Exhibit 10.33
SEVERANCE AGREEMENT
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THIS AGREEMENT dated as of August 21, 2000 is made by and between
ViroPharma Incorporated (the "Company"), and Xxxxxx Xxxx (the "Employee").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to xxxxxx the continuous employment of key personnel; and
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change of Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of key personnel to the
detriment of the Company and its stockholders; and
WHEREAS, the Board also recognizes that by continuing service with the
Company as an employee and as the Chairman of the Board, Employee has foregone
other significant opportunities and should be protected against the possibility
of his involuntary termination of employment without cause or a constructive
termination of his employment; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of the
Company's key personnel, including the Employee, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change of Control or other termination of employment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, this Company and the Employee hereby agree as
follows:
1. Defined Terms. Unless sooner defined below, the definition of capitalized
terms used in this Agreement is provided in the last Section hereof.
2. Severance Payments.
2.1 Provided that Employee has signed the Release attached hereto as
Exhibit A (the "Release"), the Company shall pay the Employee the payments
described in this Section 2.1 (the "Severance Payments") upon the termination of
the Employee's employment, unless such termination is (a) by the Company for
Cause, (b) by reason of death or Disability, or (c) by the Employee without Good
Reason. Notwithstanding the foregoing, the Company's obligation to pay Employee
the Severance Payments or to provide any other benefit to Employee hereunder
shall immediately cease (i) upon Employee's breach of any of the provisions set
forth in Section 3 below, or (ii) if Employee revokes or attempts to revoke the
Release.
(a) In lieu of any further salary payments to the Employee for periods
after the Date of Termination and in lieu of any severance benefit otherwise
payable to the Employee (other than any such benefit that may accrue under the
Company's Stock Option Plan), the Company shall pay to the Employee, in cash,
within thirty (30) days after the first day of each of four consecutive six
month periods the first of which shall begin on the first of the month
following the Date of Termination, for a total of twenty-four (24) months, an
amount equal to 1/2 of the Employee's annual base salary in effect immediately
prior to the occurrence of the event or circumstance upon which the Notice of
Termination is based. In no event shall the total payments made under this
Section 2.1(a) be more than 200% of the Employee's annual base salary in effect
immediately prior to the occurrence of the event or circumstance upon which the
Notice of Termination is based.
(b) Notwithstanding any provision of any short-term incentive bonus
arrangement applicable to the Employee, if any (the "Bonus Plan"), the Company
shall pay to the Employee a lump sum amount, in cash, equal to the sum of (i)
any bonus amount which has been allocated or awarded to the Employee for a
completed fiscal year or other measuring period preceding the Date of
Termination but has not yet been paid, and (ii) a pro rata portion to the Date
of Termination of the aggregate value of all contingent bonus awards to the
Employee for all uncompleted periods under the Bonus Plan calculated as to each
such award by assuming the achievement of the target performance level within
the performance range established with respect to such award and basing such
pro-rata portion upon the portion of the award period that has elapsed as of the
Date of Termination.
(c) For the one-year period starting on the Date of Termination (in the
case of an Early Termination), or for the two-year period starting on the Date
of Termination (in the case of a Later Termination), as the case may be, the
Company shall arrange to provide the Employee with life, disability and accident
insurance benefits substantially similar to those which the Employee is
receiving immediately prior to the Notice of Termination (without giving effect
to any reduction in such benefits if such reduction constitutes Good Reason).
For the entire period beginning on the Date of Termination and ending on the
earlier of the Employee's death or the Employee's 65th birthday, Company shall
arrange to provide the Employee with health insurance benefits substantially
similar to those which the Employee is receiving immediately prior to the Notice
of Termination (without giving effect to any reduction in such benefits if such
reduction constitutes Good Reason). Benefits otherwise receivable by the
Employee pursuant to this Section 2.1(c) shall be reduced to the extent
comparable benefits are actually received by or made available to the Employee
without cost during the above-referenced period. In addition, any such benefits
actually received by the Employee shall be reported to the Company by the
Employee.
