SECURITY AGREEMENT
Exhibit 10.48
| Name and Address of Grantor: | ||||
| Cornerstone Biopharma, Inc. | ||||
| 0000 Xxxxxxx Xxxxxxx, Xxxxx 000 | ||||
| Xxxx, XX 00000 | ||||
| Name and Address of Debtor: | ||||
| Cornerstone Biopharma Holdings, Inc. | ||||
| 0000 Xxxxxxx Xxxxxxx, Xxxxx 000 | ||||
| Xxxx, XX 00000 | ||||
| Name and Address of Secured Party: | ||||
| Paragon Commercial Bank | ||||
| 0000 Xxxxxxxx Xxxxxx | ||||
| Xxxxxxx, XX 00000 | ||||
| Attn: Xxxxx X. Xxxx, Senior Vice President | ||||
THIS SECURITY AGREEMENT is made and entered into this 25th day of June, 2008, by
and among Cornerstone Biopharma, Inc. (hereinafter called the “Grantor” whether one or more in
number, a corporation, partnership, another legal entity or an individual), whose address is 0000
Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxx XX 00000, and Cornerstone Biopharma Holdings, Inc. (hereafter
called the “Debtor”), whose address is 0000 Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxx XX 00000 and Paragon
Commercial Bank (hereinafter called the “Secured Party”), a North Carolina banking Corporation,
whose address is 0000 Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000.
WHEREAS, Cornerstone Biopharma Holdings, Inc. are indebted to Secured Party in the amount of
Four Million and 00/100 Dollars ($4,000,000.00) as evidenced by its note dated April 21, 2005; and
WHEREAS, Cornerstone Biopharma, Inc. is desirous of securing said Note for the benefit of
Cornerstone Biopharma Holdings, Inc.. with UCC filings (Secretary of State) on its properties
located at 0000 Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxx XX 00000 (the “Property”).
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Cornerstone Biopharma, Inc. hereby agree to pledge their interest in the
Property and related furnishings and equipment as security for the Note as follows:
(1) CREATION OF SECURITY INTEREST: Grantor and Debtor grants to Secured Party a security
interest in the Collateral described or referred to herein to secure the performance of all direct,
contingent, present and future obligations of Debtor to Secured Party (the “Obligations”).
(2) COLLATERAL: The Collateral is classified generally as:
þ Accounts. Any and all accounts, accounts receivable, receivables, contract rights,
book debts, checks, notes, drafts, instruments, chattel paper, acceptances, choses in
action, any and all amounts due to Debtor from a factor or other forms of obligations and
receivables now existing or hereafter arising out of the business of the Debtor, as well as
any and all returned, refused and repossessed goods, and the cash or non-cash proceeds
resulting therefrom.
þ Inventory. Any and all of Debtor’s inventory, including without limitation any and all
goods held for sale or lease or being processed for sale or lease in Debtor’s business as
now or hereafter conducted, whether now owned or hereinafter acquired, including all
materials, goods and work in process, finished goods, and other tangible property held for
sale or lease or furnished or to be furnished under contracts of service or used or consumed
in Debtor’s business, along with all documents (including documents of title) covering
inventory and all cash and non-cash proceeds from the sale of inventory, including proceeds
from insurance.
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þ Equipment. Any and all of Debtor’s furnishings and equipment, wherever located,
whether now owned or hereafter acquired, together with all increases, parts, fittings,
accessories, equipment, and special tools now or hereafter affixed to any part thereof or
used in connection therewith, and all products, additions, substitutions, accessions, and
all cash and non-cash proceeds, including proceeds from insurance thereof and thereto.
o Fixtures. All of Debtor’s fixtures now existing or hereafter acquired, together with
all substitutes and replacements therefor, all accessions and attachments thereto, and all
tools, parts and equipment now or hereafter added to or used in connection therewith. These
goods are or will become fixtures on the following described real estate in County,
(State), owned by [name of owner] more particularly described as follows:
þ Instruments and/or Investment Documents. The following described instruments and
documents including, without limitation, negotiable instruments, promissory notes, and
documents of title owned or to be owned by Debtor, certificates of deposit, and all liens,
security agreements, leases and other contracts securing or otherwise relating to any of
such instruments or documents, and all cash and non-cash proceeds and products thereof and
such additional property receivable or distributed in respect of or in exchange for all or
any of such instruments or documents.
