Contract
EXHIBIT
10.04
THIRD AMENDMENT, dated as of
November 12, 2009 (this “Amendment”), to and under CREDIT AND SECURITY AGREEMENT,
dated as of July 28, 2004 (as amended from time to time, the “Credit Agreement”),
among THE RAL SUPPLY GROUP,
INC., a New York corporation (both in its original capacity as a party
thereto and as successor-by-merger to American/Universal Supply, Inc., a New
York corporation), UNIVERSAL
SUPPLY GROUP, INC., a New York corporation, and S&A SUPPLY, INC. (formerly
known as S&A Purchasing Corp.), a New York corporation (collectively, the
“Borrowers”)
and XXXXX FARGO BANK, NATIONAL
ASSOCIATION, acting through its Xxxxx Fargo Business Credit operating
division, as successor to Xxxxx Fargo Business Credit, Inc. (the “Lender”). Terms
which are capitalized in this Amendment and not otherwise defined shall have the
meanings ascribed to such terms in the Credit Agreement.
WHEREAS, Borrowers and
Colonial have made in favor of Lender that certain Guaranty By Corporations,
dated as of July 28, 2004 (as amended, modified, supplemented or restated from
time to time, the “Guaranty”);
WHEREAS, based on the
financial statements of Colonial and its consolidated Subsidiaries delivered to
Lender pursuant to Section 6.1 of the Credit Agreement, and as acknowledged by
Borrowers in the most recent Compliance Certificate delivered to Lender pursuant
to Section 6.1 of the Credit Agreement, Borrowers have failed to comply with
certain of the financial covenants under the Credit Agreement as
follows: (i) as of September 30, 2009, Borrowers have failed to
maintain the minimum Tangible Net Worth required pursuant to Section 7.18 of the
Credit Agreement, (ii) for the fiscal quarter ended as of September 30, 2009,
Borrowers have failed to maintain the minimum quarterly Net Income required
pursuant to Section 7.19 of the Credit Agreement and (iii) for the fiscal
quarter ended as of September 30, 2009, Borrowers have failed to maintain the
minimum quarterly Net Cash Flow required pursuant to Section 7.20 of the Credit
Agreement. These failures of the Borrowers to comply with these
specified covenants under the Credit Agreement constitute Events of Default
under Section 8.1(c) of the Credit Agreement (the “Designated Events of
Default”).
WHEREAS, on October 29, 2009,
Lender sent a formal notice of default and reservation of rights letter (the
“Default
Notice”) to Borrowers and also to certain “Subordinated Creditors” (as
defined therein) who are party to certain respective Subordination Agreements
with Lender relating to certain “Junior Indebtedness” (as defined therein) owing
to such Subordinated Creditors. Under the Default Notice, inter alia,
Lender gave notice to the Subordinated Creditors that the Designated Events of
Default also constituted “Payment Blockage Events” under Section 3 of each of
the respective Subordination Agreements, and that Lender was invoking and
exercising its rights under Section 3 of each Subordination Agreement to require
that no further payments of all or any portion of the Junior Indebtedness owing
to any Subordinated Creditor, whether of interest, principal or otherwise, be
made by Borrower or Colonial or accepted by any Subordinated Creditor until such
time as the Designated Events of Default are no longer
continuing.
WHEREAS, the Borrower has
requested that the Lender: (a) waive the Designated Events of Default, and (b)
modify certain other terms of the Credit Agreement, and the Lender has agreed to
the foregoing request, on the terms and conditions set forth
herein.
NOW, THEREFORE, in
consideration of the mutual promises contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the Borrowers and the Lender hereby agree as
follows:
Section
One. Waivers of Designated Events
of Default and Default Interest; Agreement Regarding Consultant’s
Report.
(a)
Acknowledgement of
Designated Events of Default. Borrowers hereby acknowledge,
represent and warrant that, as of the date hereof immediately prior to the
effectiveness of this Amendment, (x) the Designated Events of Default have
occurred, have not been waived and remain outstanding and continuing under the
Credit Agreement and (y) no other Default or Event of Default has occurred and
is continuing which has not been waived by Lender.
