EXHIBIT 10.5
EXECUTIVE SERVICES AGREEMENT
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THIS EXECUTIVE SERVICES AGREEMENT ("Agreement") is made and entered
into as of the 6th day of December, 1999 ("Effective Date") by and between
GLOBAL SPORTS AND XXXXXX.XXX, a Delaware corporation ("Company") and XXXXXXX X.
XXXXXX, an individual ("Xxxxxx").
WHEREAS, Company desires to employ the services of Xxxxxx and Xxxxxx is
agreeable to provide his services to Company upon the terms and conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises contained herein, Company and Xxxxxx agree as follows:
1. SERVICES.
1.1 Except as set forth Paragraph 1.3, Xxxxxx agrees to
provide his exclusive services to Company as a Chief Operating Officer of
Company during the "Term" (as defined below), for the purpose of effecting and
promoting "Company's Business" (as hereafter defined). Xxxxxx hereby agrees to
provide such services, on the terms and conditions hereinafter set forth.
"Company's Business" is defined as the entertainment, sports, publishing,
telemarketing and Internet business.
1.2 Xxxxxx shall have such authority, duties and
responsibilities as may be vested in Xxxxxx by the Board of Directors of Company
and Xxxxxx agrees to discharge such duties and responsibilities to the best of
his ability.
1.3 Xxxxxx further agrees that he shall carry out his duties
and responsibilities hereunder in a diligent and competent manner and shall
devote his full business time, attention and energy thereto. During the Term,
Xxxxxx may, however, without the prior written approval of the Board of
Directors, offer his services as a (a) consultant (b) author, or (c) outside
board member, provided these activities do not interfere with Xxxxxx'x ability
to perform this duties and responsibilities under this Agreement.
1.4 Except as provided herein, Xxxxxx represents, warrants and
covenants that he will not be during the Term, subject to any employment
agreement, non-competition covenant, non-disclosure agreement or any similar
agreement, covenant, restriction or understanding that would be breached by
Xxxxxx'x execution of this Agreement or the performance by Xxxxxx of any of his
duties, responsibilities or covenants hereunder, or that would in any manner,
directly or indirectly, limit or otherwise affect the duties and
responsibilities that may now or in the future be assigned to Xxxxxx by Company.
2. TERM. The "Term" shall be for a five (5) year period commencing on
January 1, 2000 and terminating on December 31, 2004 ("Scheduled Termination
Date"), unless extended or sooner terminated pursuant to this Agreement. The
term "Year" as used herein refers to the period commencing on January 1st and
ending on December 31st.
3. COMPENSATION. In full and complete consideration of the services to
be rendered by Xxxxxx hereunder and subject to Xxxxxx performing all of his
material duties and obligations hereunder and not otherwise being in material
default of this Agreement, Company shall pay or cause to be paid to Xxxxxx the
following compensation:
3.1 BASE SALARY. The base salary ("Base Salary") payable by
Company to Xxxxxx shall be as follows: (a) One Hundred Eighty Thousand Dollars
($180,000) per annum. The Base Salary shall be payable in accordance with the
company's standard payroll procedures. The Base Salary shall be increased to
$250,000 once Company has completed an Initial Public Stock Offering ("IPO"), a
secondary financing in which it receives at least $10,000,000, or the stock of
the Company becomes publicly traded. The Base Salary shall be adjusted annually
by the greater of 5% or the increase in CPI during the Year.
3.2 BONUS. A bonus within the discretion of the Board of
Directors, except that a bonus of no less than $250,000.00 shall be immediately
payable if and when the stock of the Company is publicly traded, the Company
completes (a) a private financing of at least $10,000,000, and/or (b) a sale of
a majority of the capital stock of the Company.
3.3 REIMBURSEMENT OF EXPENSES. Company shall promptly
reimburse Xxxxxx for any and all actual, reasonable and necessary expenses
incurred by Xxxxxx in the performance of the duties hereunder during the Term,
including, without limitation, reasonable entertainment expenses and reasonable
airfare, automobile, living accommodations and other traveling expenses. Such
reimbursement shall be conditioned upon Xxxxxx submitting to Company an itemized
statement and appropriate vouchers or receipts in respect of the expenses.
