EMPLOYMENT AGREEMENT
EXHIBIT 10.3
EMPLOYMENT AGREEMENT effective as of November 2, 2012 between Marinus Pharmaceuticals, Inc. (the “Company”), a Delaware corporation, and Xxxxxxxxxxx X. Xxxxxxx (the “Employee”).
Recital:
The parties hereto desire to enter into this Agreement to provide for the employment of the Employee by the Company and for certain other matters in connection with such employment, all as set forth more fully in this Agreement.
NOW, THEREFORE, in consideration of the premises and covenants set forth herein, and intending to be legally bound hereby, the parties to this Agreement hereby agree as follows:
1. Duties. The Company agrees that the Employee shall be employed by the Company to serve as Chief Executive Officer of the Company and to devote 80% of his business time (subject to time off for vacation, holidays and sick days). The Employee shall report to the Board of Directors of the Company. The Employee agrees to be so employed by the Company and to devote his best efforts to advance the interests of the Company and to perform such executive, managerial, administrative and financial functions as are required to develop the Company’s business and to perform other duties assigned to the Employee by the Board of Directors of the Company that are consistent with the Employee’s position as Chief Executive Officer. The Employee will consider increasing his employment to full-time if requested by the Company. The Employee may work from home and otherwise outside the Company’s offices in Branford, Connecticut to the extent his duties permit.
2. Term. The Employee’s employment under this Agreement shall continue in effect until terminated pursuant to Section 4 of this Agreement.
3. Compensation.
(a) Salary. During the term of the Employee’s employment under this Agreement, the Employee shall be paid an annual salary at the rate of not less than $260,000 (the “Base Salary”); provided, however, that the Base Salary shall be increased to $325,000 if the Employee becomes a full-time employee of the Company. The Base Salary may be increased from time to time by the Board of Directors (the “Board”). The Board shall review the Base Salary at least annually at the end of each fiscal year of the Company. The Base Salary shall be paid in accordance with the Company’s regular payroll practices.
(b) Annual Bonus. At the end of each fiscal year of the Company that ends during the term of this Agreement, the Board shall consider the award of a performance bonus to the Employee for such fiscal year in an amount of up to 40% of the Employee’s Base Salary based upon the achievement of performance objectives established annually by the Board or its Compensation Committee. Whether the performance objectives for any year have been achieved by the Employee shall be determined by the Board or its Compensation Committee.
Notwithstanding the foregoing, all bonuses shall be paid within two and one-half months after the close of each year.
(c) Management Incentive Plan. The Employee shall be eligible to participate in the Company’s 2012 Management Incentive Plan. Further, subject to the approvals of the 2012 Extended MIP (as defined below), and/or any other such incentive plan, by the Board and the requisite stockholders of the Company, the Employee will be eligible to participate in any (i) extension, expansion or amendment of the 2012 Management Incentive Plan, or (ii) additional or supplemental management incentive plan of the Company that is intended to incentivize plan participants in the event the Company engages in certain identified transactions that do not constitute a Sale of the Company as currently defined in the 2012 Management Incentive Plan (such extended, amended plan or supplemental plan, the “2012 Extended MIP” and, together with the 2012 Management Incentive Plan, the “MIP Plans”).
(d) Special Incentive Bonus. Within 30 days after the date of this Agreement, the Employee and the Board, or its designee, will agree on the terms of a mutually acceptable special incentive bonus for the Employee.
(e) Equity Incentive Programs. The Company agrees that, on or promptly after the date of this Agreement, the Employee shall be granted stock options under the Company’s 2005 Stock Option and Incentive Plan exercisable for the purchase of 1,097,652 shares of the Company’s Common Stock at an exercise price equal to the fair market value per share of the Company’s Common Stock, as determined by the Board, which shall vest in 48 monthly installments on the last day of each calendar month beginning November 30, 2012 and continuing through October 31, 2016, with such vesting to accelerate upon a change of control of the Company. The Employee shall also be eligible to participate in other equity incentive programs established by the Company from time to time to provide stock options and other equity-based incentives to key employees of the Company in accordance with the terms of those programs. All stock options and restricted stock awards granted to the Employee shall vest in full upon a change of control of the Company (as defined in the stock option agreements covering such grants).