(b)
Waiver of Specified Events
of Default. Upon the effectiveness of this Amendment as provided for in
Section Five below, Lender hereby waives the Designated Events of Default as of
the date hereof. Such waiver by Lender of the Designated Events of
Default shall in no way be construed as an agreement to waive any other Events
of Default under the Credit Agreement that may have occurred prior to the date
hereof other than the Designated Events of Default, nor to waive any Events of
Default arising after the date hereof, in either case whether or not any such
existing or future Event of Default is of the same type and/or arises from the
same or similar events or circumstances as the Designated Events of Default,
including without limitation, any other Event of Default arising from a
violation of any financial covenant provided for in the Credit Agreement as in
effect from time to time (any such existing or future Event of Default other
than the Designated Events of Default, an “Excluded
Default”). Lender reserves all of its rights and remedies
under the Credit Agreement and the other Loan Documents, under applicable law
and at equity as to any such Excluded Default which may exist and/or may
hereafter occur. The Lender shall have no obligation to grant any
waivers with respect to any such existing or future Excluded Default, and the
granting of the waiver of the Designated Events of Default under this Amendment
shall not be construed as a course of conduct or dealing on the part of the
Lender that would obligate or create any duty on the part of Lender to waive any
such Excluded Default.
(c)
Borrowers and Lender acknowledge and agree that (i)
pursuant to the Default Notice, Lender elected to exercise the rights and
remedies available to it under Section 2.7(b) of the Credit Agreement to charge
interest at the Default Rate from and after October 1, 2009 until such time (if
any) as Lender may, in its sole, complete and absolute discretion, notify
Borrowers in writing that Designated Events of Default has been waived and (ii)
as of the date hereof, in accordance with the terms and provisions of the
Default Notice, Borrowers have not yet made any payments in respect of the
“Default Interest Amount” (as defined in the Default Notice). In
consideration of the amendments to the Credit Agreement and other agreements
provided for herein, Lender hereby agrees to waive its rights to receive and be
paid any of the Default Interest Amount that has accrued through the date
hereof. Lender further acknowledges that, as a result of the wavier
of the Designated Events of Default provided for herein, the Default Period that
commenced upon the occurrence of the Designated Events of Default has ended and
interest shall no longer accrue at the Default Rate.
(d)
As consideration for the waivers of the Designated Events of
Default and Default Interest Amount provided for above, Borrowers hereby
covenant that Borrowers shall cause Phoenix Management Services, Inc., the
consulting firm retained by Borrowers, to deliver to Borrowers and to Lender a
report on Borrower’s business and financial condition, covering such subjects
and providing analysis as to such matters as Lender may require in its sole
discretion, no later than December 15, 2009. Borrowers further agree
and acknowledge that any failure to fulfill their obligations under this
paragraph shall result in the immediate and automatic occurrence of an Event of
Default under the Credit Agreement.
(e)
Lender hereby acknowledges and agrees that, as a result of the
wavier of the Designated Events of Default provided for herein, the Payment
Blockage Events under the Subordinated Agreements have ceased to exist and
payments on the Junior Indebtedness may once again be paid by Colonial and
accepted by Subordinated Creditors, in each case as and to the extent expressly
permitted by the terms and conditions of the respective Subordination
Agreements.
Section
Two. Amendments
to Credit Agreement. Effective upon
satisfaction of the conditions precedent set forth in Section Four hereof, the Credit Agreement is
hereby amended as follows:
(i)
Section
1.1. Definitions. The following
defined terms contained in Section 1.1 of the Credit Agreement are amended and
restated as follows. Notwithstanding anything to the contrary
provided for herein or in the Credit Agreement, the parties hereto expressly
agree that the changes to the rates of interest applicable under the Credit
Agreement resulting from these amendments shall be retroactively effective as of
October 1, 2009, and that all interest with respect to the Advances outstanding
from time to time from October 1, 2009 through the date hereof shall be
calculated at the applicable interest rates as so calculated.
“Floating Rate” means, with
respect to all Floating Rate Advances, an annual rate equal to the Prime Rate
plus one and
one-quarter of one percent (1.25%).
(ii)
No LIBOR
Option. Notwithstanding the waiver of the Designated Events of
Default provided in this Amendment, and notwithstanding anything to the contrary
provided for in the Credit Agreement, Borrower hereby agrees that from and after
the effective date of this Amendment, LIBOR Advances shall not be available
either as an initial revolving Advance requested and made pursuant to Section
2.1 of the Credit Agreement or as the conversion and/or continuation of an
existing Advance to a LIBOR Advance under Section 2.21 of
the Credit Agreement.
Section
Three. Amendment
Fee. In consideration
for the waivers and amendments provided herein, the Borrowers shall pay to the
Lender a non-refundable fee in the amount of $60,000 (the “Amendment Fee”),
which fee shall be fully earned, non-refundable, due and payable on the date
hereof.
