties, acting through the Collateral
Agent and representing at least a 65% of the outstanding principal balance of
the Notes (the "MAJORITY SECURED PARTY"), as calculated at the time of the
action or amendment, have elected in writing to take such action. Any writing
signed by the Majority Secured Party shall have the legal effect of a writing
signed by all Secured Parties.
(b) Each Secured Party hereby appoints and authorizes Xxxxx Ventures
Limited Liability Company (the "COLLATERAL AGENT") to take such actions as the
Collateral Agent on its behalf and to exercise such powers under this Security
Agreement as are delegated to the Collateral Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. The Collateral Agent
shall have no duties or responsibilities except those expressly set forth in
this Security Agreement. THE DUTIES OF THE COLLATERAL AGENT SHALL BE MECHANICAL
AND ADMINISTRATIVE IN NATURE; THE COLLATERAL AGENT SHALL NOT HAVE BY REASON OF
THIS SECURITY AGREEMENT A FIDUCIARY RELATIONSHIP IN RESPECT OF ANY SECURED
PARTY; AND NOTHING IN THIS SECURITY AGREEMENT OR THE NOTES, EXPRESS OR IMPLIED,
IS INTENDED TO OR SHALL BE SO CONSTRUED AS TO IMPOSE UPON THE COLLATERAL AGENT
ANY OBLIGATIONS IN RESPECT OF THIS SECURITY AGREEMENT EXCEPT AS EXPRESSLY SET
FORTH HEREIN. In any instance where the Collateral Agent is required or
permitted to consent to or approve any action of Debtor under this Security
Agreement, such consent or approval shall be deemed to be administrative in
nature and may be given or withheld in the Collateral Agent's sole discretion
unless this Security Agreement or the Notes state otherwise. As to any matters
not expressly provided for by this Security Agreement, including enforcement or
collection of the Notes, the Collateral Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining) upon the
written instructions of the Majority Secured Party, and such instructions shall
be binding on the Secured Parties, PROVIDED that the Collateral Agent shall not
be required to take any action which exposes
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the Collateral Agent to personal liability or which is contrary to this Security
Agreement, the Notes or applicable law. Each Secured Party shall execute and
deliver such additional instruments, including powers of attorney in favor of
the Collateral Agent, as may be necessary or desirable to enable the Collateral
Agent to exercise its powers hereunder. Without limiting the foregoing, the
Collateral Agent is authorized on behalf of the Secured Parties, without the
necessity of any notice to or further consent from the Secured Parties, from
time to time to take any action with respect to any Collateral which may be
necessary to maintain perfected security interest in and liens upon the
Collateral. Unless the Collateral Agent shall receive written instructions from
the Majority Secured Party, however, the Collateral Agent shall have no
independent duty to take such actions.
(c) The Collateral Agent and, if applicable, any of its managers,
members, officers, agents or employees, shall not be liable for any action taken
or omitted to be taken by it or any of them under or in connection with this
Security Agreement, except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the Collateral
Agent:
(1) may treat each Secured Party which is a party thereto as
the party entitled to receive payments hereunder until the Collateral Agent
receives written notice of the assignment of such Secured Party's interest
herein signed by such Secured Party and made in accordance with the terms hereof
and a written agreement of the assignee that it is bound hereby to the same
extent as it would have been had it been an original party hereto, in each case
in form satisfactory to the Collateral Agent;
(2) to the extent the Collateral Agent deems reasonably
necessary, the Collateral Agent may consult with legal counsel, independent
public accountants and other experts selected by the Collateral Agent, the
reasonable cost of which consultation shall be borne by Debtor, and the
Collateral Agent shall not be liable for any action taken or omitted to be taken
in good faith in accordance with the advice of such experts;
(3) makes no warranty or representation of any kind whatsoever
to any Secured Party and shall not be responsible to any Secured Party for any
statements, warranties or representations made in or in connection with the Loan
Documents, or in any instrument or document furnished pursuant thereto;
(4) shall not have any duty to ascertain or to inquire as to
the performance of any of the terms, covenants, or conditions of the Loan
Documents, or of any instrument or document furnished pursuant thereto on the
part of Debtor or as to the use of the proceeds of any Note;
(5) shall not be responsible to any Secured Party for the due
execution, legality, validity, enforceability, genuineness, effectiveness, or
value of the Loan Documents, or of any instrument or document furnished pursuant
thereto; and
(6) shall incur no liability under or in respect of the Loan
Documents by
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acting upon any written notice, consent, certificate or other instrument or
writing, which may be by cable, telex or facsimile, believed by it to be genuine
and signed, sent or made by the proper party or parties or by acting upon any
representation or warranty of Debtor made or deemed to be made in this Security
Agreement or any other Note.
(d) With respect to obligations owed to the Collateral Agent by Debtor,
the Collateral Agent shall have the same rights and powers under this Security
Agreement and the Notes as any other Secured Party and may exercise the same as
though it were not the Collateral Agent, and the term "SECURED PARTY" as used
herein shall, unless otherwise expressly indicated, include the Collateral Agent
in its individual capacity.
(e) Each Secured Party agrees to indemnify the Collateral Agent on a
pro rata basis, according to the amount of principal under the Notes held by
each such Security Party bears to the aggregate principal amount of all Notes
held by the Secured Parties (the "PRO RATA AMOUNT"), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements or any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Collateral Agent in any
way relating to or arising out of the Loan Documents or any action taken or
omitted by the Collateral Agent under the Loan Documents, except any such as
result from the Collateral Agent's gross negligence or willful misconduct.
