EXHIBIT 10.23
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated as of March 9, 1998 between ATLANTIC
DIGITAL INTERNATIONAL, INC., a Nevada corporation having its principal
office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ (hereinafter called the
"Borrower") and EXCEL BANK, N.A., national banking association,
(hereinafter called the "Bank").
The Borrower has requested the Bank to extend revolving credit to it in the
aggregate principal amount up to $500,000, the proceeds of which the
Borrower intends to use for its working capital requirements.
The Bank is willing to extend such credit to the Borrower up the terms and
conditions set forth in this Agreement. Accordingly the parties agree as
follows:
Section 1. CERTAIN DEFINITIONS. As used herein:
A. "Borrowing Base Limit" means at any time, an amount equal to 75% of the
book value of Eligible Receivables plus 40% of the book value of Eligible
Inventory. "Book value" as used in this definition means the dollar value
of such asset on Borrower's books, subject to audit confirmation by the
Bank.
B. "Business day" means a day other than a Saturday Sunday or legal holiday
observed by the Bank.
C. "Credit Facility" means the revolving credit provided for in Section 3.
D. "Eligible Inventory" means the dollar value on the Borrower's books
(subject to credit confirmation by the Bank) of inventory held by the
Borrower for use in the ordinary course of its business.
E. "Eligible Receivables" means accounts receivable of the Borrower, each
of which represents a bona fide sale or lease by the Borrower of its
customary inventory, which sale has been made thereby within 75 days or
less prior to the date of a requested advance by the Borrower under Section
3.
F. "Guarantee" means a guarantee executed and delivered by a Guarantor
pursuant to Section 6.A.5 hereof.
G. "Guarantor" means LEC Technologies, Inc. (formerly Leasing Edge Corp.).
H. "Note" means the promissory note of the Borrower substantially in the
form of Exhibit A to this Agreement evidencing its liability for all
indebtedness incurred under the credit facility provided for in Section 3.
I. "Prime Rate" means the lending rate called the Prime Rate by The Wall
Street Journal and published thereby. The Prime Rate for any computation
of interest under this Agreement and the Notes, means the Prime Rate
published on the day of such computation or, if the Prime Rate is not
published on such day, the Prime Rate last previously published.
J. "Subsidiary" mean any corporation more than 50% of whose issued and
outstanding voting stock (except directors' qualifying shares, if required
by law) at the time is owned by the Borrower or Guarantor (as the case may
be), directly or through one or more Subsidiaries.
Section 2. REPRESENTATIONS. The Borrower represents, covenants and
warrants that:
A. Corporate Existence and Power. It is duly incorporated and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact
the business in which it is presently engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification.
B. Corporate Authority. The making and performance by the Borrower of this
Agreement has been duly authorized by all necessary corporate action and
will not violate any provision of law or of its Certificate of
Incorporation or By-Laws or result in the breach of or constitute a default
under any indenture or other material agreement to which it is a party or
by which it or its property may be bound or affected.
▇.▇▇▇▇▇▇▇▇▇ Condition. The statements of income, reconciliation of capital
accounts, reconciliation and the balance sheet of the Borrower, certified
by Chief Financial Officer of the Guarantor, heretofore furnished to the
Bank, is complete and correct in all material respects, and fairly presents
the financial condition of such Borrower at the date of such balance sheet.
The Borrower does not have any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments which are substantial
in amount in relation to the financial condition of the Borrower except as
reflected or provided for in said balance sheet. Since September 30, 1997,
there has been no material adverse change in the financial condition of the
Borrower from that shown on its balance sheet as of that date.
D. Use of Proceeds. The Credit Facility will be used by the Borrower to
finance its general business purposes and no part of the proceeds will be
used to purchase or carry any "margin stock" (as such term or terms of
similar import and effect shall be defined in Regulation U of the Board of
Governors of the Federal Reserve System from time to time in effect) or to
extend credit to others for the purpose of carrying any such margin stock
or for any purpose which violates, or which is inconsistent with, the
provisions of Regulation X of said Board of Governors.
E . Titles, Etc. The Company has good and marketable title to all of their
properties and assets, real and personal, and none of such properties and
assets are subject to any mortgage, lien, pledge, charge, encumbrance,
security interest or title retention or other security agreement or
arrangement of any nature whatsoever except as permitted in Subsection 7.E
hereof.
F. Litigation. There is no suit or proceeding pending, or to the knowledge
of the Borrower threatened, against or affecting it, which suit or
proceeding exceeds $50,000 in aggregate damages claimed and, in the opinion
of the Borrower, is likely to have a material adverse effect on the ability
of the Borrower to repay the Credit Facility and interest and other charges
thereon.