þ General Intangibles. All patents, trademarks, service marks, trade secrets, copyrights
and exclusive licenses (whether issued or pending) and all documents, applications,
materials and other matters related thereto, all inventions, and all manufacturing,
engineering and production plans, drawings, specifications, processes and systems, all trade
names, computer programs, databases, systems and software (including source and object
codes), goodwill, choses in action and all other general intangibles of Debtor whether now
owned or hereafter acquired and all cash and non-cash proceeds thereof.
o Timber. All of Debtor’s uncut timber growing or to be grown on the following described
property, and all cash and non-cash proceeds including proceeds from insurance, and all
products thereof (property description):
þ Other — Description of Collateral listed in box below:
Description of Collateral
A blanket first priority lien on all furnishings, equipment, inventory and other items and
types of personal property now owned or hereafter acquired, all the company’s general intangibles
and accounts receivable, whether presently existing or arising in the future, and all the proceeds
and products from the foregoing (including insurance proceeds) for Cornerstone Biopharma, Inc.
In addition to the foregoing, the collateral shall also include those items listed on Schedule
A, attached hereto and incorporated herein by reference.
Check here o if Debtor has no place of business in North Carolina but resides in North
Carolina. Check here
o if Debtor has more than one place of business in North Carolina. Check here þ if Debtor has only one place of
business in North Carolina, give county of business here: WAKE.
If checked here o the Collateral described above includes all after-acquired Consumer Goods acquired
by the Debtor within ten (10) days after the Secured Party has given value pursuant to this
Agreement. If checked here o this is a purchase money security agreement.
Any additional Collateral acquired hereafter by the Grantor shall be Collateral subject to
this Agreement. All Collateral now or hereafter subject to this Agreement includes the proceeds
thereof and any additions and accessions thereto. Nothing contained herein shall be deemed consent
to the sale of any Collateral.
| (3) | GRANTOR’S UNDERTAKINGS: The Grantor agrees: |
(A) that Grantor will protect and properly care for the Collateral and no Collateral will
be misused, wasted or allowed to deteriorate except for normal wear and tear;
(B) to use the Collateral principally within the State of North Carolina and not to affix
the Collateral to other personal property (unless other provision regarding the location or affixation of the Collateral is noted herein) and not to affix
the Collateral to real property unless it is classified as a fixture hereinabove and the requisite
information is supplied;
(C) that Secured Party may act as attorney for Grantor in adjusting and canceling any such
insurance coverage and in endorsing any insurance draft and may retain for the satisfaction of the Grantor’s Obligations any insurance
proceeds and/or unearned premium on such insurance;
(D) that upon the request of Secured Party, Grantor will (i) provide an updated appraisal
of the Collateral and (ii) give to or deposit with Secured Party additional Collateral to Secured Party’s satisfaction;
(E) that Collateral will not be changed, transferred, or otherwise disposed of (except for
sale of inventory in the ordinary course of Debtor’s business) or be subjected to any unpaid charge, unless the Secured Party consents in advance in
writing to such change, transfer or charge;
(F) to procure or execute any Financing Statement or other document and do any act or pay
any costs which Secured Party deems necessary to protect or perfect its security interest under this Agreement;
(G) that the Collateral will not be used for illegal purposes; and
(H) that Secured Party shall have the right to examine and inspect the Collateral and the
books and records relating thereto, if any, at any
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reasonable time and, upon demand, Grantor shall assemble the Collateral at such place or places as
Secured Party may designate for the purpose of allowing Bank to examine same.
| (4) | DEFAULT AND REMEDIES: |
(A) The happening of any of the following events shall constitute a default under this
Agreement: (i) the occurrence of a default under any note or other agreement secured hereby; (ii) the failure of Grantor to perform any of the terms,
stipulations and conditions written into this Agreement; (iii) the insolvency of the Debtor, or the
application for the appointment of a receiver for Debtor, the filing of a petition under any
provision of the Bankruptcy Code by or against Debtor or an assignment for the benefit of creditors
by or against Debtor; (iv) the entry of a judgment against Debtor or the issuance or service of any
attachment, levy or garnishment against Debtor or the Collateral; (v) the failure of Debtor to
furnish from time to time at Bank’s request, financial information with respect to Debtor; (vi) a
determination by Bank that the Obligations are insecure or that a material adverse change in the
financial condition of Debtor has occurred since the date hereof; (vii) failure of Debtor to
perform any other agreement with Bank; (viii) any representation or affirmation by the Debtor to
Bank herein or by separate writing is incorrect or false.
