EMPLOYMENT AGREEMENT
The Employment Agreement ("Agreement") is entered into between Spiegel, Inc., a
Delaware corporation ("the Company") and Xxxxxxxx Xxxxxxx (the "Executive").
WHEREAS, the Company wishes to employ the Executive as the President of Spiegel
Catalog, Inc. and Newport News, Inc.; and
WHEREAS, the Company and the Executive desire to memorialize the terms of their
employment relationship as set forth herein;
NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company and the Executive agree as follows:
1. Employment
1.1 Term. Subject to the approval by the Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"), the Company hereby employs
the Executive and the Executive hereby agrees to be employed by the Company
upon the terms and subject to the conditions contained in this Agreement.
The Executive's term of employment (the "Term") with the Company shall be
for the period commencing as of April 1, 2003 (the "Effective Date") and
terminating as of March 31, 2005, unless otherwise terminated pursuant to
Articles 3 and 4 of this Agreement. In the event that the Company desires
to enter into an employment agreement with the Executive for a period after
the Term, Company shall provide the Executive with the proposed employment
agreement covering the new term of employment at least six (6) months prior
to the last day of the Term.
1.2 Position and Duties. The Executive shall hold the position of President of
Spiegel Catalog, Inc. and Newport News, Inc. and shall perform such duties
and responsibilities and attain such performance objectives established
from time to time. The Executive shall report directly to the Interim Chief
Executive Officer of Spiegel Inc. or the Chief Executive Officer of Spiegel
Inc. as the case may be (the "Spiegel CEO") or such other individual(s) as
designated by the Spiegel CEO (including, without limitation, any designee
pursuant to Article 4 of this Agreement). The Spiegel CEO may, in his sole
discretion, require the Executive to perform duties and responsibilities on
behalf of any of the Company's affiliates. In the event that the Executive
shall transfer to an affiliate of the Company, then the Company shall
thereafter be defined for the purpose of this Agreement as the name of such
affiliate.
1.3 Standard of Care. During the Term, the Executive agrees to devote her
attention and energies to the Company's business and shall not engage in
any other business activity whether or not such business activity is
pursued for gain, profit or other pecuniary advantage unless such business
activity is approved by the Spiegel CEO or such other individuals as
designated by him. However, subject to approval by the Spiegel CEO, the
Executive may serve as a Director of other companies, so long as such
service does not conflict with the interests of the Company.
2. Compensation.
2.1 Annual Base Salary. The Executive's annual base salary shall be Seven
Hundred Thousand Dollars ($700,000) ("Annual Base Salary") payable in
accordance with the Company's regular payroll practices. On each January 1
during the Term thereafter, the Executive's Annual Base Salary shall be
reviewed by the Spiegel CEO or his designee, and changes, if any, shall be
in his sole discretion. Any change in the Executive's Annual Base Salary
shall occur in conjunction with the Company's normal merit review schedule
for other officers of the Company.
2.2 Guaranteed Bonus. For the fiscal year ending December 31, 2003, the
Executive shall receive a portion of the Incentive Bonus (defined below) in
the amount of Five Hundred and Twenty Five Thousand Dollars ($525,000) (the
"Guaranteed Bonus") payable at the time such bonuses are paid to the
Company's employees generally, provided that, except as set forth in
Sections 3.1, 3.3 and 4.3 below, the Executive remains employed by the
Company as of the last day of such fiscal year.
2.3 Key Employee Retention Program Participation. Subject to approval of the
Key Employee Retention Program (the "KERP") by the Bankruptcy Court the
Executive shall be a participant in the KERP attached hereto as Exhibit A.
Subject to the terms and conditions of each of this Agreement and the KERP,
the Executive shall be eligible to receive a retention bonus in the amount
of Four Hundred and Fifty Five Thousand Dollars ($455,000) (the "Retention
Bonus") and shall be eligible to earn an incentive bonus in the target
amount of Eight Hundred Fifty Seven Thousand Five Hundred Dollars
($857,500) (the "Incentive Bonus") which amount includes the Guaranteed
Bonus of $525,000 described in Section 2.2.
