EMPLOYMENT AGREEMENT
EXHIBIT 10.3
THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated and effective as of April 3, 2006 (the
“Effective Date”) is by and between US Dataworks, Inc., a Nevada corporation (the
“Company”), and Xxxxx Xxxxxxxxxx (“Xxxxxxxxxx”). In consideration of the mutual covenants
and promises contained herein, the parties agree as follows.
WHEREAS, the Company deems it essential that it have the advantage of the services of
Xxxxxxxxxx and desires to enter into a continuing agreement of employment with him, and to provide
Xxxxxxxxxx with compensation, including stock options.
ARTICLE 1
GENERAL PROVISIONS
Section 1.1 Employment. The Company hereby employs Xxxxxxxxxx, and Xxxxxxxxxx accepts
such employment by the Company upon the terms and conditions hereof.
Section 1.2 Term. Subject to earlier termination as specifically set forth herein,
the initial term of this Agreement shall be commencing on the Effective Date and continuing until
April 3, 2008 (the “Term”). The Term shall be extended automatically without further action by
either party for successive one (1) year terms (each extension expiring on the anniversary of April
2), unless either party shall have served not less than ninety (90) days prior written notice upon
the other party that this Agreement shall terminate.
Section 1.3 Termination. Xxxxxxxxxx’x employment and this Agreement shall terminate
upon the earliest to occur of any of the following events (the actual date of such termination
being referred to herein as the “Termination Date”):
(a) Pursuant to Section 1.2.
(b) In the event of Xxxxxxxxxx’x death or disability as set forth in Section 3.7.
(c) Termination of Xxxxxxxxxx’x employment by the Company for cause without any prior notice
(except as specifically set forth below), upon the occurrence of any of the following events (each
of which shall constitute “Cause”):
(i) any embezzlement or wrongful diversion of funds of the Company or any affiliate of the
Company by Xxxxxxxxxx;
(ii) gross malfeasance by Xxxxxxxxxx in the conduct of Xxxxxxxxxx’x duties;
(iii) breach of this Agreement or any of the Company’s written policies and, if such breach is
capable of being cured, as determined by the Board of Directors of the Company (the “Board of
Directors”), failure of Xxxxxxxxxx to cure such breach after notice and reasonable opportunity to
cure such breach;
(iv) gross neglect by Xxxxxxxxxx in carrying out Xxxxxxxxxx’x duties; or
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(v) willful violation by Xxxxxxxxxx of any applicable federal or state securities laws or
regulations.
(d) Termination of Xxxxxxxxxx’x employment by the Company at any time without Cause.
(e) Termination by Xxxxxxxxxx of his employment at any time.
Section 1.4 Termination Obligations: Return of Company Property. Upon termination of
this Agreement, Xxxxxxxxxx shall promptly return all Company property. Likewise, the Company will
promptly pay any monies due and payable in accordance with the terms of this Agreement and with
other policies and procedures of the Company.
ARTICLE 2
POSITION AND DUTIES; OTHER BUSINESS ACTIVITIES
Section 2.1 Position. Xxxxxxxxxx shall be employed as Executive Vice President and
Chief Technical Officer of the Company. Xxxxxxxxxx shall report directly to the Chief Executive
Officer of the Company.
Section 2.2 Duties: Full Attention to Business. The primary focus of Xxxxxxxxxx’x
employment is to develop and execute strategies for the delivery and installation of products in
support of the revenue growth of the Company through the Payment Products Division. Xxxxxxxxxx
shall be directly responsible for the supervision and management of the Company’s technology
roadmap, the Company’s information technology strategy, and the development and support of all the
Company’s products and shall perform such services for the Company that reasonably serve the
purpose of this Agreement and/or meet the needs of the Company, and that are consistent with the
position Xxxxxxxxxx holds. Xxxxxxxxxx shall devote his full business time, energies, interest,
abilities, and productive efforts to the business of the Company. Except as may be approved by the
Company’s Board of Directors, Xxxxxxxxxx shall not render any consulting services to others for
compensation and, in addition, shall not engage in any activity which conflicts or interferes with
his performance of duties hereunder. Notwithstanding the provisions of this Section 2.2,
Xxxxxxxxxx may, with the prior written consent of the Board of Directors, engage in civic,
charitable, or educational activities, provided that such service and activities do not,
individually or in the aggregate, interfere with the performance of Xxxxxxxxxx’x duties under the
Agreement.
Section 2.3 Covenant Not To Compete During Term. During the Term, Xxxxxxxxxx shall
comply in all respects with the Company’s written policies with respect to conflicts of interest.