(B) Upon the occurrence of a default as set forth in (A) above, at the option of Bank, all
or any one of the Obligations secured hereby shall become immediately due and payable without demand or notice, and Bank shall have at any time after
default the rights and remedies provided in the Uniform Commercial Code as enacted in the State of
North Carolina or other applicable law, or by any note or other agreement secured hereby, and may,
without limiting or waiving in any way the aforesaid rights:
1. Enter upon Grantor’s premises to take possession of the Collateral or render it
unusable, or require Grantor to assemble the Collateral at any place designated by the Bank reasonably convenient to both parties;
2. Give any notice or notification to the Grantor required by the Uniform
Commercial Code by mailing such notice, at least five (5) days before the event, if any, which is the subject of the notice to the Grantor’s address shown
herein. Five (5) days’ notice to Grantor of any proposed action by Bank shall be deemed reasonable
and sufficient notice for all purposes, provided, this provision shall not require a longer period
of notice than shall be reasonable under the circumstances then existing;
3. Use the proceeds of the disposition of any Collateral to pay and discharge all
or any of the Obligations of Debtor set forth herein;
4. Cure the default and the expense of curing such default shall thereupon become
part of the Obligations secured hereby and shall be payable by Debtor to Bank upon demand of Bank, together with interest thereon at the highest
rate allowed by law.
5. Obtain the appointment of a receiver for all or any part of the Collateral, without notice to Grantor.
(A) THIS AGREEMENT IS SUBJECT TO THE TERMS, CONDITIONS, COVENANTS, AGREEMENTS, AFFIRMATIONS
AND STIPULATIONS SET FORTH BELOW, ALL OF WHICH ARE A PART OF THIS AGREEMENT AND BINDING ON THE PARTIES
HERETO; AND
(B) NO MODIFICATION OR WAIVER OF THE PROVISIONS OF THIS AGREEMENT SHALL BE EFFECTIVE UNLESS
IN WRITING NOR SHALL ANY WAIVER BE APPLICABLE EXCEPT IN THE SPECIFIC INSTANCES FOR WHICH GIVEN.
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IN WITNESS WHEREOF, this Agreement is executed (i) if by individuals, by hereunto setting
their hands under seal by adoption of the word “SEAL” appearing next to the individuals’ names,
(ii) if by a corporation, by the duly authorized officers of the corporation on its behalf under
seal by adoption of the facsimile seal printed hereon for such purpose or, if an impression seal
appears hereon, by affixing such impression seal, (iii) if by a partnership, by the duly authorized
partners of the partnership on its behalf under seal by adoption of the word “SEAL” appearing next
to the name of the partnership and/or the signatures of the partners, or (iv) if by a limited
liability corporation, by the duly authorized members and/or manager(s) on its behalf under seal by
adoption of the word “SEAL” appearing next to the name of the limited liability corporation and/or
the signatures of the members and/or manager(s), as of the 25th day of June,
2008.
| Cornerstone Biopharma, Inc. (SEAL) | ||||||||
| By: | /s/ Xxxxx X. Xxxxxxx | (SEAL) | ||||||
| Cornerstone Biopharma Holdings, Inc. (SEAL) | ||||||||
| By: | /s/ Xxxxx X. Xxxxxxx | (SEAL) | ||||||
| Acknowledged By: Paragon Commercial Bank | ||||
By: |
/s/ Xxxxx X. Xxxx | |||
| Xxxxx X. Xxxx, Senior Vice President | ||||
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THE ABOVE AGREEMENT IS SUBJECT TO THE
FOLLOWING ADDITIONAL AGREEMENTS AND AFFIRMATIONS
FOLLOWING ADDITIONAL AGREEMENTS AND AFFIRMATIONS
Collections.