(f) Fringe Benefits. The Employee shall be entitled to participate in all insurance, vacation and other fringe benefit programs of the Company to the extent and on the same terms and conditions as are accorded to other officers and key employees of the Company.
(g) Reimbursement of Expenses. The Employee shall be reimbursed for all normal items of travel, entertainment and miscellaneous business expenses reasonably incurred by the Employee on behalf of the Company, provided that such expenses are documented and submitted in accordance with the reimbursement policies of the Company as in effect from time to time.
(h) Entire Compensation. The compensation provided for in this Agreement shall constitute full payment for the services to be rendered by the Employee to the Company hereunder.
4. Termination.
(a) Death. This Agreement shall automatically terminate effective as of the date of the Employee’s death, in which event the Company shall not have any further obligation or liability under this Agreement except that the Company shall pay to the Employee’s estate: (i) any portion of the Employee’s Base Salary for the period up to the Employee’s date of death that has been earned but remains unpaid; and (ii) any benefits that have accrued to the Employee under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans.
(b) Total Disability. The Company may terminate the employment of the Employee immediately upon written notice to the Employee in the event of the Disability (as that term is hereinafter defined) of the Employee, in which event, the Company shall not have any further obligation or liability under this Agreement except that the Company shall pay to the Employee: (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; and (ii) any benefits that have accrued to the Employee under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans. The term “Disability,” when used herein, shall mean an illness, incapacity or a mental or physical condition that renders the Employee unable or incompetent to carry out the job responsibilities that the Employee held or the tasks that he was assigned at the time the disability commenced, as determined by the Board and supported by the opinion of a physician. The Employee shall fully cooperate with the physician retained to furnish such opinion, including submitting to such examinations and tests as may be requested by the physician.
(c) Termination by the Company for Cause. The Company may terminate the Employee’s employment hereunder upon written notice to the Employee for any of the following reasons: (i) habitual intoxication; (ii) abuse of a controlled substance; (iii) conviction of a felony involving moral turpitude; (iv) adjudication as an incompetent; (v) a breach by the Employee of any material term of this Agreement, including the Employee’s failure to faithfully, diligently and adequately perform his duties under this Agreement, that is not corrected within ten days after written notice from the Company, which notice shall set forth the nature of the breach; (vi) violation in any material respect of any of the Company’s rules, regulations or policies; (vii) gross insubordination by the Employee in the performance of his duties under this Agreement; (viii) engaging in any conduct, action or behavior that, in the reasonable opinion of the Board, has had a material adverse effect on the reputation of the Company or the Employee; (ix) any continued or repeated absence from the Company, unless the absence is approved or excused by the Board or the result of the Employee’s illness, disability or incapacity (in which event the provisions of Section 4(b) hereof shall control); or (x) misappropriation of any funds or property of the Company, theft, embezzlement or fraud. In the event that the Company shall discharge the Employee pursuant to this Section 4(c), the Company shall not have any further obligation or liability under this Agreement, except that the Company shall pay to the Employee: (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; and (ii) any benefits that have accrued to the Employee under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans.
(d) Other Termination by the Company. The Company may terminate the employment of the Employee for any reason other than one specified in Section 4(b) or 4(c) hereof immediately upon written notice to the Employee, in which event the Company shall pay to the Employee: (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; (ii) any benefits that have accrued to the Employee under the terms of any employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans; and (iii) subject to the execution by the Employee of a release satisfactory to the Company and the compliance by the Employee with all terms and provisions of this Agreement that survive the termination of the Employee’s employment by the Company, the Employee’s Base Salary for a period of nine months after the effective date of the release, payable in accordance with the Company’s regular payroll practices.