Section
Four. Representations
and Warranties. To induce the
Lender to enter into this Amendment, each Loan Party warrants and represents to
the Lender as follows:
(i)
except for the representation and warranty
that there has been no material adverse change in any Borrower’s business,
properties or condition (financial or otherwise), for which no Loan Party makes
any representation or warranty in this Amendment, all of the representations and
warranties contained in the Credit Agreement and each other Loan Document, in
each case, after giving effect to this Amendment, continue to be true and
correct in all material respects as of the date hereof, as if repeated as of the
date hereof, except for such representations and warranties which, by their
terms, are only made as of a previous date;
(ii)
the execution, delivery and performance of this
Amendment by each Borrower is within its corporate powers, has been
duly authorized by all necessary corporate action on its part, and each Borrower
has received all necessary consents and approvals (if any shall be required) for
the execution and delivery of this Amendment;
(iii) the
execution, delivery and performance by each Borrower of this Amendment, the
consummation of the transactions herein contemplated and the compliance with the
provisions hereof have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of such Borrower’s
stockholders; (ii) require any authorization, consent, license, permit or
approval by, or registration, declaration or filing with, or notice to, any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any third party, except such authorization, consent,
license, permit, approval, registration, declaration, filing or notice as has
been obtained, accomplished or given prior to the date hereof and such filings
with the Securities and Exchange Commission as are required by applicable law;
(iii) violate any provision of any law, rule or regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or of any order, writ, injunction or decree presently in effect having
applicability to such Borrower or of such Borrower’s articles of incorporation
or bylaws; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement, lease or
instrument to which such Loan Party is a party or by which it or its properties
may be bound or affected; or (v) result in, or require, the creation or
imposition of any Lien (other than in favor of the Lender) upon or with respect
to any of the properties now owned or hereafter acquired by such Loan
Party;
(iv) upon
its execution, this Amendment shall constitute the legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in accordance
with its terms; and
(v)
after giving effect to the waiver of the Designated Events of
Default as provided for in this Amendment above, no Default or Event of Default
has occurred and is continuing;
Section
Five. Conditions
Precedent. This Amendment
shall become effective upon the date on which all of the following events shall
have occurred:
(i)
the Lender shall have received
this Amendment, duly executed by each Borrower and acknowledged by Colonial and
Xxxxxxx Xxxxxx;
(ii)
the Lender shall have received a
certificate of the secretary or assistant secretary of each Borrower, certifying
(i) as true and correct a copy of resolutions adopted by Borrower’s board of
directors approving and authorizing the execution, delivery and performance by
such Borrower of this Amendment and of the transactions contemplated herein and
therein, (ii) that there have been no amendments, supplements, or other
modifications to such Borrower’s articles of incorporation and bylaws since the
date of the closing on the Second Amendment to the Credit Agreement between
Borrowers and Lender dated September 10, 2007 and that the copies of such
articles of incorporation and bylaws delivered to Lender on such date as a part
of the secretary’s certificates of each Borrower delivered by Borrowers on such
date in connection with such closing are true, correct and complete copies of
such articles of incorporation and bylaws as in full force and effect on the
date hereof (or, if there have been any such amendments, supplements, or other
modifications to such Borrower’s articles of incorporation and bylaws since the
date of such closing, attaching and certifying true, correct and complete copies
of such articles of incorporation and bylaws as in full force and effect on the
date hereof) and (iii) the name(s) and signature(s) of one or more officers or
agents of such Borrower authorized to execute and deliver this Amendment on
behalf of such Borrower pursuant to the resolutions referenced in clause (i)
above; and
(iii) Lender
shall have received payment of (i) the Amendment Fee and (ii) all fees, costs
and expenses (including without limitation any and all legal fees and expenses)
incurred by the Lender in connection with the preparation, negotiation and
closing of this Amendment and the transactions contemplated to occur hereunder
(collectively, the “Amendment Fees and
Expenses”), and Borrowers hereby authorize Lender to charge the
Borrowers’ loan account with Lender with the aggregate amount of such Amendment
Fees and Expenses, and requests that Lender make one or more revolving Floating
Rate Advance(s) on or after the date hereof in an aggregate amount not to exceed
the aggregate amount of such Amendments Fees and Expenses and that Lender
disburse the proceeds of such revolving Floating Rate Advance(s) in satisfaction
thereof.
Section
Six. General
Provisions.