A. Bank is authorized and empowered at any time in its sole discretion (i) to require Debtor
to notify or itself to notify, either in its own name or in the name of Debtor, all or any of the account debtors, or any person obligated to Debtor for
any amount, that the accounts and/or general intangibles have been assigned to Bank or to request
in its name, in the name of Debtor or in the name of a third party, confirmation from any such
debtor or person of the amount payable or any other matter stated therein or relating thereto; (ii)
to demand, collect or compromise for any and all sums which are now or may hereafter become due or
owing upon any of the accounts or upon any other obligation to Debtor; (iii) to enforce payment of
any account or any other obligation of any person to Debtor either in its own name or in the name
of Debtor; and (iv) to endorse in the name of Debtor and to collect any instruments tendered or
received in payment of the accounts or any of Debtor’s general intangibles. But Bank under no
circumstances shall be under any duty to act in regard to any of the foregoing matters. The Debtor
hereby appoints Bank and any officer or employee of Bank as Bank may from time to time designate as
attorneys-in-fact for the Debtor, to sign and endorse in the name of Debtor, to give notices in the
name of Debtor and to perform all other actions necessary or desirable in the reasonable discretion
of Bank to effect these provisions and carry out the intent hereof. The Debtor hereby ratifies and
approves all acts of such attorneys-in-fact and neither Bank nor any other such attorneys-in-fact
will be liable for any acts of commission or omission nor for any error of judgment or mistake of
fact or law. This power, being coupled with an interest, is irrevocable so long as any account or
general intangible assigned to Bank remains unpaid and Debtor has any indebtedness to Bank. The
costs of such collection and enforcement, including attorneys’ fees and out-of-pocket expenses,
shall be borne solely by Debtor whether the same are incurred by Bank or Debtor.
B. At the option of Bank, Debtor will forthwith upon receipt of all checks, drafts, cash and
other remittances in payment or on account of Debtor’s accounts or general intangibles, deposit the same in a special bank account maintained
with Bank, over which Bank has the sole power of withdrawal and will designate with each such
deposit the particular account or general intangible upon which the remittance was made. The funds
in said account shall be held by Bank as security for the Obligations. Said proceeds shall be
deposited in precisely the form received except for the endorsement of Debtor where necessary to
permit collection of items, which endorsement Debtor agrees to make, and which Bank is also hereby
authorized to make on Debtor’s behalf. Pending such deposit, Debtor agrees that it will not
commingle any such checks, drafts, cash and other remittances with any of Debtor’s funds or
property, but will hold them separate and apart therefrom and upon an express trust for Bank until
deposit thereof is made in the special account. Bank may at any time and from time to time, in its
sole discretion, apply any part of the credit balance in the special account to the payment of all
or any of the Obligations, whether or not the same be due. Upon the full and final liquidation of
all of the Obligations, Bank will pay over to the Debtor any excess received by it from Debtor,
whether received by it as a deposit in the special account or received by it as a direct payment on
any of the Obligations.
Other Agreements and Affirmations of Debtor.
A. Each and every account or general intangible now owned or hereafter acquired, is a bonafide
existing obligation, valid and enforceable against the account debtor, or other person obligated to Debtor, and it is not subject to any
dispute, defense or offset. Debtor will promptly notify Bank of any account or general intangible
with respect to which the foregoing is untrue.
B. Debtor will at all times keep accurate and complete records of Debtor’s inventory, accounts
and general intangibles and will upon request furnish Bank a schedule, in form satisfactory to Bank, describing such accounts, etc. as Bank may
require. Debtor will furnish to Bank copies of contracts and invoices applicable thereto, together
with satisfactory evidence of the shipment and receipt of any goods covered thereby and the
performance of any services or obligations covered thereby as Bank may require if applicable.
Bank, or any of its agents, shall have the right to call at Debtor’s place or places of business at
intervals to be determined by Bank and without hindrance or delay, to inspect Debtor’s inventory
and to inspect, audit, check and make extracts from the books, records, journals, orders, receipts,
correspondence and other data relating to Debtor’s inventory, accounts, general intangibles, or to
any other transaction between the parties hereto.