3.4 VACATION. For each year of the Term, Xxxxxx may take up to
three (3) weeks paid vacation. In addition, Xxxxxx may take sick days, holidays
and personal days in accordance with Company's policies. Any additional time off
shall be only upon mutual agreement of the parties as to both the time taken and
compensation, if any.
3.5 CAR ALLOWANCE. Company shall pay the gross amount of $600
per month during the Term (prorated for partial months) as a car allowance.
Xxxxxx acknowledges and agrees that he shall be solely responsible for his
automobile costs, such as the cost of a lease, insurance, registration,
maintenance, gasoline, etc.
3.6 DISABILITY INSURANCE. Company shall obtain and pay for a
long-term disability insurance policy in the minimum amount of 60% of Xxxxxx'x
base salary.
3.7 FRINGE BENEFITS. Company shall provide Xxxxxx with
comprehensive medical and dental insurance coverage and such other fringe
benefits as and when provided by the Company to its executives or as determined
by the Board of Directors.
3.8 STOCK OPTIONS. Upon closing the Company's Private
Placement of $4.2 Million minimum, Xxxxxx shall receive Stock Options to
purchase 100,000 shares of the Company's common stock at the Private Placement
price with all shares vested. Xxxxxx shall receive an additional stock option
upon the Company completing an Initial Public Stock offering and any and all
secondary stock offerings, including a private placement of stock. These options
shall be for a number of shares equal to five (5%) of the total stock issued by
the company in the IPO and the secondary offerings. These options shall be fully
vested upon issuance and the option price shall be the same price as the IPO or
secondary stock offering price. If appropriate, these Stock Options will be
issued pursuant to the Stock Option Plan, a copy of which is attached hereto and
incorporated by this reference.
3.9 DIRECTOR'S AND OFFICER'S INSURANCE. The Company shall
provide Director's and Officer's Insurance (D&O Insurance) in an amount and
terms reasonably acceptable to Xxxxxx.
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In addition the Company will provide, pay for, and reimburse Xxxxxx for any
legal or related expenses which he incurs in any action taken against Xxxxxx as
a result of his role as an Officer, Director, or employee of the Company.
Furthermore, regardless of the outcome of such actions, the Company, at its sole
expense, will defend Xxxxxx in all such actions including the reimbursement of
any and all expenses in excess of the coverage provided by D&O Insurance.
4. TERMINATION.
4.1 TERMINATION WITHOUT CAUSE. If Company is deemed to have
terminated this Agreement without cause as provided in Paragraph 6.0, then
Xxxxxx shall be entitled to receive the Base Salary for the unexpired portion of
the Term of this Agreement plus his Base Salary for an additional two (2) year
period (the "Parachute Period"). For example, assuming that Xxxxxx is terminated
pursuant to Paragraph 6.0 and there are two years remaining on the Initial Term
of this Agreement, Xxxxxx shall receive his Base Salary for four (4) years
(i.e., two (2) years for the unexpired Term and his Base Salary for the
Parachute Period). In addition, Xxxxxx shall continue to receive the benefits
and other payments outlined in Section 3 and the unvested portion of all stock
options shall immediately become fully vested.
4.2 TERMINATION WITH CAUSE. This Agreement shall be terminable
prior to the expiration of the Term by mutual consent of the parties or by
Company upon the occurrence of one of the following events:
4.2.1 Upon the engagement by Xxxxxx in any business
activity which is competitive to Company's business or which is otherwise
contrary to Xxxxxx providing his professional services exclusively for the
benefit of Company;
4.2.2 If Xxxxxx is charged with and convicted of (or
enters a plea of NOLO CONTENDERE in any court relating to) an act of fraud or
embezzlement against the Company;
4.2.3 Failure to fulfill his material obligations
under this Agreement or the continued negligent breach or violation of the
material terms of this Agreement or the failure of any of the representation or
warranties herein to be true and correct; PROVIDED, HOWEVER, that if such
failure, breach or violation is of a nature that is curable, Xxxxxx shall have
thirty (30) business days after written notice of such failure, breach or
violation is given to him to effect cure thereof;
4.2.4 Xxxxxx'x repeated abuse of alcohol or other
drugs or controlled substances that interferes with the performance of Xxxxxx'x
performance of his material obligations hereunder or which has had or can
reasonably be expected to have a material adverse affect on the business or
affairs of Company.