Except as may be approved by the Company’s Board of Directors, Xxxxxxxxxx shall not engage in or be
interested, directly or indirectly, in any business or operation competitive with the Company. For
the purpose of this paragraph, Xxxxxxxxxx shall be deemed to be interested in a business or
operation which is competitive with the Company if Xxxxxxxxxx is a holder of five percent (5%) or
more of the issued and outstanding ownership interests in such business or operation, or serves as
a director, officer, employee, agent, partner, individual proprietor, lender, consultant, or
independent contractor of such business or operation.
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Section 2.4 Non-Disclosure of Confidential Information. Xxxxxxxxxx acknowledges that
in connection with his employment by the Company or its affiliates, he has and may acquire or learn
“Confidential Information” of the Company by virtue of a relationship of trust and confidence
between Xxxxxxxxxx and the Company. Xxxxxxxxxx warrants and agrees that during the Term he shall
not disclose to anyone (other than to officers of the Company or to such other persons as such
officers may designate), or use, except in the course of his employment with the Company or its
affiliates, any Confidential Information acquired by him in the course of or in connection with his
employment. As used herein, the term “Confidential Information” shall include, but not be limited
to: all information of any type or kind, whether or not reduced to a writing and whether or not
conceived, originated, discovered or developed in whole or in part by Xxxxxxxxxx, which is directly
related to the Company, its operations, policies, agreements with third parties, its financial
affairs and related matters, including business plans, strategic planning information, product
information, purchase and sales information and terms, supplier negotiation points, styles and
strategies, contents and terms of contracts between the Company and suppliers, advertisers,
vendors, contact persons, terms of supplier and/or vendor contracts or particular transactions,
potential supplies and/or vendors, or other related data; marketing information such as but not
limited to, prior, ongoing or proposed marketing programs, presentations, or agreements by or on
behalf of the Company, pricing information, customer bonus programs, marketing tests and/or results
of marketing efforts, computer files, lists and reports, manuals and memos pertaining to the
business of the Company, lists or compilations of vendor and/or supplier names, addresses, phone
numbers, requirements and descriptions, contract information sheets, compensation requirements or
terms, benefits, policies, and any other financial information whether about the Company, entities
related or affiliated with the Company or other key information pertaining to the business of the
Company, including but not limited to all information which is not generally available to or known
in the information services industry (or is available only as a result of an unauthorized
disclosure) and is treated by the Company as “Confidential Information” during the term of this
Agreement, regardless of whether or not such Information is a “trade secret” as otherwise defined
by applicable law unless such information is in the public domain.
Section 2.5 No Solicitation of Company’s Employees. Xxxxxxxxxx specifically agrees
that during the Term and for a period of one (1) year after his termination of employment with the
Company, Xxxxxxxxxx shall not, directly or indirectly, either for himself or for any other person,
firm, corporation, or legal entity, solicit any individual, then employed by the Company to leave
the employment of the Company.
Section 2.6 Ownership of Work Product and Ideas. Any discoveries, inventions,
patents, materials, licenses and ideas applicable to the industry or relating to Xxxxxxxxxx’x
services for the Company or its affiliates, whether or not patentable or copyrightable, created by
Xxxxxxxxxx during his employment by the Company or its affiliates (“Work Product”) and all business
opportunities within the industry (“Opportunities”) introduced to Xxxxxxxxxx by the Company or its
affiliates will be owned by the Company, and Xxxxxxxxxx will have no personal interest in such,
except to the extent that the Company allows Xxxxxxxxxx to invest or participate in or have other
rights to such Work Product or Opportunities. Xxxxxxxxxx will, in such connection, promptly
disclose any such Work Product and Opportunities to the Company and, upon request of the Company,
will assign to the Company all right in such Work Product and Opportunities.
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ARTICLE 3
COMPENSATION; BENEFITS
Section 3.1 Salary. The Company shall pay Xxxxxxxxxx seven thousand seven hundred
eight Dollars and thirty three cents ($7,708.33) on a semi-monthly basis, for an annualized base
salary (“Base Salary”) of One Hundred Eighty Five Dollars ($185,000). Beginning with the first
anniversary of the Effective Date and for each subsequent year of employment (or any portion of any
such year), Xxxxxxxxxx shall be entitled to a Base Salary review by the Company to determine if any
increase to Base Salary is warranted as a result of performance.