2.2. (a) Whether or not the Employee becomes entitled to the Severance
Payments, if any of the Total Payments (as defined in subsection (b) below) will
be subject to an excise tax under Section 4999 of the Code (the "Excise Tax"),
the Company shall pay to the Employee an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 2.2, shall be equal
to the excess of the Total Payments over the payment provided for by this
Section 2.2.
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(b) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Employee in connection with a
Change of Control or the Employee's termination of employment, whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company (the "Total Payments"), shall be treated as "parachute payments"
(within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel selected by the Company's independent auditors and reasonably
acceptable to the Employee, such payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of section 280G(b)(4)(A)
of the Code, and all "excess parachute payments" (within the meaning of section
280G(b)(1) of the Code) shall be treated as subject to the Excise Tax unless, in
the opinion of such tax counsel, such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered (within
the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject
to the Excise Tax, and (ii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Employee shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made, FICA taxes at the highest rate applicable with respect to wages in excess
of the Social Security taxable wage base in effect for the year of payment, and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Employee's residence on the Date of Termination (or
such other time as is hereinafter described), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(c) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Employee's employment (or such other time as is hereinafter described), the
Employee shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by the Employee to the extent that
such repayment results in a reduction in Excise Tax or a federal, state or local
income tax deduction) plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time of
the termination of the Employee's employment (or such other time as is
hereinafter described) (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or addition payable by the Employee with respect
to such excess) at the time that the amount of such excess is finally
determined. The Employee and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. If an Employee who remains in the employ of the Company
becomes entitled to the payment provided for by this paragraph,
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such payment shall be made no later than the later of (i) the fifth day
following the date on which the Employee notifies the Company that he is subject
to the Excise Tax and (ii) twenty days prior to the date on which the Excise Tax
is initially due.
(d) The payments provided for in this Section 2.2 shall be made as soon
as practicable prior to the date that Employee is obligated to pay the Excise
tax; provided, however, that, if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Employee on such
day an estimate, as determined in good faith by the Company of the minimum
amount of such payments to which the Employee is clearly entitled and shall pay
the remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Employee, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made under
this section, the Company shall provide the Employee with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including.
3. The Employee's Covenants.
3.1 Except as is necessary in the performance of Employee's duties as an
employee and as a member of the Board of Directors of the Company, Employee
shall not, without the prior written consent of the Company in its sole
discretion, for any reason or for any purpose, during or after Employee's
employment by the Company, either directly or indirectly, divulge to any third-
party or use for his own direct or indirect benefit, any Company Information (as
defined below) revealed to or obtained by Employee at any time during the course
of his employment with the Company. "Company Information" generally means all of
the Company's confidential, proprietary, business and technical information,
trade secrets or other information or materials that have not been made
available to the general public by the Company. Nothing contained herein shall
restrict Employee from divulging or using for his own benefit or for any other
purpose any Company Information that is readily available to the general public
so long as such information did not become available to the general public as a
direct or indirect result of Employee's breach of this Agreement.
3.2. For the two year period starting on the Date of Termination,
regardless of the reason for the termination, Employee shall not, directly or
indirectly, and whether for Employee's own direct or indirect benefit or for the
direct or indirect benefit of any third party:
(a) perform any services that may be used in connection with
developing, manufacturing or marketing a chemical entity or product that
competes with the Company's business of the discovery, development, manufacture,
marketing and sale of pharmaceuticals for the treatment of any disease that is
or was the focus of any of the Company's research, development or
commercialization programs that are described in or are incorporated by
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reference into the Company's most recent Form 10-K or most recent Form S-1 or S-
3 filed with the Securities and Exchange Commission prior to the Date of
Termination, or that are otherwise publicly announced by the Company after the
filing of the foregoing Form 10-K, Form S-1 or Form S-3 and prior to the Date of
Termination (the "Business"), provided that nothing in this Subsection shall
prevent Employee, with the prior approval of a majority of the members of the
Board of Directors of the Company, from serving on the Board of Directors of
another entity that may otherwise be deemed to be in competition with the
Business; or
(b) solicit, call on, or otherwise deal in any way with any licensor,
customer, vendor or contractor with whom the Company shall have dealt at any
time during the period of Employee's employment by the Company, for a purpose
which is competitive with the Business; or
(c) employ, engage or retain, or arrange to have any other person or
entity employ, engage or retain any person who is an employee, contractor,
consultant or agent of the Company or shall have been employed, engaged or
retained by the Company as an employee, contractor, consultant or agent at any
time during the one (1) year period preceding the Date of Termination;
additionally, Employee shall not, directly or indirectly, influence or attempt
to influence any such person to terminate or modify his or her employment
arrangement or engagement with the Company.