4.2.5 It is understood and agreed that if this
Agreement is terminated by Company for any of the reasons set forth in Paragraph
4.2 hereof or because Xxxxxx otherwise resigns or retires prior to the end of
the Term ("Termination For Cause"), then Xxxxxx shall not be entitled to receive
any compensation except for the following: (i) any earned portion of the Base
Salary or Bonus pursuant to Paragraph 3.1 and 3.2; (ii) any unpaid expenses
pursuant to Paragraph 3.3; (iii) any accrued and unpaid compensation for unused
vacation and car allowance pursuant to Paragraphs 3.4 and 3.5; and (iv) any
stock options vested prior to Termination For Cause.
5. DEATH OR DISABILITY OF XXXXXX.
5.1 In the event that Xxxxxx dies or becomes disabled during
the Term, the Term shall terminate effective as of the date of death or
disability, and Company shall have no further obligation or liability to Xxxxxx
(or any person claiming under or through him), except that Company shall pay or
cause to be paid to Xxxxxx'x legal representative the amounts that would
otherwise be payable to Xxxxxx had the Term been terminated on such date
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"without cause" pursuant to Paragraph 4.1 above. In the event that death or
disability occurs with less than twenty-four (24) months remaining in the Term,
then the Company shall continue paying to Xxxxxx'x legal representative an
amount which would have been payable under this Paragraph 5.1 as if there had
been twenty-four months remaining in the Term.
5.2 During the period of any Disability (as hereinafter
defined) of Xxxxxx during the Term, he shall continue to be compensated as
provided in Paragraph 3 hereof, less any payments paid to him under applicable
disability benefit programs (which he agrees he is obligated to pursue),
including Social Security, worker's compensation programs and disability
insurance. In the event that Xxxxxx is Disabled for less than seventy-five (75)
consecutive days (or one hundred five (105) days in the aggregate) during any
Calendar Year, Company shall not have the right hereunder to terminate this
Agreement. In the event that Xxxxxx is Disabled for more than seventy-five (75)
consecutive days (or one hundred five (105) days in the aggregate) during any
Calendar Year, Company shall have the right to terminate this Agreement, in
which event, Company shall pay or cause to be paid to Xxxxxx (or his legal
representative) the amounts that would otherwise be payable to Xxxxxx had the
Term been terminated on such date pursuant to Paragraph 5.1 above.
5.3 The term "Disability" and "Disabled" as used herein shall
mean a mental or physical condition that renders Xxxxxx unable to perform
substantially all of Xxxxxx'x duties and responsibilities hereunder. Xxxxxx
expressly agrees, in the event of any dispute under this Paragraph 5 to submit
to physical examination by a physician licensed in California and selected and
paid by Company. Xxxxxx shall also have the right, at his sole expense, to have
another physician of his own choice present during such examination. In the
event that Xxxxxx elects to have a physician present and Xxxxxx'x physician and
the Company's physician disagree as to whether Xxxxxx is Disabled, such
physicians shall mutually select a third physician, which shall be paid for by
Xxxxxx and Company, and such physician's decision shall control. In the event
that the physicians are unable in good faith to agree upon a third physician,
the decision of the Company's physician shall control so long as such physician
had a good faith basis for such determination.
