Exhibit 99.1
SECURITY AGREEMENT
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THIS IS A SECURITY AGREEMENT dated as of July 11, 2001, between
Microlog Corporation, a Virginia corporation (the "Borrower"), and TFX Equities
Incorporated, a Delaware corporation ("Lender").
Terms used herein with initial capital letters without definition have
the meanings specified therefor in section 5.
Background
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In order to induce the Lender to make loans, advances or other
financial accommodations requested by the Borrower or Microlog Corporation of
Maryland, a Maryland corporation ("MCM") from time to time, the Lender desires
and the Borrower is willing to grant, a security interest in certain property of
the Borrower as security for Borrower's obligations or the obligations of MCM to
repay such loans, advances or accommodations or any other liability or
obligation now owed or hereafter owing by the Borrower or MCM to Lender,
including Borrower's or MCM's obligation to pay all costs and expenses including
reasonable attorneys' fees incurred by Lender in collecting any amount due from
Borrower or MCM (all such liabilities and obligations of Borrower or MCM
collectively the "Secured Indebtedness"). MCM is a subsidiary of Borrower, and
Borrower expects to derive substantial direct and indirect benefit from the
extension of such credit accommodations to MCM. Borrower recognizes that this
Security Agreement will form part of the inducements to Lender to entertain
requests to extend credit accommodations to Borrower or MCM, and that but for
this Security Agreement, such credit accommodations would not be extended or
maintained by Lender for the benefit of Borrower or MCM, or both of them.
NOW THEREFORE, in consideration of the foregoing and such loans or
other Secured Indebtedness which may from time to time be advanced by Lender to
Borrower or MCM, the parties hereto intending to be legally bound hereby, agree
as follows:
1. SECURITY
1.1. Grant of Security Interest.
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To secure (a) the payment of the principal of and interest on the
Secured Indebtedness, (b) the payment and performance of all other obligations
of Borrower hereunder or under any note or other evidence of Secured
Indebtedness and (c) the payment and performance of all other obligations and
liabilities of Borrower to Lender (whether primary, secondary, direct,
contingent, sole, joint or several) under any other agreement or note or
otherwise, whether now held by Lender or hereafter acquired or contracted for,
Borrower hereby pledges, assigns, transfers and grants to Lender a security
interest in the following and all proceeds thereof:
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(i) All Equipment, machinery, motor vehicles, furniture,
fixtures and all other tangible personal property and all
of Borrower's rights, title and interest therein
(including any such property held by Borrower as lessee or
in which Borrower otherwise may hold any property
interest) now or hereafter held or acquired by Borrower,
wherever located, together with all parts, fittings,
accessories, accessions, substitutions therefor and
replacements thereof, and all of Borrower's rights and
powers in, under or to any lease or other contract
pursuant to which Borrower has acquired or may acquire any
interest in any such tangible personal property;
(ii) All Inventory and parts therefor, now owned or at any time
hereafter acquired by Borrower;
(iii) All Accounts now owned or at any time hereafter acquired
by Borrower;
(iv) All General Intangibles now owned or at any time hereafter
acquired by Borrower; and
(v) All leases and other interests in real property now owned
or held, as lessor or lessee, or hereafter acquired by
Borrower;
(vi) All Chattel Paper, Documents, Instruments, Deposit
Accounts and securities or other Investment Property, now
owned or hereafter acquired by Borrower;
including, to the extent pertinent to any such Collateral or proceeds thereof,
and subject to any limitations which may be provided in this Agreement on the
time of exercise thereof, all of the rights of Borrower to give or receive any
notice, consent, waiver, demand, or approval under or in respect of any thereof,
to exercise any election or option thereunder or in respect thereof, to demand,
collect, receive and give receipts for all amounts payable under or in respect
thereof or any policy of insurance relating thereto (and to settle, compromise,
compound or otherwise release or adjust any claim under any such Collateral or
any claim of the insured under any such policy of insurance) and to commence and
prosecute any suits, actions or other proceedings at law or in equity to collect
any such amounts or otherwise to enforce any rights of Borrower under or in
respect thereof.