2.4 Retirement Benefits. During the Term, the Executive shall be entitled to
participate in all qualified and non-qualified retirement programs
including, without limitation, the Value in Partnership Profit Sharing and
401(k) Savings Plan (the "VIP") and the Supplemental Executive Retirement
Program (the "SERP"), offered to peer level Executives at the Company,
subject to the terms and eligibility requirements as defined by each plan
as in effect from time to time.
2.5 Employee Benefits and Perquisites. During the Term, the Executive shall be
entitled to the benefits provided to peer-level executives of the Company,
subject to the terms and eligibility requirements for each such program as
in effect from time to time. The Executive shall be entitled to five (5)
weeks paid vacation annually. The Executive shall also be eligible for
three (3) personal days annually.
2.6 Executive Perquisite Allowance. During the Term, the Executive shall
receive an annual allowance of Twenty Thousand Dollars ($20,000) payable in
equal installments in accordance with the Company's regular payroll
practices.
2.7 Special Bonus. The Executive shall receive a bonus (the "Special Bonus") in
the amount of One Hundred Thousand Dollars ($100,000) which shall be paid
on August 29, 2003.
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2.8 Right to Change Plans. Notwithstanding anything in the Agreement to the
contrary, the Company in its sole discretion may amend, discontinue,
terminate, substitute, or maintain any qualified or non-qualified benefit
plan or program.
2.9 Execution of a Release and Settlement Agreement. Executive shall be
eligible to receive the additional compensation described in Sections 3.1,
3.3, 3.3, 3.4 and 4.3 only if the Company and Executive execute a mutually
satisfactory Release and Settlement Agreement.
3. Notice of Termination of Employment
In the event of the Executive's termination of employment with the Company
prior to the expiration of the Term, the Executive shall be entitled to receive
the payments and benefits (the "Severance Benefits") set forth below in this
Article 3 or Article 4. Executive agrees that by accepting any of the Severance
Benefits set forth in this Agreement, she waives her right to any severance
benefits under any Company policy, plan or procedure. Executive further agrees
that acceptance of Severance Benefits under any Section of this Agreement waives
Executive's rights to Severance Benefits under any other Section of this
Agreement.
3.1 Termination Due to Retirement, Death or Incapacity. If, prior to the
expiration of the Term, the Executive's employment is terminated by reason
of retirement, death or incapacity (as described below), the Company's
obligation under this Agreement shall immediately terminate.
Notwithstanding the foregoing, the Company shall be obligated for the
following through the effective date of such termination (to the extent
that such amounts have not been previously paid):
(a) any Annual Base Salary accrued through the effective date of such
termination;
(b) the Special Bonus
(c) the pro rata portion of the Guaranteed Bonus and a pro rata
portion of the Incentive Bonus, if any, for the fiscal year in
which such termination occurs (less the Guaranteed Bonus);
(d) any accrued but unused vacation pay; and
(e) all other rights and benefits the Executive is vested in pursuant
to other plans and programs of the Company.
In the event of the Executive's termination of employment due to
Executive's death, her date of termination shall be the date of death.
In the event the Executive shall be unable to perform all of the
Executive's duties hereunder by reason of illnesses, physical or mental
disability or other similar incapacity which inability has continued or
could reasonably be expected to continue for more than ninety (90) days,
the Company has the right to immediately terminate the Executive's
employment.
The benefits described in Sections 3.1 (a) and (d) shall be paid in cash to
the Executive in a single lump sum as soon as practicable following the
effective date of termination. All other payments due to the Executive upon
termination of employment shall be paid in accordance with the terms of
such applicable plans or programs. With the exception of the covenants
contained in Article 6 herein
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(which shall survive such termination), the Company and the Executive
thereafter shall have no further obligations under this Agreement.