6. TERMINATION OF EXCLUSIVE DUTIES.
6.1 In the event that Company elects in writing at any time
not to continue using the exclusive services of Xxxxxx and removes Xxxxxx as the
Chief Operating Officer of Company other than for the reasons specified in
Paragraphs 4.2 and/or 5 above, Xxxxxx shall be relieved of all obligations
hereunder except as provided in this Paragraph 6. Subject to Xxxxxx receiving
the amount specified in this Agreement, Xxxxxx shall remain obligated upon
Company's request to provide non-exclusive consulting services (in such a manner
as not to restrict Xxxxxx from full time employment by another company) to
Company from the effective date of the election by Company ("Trigger Date")
through the Scheduled Termination Date (the "Mitigation Period"). During the
Mitigation Period, Company shall remain obligated to pay to Xxxxxx the
Compensation payable to Xxxxxx under Paragraph 3 above provided that during such
Mitigation Period Xxxxxx honors the obligations specified in Paragraphs 8 and 9
below. The Compensation shall be paid to Xxxxxx as and when such Compensation is
payable under Paragraph 3 of this Agreement. In addition, promptly after the
Trigger Date, Company shall pay to Xxxxxx any unpaid expenses pursuant to
Paragraph 3.4 and any accrued and unpaid compensation for unused vacation
pursuant to Paragraph 3.5 as of the Trigger Date, and any accrued and unpaid car
allowance pursuant to Paragraph 3.6 as of the Trigger Date.
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6.2 Payments which Company is obligated to make to Xxxxxx
during the Mitigation Period shall be reduced by the amount equal to one-half
(1/2) the compensation earned by Xxxxxx from other sources during the Mitigation
Period (which shall exclude any and all non-cash consideration, contingent,
and/or deferred compensation received during or after the Mitigation Period, as
well as exclude amounts paid to him as a result of investments or amounts
received by him as an author). If Xxxxxx earns more than twice the Compensation
specified in Paragraph 6.1 during the Mitigation Period, Xxxxxx shall not be
entitled to any payments from Company for his Base Salary or Parachute Payment
during the Mitigation Period. During the Mitigation Period Xxxxxx shall have an
affirmative duty to seek other employment that will not violate the provisions
of Paragraph 9 and shall truthfully, accurately and promptly report and account
in writing to Company for all compensation earned by him (excluding that
outlined above) with respect to the Mitigation Period. Nothing in this Paragraph
6.2 shall require Xxxxxx to accept employment which he believes, in good faith,
is inappropriate, or at a level below that which he performed at Company.
6.3 Notwithstanding anything herein to the contrary, Company
shall not be obligated to utilize the services of Xxxxxx so long as Company pays
to him the amount specified in Paragraph 6.1 above. In the event that Company is
deemed to have terminated Xxxxxx without cause, his sole remedy shall be to
collect the amounts provided in this Agreement and such amounts shall be
retained by him as full and complete discharge and satisfaction of any claims
for damages and remedies, legal or equitable, and he expressly agrees to honor
the obligations specified in Paragraphs 8 and 9 below during the Mitigation
Period so long as Company is making such payments to him.
7. ADDITIONAL AGREEMENTS. Xxxxxx agrees to execute the Confidential
Information Disclosure Agreement and the Indemnity Agreement, a copy of which is
attached hereto and incorporated by this reference.
8. CONFIDENTIAL INFORMATION. Xxxxxx shall not use or disclose to any
other person (other than to another officer of the Company or his attorney,
accountant or professional financial advisor with a need to know such
information), any confidential information or trade secrets that he has or may
receive during such time as he has rendered or is rendering services to Company
relating to Company, or its business or affairs (including, without limitation,
any such information stored on any computer or in computer-readable form) that
contains or reflects any such information (except that Xxxxxx may take a copy of
his rolodex and documents reflecting his compensation). The confidentiality
obligations hereunder shall not extend to information in the possession of
Xxxxxx prior to his employment with Company or if the confidentiality is lost
due to reasons other than a violation of this Paragraph by Xxxxxx, or if Xxxxxx
is required to disclose such information by court order or other binding legal
process (so long as Xxxxxx gives ten (10) days' prior written notice to Company
of proceeding pursuant to which Xxxxxx is being asked to disclose confidential
information).
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9. NON-COMPETITION AND RELATED COVENANTS.