(i)
Except as herein expressly amended, the Credit Agreement and all of the
other Loan Documents are ratified and confirmed in all respects and shall remain
in full force and effect in accordance with their respective terms as so
amended. Each Borrower hereby confirms its existing pledge,
assignment and grant to the Lender of a security interest and a Lien upon all of
the Collateral, as security for the payment and performance of all of the
Obligations (including any interest accruing under the Credit Agreement from and
after October 1, 2009 at the amended rate(s) provided for
herein). The Borrower hereby confirms that all security interests at
any time granted by it to the Lender in any and all of the Borrower’s property
and assets, including the security interest and a Lien upon all of the
Collateral, continue in full force and effect and secure and shall continue to
secure the Obligations and the “Indebtedness” (as defined in the Guaranty) so
long as any such Obligations and Indebtedness remain outstanding and that all
Collateral subject thereto remain free and clear of any liens or encumbrances
other than (i) those in favor of the Lender provided for under the Loan
Documents, and (ii) other Permitted Liens. Nothing herein contained
is intended to in any manner impair or limit the validity, priority and extent
of the Lender’s existing security interest and Lien in and upon the
Collateral.
(ii)
All references to the Credit Agreement in
the Loan Documents shall mean the Credit Agreement as amended as of the
effective date hereof, and as amended hereby and as hereafter amended,
supplemented and modified from time to time.
(iii) Except
as expressly provided in this Amendment, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Lender under the Credit Agreement or any of the other
Loan Documents, nor constitute a waiver of any other provision of the Credit
Agreement or any of the other Loan Documents.
(iv) This
Amendment embodies the entire agreement between the parties hereto with respect
to the subject matter hereof and supercedes all prior agreements, commitments,
arrangements, negotiations or understandings, whether written or oral, of the
parties with respect thereto.
(v)
This Amendment shall be governed by and construed
in accordance with the substantive laws (other than conflict laws) of the State
of New York. The provisions of Section 9.15 of the Credit Agreement
regarding consents to jurisdiction and venue, consents and waivers regarding
service of process and waivers of rights to jury trial, of Section 9.7 of the
Credit Agreement regarding costs and expenses and of Section 9.8 of the Credit
Agreement regarding indemnities are incorporated herein by
reference.
(vi) This
Amendment shall be binding upon and inure to the benefit of each Borrower and
Lender and their respective successors and assigns, except that no Borrower
shall have the right to assign its rights hereunder or any interest herein
without the Lender’s prior written consent.
(vii) Any
provision of this Amendment which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof
(viii) Each
Borrower hereby confirms and agrees, and represents and warrants, that all
Obligations (whether representing outstanding principal, accrued and unpaid
interest, accrued and unpaid fees or any other Obligations of any kind or
nature) currently owing by each and all Borrowers under the Credit Agreement and
the other Loan Documents, as reflected in the books and records of Lender as of
the date hereof, are unconditionally owing from and payable by each and all
Borrowers to Lender and that Borrowers are jointly and severally indebted to
Lender with respect thereto, all without any set-off, deduction, counterclaim or
defense. Each
Borrower acknowledges and agrees that it has no actual or potential claim or
cause of action against Lender relating to the Credit Agreement or any Loan
Document and/or the Obligations arising
thereunder or related thereto, in any such case arising on or before the date
xxxxxx.Xx further
consideration for Lender’s agreements to grant the waivers, amendments and
accommodations set forth herein, each Borrower hereby waives and releases and
forever discharges Lender and each of its officers, directors, attorneys,
agents, professionals and employees (the “Released
Parties”) from any
liability, damage, claim, loss or expense of any kind that such Borrower
had, may now have or may hereafter haveagainst any one or more of the
Released Parties arising out of or relating to the Loan Documents, (including
this Amendment and any documents, agreements being executed in connection
herewith), any and all Advances made through the date hereof, any other
Obligations heretofore made and/or now outstanding under the Loan Documents, any
transactions related to any of the foregoing or contemplated by the Loan
Documents and/or any other action (or failure to act) taken (or, as applicable,
not taken or taken only after any delay or satisfaction of any conditions) by
any of the Released Parties in connection with any of the foregoing or
contemplated by the Loan Documents or in connection with the negotiation or
administration thereof.
Section
Seven. Acknowledgement
of Guarantors. By executing this Amendment, each Borrower and Colonial
(by its signature below), each in its capacity as a “Guarantor” under the
Guaranty, hereby acknowledges and agrees to all the terms and provisions of this
Amendment, and agrees that its obligations under the Guaranty are unaffected,
undiminished and unmodified hereby, and also hereby ratifies, reaffirms and
restates all of the provisions, terms and conditions, covenants, representations
and warranties made and all of the obligations undertaken by such Guarantor in
the Guaranty. Each Guarantor further acknowledges and agrees that the
foregoing acknowledgements, agreements, ratifications and reaffirmations are
being given in an abundance of caution and for the avoidance of any doubt, and
that nothing contained in the foregoing is intended to limit or contradict the
provisions of and agreements and waivers contained in Section 7 and 8 of the
Guaranty, and further that the giving by such Guarantor of the foregoing
acknowledgements, agreements, ratifications and reaffirmations shall not be
interpreted or construed under any circumstances as having established a course
of dealing or course of conduct binding upon the Lender in the future or
otherwise creating any future obligations on the Lender to obtain any similar
acknowledgements, agreements, ratifications and reaffirmations in connection
with any future amendments to the Credit Agreement and/or any other Loan
Document.