Section 3.2 Bonus. The primary focus of Xxxxxxxxxx’x employment is to provide the
technical direction for the Company, to manage the timely development of new product, and to
support the increase of the Payment Products revenue with professional services support. As an
incentive to achieving these objectives, a cash bonus, paid quarterly, equal to three and one-half
percent (3.5%) of the revenue increase, if any, determined by comparing the Top-line Revenues for
the prior fiscal year’s quarter against the Top-line Revenues for the current fiscal quarter
(“Revenue Growth Bonus”) shall be paid to Xxxxxxxxxx within thirty (30) days of the Company’s
fiscal quarter’s end. In the event that the Company’s cash position at the end of any fiscal
quarter is such that the Company, in good faith, determines that it will not have sufficient cash
to fund its business operations for the next three successive fiscal quarters, then, in lieu of an
all cash Revenue Growth Bonus, Xxxxxxxxxx will, at his option, receive a Revenue Growth Bonus
payable as follows: (i) cash in any portion Xxxxxxxxxx chooses, up to but not exceeding fifty
percent (50%) of the Revenue Growth Bonus amount, and (ii) the remaining balance of the Revenue
Growth Bonus shall be payable in shares of restricted common stock equal to one hundred ten percent
(110%) of the non-cash balance of the Revenue Growth Bonus granted at the date of the current 10-q
or 10-k filing. If the cash payment is not made, it will be accrued at a 10% interest rate. For the
purpose of this Agreement, “Top-line Revenues” shall mean all revenues recognized by the Company
for the Payment Products Division during the fiscal year in accordance with generally accepted
accounting principles (GAAP) and as reported in the Company’s SEC Forms 10-q and 10-k. In the
event Xxxxxxxxxx is paid a Revenue Growth Bonus and the Top-line Revenues for the fiscal quarter in
question are subsequently adjusted (such adjustment being made in accordance with GAAP and reported
as an amendment to the corresponding SEC Form 10-q or 10-k as such) then, as a result: (i) if the
Revenue Growth Bonus is determined to have been underpaid, any resulting increase in cumulative
commissions due will be promptly paid on the next succeeding payroll processing date; conversely,
(ii) if the Revenue Growth Bonus is determined to have been overpaid (either by accounting
adjustment or negative Top-line Revenues for the subsequent fiscal quarter) any Revenue Growth
Bonus previously paid and determined (in accordance with GAAP) to have been overpaid, shall be
offset against any subsequent Revenue Growth Bonus earned during the Term of this Agreement. In no
case will the bonus earned exceed three and one-half percent (3.5%) of the increase of the Top-line
Revenue for the fiscal year. Upon termination of this Agreement, any offset to be made against
future Revenue Growth Bonuses shall be deemed non-recoverable.
Section 3.3 FY2006 Bonus. In recognition for the Xxxxxxxxxx’x part in securing major
contracts, the Company will pay Xxxxxxxxxx seventy eight thousand seven hundred fifty
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dollars ($78,750) for his successful efforts in securing this sale. Payment will be made
quarterly during FY2007 as determined jointly by the Company and Xxxxxxxxxx. If accrued, 10%
interest will be paid on the unpaid accrual.
Section 3.4 Paid Vacation. Xxxxxxxxxx shall be entitled to be paid vacation time
under the Company’s policies applicable to other senior executives of the Company’s policies, but
in no event shall Xxxxxxxxxx be eligible for less than four (4) weeks of paid time off per calendar
year.
Section 3.5 Restricted Stock. Subject to approval of the Compensation Committee of
the Board of Directors, which such grant shall be made as promptly hereafter as practicable, the
Company will grant to Xxxxxxxxxx two hundred thousand (200,000) shares of restricted common stock
under the Company’s 2000 Stock Option Plan (the “Plan”) as amended. The grant shall be subject to
the terms and conditions of the Plan. A Restricted Share Agreement will be entered into between the
Company and Xxxxxxxxxx, in a form approved by the Compensation Committee of the Board of Directors.
The shares would vest twenty five thousand (25,000) shares April 3, 2006, eighty seven thousand
five hundred (87,500) shares on April 3, 2007 and eighty seven thousand five hundred (87,500)
shares on April 3, 2008.
Section 3.6 Other Benefits. During the Term, Xxxxxxxxxx shall be entitled to
participate in present and future employee benefit plans which are available to the Company’s
employees, subject to eligibility requirements thereunder.
Section 3.7 Disability or Death. If the Board of Directors determines, on the basis
of professional medical advice, that Xxxxxxxxxx has become unable to substantially perform his
duties under this Agreement due to illness or mental or physical disability with reasonable
accommodation, and that such failure or inability has continued or is reasonably expected to
continue for any consecutive six-month period, the Company shall have the option to terminate this
Agreement by giving written notice to Xxxxxxxxxx thereof and the basis therefor at least thirty
(30) days prior to the effective date of termination. This Agreement shall also terminate
immediately upon Xxxxxxxxxx’x death. If Xxxxxxxxxx’x employment with the Company is terminated
pursuant to this Section 3.7, the Company shall pay Xxxxxxxxxx the salary, bonuses, and commissions
which are earned but unpaid as of the date of termination.