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1.2. Further Action and Assurances by Borrower.
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Borrower will take all such further action as Lender may at
any time request to evidence or confirm the assignments and grants of security
interest and powers herein contained, including without limitation:
(a) Furnish to Lender such information as to the Collateral
(or any part thereof), in such form and detail, as Lender may request from time
to time, and permit Lender to examine all of Borrower's records relating thereto
at any time and to make extracts therefrom, and to inspect Borrower's Inventory
and Equipment; and
(b) Give Lender assignments, in form acceptable to Lender, of
such Borrower's Accounts or groups of Accounts, money due and to become due to
Borrower under contracts, and Borrower's Patents and Patent Rights, as may be
specified by Lender.
1.3. Perfection of Security Interests.
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Borrower will, at its expense, execute, authenticate,
acknowledge, deliver, file and record all such documents (including financing
statements, assignments and other instruments of transfer) and take all such
other action as Lender may reasonably request to perfect and continue perfected
under applicable law the security interests granted hereby or pursuant hereto,
subject to no prior liens, encumbrances or security interests (other than those
held by Silicon Valley Bank). The Borrower hereby irrevocably constitutes and
appoints the Lender and each of its officers as attorney-in-fact of Borrower,
with full power of substitution and revocation, in the name and on behalf of
Borrower to execute, acknowledge, file and record any such financing statement,
assignment or other instrument of transfer and take all such other action
provided for in the preceding sentence. Lender shall give to Borrower a copy of
any such document or instrument and a description of any such action, but any
failure or delay to do so shall not affect or limit the authority granted in
this Section.
1.4. Disposition of Collateral.
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So long as no Default shall have occurred and be continuing or
would result from any of the following actions, Borrower may in the ordinary
course of its business dispose of any Collateral which constitutes tangible
personal property and enforce and collect Collateral which constitutes Accounts
or General Intangibles, and Borrower may retain, use and apply for its corporate
purposes the Collateral and proceeds thereof.
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1.5. Action by Lender After Default.
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If a Default shall have occurred and be continuing (but not
otherwise), Lender may exercise the rights and powers set forth below:
1.5.1. Lender may receive and collect all amounts payable to
and receivable by Borrower under or in respect of any of the
Collateral, may make all waivers and agreements, give all notices,
consents and releases and do any and all other things whatsoever which
Borrower is or may be entitled to do thereunder or under any policy of
insurance relating thereto and, in general, exercise any rights granted
in respect thereof to Lender pursuant to the last clause of Section
1.1. Borrower hereby waives any requirement of law for notice of any
default, payment or partial payment by any Person liable under or in
respect of any Collateral or policy of insurance, and Borrower hereby
consents to and waives notice of the granting by Lender, as assignee
and secured party hereunder acting pursuant to the powers and authority
granted to it herein or pursuant hereto, of indulgences to or
extensions of time for payment of any obligation of any Person which
may constitute or be in respect of any Collateral, Lender's taking or
releasing of any security for the obligation of any such Person,
Lender's acceptance of partial payments in respect thereof or Lender's
settlement, compromising or compounding of any such obligation, all in
such manner and at such time or times as Lender may deem advisable.
1.5.2. In furtherance of the assignment and granting of rights
to Lender provided for in Section 1.1 and for the purposes thereof (and
not otherwise), Borrower hereby irrevocably constitutes and appoints
Lender as attorney-in-fact of Borrower, with full power of substitution
and revocation, in the name of Borrower or otherwise to demand,
enforce, collect, receive and receipt and give releases for any
payment, indemnity or other performance becoming due or arising under
any Collateral or any policy of insurance relating thereto (including
any return of insurance premiums), to endorse and collect any checks,
drafts or other instruments payable to Borrower therefor, and to do and
take such other action (or exercise any rights), and to file any claims
or institute any proceedings for any of the foregoing which Lender may
deem appropriate and to compromise any such demand, claim or action.