9.1 During the Term and for one year thereafter (which
one-year period shall be referred to herein as the "Post-Agreement Period"),
Xxxxxx shall not, unless acting pursuant to this Agreement or with the prior
consent of Company, own, control, manage, operate, join or finance, or
participate in the ownership, control, management, operation or financing of, or
be connected as a director, officer, employee, partner, principal, agent
representative, consultant or otherwise with, or use or permit its or his name
to be used in connection with, any business or enterprise that is or is
reasonably likely to become competitive with the Company's Business in any
jurisdiction in which Company is then engaged in business, for so long as
Company continues to conduct business in such jurisdiction. During the
Post-Agreement Period, Xxxxxx agrees to provide mutually acceptable
non-exclusive consulting services of Xxxxxx to Company, subject to payment of
the compensation set forth in this Agreement.
9.2 Prior to the expiration of the Term and during the
Post-Agreement Period, Xxxxxx shall not: (i) solicit or attempt to solicit for
employment any person who is then an employee of Company, or induce or attempt
to induce any such employee to terminate his or her employment with Company; or
(ii) solicit, divert or take away, or attempt to solicit, divert or take away,
any person that is at the time of such termination an advertiser, customer or
client of Company; or advise or induce or attempt to advise or induce any such
person not to continue its relationship with Company or to withdraw, curtail or
cancel its business dealings with Company; or (iii) interfere with or damage
Company's business relationships with its employees, lenders, creditors,
advertisers, clients, customers and others with whom it does business.
9.3 Xxxxxx'x obligations under Paragraph 9 during the
Post-Agreement Period shall be conditioned upon payment to Xxxxxx of the
Compensation provided for in this Agreement.
9.4 The covenants set forth in this Paragraph 9 shall be
construed as a separate and independent covenant for each of the separate
states, provinces, territories and possessions throughout the world. To the
extent that such covenant shall be declared to be invalid or unenforceable in
any particular jurisdiction, such declaration shall not affect such covenant
with respect to any other jurisdiction. In addition, in the event that any court
shall determine that the scope, time or territorial restrictions set forth
herein are not reasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent permitted by law, and this
Agreement shall thereby and to that extent be reformed.
9.5 The restrictions set forth in this Paragraph 9 shall not
be construed to prohibit the ownership collectively by Xxxxxx of less than five
percent (5) of any class of securities of any corporation having a class of
securities registered under the Securities Exchange Act of 1934, if and as long
as such ownership represents a passive investment and neither Xxxxxx nor any
group of affiliated persons in any way, directly or indirectly, manages or
exercises control over such corporation or otherwise takes part in such
corporation's business, or seeks to do any of the foregoing.
9.6 As used in Paragraph 8 hereof and this Paragraph 9, the
term "Company" shall be deemed to include any Affiliate(s) (whether now existing
or hereafter formed or acquired).
10. NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if (i) delivered
personally, (ii) sent by nationally-recognized overnight courier, or (iii) sent
by certified mail, postage prepaid, return receipt requested, addressed as
follows:
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If to Company, to: Global Sports And Xxxxxx.xxx
c/o Xxx Xxxxx
Law Offices Of Xxx Xxxxx
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
If to Xxxxxx, to: Xxxxxxx X. Xxxxxx
0000 0xx Xxxxxx
Xxxxxxxxx Xxxxx, Xxxxx 00000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered if
personally delivered, (ii) on the business day after dispatch if sent by
nationally-recognized, overnight courier as an overnight package for next day
delivery and so received, and (iii) on receipt, if sent by mail.
11. MISCELLANEOUS.
11.1 All compensation payable to Xxxxxx hereunder shall be net
of required deductions, withholdings and reductions to offset payments. If any
payment required to be made hereunder is to be paid on a weekend or holiday,
such payment shall be made on the next business day. If Company fails to make
any payment required hereunder on the date such payment is due, Xxxxxx shall
give written notice to Company requesting such payment and Company shall have
five (5) business days from receipt of such notice to pay the amount due. In the
event that Company pays the amount due within such five (5) days period, Company
shall not be deemed to have breached any such payment obligation to Xxxxxx.