Section 3.8 Severance.
(a) If the Company terminates Xxxxxxxxxx’x employment other than for Cause pursuant to Section
1.3(d), other than by reason of death or Disability pursuant to Section 3.7, or if Xxxxxxxxxx
resigns within ten (10) days following a material reduction in his duties (as per Section 2.2) or
material reduction of compensation within six (6) months following a Change in Control then subject
to Xxxxxxxxxx’x continuing obligations under Section 2.4 and Section 2.5 and in consideration of
the execution, delivery and effectiveness of a general release of claims in a standard form
approved by the Company, the Company shall pay to Xxxxxxxxxx a lump sum of two (2) times
Xxxxxxxxxx’x current Base Salary in cash, any Revenue Growth Bonus (calculated on a trailing twelve
month (TTM) year-to-year basis) and shall vest one hundred percent (100%) of Xxxxxxxxxx’x then
remaining unvested portion of the Restricted Stock granted in accordance with this Agreement, in
addition to other amounts payable from qualified plans, nonqualified
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retirement plans, and deferred compensation plans, which amounts shall be paid in accordance
with the terms of such plans, any unpaid FY2006 bonus accrued but unpaid (Section 3.3), within
fifteen (15) days after the date of termination (or, if later, upon the effectiveness of the
general release following any applicable revocation period).
(b) If the Company terminates Xxxxxxxxxx’x employment for Cause, or if Xxxxxxxxxx resigns,
then Xxxxxxxxxx shall only be entitled to be paid his accrued, unpaid Base Salary through the
effective date of his termination of employment, any Revenue Growth Bonus (calculated on a trailing
twelve month year-to-year basis), any unpaid FY2006 bonus accrued but unpaid (Section 3.3), and his
entitlement to other amounts payable from qualified plans, nonqualified retirement plans, and
deferred compensation plans shall be determined in accordance with the terms of such plans.
(c) No severance benefits shall be provided pursuant to this Section 3.8 if Xxxxxxxxxx’x
employment is terminated by reason of expiration or non-renewal of this Agreement in accordance
with Section 1.2. with the exception of any earned Revenue Growth Bonus or any unpaid FY2006 bonus.
Section 3.9 Excess Parachute Payments.
(a) If there is a “Change in Control” of the Company within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”), a portion of the benefits to which
Xxxxxxxxxx is entitled under this Agreement could be characterized as “excess parachute payments”
within the meaning of Section 280G of the Code. The parties hereto acknowledge that the protections
set forth in this Section 3.9 are important, and it is agreed that Xxxxxxxxxx should not have to
bear the full burden of the excise tax that might be levied under Section 4999 of the Code or any
similar provision of federal, state of local law, in the event that any portion of the benefits
payable to Xxxxxxxxxx pursuant to this Agreement or the other incentive plans of the Company are
treated as an excess parachute payment. The parties, therefore, have agreed as set forth in this
Section 3.9.
(b) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that
any payment or distribution (including income recognized by Xxxxxxxxxx upon the early vesting of
restricted property or upon the exercise of options whose exercise date has been accelerated) by
the Company or any other Person to or for the benefit of Xxxxxxxxxx (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Section 3.9, (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any similar provision of any
federal, state or local law or any interest or penalties are incurred by Xxxxxxxxxx with respect to
such excise tax (such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then the Company shall pay an additional payment,
not to exceed the amount of Xxxxxxxxxx’x then current Base Salary in the aggregate (a “Gross-Up
Payment”), in an amount such that after payment by Xxxxxxxxxx of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the
Gross-Up Payment, Xxxxxxxxxx retains an amount of the Gross-Up Payment equal to fifty percent (50%)
of the Excise Tax imposed on the Payments. Xxxxxxxxxx will
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bear the cost of the remaining fifty percent (50%) until the aggregate Gross-Up Payments from
the Company have reached the amount of Xxxxxxxxxx’x then current Base Salary, and will thereafter
bear all additional taxes, interest or penalties.
