NEUROCRINE BIOSCIENCES, INC. EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION
EXHIBIT 10.1
NEUROCRINE BIOSCIENCES, INC.
EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION
THIS EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION (the “Agreement”), dated as of
October 31, 2005, is made by and between Neurocrine Biosciences, Inc., a Delaware corporation (the
“Company”), and Xxxxxxxxxxx X’Xxxxx, M.D., an employee of the Company (the
“Optionee”).
WHEREAS, the Board of Directors of the Company has determined that it would be to the
advantage and best interest of the Company and its stockholders to grant the nonstatutory stock
option provided for herein (the “Option”) to Optionee in connection with his initial
commencement of employment with the Company and that such grant is an essential inducement to
Optionee’s entering into a contract of employment with the Company as its Senior Vice President,
Clinical Development.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Definitions.
(a) “Board” shall mean the Committee, if one has been appointed, or the Board of
Directors of the Company, if no Committee is appointed.
(b) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(c) “Committee” shall mean the Committee appointed by the Board to administer this
Option, if one is appointed, which Committee shall be constituted to satisfy applicable laws.
(d) “Common Stock” shall mean the common stock of the Company, par value $.001 per
share.
(e) “Company” shall mean Neurocrine Biosciences, Inc.
(f) “Consultant” shall mean any natural person who is engaged by the Company or any
Parent or Subsidiary of the Company to render bona fide consulting services and is compensated for
such consulting services.
(g) “Continuous Status as an Employee or Consultant” shall mean the absence of any
interruption or termination of service as an Employee or Consultant, as applicable. Continuous
Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided that such
leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(h) “Employee” shall mean any person, including an officer or director, employed by
the Company or any Parent or Subsidiary of the Company. The payment of a director’s fee by the
Company shall not be sufficient to constitute “employment” by the Company.
(i) “Fair Market Value” shall be determined by the Board in its discretion;
provided, however, that where there is a public market for the Common Stock, the
Fair Market Value per Share shall be the mean of the bid and asked prices (or the closing price per
share if the Common Stock is listed on the National Association of Securities Dealers Automated
Quotation (“NASDAQ”) National Market System) of the Common Stock for the date of
determination, as reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the NASDAQ System) or, in the event the Common Stock is listed on a stock exchange, the
Fair Market Value per Share shall be the closing price on such exchange on the date of
determination, as reported in the Wall Street Journal.
(j) “Optioned Stock” shall mean the Common Stock subject to this Option.
(k) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(l) “Subsidiary” shall mean a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.
2. Grant of Option. In consideration of Optionee’s agreement to render services to
the Company and for other good and valuable consideration, the Company grants to Optionee an Option
to purchase the Common Stock (the “Shares”) set forth below, at the exercise price set
forth below (the “Exercise Price”), subject to the terms and conditions of this Agreement.
The terms of Optionee’s grant are set forth below:
Date of Grant:
|
October 31, 2005 | |
Vesting Commencement Date:
|
October 31, 2005 | |
Exercise Price per Share:
|
Closing price of the Company’s common stock on the NASDAQ National Market System on October 31, 2005 | |
Total Number of Shares Granted:
|
55,000 | |
Term/Expiration Date:
|
October 31, 2015 |
This Option is a nonstatutory stock option and is not intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
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3. Exercise and Vesting Schedule. The Shares subject to this Option shall vest and
become exercisable according to the following schedule:
This Option may be exercised, in whole or in part, in accordance with the following schedule:
25% of the Shares subject to this Option shall vest twelve (12) months after the Vesting
Commencement Date, and 1/48th of the Shares subject to this Option shall vest
each month thereafter, subject to the Optionee continuing to be an Employee or Consultant on
such dates.
For purposes of this Agreement, Shares subject to this Option shall vest and become
exercisable based on Optionee’s Continuous Status as an Employee or Consultant.
4. Exercise of Option.
(a) Right to Exercise.
(i) This Option shall be exercisable cumulatively according to the vesting schedule set out in
Section 3 above.
(ii) This Option may not be exercised for a fraction of a Share.
(iii) In the event of Optionee’s death, retirement, disability or other termination of
Optionee’s Continuous Status as an Employee or Consultant, the exercisability of this Option is
governed by Sections 7, 8, 9 and 10 below.