G. ERISA Matters. Neither the Borrower nor any entity under common control
(within the meaning of the Employee Retirement Income Security Act of 1974,
as amended from time to time ("ERISA") with the Borrower has incurred, nor
to its knowledge is it likely to incur with the passage of time liability
in respect of any employee benefit plan (within the meaning of ERISA),
which would, in the reasonable opinion of the Bank, have a material adverse
effect on the ability of the Borrower to repay the Credit Facility and
interest and other charges thereon.
H. Year 2000 Compliance. In connection with its computer software relevant
for the normal operation of its business, the Borrower (i) is aware of the
risks associated with the date change from December 31, 1999 to January 1,
2000, (ii) is taking, or has taken, appropriate steps to remedy any
problems relating to the year 2000 date change that might adversely affect
its business, both prior to and following January 1, 2000, (iii) is taking,
or has taken, steps to assure that its clients, counter parties and
suppliers, including technology, telecommunications and software providers,
are able to meet the requirements of the year 2000 date change, as
applicable, and (iv) will complete all modifications, validation and
implementation required by the year 2000 date change by not later than
December 31, 1998.
I. Consents of Other Parties. No consent of any other person or entity is
required in connection with the execution, delivery, performance, validity
or enforceability of the Agreement or of any of the loan documents required
to be executed and delivered in connection herewith, except for the consent
of the Bank of America which has been obtained.
Section 3. CREDIT FACILITY. The Bank agrees, on the terms of this
Agreement, to make advances to the Borrower under this Section 3 from time
to time prior to October 15, 1998, at such time and in such amount as to
each advance as the Borrower shall request, up to but not exceeding in
aggregate principal amount at any one time outstanding $500,000. Within
such limit, and provided that the Bank does not demand repayment prior
thereto pursuant to Section 8, Borrower may borrow, prepay and reborrow
under this Section 3 from the date of execution of this Agreement to and
including October 15, 1998. The following provisions will apply to
advances under this Section 3:
A. Note, Advances, Term. Each advance from the Bank shall be in a minimum
amount of $10,000. The loan under this Section 3 shall be evidenced by,
and repaid with interest in accordance with the Note, dated the date of
this Agreement and payable on October 15, 1998.
B. Borrowing Base Limit.
(1) No advance by the Bank will be made to the Borrower if at the time
thereof the aggregate principal and interest outstanding on the Credit
Facility would, or by the making of such advance, exceed the Borrowing Base
Limits.
(2) The Borrower will provide to the Bank an accounts receivable aging
report and an inventory report, on or before the 10th day of each month,
with respect to the last preceding calendar inventory report, on or before
the 10th day of each month. Such report shall be in form and content
acceptable to the Bank.
(3) If, at any time, the aggregate principal and interest outstanding on
the Credit Facility exceeds the Borrowing Base Limit the Borrower will make
an immediate repayment to the Bank in reduction of the balance outstanding
on the Line to eliminate such excess.
C. Loan Account. The Bank shall open and maintain on its books a loan
account in the Borrower, s name showing the amount of each advance,
repayments, the computation and payment of interest, and any other amounts
due and sums paid hereunder. Such loan account shall be conclusive and
binding on the Borrower and the Bank as to the amount at any time due from
the Borrower, absent manifest error.
Section 4. MANNER OF BORROWING. The Borrower will give the Bank notice,
at the Bank's office referred to above, in accordance with written
instructions accepted by the Bank, specifying the amount and date of a
requested borrowing under Section 3. The Bank will deposit in the general
deposit account of the Borrower with the Bank the amount requested pursuant
to such section.
Section 5. PAYMENTS, ETC. All payments of principal, interest and other
charges hereunder will be made in lawful money of the United States of
America, in immediately available funds. Interest on the Note and other
charges will be calculated on the basis of actual interest on any Note
falls due on a Saturday, Sunday or public holiday observed by the Bank,
then such due date will be extended extended to the next succeeding full
business day of the Bank at such place and interest will be payable in
respect of such extension.
Section 6. CONDITIONS OF LENDING.
A. Initial Advance. The obligation of the Bank to make the initial advance
to be made by it hereunder is subject to the following conditions
precedent:
1. Signatures. The Borrower shall have certified to the Bank the name and
signature of signature of each officer of the Borrower authorized to sign
the Note and borrow hereunder. The Bank may conclusively rely on such
certification until it receives notice in writing to the contrary and has
had a reasonable opportunity to implement such change.
2. Opinion of Counsel. The Bank shall have received from a law firm
acceptable to the Bank, a favorable written legal opinion in a form of
satisfactory to the Bank and its counsel.