(e) Termination by the Employee for Good Reason. The Employee may terminate his employment by providing written notice to the Company of a breach constituting Good Reason. “Good Reason” shall be deemed to exist with respect to any termination of employment by the Employee for any of the following reasons: (i) a reassignment of the Employee to a location outside the Greater Philadelphia area; (ii) any material failure by the Company to comply with any material term of this Agreement; or (iii) the demotion of the Employee to a lesser position than described in Section 1 hereof or a substantial diminution of the Employee’s authority, duties or responsibilities as in effect on the date of this Agreement or as hereafter increased; provided, however, that Good Reason shall not include a termination of the Employee’s employment pursuant to Section 4(b) or 4(c) hereof or, following a change of control of the Company, a reduction in title, position, responsibilities or duties solely by virtue of the Company being acquired and made part of a larger entity or operated as a subsidiary. If the Employee shall terminate his employment hereunder for Good Reason, the Employee shall be entitled to be paid: (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; (ii) any benefits that have accrued to the Employee under the terms of any employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans; and (iii) subject to the execution by the Employee of a release satisfactory to the Company and the compliance by the Employee with all terms and provisions of this Agreement that survive the termination of the Employee’s employment by the Company, the Employee’s Base Salary for a period of nine months after the effective date of the release, payable in accordance with the Company’s regular payroll practices. The Employee may not resign with Good Reason pursuant to this Section 4(e), and shall not be considered to have done so for any purpose of this Agreement, unless (A) the Employee, within 60 days after the initial existence of the act or failure to act by the Company that constitutes “Good Reason” within the meaning of this Agreement, provides the Company with written notice that describes, in particular detail, the act or failure to act that the Employee believes to constitute “Good Reason” and identifies the particular clause of this Section 4(e) that the Employee contends is applicable to such act or failure to act; (B) the Company, within 30 days after its receipt of such notice, fails or refuses to rescind such act or remedy such failure to act so as to eliminate “Good Reason” for the termination by the Employee of his employment relationship with the Company, and (C) the Employee actually resigns from his employment with the Company on or before that date that is six calendar months after the initial existence of the act or failure to act by the Company that constitutes “Good Reason.” If the requirements of the preceding sentence are not fully satisfied on a timely basis, then the resignation by the Employee from his employment with the Company shall not be deemed to have been for “Good
Reason,” the Employee shall not be entitled to any of the benefits to which he would have been entitled if he had resigned his employment with the Company for “Good Reason,” and the Company shall not be required to pay any amount that would otherwise have been due to the Employee under this Section 4(e) had the Employee resigned with “Good Reason.”
(f) Other Termination by the Employee. The Employee may terminate his employment for any reason other than one specified in Section 4(e) hereof upon at least 30 days’ prior written notice to the Company, which notice shall specify the effective date of the termination. In the event that the Employee shall terminate his employment pursuant to this Section 4(f), the Company shall not have any further obligation or liability under this Agreement, except that the Company shall pay to the Employee: (i) any portion of the Employee’s Base Salary for the period up to the date of termination that has been earned but remains unpaid; and (ii) any benefits that have accrued to the Employee under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans
(g) Determination of Accrued Bonus. For purposes of this Section 4, upon the termination of the Employee’s employment, the Board or its Compensation Committee shall consider whether all or any portion of the Employee’s bonus has accrued based upon a review and determination of the Employee’s progress toward achieving the performance objectives on which his bonus is based. All decisions regarding the achievement of the performance objectives and the accrual of all or any portion of the bonus shall be in the absolute discretion of the Board or Compensation Committee, as the case may be.