(iv) In no event may this Option be exercised after the date of expiration of the term of this
Option as set forth in Section 2 above.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall
state the election to exercise this Option, the number of Shares in respect of which this Option is
being exercised (the “Exercised Shares”), and such other representations and agreements as
may be required by the Company. The Exercise Notice shall be completed by Optionee and delivered
to the President, the Chief Financial Officer or Secretary of the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares,
including payment of any applicable withholding tax. This Option shall be deemed to be exercised
upon receipt by the Company of such fully-executed Exercise Notice accompanied by such aggregate
Exercise Price and payment of any applicable withholding tax, which may be paid by the withholding
of shares otherwise issuable upon exercise having a Fair Market Value equal to the statutory
minimum amount required to be withheld.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise program implemented by the
Company;
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(d) surrender of other shares of Common Stock which (i) either have been owned by Optionee for
more than six (6) months on the date of surrender or were not acquired directly or indirectly, from
the Company, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Shares;
(e) with the consent of the Board, such other consideration and method of payment for the
issuance of Shares to the extent permitted under applicable law; or
(f) any combination of the foregoing methods of payment.
6. Restrictions on Exercise. No Shares shall be issued pursuant to the exercise of
this Option unless such issuance and such exercise comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of the
Nasdaq Stock Market or any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such compliance.
Assuming such compliance, for income tax purposes the Exercised Shares shall be considered
transferred to Optionee on the date this Option is exercised with respect to such Exercised Shares.
As a condition to the exercise of this Option, the Company may require the person exercising this
Option to represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
7. Termination of Relationship. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant (as the case may be) (other than by reason of Optionee’s death,
retirement or the total and permanent disability of Optionee as defined in Code Section 22(e)(3)),
Optionee may exercise this Option to the extent this Option was vested at the date on which
Optionee’s Continuous Status as an Employee or Consultant terminates, but only within ninety (90)
days from such date (or such other period of time not exceeding six (6) months, as is determined by
the Board) (and in no event later than the expiration date of the term of this Option as set forth
in Section 2). To the extent that Optionee was not entitled to exercise this Option at the date of
such termination, or if Optionee does not exercise this Option (which Optionee was entitled to
exercise) within the time specified herein, this Option shall terminate.
8. Disability of Optionee. In the event of termination of Optionee’s Continuous
Status as an Employee or Consultant (as the case may be) as a result of Optionee’s total and
permanent disability as defined in Code Section 22(e)(3), Optionee may exercise this Option to the
extent the right to exercise would have accrued had Optionee continued Continuous Status as an
Employee or Consultant for a period of six (6) months following termination of Optionee’s
Continuous Status by reason of disability, but only within six (6) months from such date (and in no
event later than the expiration date of the term of this Option as set forth in Section 2). To the
extent that Optionee was not entitled to exercise this Option in this period, or if Optionee does
not exercise this Option (which Optionee was entitled to exercise) within the time specified
herein, this Option shall terminate.
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9. Retirement of Optionee. In the event of termination of Optionee’s Continuous
Status as an Employee as a result of such Optionee’s retirement from the Company at age fifty five
(55) or greater after having Continuous Status as an Employee for (5) years or more, Optionee shall
fully vest in and have the right to exercise this Option as to all of the Optioned Stock and
Optionee may, but only within three (3) years from the date of such termination (but in no event
later than the expiration date of the term of this Option as set forth in Section 2), exercise this
Option to the extent Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee does not exercise this Option (which Optionee was entitled to exercise) within
the time specified herein, this Option shall terminate.
10. Death of Optionee. In the event of the death of Optionee:
(a) During the term of this Option while still an Employee or Consultant of the Company, so
long as Optionee shall have been in Continuous Status as an Employee or Consultant since the date
of grant of this Option, this Option may be exercised, at any time within six (6) months (but in no
event later than the expiration date of the term of this Option as set forth in Section 2), by
Optionee’s estate or by a person who acquired the right to exercise this Option by bequest or
inheritance, but only to the extent that the right to exercise would have accrued had Optionee
continued living and remained in Continuous Status as an Employee or Consultant six (6) months
after the date of death; or
(b) Within thirty (30) days after the termination of Optionee’s Continuous Status as an
Employee or Consultant, this Option may be exercised, at any time within six (6) months following
the date of death (but in no event later than the expiration date of the term of this Option as set
forth in Section 2), by Optionee’s estate or by a person who acquired the right to exercise this
Option by bequest or inheritance, but only to the extent that the right to exercise had accrued at
the date of termination.
