INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT made this 9th day of September, 1993 by
and among ISRAEL DISCOUNT BANK OF NEW YORK ("IDB"), EXTEBANK (("EB"), BANK
LEUMI TRUST COMPANY OF NEW YORK ("BL"), BANK HAPOALIM B.M. ("BH") (IDB, EB,
BL and BH being hereinafter each referred to as a "Senior Lender" or "Bank", or
collectively as the "Senior Lenders" or "Banks"), the U.S. SMALL BUSINESS
ADMINISTRATION (the "SBA") and ELK ASSOCIATES FUNDING CORPORATION (the
"Borrower").
W I T N E S S E T H:
WHEREAS, the Senior Lenders have entered into certain loan agreements
(collectively, the "Loan Agreements") with the Borrower pursuant to which the
Borrower has borrowed funds and from time to time may borrow additional funds as
provided in such Loan Agreements; and
WHEREAS, the obligations incurred by Borrower under said Loan
Agreements are or may be secured, either wholly or partially, by certain
collateral as defined in the Loan Agreements (the "Collateral"); and
WHEREAS, the security interest of each Senior Lender in the Collateral
ranks equally in priority with each other Senior Lender and is senior in right
to any other interest, whether secured or unsecured now or hereafter; and
WHEREAS, the Borrower is a licensed specialized small business
investment company, licensed by the SBA under the Small Business Investment Act
of 1958, as amended (the "Act"); and
WHEREAS, the Borrower has incurred certain indebtedness through the
sale to the SBA of debentures or through the sale of debentures guaranteed by
the SBA; and
WHEREAS, as of the date of this Agreement the Borrower and the SBA have
entered into a security agreement (the "SBA Security Agreement") pursuant to
which the Borrower has granted to the SBA a security interest in the Collateral
securing obligations which have been or hereafter may be incurred from time to
time through the sale to the SBA of debentures, through the sale of debentures
guaranteed by the SBA, or through other indebtedness or liability to SBA; and
WHEREAS, the security interest of the SBA will rank junior in priority
to the security interests of the Senior Lenders; and
WHEREAS, simultaneously with the execution of this agreement, the
Borrower, the Senior Lenders and the SBA are entering into a custodian agreement
(the "Custodian Agreement"),
pursuant to which IDB, as custodian (such party and any and all successors
hereinafter referred to as the "Custodian") will hold certain collateral
(collectively, the "Escrow Collateral") solely for the benefit of the Senior
Lenders and the SBA; and
WHEREAS, simultaneously with the execution of this agreement, the
Borrower and the SBA are entering into an agreement (the "SBA Agreement")
relating to, among other things, the permitted amount of total indebtedness the
Borrower may incur from time to time; and
WHEREAS, it is contemplated that the Borrower may incur (i) additional
senior indebtedness either under the Loan Agreements or with other senior
lenders and (ii) additional indebtedness through the sale to the SBA of
debentures or through the sale of debentures guaranteed by the SBA, each such
occurrence of indebtedness to be made in accordance with the terms of the SBA
Agreement, SBA Security Agreement, Custodian Agreement and this Agreement; and
WHEREAS, the parties desire to set forth their respective rights and
priorities with respect to the repayment of indebtedness to the Banks and to the
SBA and as to their respective interests in the Collateral,
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto mutually agree as follows:
1. Certain Definitions.
1.1 Event of Default. The following shall constitute an Event of
Default:
a. In the event Borrower is in default (i) in the payment
of any Senior Indebtedness beyond any applicable grace periods or (ii) under
any provision of the Loan Agreements other than for the payment of money beyond
any applicable grace periods and provided that any of the Senior Lender(s) have
"accelerated" their indebtedness; and further as respects either (i) or (ii)
above, any Senior Lender has delivered to SBA and Borrower a Notice of Event of
Default; or
b. Borrower is in default under any Obligation (as defined in the SBA
Security Agreement) beyond any applicable grace periods, and the SBA has
elected to accelerate the payment of the Obligation(s) as provided for pursuant
to SBA Regulations, or the SBA has transferred the Borrower to "liquidation
status", as provided for pursuant to SBA Regulations.
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1.2 Notice of Event of Default. The term "Notice of Event of Default"
shall mean a written notice from any Senior Lender or the SBA that one or more
Events of Default (as defined in Section 1.1) in respect of Senior Indebtedness
and/or the Junior Indebtedness, as hereinafter defined, has occurred and is
continuing, describing such Event or Events of Default, which notice shall
constitute a notice of the Event or Events of Default described therein.