3. Proof of Corporate Action. The Bank shall have received certified
copies of all corporate action taken by the Borrower to authorize the
execution, delivery and performance of this Agreement and the Note and
borrowings hereunder, and such other documents as the Bank shall reasonably
require.
4. Security Agreement. The Borrower shall have executed and delivered to
the Bank a security agreement, in substantially the form of Exhibit B,
granting to the Bank a security interest in the Borrower's personal
property, including without limitation, all inventory, accounts receivable,
contract rights, general intangibles, leases, deposit accounts, and all
other business assets as security for the payment of all of the obligations
of the Borrower to the Bank.
5. Guarantees. Each Guarantor shall' have executed and delivered to the
Bank its unconditional guarantee of payment of the obligations of the
Borrower herein and hereafter incurred, in substantially the form of
Exhibit C.
6. Insurance in Force. The Borrower shall have in effect insurance of its
property against hazard and extended coverage and of its assets and
business, against liability, hazards and interruption in form and amount
acceptable to the Bank. Such insurance shall name the Bank as loss payee
as its interests may appear. The Borrower shall have provided to the Bank
a certificate or certificates from issuers of such insurance identifying
such insurance, wherein such insurers agree to give the Bank 10 days
written notice prior to any cancellation or material modification thereof.
7. Bank's Counsel. All legal matters incident to the transactions hereby
contemplated shall be satisfactory to counsel to the Bank.
B. Each Advance. The obligations of the Bank to make each advance to be
made by it under Section 3 (including the initial advance) is subject to
the following conditions precedent:
1. Defaults, etc. No event of default specified in 9 below, and no event
which with notice or lapse of time or both would become such an event of
default, shall have occurred and be continuing; the representations of the
Borrower in Section 2 shall be true on and as of the date of the making of
such loan with the same force and effect as if made on and as of such date.
2. Litigation. No lawsuit or proceeding shall be pending against the
Borrower which is likely to have a material adverse effect upon its
financial condition or upon its ability to carry out the transactions
contemplated hereby.
Section 7. PARTICULAR COVENANTS OF THE BORROWER. From the date hereof and
until the payment in full of the Notes outstanding hereunder and the
performance of all other obligations of the Borrower, Borrower agrees that,
unless the Bank shall otherwise consent in writing:
A. Financial Statements. Borrower will, and will cause each Guarantor to
deliver to the Bank:
1 . As soon as available, but in any event not later than 90 days after the
close of each fiscal year of the Borrower, a copy of the annual report for
such year for the Borrower, including therein balance sheets of the
Borrower at the end of such fiscal year, and related statements of income
and retained earnings of the Borrower for such fiscal year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal period, all in reasonable detail, prepared in accordance
with generally accepted accounting principles applied on a basis
consistently maintained throughout the period involved and with prior
periods, each such financial statements prepared by Chief Financial
Officer.
2. As soon as available, but in any event not later than 90 days after the
close of each fiscal year of the Guarantor, a copy of the annual audit
report for such year for the Guarantor and its Subsidiaries, including
therein a consolidated balance sheets of the Guarantor and its Subsidiaries
as at the end of such fiscal year, and related consolidated statement of
income and retained earnings of the Guarantor and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal period, all in reasonable
detail, prepared in accordance with generally accepted accounting
principles applied on a basis consistently maintained throughout the period
involved and with prior periods, such financial statements being certified
by independent certified public accountants of recognized standing selected
by the Guarantor and acceptable to the Bank.
3. As soon as available, but in any event not later than 60 days after the
end of each of the first three quarterly periods of each fiscal year of the
Borrower/Guarantor, unaudited balance sheets of the Borrower/Guarantor as
at the end of such fiscal quarter, and unaudited statements of income and
retained earnings of the Borrower/Guarantor for the period from the
beginning of such fiscal year to the end of such fiscal quarter, setting
forth in comparative form the corresponding figures for the preceding
fiscal period, all in reasonable detail, prepared in accordance with
generally accepted accounting principles applied on a basis
consistently maintained throughout the period involved and with prior
periods and prepared by the chief financial officer of the
Borrower/Guarantor (subject to normal year-end audit adjustment).
C. Payment If Control Or Management Changes. If, during the continuance of
this Agreement, LEC Technologies, Inc. shall cease to be engaged in the
active management thereof, or shall own less than 100% of the aggregate
stock of the Borrower entitled to vote on its management and affairs, the
Borrower will immediately notify the Bank and will, upon demand by the
Bank, pay the entire principal amount outstanding under the Note, without
premium, together with accrued interest and other fees thereon, on the date
specified in such demand, which shall be not less than 30 days after such
demand.