11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any action by the Company required by
applicable law or regulations or the requirements of the Nasdaq Stock Market or an established
stock exchange on which the Company’s securities are traded, the number and kind of shares of
Common Stock (or other securities or property) covered by this Option, as well as the exercise
price per share of Common Stock (or other securities or property) subject to this Option, shall be
adjusted proportionately to the extent the Board determines that any increase, decrease or
adjustment in the number or kind of issued shares of Common Stock (or other securities or
property), dividend, distribution, stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, reorganization, merger, consolidation, split-up, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially
all of the assets of the Company, exchange of Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Board’s sole discretion, affects the Common
Stock such that an adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be made available under
this Option. Such adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common Stock subject to
this Option.
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(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, this Option shall
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger, sale of all or substantially all
of the assets of the Company, tender offer or other transaction or series of related transactions
resulting in a change of ownership of more than fifty percent (50%) of the voting securities of the
Company (“Change in Control”) approved by the majority of the members of the Board on the
Board prior to the commencement of such Change in Control, this Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation; provided, however, in the event that within one year of
the date of the completion of the Change in Control, the successor corporation or a Parent or
Subsidiary of the successor corporation terminates the employment of Optionee without Cause (as
defined below), Optionee shall fully vest in and have the right to exercise the options assumed or
substituted for this Option as to all of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable. In the event that the successor corporation refuses to assume or
substitute for this Option, Optionee shall fully vest in and have the right to exercise this Option
as to all of the Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If this Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a Change of Control, the Board shall notify Optionee in writing or
electronically that this Option shall be fully vested and exercisable for a period of fifteen (15)
days from the date of such notice, and this Option shall terminate upon the expiration of such
period. For the purposes of this paragraph, this Option shall be considered assumed if, following
the Change of Control, the option confers the right to purchase, for each Share of Optioned Stock
subject to this Option immediately prior to the Change in Control, the consideration (whether
stock, cash, or other securities or property) received in the Change of Control by holders of
Common Stock for each Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received in
the Change of Control is not solely common stock of the successor corporation or its Parent, the
Board may, with the consent of the successor corporation, provide for the consideration to be
received upon the exercise of this Option, for each Share of Optioned Stock subject to this Option,
to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to
the per share consideration received by holders of Common Stock in the Change of Control. For
purposes of this paragraph, termination shall be for “Cause” in the event of the occurrence
of any of the following: (a) any intentional action or intentional failure to act by Optionee which
was performed in bad faith and to the material detriment of the successor corporation or its Parent
or Subsidiary; (b) Optionee willfully and habitually neglects the duties of employment; or (c)
Optionee is convicted of a felony crime involving moral turpitude, provided that in the event that
any of the foregoing events is capable of being cured, the successor corporation or its Parent or
Subsidiary shall provide written notice to the employee describing the nature of such event and
Optionee shall thereafter have five (5) business days to cure such event.
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In the event of a Change in Control which is not approved by the majority of the members of
the Board on the Board prior to the commencement of a Change in Control, Optionee shall fully vest
in and have the right to exercise this Option as to all of the Optioned Stock, including Shares as
to which it would not otherwise be exercisable.
12. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
13. Term of Option. This Option may be exercised only within the term set out in
Section 2 and may be exercised during such term only in accordance with the terms of this Option.
14. Powers of the Board. The Board shall have the authority, in its discretion, to
interpret this Option; to accelerate or defer (with the consent of Optionee) the exercise date of
this Option; and to make all other determinations deemed necessary or advisable for the
administration of this Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under this Option.
15. Successors and Assigns. Subject to the provisions of Section 11 above, the
Company may assign any of its rights under this Option to single or multiple assignees, and this
Option shall inure to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Option shall be binding upon Optionee and his
heirs, executors, administrators, successors and assigns.
16. Interpretation. Any dispute regarding the interpretation of this Agreement shall
be submitted by Optionee or by the Company forthwith to the Board, which shall review such dispute
at its next regular meeting. The resolution of such a dispute by the Board shall be final and
binding on the Company and on Optionee.
17. Notices. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the United States mail
by certified mail, with postage and fees prepaid, addressed to the other party at its address as
shown below beneath its signature, or to such other address as such party may designate in writing
from time to time to the other party.
18. Further Instruments. The parties agree to execute such further instruments and to
take such further action as may be reasonably necessary to carry out the purposes and intent of
this Option.