1.3 Senior Indebtedness and Junior Indebtedness. As used in this
Agreement, each of the obligations enumerated in Section 1.3.1 shall at all
times constitute "Senior Indebtedness" which indebtedness shall be senior and
have priority with respect to all obligations whatsoever enumerated in Section
1.3.2, which obligations shall constitute "Junior Indebtedness".
1.3.1 (Senior Indebtedness): Any and all indebtedness and
other obligations including, without limitation, all principal, interest
(including all interest accruing after commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of the
Borrower) charges, expenses, fees and other sums owing by the Borrower under the
Loan Agreements from time to time in effect, new or replacement loan agreements
with other senior lenders and any refinancing or refinancings of the foregoing
including any agreement or agreements increasing the obligations under,
extending the maturity of, refinancing or restructuring any of the Loan
Agreements, new or replacement loan agreements with other senior lenders or any
successor agreement or agreements. The Company agrees that the Senior
Indebtedness shall not be increased so that the Company's total indebtedness
exceeds the limitations provided for in the SBA Agreement.
1.3.2 (Junior Indebtedness): Any and all indebtedness and other
obligations owing by the Borrower to the SBA, including any and all amounts
outstanding from time to time under any and all debentures sold to or guaranteed
by the SBA (the "Debentures") whether principal, interest or otherwise, plus all
fees, expenses, other amounts and other monetary obligations owing pursuant to
the Debentures and refinancings of the foregoing, but not including any
preferred stock sold to the SBA.
2. Terms of Priority.
2.1 Priority of Senior Indebtedness. Any payment in respect of or to
or for the benefit of any Junior Indebtedness is and shall be junior in right of
payment and the exercise of any remedy to the prior payment in full of Senior
Indebtedness to the extent and in the manner provided for herein. The Borrower
agrees to comply with the rights of the holders of Senior Indebtedness and the
rights of the SBA (or any holder of Junior Indebtedness), as embodied in the
terms and provisions of this
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Agreement. It is further agreed that Junior Indebtedness shall also be second in
priority as a claim against the Borrower or any of the assets of the Borrower to
the prior payment in full of Senior Indebtedness, regardless of whether any such
claim is made (i) in any distribution of the assets of the Borrower upon any
voluntary or involuntary dissolution, winding-up, total or partial liquidation
or reorganization, or bankruptcy, insolvency, receivership or other statutory or
common law proceedings or arrangements involving the Borrower or the
readjustment of the Borrower's liabilities or any assignment for the benefit of
creditors or any marshalling of the assets or liabilities of the Borrower
(hereinafter collectively referred to as a "Reorganization") or (ii) other than
in connection with a Reorganization.
2.2 Event of Default; Repayment of Junior Indebtedness.
No payment, direct or indirect, on account of principal or
premium, if any, interest or otherwise on or in respect of Junior Indebtedness
shall be made to the SBA (or any holder of Junior Indebtedness) if, at the time
of such payment, there exists or shall have occurred an Event of Default and the
Senior Indebtedness has not been paid in full.
2.3 Distributions in Reorganization.
2.3.1 In the event of any Reorganization, then all Senior
Indebtedness owing shall first be paid, before any payment or distribution
whatsoever is made upon or in respect of any Junior Indebtedness, and in any
such proceedings, any and all payments or distributions of any kind or
character, whether in cash, property, securities or otherwise (or any
combination of the foregoing), which is or may be payable or deliverable upon,
in respect of, or to or for the benefit of such Junior Indebtedness shall be
paid or delivered directly first to the Banks, in proportion to the extent they
hold Senior Indebtedness, until all such Senior Indebtedness has been paid and
satisfied in full. The SBA hereby authorizes the Banks, to the extent they hold
Senior Indebtedness, to the extent permitted by law, to accept, receive and
retain any and all payments or distributions, it being understood that any
monies or other assets so received shall be applied first to the payment in full
of the Senior Indebtedness (as set forth above) and any remainder shall be
transferred to the SBA (or upon written approval of the SBA to the holders of
any of the Junior Indebtedness). If, notwithstanding the foregoing, during any
such Reorganization, any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property, securities or otherwise, shall
be, directly or indirectly, received by (or the benefit of such payment or
distribution shall accrue, directly or indirectly, to) the SBA (or any holder of
Junior Indebtedness) before all Senior Indebtedness is paid in full, such
payment or
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distribution shall be immediately paid over first to the Banks, in proportion to
the Senior Indebtedness held by each Bank and to the extent they hold Senior
Indebtedness, provided all such Banks consent in writing to the proposed
distribution, and then, but in no event unless and until all such Senior
Indebtedness has been paid in full, to the SBA.