D. Indebtedness. Borrower will not incur, assume', allow to exist or have
outstanding or otherwise become directly or indirectly liable in respect of
any indebtedness for borrowed money or for the deferred purchase price of
property purchased, except (i) that which was reflected in the financial
statements referred to in Section 2.C; and (ii) accounts payable incurred
in the ordinary course of business.
E. Liens, etc. Borrower will not create, assume, or allow any security
interest or lien (including judicial liens) on any property or interest in
property (real or personal, tangible or intangible) Borrower now owns or
hereafter acquires, except (i) mortgages, deeds of trust and security
agreements in favor of the Bank; (ii) liens for taxes not overdue; (iii)
liens outstanding on the date of this Agreement.
F. Capital Expenditures. Borrower shall not make any additional capital
expenditures exceeding $50,000 in the aggregate in any fiscal year of
Borrower.
G. Contingent Liabilities. Borrower shall not guarantee, endorse,
contingently agree to purchase or otherwise become or be contingently
liable upon the obligation or in connection with the stock or dividends of
any other person, firm or corporation, except a guarantee of the
obligations to the Bank of LEC Technologies, Inc.
H. Payments, Distributions and Loans. Borrower shall not make:
1. Loans to any person or business entity, except in the ordinary course of
its business, nor directly or indirectly make any distributions in cash or
kind or pay any dividend on its stock or redeem or retire any of its stock,
whether now or hereafter outstanding except for distributions or dividends
to the Guarantor;
2. Salary or bonus payments other than commissions, directly or indirectly,
to any officer, director or stockholder of the Borrower or any affiliate of
the Borrower or to a Guarantor, in excess of an aggregate of $250,000;
3. Principal repayments or interest payments to any officer, director,
stockholder or to a Guarantor.
I. Mergers, Etc. Borrower shall not merge or consolidate with any
corporation, or sell, lease, assign, transfer or otherwise dispose of
(whether in one transaction or in a series of related transactions) any of
its assets, whether now owned or hereafter acquired, if the aggregate value
thereof represents a material part of the aggregate value of all assets
ofBorrower, nor will it acquire by purchase or otherwise all or
substantially all of the assets of any business entity, except that
Borrower may sell inventory (as defined in the Uniform Commercial Code) in
the ordinary course of business.
J. Taxes. Borrower will pay and discharge all taxes, assessments and
governmental charges or levies, imposed on it or on its income or profits
or on any of its property, prior to the date on which penalties attach
thereto, except that Borrower will not be required hereby to pay any such
tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings.
K. Litigation. Borrower will promptly give notice in writing to the Bank
of all litigation and of all proceedings before any governmental or
regulatory agencies directly affecting the Borrower, except any litigation
or proceeding which, if adversely determined, would not involve a liability
of $50,000 or more or. which is fully covered by effective insurance.
L. Insurance. Borrower will maintain in effect and in good standing the
insurance referred to in Section 6.A.(6).
M. Deposits. Borrower will maintain a deposit account at the Bank upon
the same terms and conditions (including interest and charges) as are
available to all other depositors of the Bank on identical types of
accounts.
N. Stock and Debt. Borrower will not sell or otherwise dispose of its
stock or indebtedness.
Section 8. DEFAULTS. If any one of the following "events of default" shall
occur and be continuing, namely:
A. Any representation or warranty made by Borrower in Section 2 shall prove
to have been incorrect in any material respect or shall be breached; or
B. Default in the payment when due of any principal of or interest on the
Note and the continuation thereof beyond any grace period provided for the
curing thereof; or
C. Default by Borrower in the performance of any agreement in subsections
of Section 7 and the continuation thereof beyond any grace period provided
for the curing thereof; or
D . Except as otherwise provided below in Section 8.E hereof, default by
Borrower or a Guarantor in the performance of any other agreement which
shall remain unremedied for thirty days; or
E . Default by any Guarantor of any of its present or future obligations,
liabilities or indebtedness to the Bank and the continuation thereof beyond
any grace period provided for the curing thereof.