3.2 Voluntary Termination by the Executive. The Executive may terminate her
employment with the Company at any time by giving the Spiegel CEO, written
notice of her intent to terminate, delivered at least three (3) months
prior to the effective date of termination. The termination automatically
shall become effective upon the expiration of the three (3) month notice
period. Notwithstanding the foregoing, the Spiegel CEO may waive the three
(3) month notice period; however, the Executive shall be entitled to
receive the compensation described in Sections 2.1, 2.4, 2.5 and 2.6 for
the three (3) month notice period, subject to the eligibility and
participation requirements of such plans and programs. The Executive shall
also be entitled to receive the Special Bonus in the event it has not been
paid as of the date of such voluntary termination.
In the event of a voluntary termination the Executive shall be entitled to
all her vested amounts in the VIP and SERP plans, as defined by the vesting
schedule in effect at the time of termination.
3.3 Involuntary Termination. At all times during the Term, the Spiegel CEO, or
such other individuals as designated by him may terminate the Executive's
employment for reasons other than death, incapacity, retirement or for
Misconduct by providing to the Executive a Notice of Termination, at least
three (3) months prior to the effective date of termination (an
"Involuntary Termination"). Such notice of Involuntary Termination shall be
irrevocable absent express, mutual consent of the parties.
Upon the effective date of an Involuntary Termination, following the
expiration of the three (3) month notice period, the Company shall pay or
provide the following to the Executive.
(a) The amounts set forth in either clause (i) or clause (ii) in this
Section 3.3(a) which shall be determined based on the effective
date of the Involuntary Termination:
(i) in the event the effective date of an Involuntary
Termination occurs on or prior to the effective date of a
plan of reorganization of the Company, an amount equal to
two (2) times the Executive's Annual Base Salary established
for the fiscal year in which the effective date of an
Involuntary Termination occurs; or
(ii) in the event the effective date of an Involuntary
Termination occurs following the effective date of a plan of
reorganization of the Company, an amount equal to the
greater of (x) one times the Executive's Annual Base Salary
in effect on the date such Involuntary Termination occurs
and (y) the balance of the Annual Base Salary that would
have been paid to the Executive if she had remained employed
through the remainder of the Term;
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(b) The following amounts, but only to the extent such amounts have
not been paid as of the time of the Involuntary Termination:
(i) the Guaranteed Bonus,
(ii) the Retention Bonus,
(iii) the Special Bonus, and
(iv) the pro rata portion of the Incentive Bonus, if any, for the
fiscal year in which such termination occurs (less the
Guaranteed Bonus).
(c) Any accrued but unused vacation through the effective date of
termination.
(d) All other benefits to which the Executive has a vested right at
the time according to the provisions of the governing plan or
program, through the effective date of termination. All other
benefits shall include Company matching and profit sharing
allocations contributed on the Executive's behalf to the VIP and
the SERP. In the event of an Involuntary Termination the
Executive shall be considered 100% vested in all funds in her VIP
and SERP Plans as of the date of termination in accordance with
the terms of such plans as in effect from time to time.
The benefits described in Sections 3.3 (a)(i) or (ii), and (c) shall be
paid in cash to the Executive in a single lump sum as soon as practicable
following the effective date of the Involuntary Termination. All other
payments due to the Executive upon the Involuntary Termination of
employment shall be paid in accordance with the terms of such applicable
plans or programs. With the exception of the covenants contained in Article
6 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this
Agreement.
3.4 Offer of Proposed Employment Agreement. Pursuant to Section 1.1, if Company
elects to present to Executive a proposed new employment agreement for a
new term (the "Proposed Employment Agreement"), it will be provided to
Executive at least six (6) months prior to the end of the Term. In the
event that prior to the end of the Term the Company fails to offer the
Proposed Employment Agreement within twenty (20) days after receiving
written notice from Executive detailing such failure, the Company shall pay
the Executive, within thirty (30) days following the expiration of the
Term, an amount equal to one (1) times the Executive's Annual Base Salary
in effect at such time, provided that the Executive is no longer employed
by the Company or any of its affiliates.