2.3.2 In the event that any Senior Indebtedness is paid in full
and subsequently, for whatever reason (including, but not limited to, an order
or judgment for disgorgement of a preference under any law regarding
reorganization, fraudulent conveyance or fraudulent transfer or the settlement
of any claim in respect thereof), former or satisfied Senior Indebtedness
becomes unpaid or unsatisfied, then the priorities provided in this Agreement
shall again be operative until all such Senior Indebtedness shall have been paid
in full.
2.3.3 The provisions of this Agreement shall continue to be
effective regardless of whether the Borrower shall have taken advantage of or
been subject to any bankruptcy, Reorganization or similar proceeding.
2.4 Effect of Provisions. The provisions hereof as to payment
priorities are solely for the purpose of defining the relative rights of holders
of Senior Indebtedness, on the one hand, and the SBA (or its assigns) as holders
of Junior Indebtedness, on the other hand, and, except to the extent otherwise
provided in this Agreement, none of such provisions shall impair, as between the
Borrower and the SBA (or any holder of Junior Indebtedness), the obligations of
the Borrower, which are unconditional and absolute, to pay the Junior
Indebtedness, nor shall any such provisions prevent the SBA from exercising all
remedies otherwise permitted by applicable law or under the terms of any
agreement governing Junior Indebtedness, as the case may be, upon a default
thereunder; provided, however, that to the extent that any terms or provisions
of any agreement governing Junior Indebtedness contradict or conflict with any
terms or provisions of this Agreement, the terms or provisions in this Agreement
shall prevail, except as hereinafter set forth in Section 3 hereof.
3. Escrow Collateral. The parties hereto have entered into the
Custodian Agreement pursuant to which the Custodian will hold the Escrow
Collateral as security for the Senior Indebtedness and the Junior Indebtedness.
If any conflicts arise between this Agreement and the Custodian Agreement with
respect to the Escrow Collateral, then the Custodian Agreement shall govern. As
provided in the Custodian Agreement, Borrower shall have the right to substitute
or add other senior lenders, subject to the limitations on indebtedness set
forth in the SBA Agreement and provided no Event of Default exists and is
continuing and to take all actions in respect of the Escrow Collateral as
provided
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in the Custodian Agreement; provided, however, the rights of any substitute or
additional senior lender shall be subject to such senior lender's execution of
this Agreement, the Custodian Agreement and such other agreements among the
parties as are in effect from time to time.
4. Requirement of Notice.
4.1 The SBA agrees to notify the Borrower and each of the Banks or
other senior lenders upon becoming aware of any of the following:
4.1.1 The occurrence of any payment default or Event of Default;
or
4.1.2 The curing by Borrower of any Event of Default.
4.1.3 The transfer of any Junior Indebtedness, specifying the name
and address of the transferee.
4.2 Each of the Senior Lenders agrees to notify the Borrower and SBA
and the other Senior Lenders upon becoming aware of any of the following:
4.2.1 The occurrence of any payment default or Event of Default;
4.2.2 The waiver by any Bank of any payment default under its Loan
Agreement or any other agreement governing Senior Indebtedness, as applicable;
or
4.2.3 The transfer of any Senior Indebtedness, specifying the name
and address of the transferee.
5. Consent to Grant of Junior Security Interest. The Banks hereby
consent to the grant by the Company to the SBA of a security interest in the
Escrow Collateral which security interest shall rank junior in priority to the
security interests of the Banks. The Banks further consent to the execution of
the SBA Agreement.
6. Rights of Action.
6.1 If any senior Lender has declared an acceleration of Senior
Indebtedness or if an Event of Default under 1.1b. hereof has occurred, the SBA
may declare, claim, permit or seek the benefit of an acceleration of the Junior
Indebtedness or avail itself of any other remedy available under the Small
Business Investment Act of 1958, as amended, or the regulations promulgated
thereunder, but the rights of the SBA (or any holder of Junior Indebtedness)
thereupon and any payments, distributions, redemptions, defeasance, purchases,
acquisitions
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or retirements, direct or indirect, whether in whole or in part, upon or in
respect thereof shall be subject to all other provisions of this Agreement.
7. Amendments.
7.1 (a) Each holder of Senior Indebtedness hereby reserves the right,
without the consent of the SBA (or any holder of Junior Indebtedness) but with
the required consent of the Borrower, if any, to modify, amend, waive or release
any of the terms of the Senior Indebtedness held by such holder of Senior
Indebtedness, or any other document executed in connection with such Senior
Indebtedness, or any other document relative thereto, and to exercise or refrain
from exercising any powers or rights, in whole or in part, which such holder of
Senior Indebtedness may have thereunder; and such modification, amendment,
waiver, release, exercise or failure to exercise shall not affect the rights of
any such holder of Senior Indebtedness under this Agreement.