The Employee acknowledges that the Company would be irreparably injured by
a violation of this Section 3, and agrees that the Company, in addition to other
remedies available to it for such breach or threatened breach, shall be entitled
to a preliminary injunction, temporary restraining order or other equitable
relief restraining the Employee from any actual or threatened breach of this
Section 3 without any bond or other security being required. Employee's
obligation under this Section 3 shall survive any termination of the Company's
obligation to make payments to Employee hereunder.
4. Termination Procedures.
4.1. During the term of this Agreement, any termination of the
Employee's employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated.
4.2. "Date of Termination," with respect to any termination of the
Employee's employment shall mean:
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(a) if the Employee's employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that the Employee shall
not have returned to the full-time performance of the Employee's duties during
such thirty (30) day period); and
(b) if the Employee's employment is terminated for any other
reason, the date specified in the Notice of Termination, which, in the case of:
(i) a termination by the Company, shall not be less than thirty (30) days after
the date Notice of Termination is given (except in the case of a termination for
Cause) and, (ii) a termination by the Employee, shall not be less than fifteen
(15) days nor more than sixty (60) days after the date such Notice of
Termination is given.
5. Successors; Binding Agreement.
5.1. In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as the Employee would be entitled to hereunder if the
Employee were to terminate the Employee's employment for Good Reason after a
Change of Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
5.2. This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die while any amount would still be payable to the Employee hereunder (other
than amounts which, by their terms, terminate upon the death of the Employee) if
the Employee had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Employee's estate.
6. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or mailed by United
states registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
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To the Company: To the Employee:
ViroPharma Incorporated Xxxxxx X. Xxxx
000 Xxxxxxxxx Xxxxxxxxx 0000 Xxxxxx Xxxx Xx., XX Xxx 000,
Xxxxx, XX 00000 Xxxxxxxxxxxxx, XX 00000-0000
Attention: General Counsel
7. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Employee and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Employee has agreed
8. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instruments.
10. Settlement of Disputes; Arbitration. All claims by the Employee for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable opportunity to the
Employee for a review of the decision denying a claim and shall further allow
the Employee to appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Employee's claim has been denied.
Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Philadelphia,
Pennsylvania in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction.
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11. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:
11.1 "Cause" means Employee's conviction of any felony, Employee's
commission of any act of fraud or embezzlement, or Employee's unauthorized use
or disclosure of confidential information or trade secrets of the Company or its
subsidiaries.
11.2 "Change of Control" shall mean "Change of Control" as defined in
the ViroPharma Incorporated Stock Option Plan.
11.3 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. References to specific sections of the code shall include any
successors thereto.
11.4 "Disability" shall be deemed the reason for the termination by the
Company of the Employee's employment if, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Employee a Notice of Termination for Disability and, within thirty (30) days
after such Notice of Termination is given, the Employee shall not have returned
to the full-time performance of the Employee's duties.