Section
Eight. Acknowledgment
of Liens by Colonial. Colonial (by its signature below), in
its capacity as the “Guarantor” under the General Security Agreement dated as of
July 28, 2004 (as amended, modified, supplemented or restated from time to time,
the “Colonial Security
Agreement”) by Colonial in favor of Lender and as the “Pledgor” under the
Securities Pledge Agreement dated as of July 28, 2004 (as amended, modified,
supplemented or restated from time to time, the “Colonial Pledge
Agreement”), hereby confirms that all security interests at any time
granted by it to the Lender in any and all of Colonial’s property and assets,
including the security interest and a Lien upon all of the “Collateral” (as
defined under the Colonial Security Agreement) and the “Pledged Collateral” (as
defined under the Colonial Pledge Agreement) (collectively, the “Colonial
Collateral”), continue in full force and effect and secure and shall
continue to secure the Obligations and the “Indebtedness” (as defined under the
Guaranty) and the “Indebtedness” (as defined under the Colonial Security
Agreement) so long as any such Obligations, Indebtedness and Indebtedness remain
outstanding and that all Colonial Collateral subject thereto remain free and
clear of any liens or encumbrances other than (i) those in favor of the Lender
provided for under the Loan Documents, and (ii) other Liens expressly permitted
under the Colonial Security Agreement and the Colonial Pledge
Agreement. Nothing herein contained is intended to in any manner
impair or limit the validity, priority and extent of the Lender’s existing
security interest and Lien in and upon the Colonial Collateral.
Section
Nine. Acknowledgement
of Guarantors. By executing this Amendment, each Borrower and Xxxxxxx
Xxxxxx (by his signature below), each in its/its capacity as a party (in such
capacity, a “Support
Party”) to that certain Support Agreement dated as of July 28, 2004 (as
amended, modified, supplemented or restated from time to time, the “Support Agreement”)
among Borrowers, Xx. Xxxxxx and Lender, hereby acknowledges and agrees to all
the terms and provisions of this Amendment, and agrees that its obligations
under the Support Agreement are unaffected, undiminished and unmodified hereby,
and also hereby ratifies, reaffirms and restates all of the provisions, terms
and conditions, covenants, representations and warranties made and all of the
obligations undertaken by such Support Party under the Support
Agreement. Each Support Party further acknowledges and agrees that
the foregoing acknowledgements, agreements, ratifications and reaffirmations are
being given in an abundance of caution and for the avoidance of any doubt, and
that nothing contained in the foregoing is intended to limit or contradict the
provisions of and agreements and waivers contained in the Support Agreement, and
further that the giving by such Support Party of the foregoing acknowledgements,
agreements, ratifications and reaffirmations shall not be interpreted or
construed under any circumstances as having established a course of dealing or
course of conduct binding upon the Lender in the future or otherwise creating
any future obligations on the Lender to obtain any similar acknowledgements,
agreements, ratifications and reaffirmations in connection with any future
amendments to the Credit Agreement and/or any other Loan Document.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Loan
Parties and the Lender have signed below to indicate their agreement with the
foregoing and their intent to be bound thereby.
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THE
RAL SUPPLY GROUP, INC.
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By:
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/s/ Xxxxxxx Xxxxxx
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Name:
Xxxxxxx Xxxxxx
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Title:
Executive Vice President
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UNIVERSAL
SUPPLY GROUP, INC.
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By:
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/s/ Xxxxxxx Xxxxxx
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Name:
Xxxxxxx Xxxxxx
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Title:
President
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S&A
SUPPLY, INC..
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By:
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/s/ Xxxxxxx Xxxxxx
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Name:
Xxxxxxx Xxxxxx
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Title:
President
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XXXXX
FARGO BANK, NATIONAL ASSOCIATION, acting through its Xxxxx Fargo Business
Credit operating division
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By:
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Name:
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Title:
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ACKNOWLEDGED
AND AGREED TO:
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By:
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/s/ Xxxxxxx Xxxxxx
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Name:
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Xxxxxxx
Xxxxxx
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Title:
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Chief
Executive Officer
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/s/ Xxxxxxx Xxxxxx
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XXXXXXX
XXXXXX
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