1.5.3. Lender shall have no obligation to Borrower or any
other Person to take any action to enforce any right or power granted
hereby except (a) such action as may be commercially reasonable in the
circumstances, (b) which shall have been requested of Lender by
Borrower in writing and (c) in connection with which Lender shall have
received from or on behalf of Borrower indemnity against costs,
expenses and liabilities which may be incurred by it in connection
therewith in amounts and form satisfactory to Lender.
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1.6. Termination of Security Interests.
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When and only when Borrower shall have indefeasibly paid and
performed in full all the Secured Indebtedness then outstanding and interest
accrued thereon, the security interests granted to Lender pursuant to Section
1.1 shall terminate and, at the request and expense of Borrower, Lender will
execute and deliver to Borrower such written evidence thereof, including
termination statements, and take such other action as Borrower may reasonably
request.
1.7. Representations and Covenants as to Location of Offices.
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Borrower represents and covenants as follows:
(a) Borrower is a corporation duly organized and existing
under the laws of the State of Virginia.
(b) Borrower's exact legal name is as set forth in the first
paragraph of this Security Agreement.
(c) Collateral which is tangible personal property is located
at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(d) Borrower will give advance written notice to Lender before
making any change in the foregoing.
2. AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that so long as any Secured Indebtedness
shall be outstanding:
2.1. Payment of Principal and Interest.
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Borrower will pay upon demand all principal on the Secured
Indebtedness and will pay when due all interest accrued on the Secured
Indebtedness and all other amounts payable by Borrower hereunder.
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2.2. Payment of Taxes.
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Borrower will pay or cause to be paid when due all taxes,
assessments, governmental charges or levies imposed upon it or its income,
profits or any property belonging to it and also pay or cause to be paid all
claims for labor, materials and supplies which, if unpaid, might become a lien
or charge upon any of its properties or assets; provided, however, that Borrower
shall not be required to pay any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings promptly initiated and diligently conducted by it, no proceedings in
foreclosure or for the sale of any property of Borrower shall have been
commenced (or such proceedings shall have been stayed pending the disposition of
such contest of validity), and Borrower shall have set aside on its books
adequate reserves with respect thereto.
2.3. Maintenance of Properties.
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Borrower will at all times maintain, preserve, protect in good
working order and condition its property used or useful in the conduct of its
business (ordinary wear and tear and obsolescence excepted).
2.4. Insurance.
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Borrower will carry adequate insurance (including fire and
extended coverage insurance) issued by responsible insurers in amounts
sufficient to comply with any applicable co-insurance provisions and against all
such hazards as are usually carried by companies engaged in the same or a
similar business similarly situated, and will deliver such evidence thereof to
Lender as it may reasonably request.
2.5. Maintenance of Patents and Other General Intangibles.
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Borrower will take all such action as may be required from
time to time (a) to prosecute successfully all applications for Patents,
trademarks, service marks and other similar items of Collateral, except where
the Borrower makes a good faith business judgment that such prosecution would
not be in the best interests of the Borrower, (b) to maintain effective, in
force and in good standing all Patents, trademarks, service marks and other
similar items of Collateral in all jurisdictions where such rights shall have
been filed, granted or issued, except where the Borrower makes a good faith
business judgment that the maintenance of such items would not be in the best
interests of the Borrower, and (c) to maintain in force and effect all contracts
and contract rights, the termination of which would materially adversely affect
the value of the Collateral, taken as a whole.
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2.6. Borrowing Under the Silicon Valley Bank Line of Credit.
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Until such time as all of the Secured Indebtedness shall have
been repaid to the Lender, the Borrower shall not draw any funds pursuant to the
Loan and Security Agreement, dated as of March 24, 1999 and as amended through
January 26, 2001 among the Borrower, Microlog Corporation, and Silicon Valley
Bank without the prior written consent of Lender.
2.7 Further Assurances.
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Borrower will execute and deliver all such instruments and
take such other action as Lender may reasonably request to effectuate the
purposes of this Agreement and to secure the rights and remedies conferred upon
Lender hereby or pursuant hereto.