11.5 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
11.6 "Good Reason" for termination by the Employee of the Employee's
employment shall mean the occurrence (without the Employee's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
subsections (a), (d), or (e) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(a) the assignment by the Company to the Employee of any duties
inconsistent with the Employee's status as an employee of the Company or a
substantial adverse alteration in the nature or status of the Employee's
responsibilities;
(b) a reduction by the Company in the Employee's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
except for across-the-board salary reductions similarly affecting all Employees
of the Company and all Employees of any Person in control of the Company;
(c) the relocation by the Company of its principal executive offices to
a location more than 30 miles from the Company's principal offices on the date
of this Agreement or the Company's requiring the Employee to be based anywhere
other than the Company's
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principal executive offices except for required travel on the Company's business
to an extent substantially consistent with the Employee's present business
travel obligations;
(d) the failure by the Company to pay to the Employee any portion of
the Employee's current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all Employees of the Company and all
Employees of any Person in control of the Company, or to pay to the Employee any
portion of an installment of deferred compensation under any deferred
compensation program of the Company, within thirty (30) days of the date such
compensation is due;
(e) the failure by the Company to continue to provide the Employee with
benefits substantially similar to those enjoyed by the Employee under any of the
Company's pension, life insurance medical, health and accident, or disability
plans in which the Employee was participating immediately preceding such
failure, the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee immediately preceding such
failure, or the failure by the Company to provide the Employee with the number
of paid vacation days to which the Employee is entitled on the basis of years of
service with the Company in accordance, with the Company's normal vacation
policy in effect immediately preceding such failure.
11.7 "Person" shall have the meaning given in section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include (a) the Company or any of its
subsidiaries, (b) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (c) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (d) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
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IN WITNESS WHEREOF, this Agreement has been executed, as of the date
first above written, on behalf of this Company by its duly authorized officer
and by the Employee.
ATTEST: VIROPHARMA INCORPORATED
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxx
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Secretary
Name: Xxxxxxx X. Xxxxxx
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Title: VP and Chief Financial Officer
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EMPLOYEE
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
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EXHIBIT A
RELEASE
In consideration for the above consideration and the promises contained in that
certain Severance Agreement dated as of August 21, 2000 between you and
ViroPharma Incorporated (the "Company"), the sufficiency of which are hereby
acknowledged, you hereby agree of your own free will, to voluntarily waive,
release and forever discharge the Company and its subsidiaries, affiliates,
predecessors, officers, employees and directors of and from any and all actions,
causes of actions, suits, grievances, claims, debts, charges, complaints,
contracts (whether oral or written, express or implied from any source), claims
for recall or reinstatement and promises, whatsoever, in law or equity, which
you or your heirs, executors, administrators, successors and assigns, may have,
or may have knowledge of, or may be charged with knowledge of, as of the date of
this Agreement, for, upon, or by reason of any matter, cause or thing
whatsoever, including, but not limited to, any and all matters arising out of
your employment by the Company and the cessation of said employment, and
including but not limited to, any violation of:
(a) Title VII of the Civil Rights Act of 1964, as amended;
(b) Sections 1981 through 1988 of Title 42 of the United States Code;
(c) The Employee Retirement Income Security Act of 1974, as amended;
(d) The Vocational Rehabilitation Act of 1973, as amended;
(e) The Age Discrimination in Employment Act of 1967, as amended;
(f) The Older Workers Benefit Protection Act of 1990, as amended;
(g) The Americans with Disabilities Act of 1990, as amended;
(h) The Pennsylvania Human Relations Act, 43 P.S. sections 951, et. seq.;
(i) Any other federal, state or local labor, whistleblower, wage and hour or
human rights law; and
(j) Any other alleged violation of any local, state or federal law, regulation
or ordinance and/or public policy, contract, tort or common law having any
bearing whatsoever on the terms and conditions and/or cessation of your
employment with the Company which you ever had, now has or may have as of
the date of execution of this Agreement.
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IN WITNESS WHEREOF, this Release has been executed, as of the date written below
by the undersigned in favor of ViroPharma Incorporated.
EMPLOYEE:
--------------------------
Xxxxxx X. Xxxx
ACCEPTED:
VIROPHARMA INCORPORATED
By:
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Name:
---------------------
Title:
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