F. Any bond, debenture, note or other evidence of indebtedness of Borrower
shall become due before stated maturity thereof by reason of default or
shall become due by its terms and shall not, within twenty days following
such due date, be paid, extended or stayed by order of a court of competent
jurisdiction; or
G. Borrower or any Guarantor shall (1) apply for or consent to the
appointment of a receiver, trustee or liquidator of itself or of its
property, (2) be unable or admit in writing its inability, to pay its debts
as they mature, (3) make a general assignment for the benefit of creditors,
(4) be adjudicated a bankrupt or insolvent, or (5) file a voluntarily
petition in bankruptcy or a petition or answer seeking reorganization or
an, arrangement with creditors or to take advantage of any insolvency law
or an answer admitting the material allegations of a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding, or corporate
action shall be taken by it to effect any of the foregoing; or
H. An order, judgment or decree shall be entered, without the application,
approval or consent of Borrower or a Guarantor, by any court or
governmental agency of competent jurisdiction, approving a petition seeking
its reorganization, or appointing a receiver, trustee liquidator,
intervenor or the like thereof, or of all or a substantial part of its
assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of 30 consecutive days.
THEREUPON, in case of an event of default set forth in Section 8.G. or H.,
the principal and interest on the Note shall be immediately due and payable
without notice or demand, and if such event is any other event of default
specified above, the Bank may, by written notice to the Borrower, declare
the principal of and interest on the Note to be forthwith due and payable,
whereupon the same will become forthwith due and payable, without protest,
presentment, notice or demand, all of which are expressly waived by
Borrower.
Section 9. NOTICES. All notices, requests and demands will be given to or
made upon the respective parties hereto at their respective addresses
specified below or, as to any party, at such other address as may be
designated by it in a written notice to all other parties. All notices,
requests, consents and demands hereunder will be effective when duly
deposited in the mails postage prepaid for certified or registered
delivery, or delivered to a reputable delivery agency with instructions for
delivery to the addressee within twenty four hours, or when received if
transmitted by telephone facsimile, addressed as aforesaid, except that
notices to the Bank under Section 3 will not be effective until received:
Atlantic Digital International, Inc.
c/o LEC Technologies, Inc.
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▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax. No. ▇▇▇-▇▇▇-▇▇▇▇
Excel Bank, N.A.:
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att: Ms. ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇, Vice President
Telephone (▇▇▇)▇▇▇-▇▇▇▇
Fax No. (▇▇▇)▇▇▇-▇▇▇▇
Section 10. MISCELLANEOUS.
A. Entire Agreement. This is the entire agreement of the parties with
respect to the revolving credit facility extended by the Bank to the
Borrower and supersedes all other action taken and/or letters, agreements
and representations relating to the subject matter.
B. Waivers, Etc. No failure on the part of the Bank to exercise, and no
delay in exercising, any right hereunder will operate as a waiver thereof,
nor will any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
C. Amendments. This agreement may not be amended or modified except in
writing signed by the parties.
D. Expenses. The Borrower will be responsible for paying, whether or not
any loan is made hereunder (1) all expenses of the Bank in connection with
the preparation, execution and delivery hereof and of the Note and all
other documents and instruments hereunder, and the administration thereof
(including without limitation, the reasonable fees of counsel to the Bank),
and (2) all reasonable costs of collection, including reasonable fees,
incurred by the Bank if default is made under this Agreement.
E. Offsets, etc. Nothing in this Agreement deemed a waiver or prohibition
of the Bank's right of banker's lien or offset.
F. Governing Law. This Agreement and the Note will be construed in
accordance with and governed by the law of the State of New York, without
regard to the principles of conflict of laws thereof.
G. Submission to Jurisdiction. (a) The Borrower hereby irrevocably agrees
that any legal action or proceedings against it with respect to this
Agreement or the Note may be brought in any court of the State of New York
or any Federal Court of the United States of America located in the City
and State of New York, United States of America, or both, as the Bank may
elect, and by execution and delivery of this Agreement the Borrower hereby
submits to and accepts with regard to any such action or proceeding service
of process by the mailing of copies thereof by registered or certified
airmail, postage prepaid, to the Borrower at its address set forth in
Section 9.
(b) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Note in the
State of New York and hereby further irrevocably waives any claim that the
State of New York is not a convenient forum for any such suit, action or
proceeding.
H. Counterparts. This Agreement may be executed in Counterparts, which
taken together will constitute one agreement. The parties hereto may
execute this Agreement by signing any such counterpart.
I. Assignment. The Borrower shall not assign any of its rights or
obligations under this Credit Agreement nor the loan proceeds hereunder,
without the Bank's prior written consent. The Bank, without notice to or
the consent of the Borrower, may assign to and participate with one or more
financial institutions its rights and obligations under this Credit
Agreement and may receive servicing, brokerage and/or other fees.
J. Severability of Provisions. Any provision of this Agreement, the Note
and any other document or instrument prepared hereunder, which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of unenforceability without affecting the
enforceability of provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused Agreement to
be duly executed as of the day and year first written.
ATLANTIC DIGITAL INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chairman
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Chief Financial Officer
EXCEL BANK, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Title: Vice President