3.5 Termination for Misconduct. Nothing in this Agreement shall be construed to
prevent the Spiegel CEO, or such other individuals as designated by him
from terminating the Executive's employment under this Agreement for
Misconduct.
In the event the Executive's employment under this Agreement is terminated
by the Spiegel CEO, or such other individuals as designated by him for
Misconduct, the Company shall pay the Executive her Annual Base Salary and
accrued vacation pay pro-rated through the effective date of termination,
and the Executive shall immediately thereafter forfeit all rights and
benefits (other than vested benefits) she would otherwise have been
entitled to receive under this
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Agreement, including, without limitation, any benefits under Section 2.3 of
this Agreement. The Company and the Executive thereafter shall have no
further obligations under this Agreement with the exception of the
covenants contained in Article 6 herein (which shall survive such
termination).
"Misconduct" shall mean (i) a breach by the Executive of the duties and
responsibilities of the Executive under this Agreement or any breach by the
Executive of any term of this Agreement and the continued failure of
Executive to cure such breach within ten (10) days after written notice of
such breach and demand for performance has been given by the Company to the
Executive, (ii) the willful engaging by the Executive in conduct that is
injurious to the business, reputation, character, or community standing of
the Company or its affiliates, (iii) the engaging by the Executive in
dishonest, fraudulent, or unethical conduct or in other conduct involving
moral turpitude to the extent that in the reasonable judgment of the
Spiegel CEO, or such other individuals as designated by him, the
Executive's reputation and credibility no longer conform to the standards
expected of the Company's executives, (iv) the Executive's admission,
confession, plea bargain to or conviction in a court of law of any crime or
offense involving misuse, or misappropriation of money or other property, a
felony, fraud or moral turpitude, or (v) a violation of any statutory or
common law duty to the Company or its affiliates, including, but not
limited to, the duty of loyalty.
4. Change in Control
4.1 Employment Termination Within Twenty Four (24) Months Following a Change in
Control of the Company. Under certain circumstances set forth below,
Executive shall be entitled to receive from the Company Change in Control
("CIC") Severance Benefits ("CIC Severance Benefits") if there has been a
CIC of the Company.
4.2 Qualifying CIC Termination. The occurrence of any one or more of the
following events ("Qualifying CIC Termination") within twenty four (24)
months following the effective date of a CIC of the Company shall trigger
the payment of CIC Severance Benefits:
(a) An Involuntary Termination of the Executive's employment
evidenced by a Notice of Termination delivered to the Executive;
or
(b) A resignation by the Executive in the event that the Company or
any Successor Company, as defined in Section 5.3, materially
breaches any provision of this Agreement and does not cure such
breach within (30) days of receiving a written notice from the
Executive with such notice explaining in reasonable detail the
facts and circumstances claimed to provided a basis for the
Executive's claim.
4.3 Severance Benefits Paid upon a Qualifying CIC Termination. In the event of
a Qualifying CIC Termination, the Company shall pay or provide the
following to the Executive.
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(a) An amount equal to two (2) times the Executive's Annual Base
Salary established for the fiscal year in which the effective
date of termination occurs.
(b) The following amounts, but only to the extent such amounts have
not been paid as of the time of the Qualifying CIC Termination:
(i) the Guaranteed Bonus,
(ii) the Retention Bonus,
(iii) the Special Bonus
(iv) the pro rata portion of the Incentive Bonus if any, for the
fiscal year in which such termination occurs (less the
Guaranteed Bonus).
(c) Any accrued but unused vacation through the effective date of
termination.
(d) All other benefits to which the Executive has a vested right at
the time according to the provisions of the governing plan or
program, through the effective date of termination. All other
benefits shall include Company matching and profit sharing
allocations contributed on the Executive's behalf to the VIP and
the SERP. In the event of a Qualifying CIC Termination the
Executive shall be considered 100% vested in all funds in her VIP
and SERP Plans as of the date of termination in accordance with
the terms of such plans as in effect from time to time.