11.2 Company may secure, at its cost, life, health, accident,
and other insurance covering Xxxxxx for Company's benefit, and Xxxxxx shall not
have any right, title or interest in or to such insurance. Xxxxxx shall submit
to usual and customary medical examinations for Company's insurance purposes
(including self-insurance) and will sign such applications or other documents as
may be reasonably required in the premises.
11.3 Company shall have the right during the Term and
thereafter to the extent already embodied in materials already distributed,
throughout the Universe, to use Xxxxxx'x name, likeness, photograph, voice
and/or biography in connection with Company's business, including, without
limitation, any advertising relating thereto.
11.4 This Agreement and any Exhibits attached hereto
constitutes and contains the entire agreement and understanding among the
parties hereto with respect to the matters set forth herein and the transactions
contemplated hereby, and supersedes and replaces all prior contracts,
negotiations and all proposed agreements, promises, covenants, guarantees,
representations, whether written or oral, express or implied, concerning any of
the subject matters hereof. Each of the parties agrees and acknowledges that
such party has not executed this Agreement in reliance on any agreement,
promise, covenant, guarantee, representation, commitment, or warranty not
expressly set forth in this Agreement. This Agreement may not be altered or
otherwise amended except by an instrument in writing signed by each of the
parties hereto.
11.5 Company believes that a monetary remedy for a breach of
Paragraphs 8 or 9 of this Agreement will be inadequate, and will be
impracticable and extremely difficult to prove, and further believes that such a
breach would cause Company irrevocable harm, and that Company should be entitled
to seek temporary and permanent injunctive relief without the necessity of
proving actual damages.
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11.6 The failure of either party at any time to require the
other party's performance of any provision hereof shall not affect such parties
right thereafter to enforce the same, except to the extent specifically
contemplated herein; nor shall the waiver by either party of any breach of any
provision hereof be construed to be a waiver of any succeeding breach of any
such provision, or as a waiver of the provision itself.
11.7 This Agreement and each of its provisions shall be
interpreted according to the fair and common meaning of its terms and shall not
be construed in favor of, or against, any of the parties hereto by reason of the
extent to which any such party or its counsel participated in its drafting or by
reason of the extent to which this Agreement or any such provision hereof is
inconsistent with any prior draft hereof.
11.8 Amendments to this Agreement shall only be effective if
the same shall be in writing and signed by the party to bound thereby.
11.9 The parties hereto acknowledge that they have read and
understand each and every provision of this Agreement and consent to all of the
terms and provisions contained herein voluntarily and without any reservation
whatsoever, and that the parties have had the same explained to them by
independent legal counsel.
11.10 As used in this Agreement, the term "person" shall mean
an individual, firm, corporation, partnership, governmental jurisdiction or
agency or other entity or enterprise.
11.11 More than one counterpart of this Agreement may be
executed by the parties hereto, and each such counterpart shall be deemed an
original.
11.12 Except as expressly provided herein, it is not the
intention of any of the parties to confer, and the Agreement shall not be
construed as to confer, any right or benefit upon any person or entity other
than the parties and each of their successors and permitted assigns.
11.13 This Agreement shall be assigned by Company to any
person, firm, corporation or other entity with which Company may merge,
consolidate or which acquires substantially all of Company's assets. This
Agreement may not be assigned by Xxxxxx. Subject to the foregoing, the parties
agree that this Agreement and all of its terms shall be binding upon their
respective heirs, personal representatives, executors, administrators,
successors and assigns.
11.14 This Agreement shall be governed by and its terms
construed in accordance with the laws of the State of California, applicable to
agreements entered into and to be performed wholly in California.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
December 6, 1999 in Los Angeles County, California.
Dated: 12/6/99 GLOBAL SPORTS AND XXXXXX.XXX, INC.
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By: /S/ XXXXX XXXXX ROOT
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Xxxxx Xxxxx Root, Chief Executive Officer
Dated: 12/6/99 /S/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
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