C. If any of the Debtor’s accounts or general intangibles arise out of contracts with the
United States or any department, agency, or
instrumentality thereof, Debtor will immediately notify Bank in writing and execute any instruments
and take any steps required by Bank in order that all monies due and to become due under such
contracts shall be assigned to Bank and notice thereof given to the Government under the Federal
Assignment of Claims Act.
D. If any of Debtor’s accounts or general intangibles should be evidenced by promissory note,
trade acceptances, or other instruments for the payment of money, Debtor, unless otherwise directed by Bank will deliver same to Bank within
ten days after receipt, appropriately endorsed to Bank’s order and, regardless of the form of such
endorsement, Debtor hereby waives presentment, demand, notice of dishonor, protest and notice of
protest and all other notices with respect thereto. Bank shall not be bound to take any steps
necessary to preserve any right of Debtor against any prior parties to such instruments which
Debtor hereby assumes to do.
E. Debtor will not without the prior written consent of Bank borrow from anyone except Bank or
pledge, or grant any security interest in, any of its accounts, general intangibles, or any inventory, equipment, or other property to anyone
except Bank, or permit any lien or encumbrance to attach to any of the foregoing, or any levy to be
made thereon, or any financing statement (except Bank’s statement) to be on file with respect
thereto.
F. Debtor will pay and discharge when due all taxes, levies and other charges on the
Collateral, keep the Collateral insured for the benefit of Bank (to whom loss shall be payable) in such amounts, in such companies, and against such risks as
may be satisfactory to Bank; pay the cost of all such insurance and deliver certificates evidencing
such insurance to Bank; and Debtor assigns to Bank all rights to receive the proceeds of
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of such insurance, directs any insurer to pay all proceeds directly to Bank, and authorizes Bank to
endorse any draft for such proceeds and to apply such proceeds against the Obligations in such
manner as Bank may determine from time to time. All insurance policies shall provide for at least
ten days prior written notice of cancellation to Bank.
G. Debtor agrees that it will not permit any return of merchandise, the sale of which gave
rise to any of the accounts, except in the usual and regular course of business.
H. Debtor shall give Bank written notice of each office of Debtor in which records of Debtor
pertaining to accounts held as Collateral are kept
and each location at which Collateral is or will be kept, and of any change in any such location.
If no such notice is given, all records of Debtor pertaining to the Collateral are and shall be
kept at Debtor’s address shown above, and all Collateral of Debtor will be kept at Debtor’s address
shown above unless otherwise noted as follows:
Debtor will notify Bank immediately of any material change in the Collateral, or of a change in
Debtor’s residence or location or of the location of any Collateral or of the location of the
records related to any Collateral.
I. Without the written consent of Bank, Debtor will not change its name, change its corporate
partnership or other legal status, use any tradename or engage in any business in which it was not engaged on the date of this Agreement.
J. Notwithstanding anything here in the contrary, the term “Obligations” includes all costs
incurred by Bank to obtain, preserve, perfect, and enforce this Agreement and maintain, preserve, collect and enforce its rights with respect to the
Collateral, including, without limitation, its reasonable attorneys fees.
K. Debtor agrees that Bank may sell or assign all or any of the Obligations to a third party
and, in connection therewith, Bank may assign and transfer all of its rights under this Agreement to such third party who, upon such assignment,
shall have all of the rights and benefits granted to the Bank herein.
L. Notwithstanding anything in this Agreement to the contrary, the proceeds from any
disposition of the Collateral shall be applied toward all or any of the following items in such order as the Bank deems necessary and appropriate: (i) the
expenses of taking, removing, storing, repairing, processing, holding and selling the Collateral,
including, without limitation, reasonable attorney’s fees; (ii) at the Bank’s option, to the
expense of liquidating and satisfying any liens, security interests or encumbrances against the
Collateral which may be prior to the Bank’s security interest; (iii) to the unpaid Obligations. If
the proceeds realized from the disposition of the Collateral shall fail to satisfy all of the
foregoing items, Debtor shall be liable for the remaining deficiency, which shall be payable to
Bank on demand. If all of the above items are paid as a result of the disposition of the
Collateral and a surplus exists, the surplus shall be paid to the persons entitled thereto by law.