(c) In the event of any dispute as to the applicability or amount of any Gross-Up Payment, all
determinations required to be made under this Section 3.9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by the independent public accounting firm regularly
employed by the Company (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and to Xxxxxxxxxx within fifteen (15) business days after the
receipt of notice from Xxxxxxxxxx that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm will be borne by the
Company. If the Accounting Firm determines that no Excise Tax is payable by Xxxxxxxxxx, it shall
furnish Xxxxxxxxxx with a written statement that failure to report the Excise Tax on Xxxxxxxxxx’x
applicable federal income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding on the Company and Xxxxxxxxxx
unless and until a final determination is received from the Internal Revenue Service indicating a
contrary result. As a result of uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments may not have been made by the Company that should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. If Xxxxxxxxxx thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of Xxxxxxxxxx, consistent with the maximum limitation stated in this Section
3.9. In the event it is determined by the Accounting Firm that the Gross Payments previously made
by the Company exceeded the limitations stated in this Section 3.9, upon written notice from the
Company, accompanied by a copy of the Accounting Firm’s calculation of same, the amount of such
overpayment shall be promptly paid by Xxxxxxxxxx to the Company.
ARTICLE 4
MISCELLANEOUS PROVISIONS
Section 4.1 Entire Agreement. This Agreement contains the entire Agreement between
the Parties and supersedes all prior oral and written Agreements, understandings, commitments, or
practices between the Parties with respect to the subject matter hereof. Other than as expressly
set forth herein, Xxxxxxxxxx and the Company acknowledge and represent that there are no other
promises, terms, conditions or representations (verbal or written) regarding any matter relevant
hereto. No supplement, modification, or amendment of any term, provision or condition of this
Agreement shall be binding or enforceable unless evidenced in writing and executed by the parties.
The provisions of Sections 2.4, 2.5, and 2.6 shall survive termination of this Agreement.
Section 4.2 Applicable Law. This Agreement shall be governed exclusively by and
construed in accordance with the laws of the State of Texas, notwithstanding choice of law
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provisions thereof; and the venue of any litigation commenced hereunder shall be Houston,
Texas.
Section 4.3 Injunctive Relief. Xxxxxxxxxx acknowledges that his services are of a
special, unique, unusual, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in damages in an action at
law. If he should breach this Agreement, in addition to its rights and remedies under general law,
the Company shall be entitled to seek equitable relief by way of injunction or otherwise.
Section 4.4 Partial Invalidity. If the application of any provision of this
Agreement, or any section, subsection, subdivision, sentence, clause, phrase, word or portion of
this Agreement should be held invalid or unenforceable, the remaining provisions thereof shall not
be affected thereby, but shall continue to be given full force and effect as if the invalid or
unenforceable provision had not been included herein.
Section 4.5 Notices. Notices given under this Agreement shall be given by registered
or certified mail, postage prepaid, return receipt requested, or by personal delivery to the
respective addresses of the parties. Notices to Xxxxxxxxxx shall be sent to 0000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attn: Xxxxx Xxxxxxxxxx. Notices to the Company shall be sent to
0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attn: Chief Executive Officer. A mailed
first-class notice shall be deemed given two (2) business days after deposit with U.S. Postal
Service.
Section 4.6 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one and the same
instrument.
Section 4.7 Assignment. This Agreement may not be assigned or encumbered in any way
by Xxxxxxxxxx. The Company may assign this Agreement to any successor (whether by merger,
consolidation, or purchase of the Company’s stock) to all or a controlling interest in the
Company’s business, in which case this Agreement shall be binding upon and inure to the benefit of
such successor(s) and assign(s).
Section 4.8 Limitation on Waiver. A waiver of any term, provision, or condition of
this Agreement shall not be deemed to be, or constitute a waiver of any other term, provision or
condition herein, whether or not similar. No waiver shall be binding unless in writing and signed
by the waiving party.
Section 4.9 Attorney’s Fees. In the event that any proceeding is commenced involving
the interpretation or enforcement of the provisions of this Agreement, the Party prevailing in such
proceeding shall be entitled to recover its reasonable costs and attorneys’ fees.
Section 4.10 Taxes. All payments made pursuant to the provisions of this Agreement
shall be subject to the withholding of applicable taxes.
Section 4.11 Not for the Benefit of Creditors or Third Parties. The provisions of
this Agreement are intended only for the regulation of relations among the parties. This
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Agreement is not intended for the benefit of creditors of the parties or other third parties
and no rights are granted to creditors of the parties or other third parties under this Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the Effective Date.
US DATAWORKS, INC. | ||||||
By | /s/ Xxxxxxx X. Xxxxx
|
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Name | Xxxxxxx X. Xxxxx | |||||
Title: | Chief Executive Officer | |||||
/s/ Xxxxx Xxxxxxxxxx | ||||||
Xxxxx Xxxxxxxxxx |
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