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19. Entire Agreement; Governing Law; Severability. This Option and the exhibit hereto
constitute the entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest
except by means of a writing signed by the Company and Purchaser. This Agreement is governed by
the internal substantive laws, but not the choice of law rules, of California. Should any
provision of this Option be determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.
20. Shareholder Approval Not Required. Rule 4350(i) promulgated by the National
Association of Securities Dealers, Inc. (“NASD”) generally requires shareholder approval
for stock option plans or other equity compensation arrangements adopted by companies whose
securities are listed on the Nasdaq Stock Market pursuant to which options or stock may be acquired
by officers, directors, employees, or consultants of such companies. NASD Rule 4350(i)(1)(A)(iv)
provides an exception to this requirement for issuances of securities to a person not previously an
employee or director of the issuer, or following a bona fide period of non-employment, as an
inducement material to the individual’s entering into employment with the issuer, provided such
issuances are approved by either the issuer’s compensation committee comprised of a majority of
independent directors or a majority of the issuer’s independent directors. The grant of this
Option is made to the Optionee, who has not previously been an employee or director of the Company,
as an inducement material to the Optionee’s entering into employment with the Company, and this
Option has been approved by the Company’s compensation committee comprised of a majority of the
Company’s independent directors or a majority of the Company’s independent directors. Accordingly,
pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of this Option and the Shares issuable upon
exercise of this Option are not subject to the approval of the Company’s shareholders.
21. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS AN
EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS AN EMPLOYEE OR CONSULTANT AT ANY TIME, WITH OR WITHOUT CAUSE.
[SIGNATURE PAGE FOLLOWS]
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By your signature and the signature of the Company’s representative below, you and the Company
agree that this Option is granted under and governed by the terms of this Agreement. Optionee has
reviewed the Option, has had an opportunity to obtain the advice of counsel prior to executing this
Option and fully understands all provisions of the Option. Optionee further agrees to notify the
Company upon any change in the residence address indicated below.
| OPTIONEE: | NEUROCRINE BIOSCIENCES, INC. | |||||
/s/
Xxxxxxxxxxx X’Xxxxx, M.D. |
By: | /s/ Xxxx Xxxxx | ||||
| Name: Xxxxxxxxxxx X’Xxxxx, M.D. | Xxxx Xxxxx | |||||
| Date: | 10/31/05 | President and Chief Executive Officer | ||||
| Residence Address: | ||||||
000
Xxx Xxxxxxx Xxx. |
||||||
Xxx
Xxxxx, XX 00000 |
||||||
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EXHIBIT A
NEUROCRINE BIOSCIENCES, INC.
EXERCISE NOTICE
Neurocrine Biosciences, Inc.
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Secretary
1. Exercise of Option. Effective as of today, ___, ___, the undersigned
(“Purchaser”) hereby elects to purchase ___shares (the “Shares”) of the Common
Stock of Neurocrine Biosciences, Inc. (the “Company”) under and pursuant to the Employment
Commencement Nonstatutory Stock Option dated October 31, 2005 (the “Option Agreement”).
The purchase price for the Shares shall be $___, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase
price for the Shares.
Cash Exercise
|
_________ | (Payment Attached) | ||||
Same-Day Sale
|
_________ | (Broker Paid) | ||||
Sell-to-Cover
|
_________ | (Broker Paid) | ||||
Other
|
_________ | (Please Specify: _________ ) |
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received,
read and understood the Option Agreement and agrees to abide by and be bound by its terms and
conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares,
no right to vote or receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be
issued to Purchaser as soon as practicable after the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the date of issuance,
except as provided in Section 11 of the Option Agreement.
5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser
represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on
the Company for any tax advice.
6. Entire Agreement; Governing Law. The Option Agreement is incorporated herein by
reference. This Agreement and the Option Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not
be modified adversely to the Purchaser’s interest except by means of a writing signed by the
Company and Purchaser. This Agreement is governed by the internal substantive laws, but not the
choice of law rules, of California.
| Submitted by: | Accepted by: | |||||
| PURCHASER: | NEUROCRINE BIOSCIENCES, INC. | |||||
| By: | ||||||
| Signature | ||||||
| Name: | Its: | |||||
| Address: | Address: | |||||
| Neurocrine Biosciences, Inc. | ||||||
| 00000 Xx Xxxxxx Xxxx | ||||||
| Xxx Xxxxx, Xxxxxxxxxx 00000 | ||||||
| Date Received: | ||||||
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