The benefits described in Sections 4.3 (a), and (c) shall be paid in cash
to the Executive in a single lump sum as soon as practicable following the
effective date of termination. All other payments due to the Executive upon
termination of employment shall be paid in accordance with the terms of
such applicable plans or programs. With the exception of the covenants
contained in Article 6 herein (which shall survive such termination), the
Company and the Executive thereafter shall have no further obligations
under this Agreement.
4.4 "Change in Control" or CIC" means the consummation of any of the following
events:
(a) Any merger or consolidation of the Company with or into another
entity; provided that as a result thereof, the owners, as of the
Effective Date, of the Company cease to own, directly or
indirectly, an aggregate of more than fifty percent (50%) of the
outstanding equity ownership of the surviving company;
(b) The complete liquidation of the Company;
(c) The sale to a third party of the equity ownership in the Company
provided that as a result thereof, owners of the Company as of
the Effective Date cease to own, directly or indirectly, an
aggregate of more than fifty percent (50%) of the outstanding
equity ownership of the Company.
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5. Assignment
5.1 Assignment by the Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of
any Successor Company.
Failure of the Company to obtain the agreement of any Successor Company to
be bound by the terms of this Agreement prior to the effective date of any
such succession shall be a breach of this Agreement, and shall immediately
entitle the Executive, upon her resignation to receive benefits from the
Company in the same amount and on the same terms as the Executive would be
entitled to receive in the event of an Involuntary Termination as provided
in Section 3.3 (failure of assignment not related to a Change in Control)
or a Qualifying CIC Termination as provided in Section 4.3 (if failure of
assignment follows or is in connection with a Change in Control). Except as
herein provided, this Agreement may not otherwise be assigned by the
Company.
5.2 Assignment by Executive. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive dies and any amount is owed to him pursuant to
this Agreement, all such amounts, unless otherwise provided herein, shall
be paid to Executive's beneficiary in accordance with the terms of the
Agreement. If the Executive has not named a beneficiary, then such amounts
shall be paid to the Executives' devisee, legatee, or other designee, or if
there is no such designee, to the Executive's estate.
5.3 Definition of Successor Company. "Successor Company" for purposes of this
Agreement is an entity who is a successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business or assets of the Company. Any such Successor Company shall
be deemed substituted for all purposes of the "Company" under the terms of
this Agreement.
6. Confidentiality
6.1 Disclosure of Information. The Executive recognizes that he has access to
and knowledge of confidential and proprietary information of the Company
that is essential to the performance of her duties under this Agreement.
The information which the Company regards as confidential and proprietary
and/or as trade secrets includes all information, including a formula,
pattern, compilation, program, device, method, technique, or process that
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means, by
other persons who can obtain economic value, actual or potential, from its
disclosure or use.
The Executive shall not, during or after her employment by the Company, in
whole or in part, disclose such information to any person, firm,
corporation, association, or other entity for any reason or purpose
whatsoever, nor shall he make use of any such information for her own
purposes, so long as such information has not otherwise been disclosed to
the public or is not otherwise in the public domain except as required by
law or pursuant to administrative or legal process.
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6.2 Covenants Regarding Other Employees. During the Term, and for a period of
twelve (12) months following the Executive's termination of employment for
any reason, the Executive agrees not to actively solicit directly or
indirectly any exempt, supervisory and/or management (as such terms are
defined under the Fair Labor Standards Act) employee ("Prohibited
Employee") of the Company to terminate his or her employment with the
Company or to interfere in a similar manner with the business of the
Company. For each breach of this provision by Executive, in addition to the
rights and remedies available to the Company as provided in this Agreement,
Executive hereby agrees to pay the Company, not as a penalty but as
liquidated damages to reimburse the Company for training and recruiting
costs incurred in replacing such Prohibited Employee, a sum equal to fifty
percent (50%) of the employee's annual salary as of the date of the
Prohibited Employee's termination of employment with the Company.