3. DEFAULT AND REMEDIES
3.1. Events of Default.
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The occurrence of any one or more of the following events
shall constitute an Event of Default hereunder:
(a) The failure by Borrower to pay any amount of principal of
or interest on any Secured Indebtedness when due, within 30 days after it
becomes due;
(b) The failure by Borrower to duly perform or observe any of
its other covenants set forth herein or in any note or other evidence of any
Secured Indebtedness and such failure shall continue for 15 days after Lender
shall have given Borrower notice thereof;
(c) The entry of an order for relief against Borrower in an
involuntary case under the Federal Bankruptcy Code, or the entry of an order
adjudicating Borrower a bankrupt or insolvent under any similar bankruptcy or
insolvency law, or the entry of an order appointing a receiver or trustee for
Borrower or any of its property, or approving a petition seeking reorganization,
dissolution, liquidation or other similar relief under the bankruptcy or other
similar laws of the United States or any state or other jurisdiction, or the
filing by Borrower of a petition commencing a voluntary proceeding under any
such law or a petition, answer or other document seeking or consenting to any of
the foregoing, or the filing by Borrower of a petition to take advantage of any
debtor's act or the making by Borrower of a general assignment for the benefit
of creditors or admitting in writing its inability to pay its debts as they
mature;
(d) The issue of attachment, garnishment or any execution
process or the making of any levy against any property of Borrower and within 60
days thereafter (but prior to any sale or other disposition pursuant to such
process) such attachment, garnishment, execution process or levy shall not have
been discharged; and
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(e) The entry of a final judgment for the payment of money
against Borrower which, within 60 days after such entry, shall not have been
discharged or execution thereof stayed pending appeal or shall not have been
discharged within 60 days after the expiration of any such stay.
3.2. Remedies Against Collateral.
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Upon the occurrence of any Event of Default or at any time
thereafter while such default shall remain uncured, Lender shall have and may
exercise all of the rights and remedies in respect of the Collateral of a
secured party under the Uniform Commercial Code, as well as all of its other
rights and remedies in respect of the Collateral provided herein or provided
under other applicable law, including the right, with or without judicial
proceedings, without notice to Borrower, to take possession of any Collateral
not then in Lender's possession and to dispose of it or Borrower's interest
therein, at public or private proceedings for the sale, lease or other
disposition thereof (and Lender may be the purchaser thereof at any such public
proceedings for sale) and to apply such Collateral or the proceeds thereof to
the obligations secured hereby. Any notice of any such sale required by law
shall be reasonably and sufficiently given if given to Borrower at least 15 days
prior to the date of such disposition at the address and in the manner
hereinafter provided for notices. After application of the proceeds of
Collateral or any disposition thereof to the obligations secured thereby,
Borrower will be entitled to any surplus and will remain liable for any
deficiency.
3.3. Delay or Omission Not Waiver.
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No delay or omission on the part of Lender to exercise any
right upon the occurrence of any Event of Default shall impair any such right or
shall be construed to be a waiver of any such default or any acquiescence
therein. No waiver of any default hereunder shall affect any later default or
shall impair any of Lender's rights hereunder. No single, partial or other
exercise of any right by Lender shall preclude further or other exercise
thereof.
3.4. Remedies Cumulative.
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The remedies provided for herein and in any instrument or
agreement made pursuant hereto shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies existing, in Lender's
favor, under the applicable law (including equity) of any jurisdiction.
3.5. Lender May Perform Obligations of Borrower.
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If Borrower fails to perform any of its covenants or
obligations hereunder, Lender may, at its option, perform such covenant or
obligation on behalf of and for the account of Borrower, whereupon the costs and
expenses thereof incurred by Lender shall forthwith be paid on demand to Lender
by Borrower.
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3.6. Expenses of Enforcement.
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Borrower will pay all reasonable expenses of Lender, including
attorneys' fees, incurred by Lender in enforcing its rights and remedies
hereunder or under any Secured Indebtedness. If Lender brings suit (or files any
claim in any bankruptcy, reorganization, insolvency or other proceeding) to
enforce any of its rights hereunder or under any Secured Indebtedness and shall
be entitled to judgment (or other recovery) in such action (or other proceeding)
then Lender may recover, in addition to all other amounts payable hereunder or
under any Secured Indebtedness, its reasonable expenses in connection therewith,
including attorneys' fees, and the amount of such expenses shall be included in
such judgment (or other form of award).