(b) The SBA (or any holder of Junior Indebtedness) hereby reserves
the right, without the consent of the Banks (or any holder of Senior
Indebtedness) but with the required consent of the Borrower, if any, to modify,
amend, waive or release any of the terms of the Junior Indebtedness held by such
holder of Junior Indebtedness, or any other document executed in connection
with such Junior Indebtedness, or any other document relative thereto, and to
exercise or refrain from exercising any powers or rights, in whole or in part,
which such holder of Junior Indebtedness may have thereunder; and such
modification, amendment, waiver, release, exercise or failure to exercise shall
not affect the rights of the SBA or any such holder of Junior Indebtedness under
this Agreement.
7.2 The Borrower shall furnish each party hereto with a copy of any
amendment to any agreement relating to Senior Indebtedness or Junior
Indebtedness; provided, however, that the failure of the Borrower so to furnish
any such amendment shall in no way affect the enforceability of any amendment
effected in accordance with this Agreement or in any other way affect the
relative rights of the parties hereto.
8. Further Assurances. The SBA, as a holder of Junior Indebtedness,
covenants to execute and deliver to each other holder of Senior Indebtedness,
such further instruments and to take such further action as may be reasonably
necessary at any time or times in order to effectuate the priority provisions of
this Agreement.
9. Conflicts with Other Agreements. After giving effect to this
Agreement, there are no agreements between any Senior Lender and the Borrower as
a result of which Borrower is or will
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be in violation of any of the terms of any of the Loan Agreements, the related
notes or security documents.
10. Notices. Any notice or other communication in connection with this
Agreement shall be in writing addressed as provided below and delivered by
express delivery (including overnight courier) providing receipt of delivery or
mailed by certified or registered mail, postage prepaid, return receipt
requested, or transmitted by telex or facsimile transmission with a copy sent by
first class mail:
If to Israel Discount Bank, to it at the following address:
Israel Discount Bank of New York
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to Bank Leumi Trust Company of New York, to it at the following
address:
Bank Leumi Trust Company of New York
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to Bank Hapoalim B.M., to it at the following address:
Bank Hapoalim B.M.
1177 Avenue of the Americas
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Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to Extebank, to it at the following address:
Extebank
1001 Avenue of the Americas
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Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to:
Extebank
1001 Avenue of the Americas
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Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Senior Vice President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to the SBA, to it at the following address:
United States Small Business Administration
Office of Investment
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Attention: Director, Office of Investment
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
United States Small Business Administration
Office of General Counsel
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Attention: Chief Counsel for Investment
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to the Borrower, to it at the following address:
Elk Associates Funding Corporation
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Stursberg & ▇▇▇▇▇
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Attention: C. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Telecopy: 212-922-0995
or at such other addresses as the addressee shall have specified by notice given
in compliance with this Section. Any such notice or communication, if given or
made by prepaid, registered or certified mail or by recorded express delivery,
shall be deemed to have been received on the earlier of when actually received
or five (5) business days after the same was posted or given to such express
delivery service (and in proving such it shall be sufficient to prove that the
envelope containing the same was
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properly addressed and posted or given to such service as aforesaid) and if
given or made by telex or facsimile transmission shall be deemed to have been
received at the time of dispatch.
11. Successors; Continuing Effect, etc. This Agreement is being
entered into for the benefit of, and is binding upon, the Borrower, the Banks,
any other holders of Senior Indebtedness and their respective successors and
assigns and the SBA and its respective successors and assigns. This Agreement
shall be a continuing agreement and shall be irrevocable and shall remain in
full force and effect so long as there is any Senior Indebtedness outstanding.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY
THEREIN.
13. CONSENT TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURT OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OUT OF THE AFOREMENTIONED COURT IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE RESPECTIVE PARTY HERETO AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 10
HEREOF, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF SENIOR OR JUNIOR INDEBTEDNESS To
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
14. The headings in this Agreement are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof.
15. This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
ELK ASSOCIATES FUNDING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
ISRAEL DISCOUNT BANK OF NEW YORK
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
BANK LEUMI TRUST COMPANY
OF NEW YORK
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
BANK HAPOALIM B.M.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
By:/s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Title: Vice President
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EXTEBANK
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Assoc. Admin. for Ins.
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