Sale of Inventory. So long as Debtor is not in default hereunder, Debtor shall have
the right, in the regular course of business, to process and sell Debtor’s inventory. Bank’s
security interest hereunder shall attach to all proceeds of all sales or other dispositions of
Debtor’s inventory.
Term. This Agreement may not be terminated by Debtor while any Obligations remain
unpaid, in whole or in part.
Financing Statements. Debtor will deliver such instruments of further assignment or
assurance as Bank may from time to time request to carry out the intent hereof, and will join with
Bank in executing financing statements in form satisfactory to Bank and pay the cost of filing the
same and continuation statements and any other documents in any public office deemed advisable by
Bank. Debtor agrees that a carbon, photographic or other reproduction of this Agreement or a
financing statement shall be sufficient as a financing statement.
Notification to Purchasers of Farm Products. If the Collateral is or includes farm
products, as soon as possible, and in any event not less than 15 days prior to any sale of
livestock or crops, the Debtor will provide to the Secured Party a written list of all buyers,
commission merchants, or selling agents (including addresses and phone numbers) to or through whom
the Debtor intends to sell livestock or crops constituting “farm products” under the Food Security
Act of 1985 (7 U.S.C. Section 1631, as amended)(the FSA), or applicable state law. The Secured
Party is hereby authorized to give written notice to any person of its security interest, as
required or permitted under the Uniform Commercial Code, the FSA, or other applicable law, which
notice may instruct the recipient to make payments jointly to the Debtor and the Secured Party and
may disclose the Debtor’s social security or taxpayer identification number, together with such
other information as must or may be included for an effective notice under such law. The Debtor
agrees to keep the list on a current basis and not to sell crops or livestock to or through any
person not on the list.
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Schedule A
Accounts. Any and all accounts, accounts receivable, receivables, contract rights, book debts,
checks, notes, drafts, instruments, chattel paper, acceptances, choses in action, any and all
amounts due to Debtor from a factor or other forms of obligations and receivables now existing or
hereafter arising out of the business of the Debtor, as well as any and all returned, refused and
repossessed goods, and the cash or non-cash proceeds resulting therefrom.
Inventory. Any and all of Debtor’s inventory, including without limitation any and all goods held
for sale or lease or being processed for sale or lease in Debtor’s business as now or hereafter
conducted, whether now owned or hereafter acquired, including all materials, goods and work in
process, finished goods, and other tangible property held for sale or lease or furnished or to be
furnished under contracts of service or used or consumed in Debtor’s business, along with all
documents (including documents of title) covering inventory and all cash and non-cash proceeds from
the sale of inventory, including proceeds from insurance.
Furniture and Equipment. Any and all of Debtor’s furnishings, fixtures and equipment, wherever
located, whether now owned or hereafter acquired, together with all increases, parts, fittings,
accessories, equipment, and special tools now or hereafter affixed to any part thereof or used in
connection therewith, and all products, additions, substitutions, accessions, and all cash and
non-cash proceeds, including proceeds from insurance thereof and thereto.
Instruments and/or Investment Documents. The following described instruments and documents
including, without limitation, negotiable instruments, promissory notes, and documents of title
owned or to be owned by Debtor, certificates of deposit, and all liens, security agreements, leases
and other contracts securing or otherwise relating to any of such instruments or documents, and all
cash and non-cash proceeds and products thereof and such additional property receivable or
distributed in respect of or in exchange for all or any of such instruments or documents.
General Intangibles. All patents, trademarks, service marks, trade secretes, copyrights and
exclusive licenses (whether issued or pending) and all documents, applications, materials and other
matters related thereto, all inventions, and all manufacturing, engineering and production plans,
drawings, specifications, processes and systems, all trade names, computer programs, databases,
systems and software (including source and object codes), goodwill, choses in action and all other
general intangibles or Debtor whether now owned or hereafter acquired and all cash and non-cash
proceeds thereof.
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