Without limiting the foregoing, each Secured Party agrees to reimburse the
Collateral Agent promptly on demand in proportion to its Pro Rata Amount for any
out-of-pocket expenses, including legal fees, incurred by the Collateral Agent
in connection with the administration or enforcement or preservation of any
rights under the Loan Documents.
(f) Each of the Secured Parties, other than The Xxxxx Partnership III,
SBIC LP and its affiliates, hereby (1) appoints Xxxx X. Xxxxxx as his, her or
its agent under this Security Agreement, (2) authorizes Xxxx X. Xxxxxx to take
all actions under this Security Agreement on his, her or its behalf and exercise
all powers under this Security Agreement, (3) agrees that Xxxx X. Xxxxxx shall
not be liable to them for any action taken or omitted to be taken by him under
or in connection with this Security Agreement as his, her or its agent, except
for his own gross negligence or willful misconduct, and (4) agrees to indemnify
Xxxx X. Xxxxxx from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
or any kind or nature whatsoever which may be imposed on, incurred by or
asserted against him in any way relating to or arising out of the Loan Documents
or any action taken or omitted by him under the Loan Documents as his, her or
its agent, except to the extent that any such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
result from his gross negligence or willful misconduct.
12. GENERAL:
(a) Any financing statements filed pursuant to this Security Agreement
are, in part, for the protection of Secured Parties if any court shall at any
time hold that notice of Secured Parties' priority of interest in any property
described herein must, in order to be effective against a particular class of
persons, including, but not limited to, the Federal Government or any
subdivision or entity thereof, be filed in the Commercial Code records.
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(b) Debtor hereby indemnifies and holds harmless Secured Parties, and
their employees, officers and agents, from and against any and all liabilities,
claims and obligations which may be incurred, asserted or imposed upon them or
any of them as a result of or in connection with any use, operation, lease or
consumption of any of the Collateral or as a result of Secured Parties' seeking
to obtain performance of any of the obligations due with respect to the
Collateral (collectively, the "LOSSES"), unless such Losses were the result of
any Security Party's gross negligence or willful misconduct.
(c) No default shall be waived by Secured Parties except in writing and
no waiver of any payment or other right under this Security Agreement shall
operate as a waiver of any other payment or right.
(d) Without affecting any obligations of Debtor under this Security
Agreement and without prejudice to any of their rights hereunder, Secured
Parties may, without notice or demand, renew, extend or grant indulgences with
respect to any of the Obligations, take or release any other collateral as
security for any of the Obligations, or add or release any guarantor, endorser,
surety or other party to any of the Obligations.
(e) Debtor hereby waives diligence, presentment, protest, demand and
notice of every kind, as well as the right to require Secured Parties to proceed
against any person liable for the payment or performance of any of the
Obligations or to foreclose upon, sell or otherwise realize upon or collect or
apply any other property, real or personal, securing any of the Obligations, as
a condition or prior to proceeding hereunder.
(f) Any notice, request, demand, statement, authorization, approval,
consent or acceptance made under this Security Agreement shall be in writing and
shall be (i) hand delivered, (ii) sent by Federal Express or other reputable
overnight courier service, or (iii) sent by registered or certified mail, return
receipt requested, postage prepaid and shall be deemed given (xx) when received
if hand delivered, sent by Federal Express, or other reputable overnight courier
service, or (yy) three business days after being postmarked and addressed as
follows if sent by registered or certified mail, return receipt requested. Any
notice, request, demand, statement, authorization, approval, consent or
acceptance shall be sent to the following addresses:
If to Debtor:
Syngistix, Inc.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxx Godward LLP
000 Xxxxxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
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If to a Secured Party, to Secured Party's address as set forth on the
attached SCHEDULE 1,
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Each party may designate a change of address by notice to the other parties,
given as provided above at least 15 days before such change of address is to
become effective.
(g) Unless the context otherwise requires, all terms used herein which
are defined in the Uniform Commercial Code as in effect in the State of Colorado
shall have the meanings therein stated.
(h) All of the rights and remedies of Secured Parties under this
Security Agreement shall inure to the benefit of their successors and assigns.
All obligations of Debtor hereunder shall be binding upon the successors and
assigns of Debtor.
(i) This Security Agreement may not be amended, modified or otherwise
changed except by a written instrument duly executed by Debtor and the Majority
Secured Party.
(j) THIS SECURITY AGREEMENT SHALL BE CONSTRUED UNDER AND GOVERNED BY
THE LAWS OF THE STATE OF COLORADO, EXCEPT TO THE EXTENT THAT THE APPLICABILITY
OF ANY SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH
CASE, SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.
(k) Any provision hereof prohibited or invalid under applicable law
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the other provisions hereof.
(l) Time is of the essence of this Security Agreement and all of its
provisions.
(m) The headings of this Security Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Security Agreement or any provisions hereof.
* * * * * *
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DATED: February ___, 2002.
DEBTOR:
SYNGISTIX, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
SECURED PARTIES:
THE XXXXX PARTNERSHIP III, SBIC LP
By: Xxxxx Ventures SBIC Limited Liability Company, its general partner
By:
-----------------------------------
Print Name:
---------------------------
Title:
--------------------------------
CORE TECHNOLOGY FUND IV, LLC
By:
-----------------------------------
Print Name:
---------------------------
Title:
--------------------------------
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SCHEDULE 1
LIST OF SECURED PARTIES
NAME AND ADDRESS:
THE XXXXX PARTNERSHIP III, SBIC LP
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxx, Manager
CORE TECHNOLOGY FUND IV, LLC
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
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