6.3. Non-Competition. During the period beginning on the Effective Date and
ending on the first anniversary of the cessation of the employment of the
Executive for any reason whatsoever (the "Restricted Period"), the
Executive shall not (i) engage, directly or indirectly, in any business
anywhere in the world that directly and primarily produces or supplies
services or products of the kind produced or supplied by the Company and
its subsidiaries and affiliates (collectively, the "Company Group") or (ii)
directly or indirectly own an interest in, manage, operate, join or Control
(as defined below), lend money or render financial or other assistance to
or participate in or be connected with as an officer, employee, partner,
shareholder, consultant or otherwise of any person or company that directly
and primarily competes with the Company Group in producing or supplying
services or products of the kind produced or supplied by the Company Group
as of the Date of Termination; provided, however, that, for the purposes of
this Section 6.3, ownership of securities having no more than one percent
of the outstanding voting power of any competitor, and that are listed on
any national securities exchange or traded actively in the national
over-the-counter market shall not be deemed to be in violation of this
Section 6.3 so long as the Executive has no other connection or
relationship with such competitor. For purposes of this Section 6.3, the
term "Control," as used with respect to any person or company, means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person or company, whether
through the ownership of voting securities, by contract or otherwise.
7. Miscellaneous
7.1 Indemnity Protection. In the event that the Executive is personally named
in a lawsuit in connection with the services he provides to the Company
under this Agreement, the Company shall indemnify the Executive provided
that the Executive cooperates in defense of such matter, and that at all
times the Executive acted within the scope of her job responsibilities and
authority. Notwithstanding the foregoing, the Executive shall have no right
of indemnification should a subsequent discovery or a factual determination
disclose that the Executive's actions were inconsistent with the foregoing
conditions.
7.2 Payment of Legal Fees. Neither the Company nor the Executive shall pay or
seek payment of any of the legal fees or other expenses incurred by the
other
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party as a result of any dispute between the parties regarding the
validity, enforceability, or interpretation of this Agreement.
7.3 Notices. Any notice or request required or permitted to be given hereunder
shall be sufficient if given in writing and delivered personally or sent by
registered mail, return receipt requested, as follows: (a) if to the
Executive, to her address as set forth in the records of the Company, and
(b) if to the Company, to the attention of the Vice President-Human
Resources of the Company with a copy to the General Counsel, Spiegel, Inc.
Either party may designate a different address for delivery of notices in
accordance with this Section 7.4. Such notice of a different address for
delivery of notices shall be deemed to have been given upon the personal
delivery or mailing thereof, as the case may be.
7.4 No Further Benefits. In the event the Executive is entitled to receive any
Severance Benefits or any CIC Severance Benefits under this Agreement, he
shall not be entitled to any payment or benefit under any other severance
plan, program, agreement or similar arrangement of the Company or any of
its affiliates.
7.5 Entire Agreement. This Agreement and the KERP supersedes any prior
agreements or understandings, oral or written, between the parties hereto
or between the Executive and the parties hereto, with respect to the
subject matter hereof, and constitutes the entire agreement of the parties
with respect thereto.
7.6 Modification. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their
legal representatives.
7.7 Severability. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
7.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
7.9 Governing Law. To the extent not preempted by federal law, the provisions
of the Agreement shall be construed and enforced in accordance with the
laws of the State of Illinois.
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IN WITNESS WHEREOF, this Agreement shall become effective as of the first
day of the Term upon receipt and execution by the Company of two originals of
this Agreement duly executed by the Executive.
Spiegel, Inc. Executive
By: /s/ Xxxx Xxxxxxx /s/ Xxxxxxxx Xxxxxxx
------------------------- ----------------------------------
Title: SVP Human Resources Xxxxxxxx Xxxxxxx
Date: 7/17/03 Date: 7/25/03
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