4. COMMUNICATIONS AND NOTICES
4.1. Form, Addresses, Etc.
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All notices, requests and other communications given or made
in connection with this Agreement or any transaction contemplated hereby shall
be in writing, and, unless actual receipt is stated herein to be required, shall
be deemed to have been validly given three days after being placed in the U.S.
mail if mailed within the continental United States, first class postage
prepaid, addressed as follows, or delivered to the individual or division or
department to whose attention notices to a party are to be addressed, until some
other address (or individual or division or department for attention) shall have
been designated by notice given by a party to the other:
To Borrower:
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Microlog Corporation
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
To Lender:
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TFX Equities Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
Plymouth Meeting, PA. 19462
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
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5. DEFINITIONS
5.1. Meanings.
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The following words and phrases as used with initial capital
letters in this Agreement, whether in singular or plural, shall have the
meanings indicated:
(a) "Account" means "account" as that term is defined in the
Uniform Commercial Code.
(b) "Chattel Paper" means "chattel paper" as that term is
defined in the Uniform Commercial Code.
(c) "Collateral" means all property and rights in which Lender
may hold a security interest pursuant to this Agreement.
(d) "Default" means an event or condition which would, with
the passage of time or the giving of notice or both, constitute an Event of
Default.
(e) "Deposit Accounts" means "deposit accounts" as that term
is defined in the Uniform Commercial Code.
(f) "Documents" means "documents" as that term is defined in
the Uniform Commercial Code.
(g) "Equipment" means "equipment" as that term is defined in
the Uniform Commercial Code.
(h) "Event of Default" means each of the events specified in
Section 3.1.
(i) "General Intangibles" means "general intangibles" as that
term is defined in the Uniform Commercial Code, including, without limitation,
customer lists, books and records (including, without limitation,
correspondence, credit files, tapes, cards, computer runs, computer programs and
other papers and documents, whether in the possession or control of Borrower or
any computer service bureau), rights and franchises in or under copyrights,
Patents, Patent Rights, service marks and trademarks (and applications for
service marks and trademarks), manufacture and supply agreements,
distributorship agreements, contracts, logos, trade names, royalties, brand
names, plans, blueprints, patterns, trade secrets, licenses, jigs, dies, molds
and formulae.
(j) "Instruments" means "instruments" as that term is defined
in the Uniform Commercial Code.
(k) "Inventory" means "inventory" as that term is defined in
the Uniform Commercial Code.
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(l) "Investment Property" means "investment property" as that
term is defined in the Uniform Commercial Code.
(m) "Patents" means United States and foreign patents in
respect of any invention, including original and reissued patents, and
applications for any such patent.
(n) "Patent Rights" means all rights to apply for the issue or
to receive or obtain the assignment of any Patents, including all divisional,
continuing, renewal, reissue and other applications therefor, and all other
rights (including licenses) respecting Patents.
(o) "Person" means an individual, a corporation, partnership,
trust, unincorporated association or a government or political subdivision or
agency thereof.
(p) "Secured Indebtedness" means all indebtedness secured
hereby as defined under the heading "Background."
(q) "Uniform Commercial Code" means the Uniform Commercial
Code as adopted in Pennsylvania at the date of this Agreement.
6. MISCELLANEOUS
6.1. Successors and Assigns.
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This Agreement, and all rights and powers granted hereby, will
bind and inure to the benefit of the parties hereto and their respective
successors, heirs and assigns.
6.2. Governing Law.
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This Agreement has been made, executed and delivered in, and
is to be governed and construed in accordance with the laws of the Commonwealth
of Pennsylvania except to the extent that the Uniform Commercial Code provides
for the application of the law of a state where either the Collateral or the
Borrower is located.
6.3. Headings Not Part of Agreement.
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The headings of the articles, sections and paragraphs hereof
are inserted for convenience only, form no part of this Agreement and shall not
be considered for the purpose of construing or interpreting the text hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROLOG CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
Title: President and CEO
TFX EQUITIES INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice Chairman
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