(h) Parachute Provisions. In the event the Company determines in good faith that any payments or benefits (whether made or provided pursuant to this Agreement or otherwise) provided to the Employee constitute “parachute payments” (“Parachute Payments”) within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and may be subject to an excise tax imposed pursuant to Section 4999 of the Code, the Parachute Payments will be reduced to an amount determined by the Company in good faith to be the maximum amount that may be provided to the Employee without resulting in any portion of such Parachute Payments being subject to such excise tax (the amount of such reduction, the “Cutback Benefits”). The Employee shall be entitled to select which Parachute Payments (of those that are not considered to be deferred compensation under Section 409A of the Code) shall be reduced hereunder; provided that if the Employee fails to so select promptly, the Company shall select which Parachute Payments (of those that are not considered to be deferred compensation under Section 409A of the Code) will be reduced. Parachute Payments that are considered to be deferred compensation under Section 409A of the Code shall be reduced only to the extent that the complete reduction of the Parachute Payments in the preceding sentence is insufficient to eliminate the imposition of the excise tax imposed under Section 4999 of the Code. Notwithstanding the foregoing, the Company shall use reasonable efforts to obtain the approval of the Cutback Benefits by the Company’s stockholders in the manner contemplated by Q&A 7 of Treas. Reg. Section 1.280G, it being understood and agreed that the Company does not guarantee that such approval will be obtained. If, and only if, the Company determines that such approval is obtained, the Employee shall be entitled to receive the Cutback Benefits without regard to the first sentence of this Section 4(h).
(i) Base Salary Continuation. The Base Salary continuation set forth in Sections 4(d) and (e) above shall be intended either (i) to satisfy the safe harbor set forth in the regulations issued under section 409A of the Code (Treas. Regs. 1.409A-1(n)(2)(ii)) or (ii) be treated as a Short-term Deferral as that term is defined under Code section 409A (Treas. Regs. 1.409A-1(b)(4)). To the extent such continuation payments exceed the applicable safe harbor amount or do not constitute a Short-term Deferral, the excess amount shall be treated as deferred compensation under Code section 409A and as such shall be payable pursuant to the following schedule: such excess amount shall be paid via standard payroll in periodic installments in accordance with the Company’s usual practice for its senior executives. Notwithstanding any provision in this Agreement to the contrary, in the event that the Employee is a “specified employee” as defined in Section 409A, any continuation payment, continuation benefits or other amounts payable under this Agreement that would be subject to the special rule regarding payments to “specified employees” under Section 409A(a)(2)(B) of the Code shall not be paid before the expiration of a period of six months following the date of the Employee’s termination of employment or before the date of the Employee’s death, if earlier.
5. Non-Disclosure and Non-Competition.
(a) Non-Disclosure. The Employee acknowledges that in the course of performing services for the Company, the Employee will obtain knowledge of the Company’s business plans, products, processes, software, know-how, trade secrets, formulas, methods, models, prototypes, discoveries, inventions, improvements, disclosures, names and positions of employees and/or other proprietary and/or confidential information (collectively the “Confidential Information”). The Employee agrees to keep the Confidential Information secret and confidential and not to publish, disclose or divulge to any other party, and the Employee agrees not to use any of the Confidential Information for the Employee’s own benefit or to the detriment of the Company without the prior written consent of the Company, whether or not such Confidential Information was discovered or developed by the Employee. The Employee also agrees not to divulge, publish or use any proprietary and/or confidential information of others that the Company is obligated to maintain in confidence.
(b) Non-Competition. The Employee agrees that, during his employment by the Company hereunder and for an additional period of one year after the termination of the Employee’s employment hereunder, neither the Employee nor any corporation or other entity in which the Employee may be interested as a partner, trustee, director, officer, employee, agent, shareholder, lender of money or guarantor, or for which he performs services in any capacity (including as a consultant or independent contractor) shall at any time during such period (i) be engaged, directly or indirectly, in any Competitive Business (as that term is hereinafter defined) or (ii) solicit, hire, contract for services or otherwise employ, directly or indirectly, any of the employees of the Company. For purposes of this Section 5(b) the term “Competitive Business” shall mean any firm or business organization that competes with the Company in the development and/or commercialization of drugs that prevent or treat partial complex seizures, post-traumatic stress disorder or fragile-x syndrome or any other Ganaxolone-related technology, product or service being developed, manufactured, marketed, distributed or planned in writing by the Company at the time of termination of the Employee’s employment with the Company. The foregoing prohibition shall not prevent any employment or engagement of the Employee, after termination of employment with the Company, by any company or business organization not
substantially engaged in a Competitive Business as long as the activities of any such employment or engagement, in any capacity, do not involve work on matters related to any product or service being developed, manufactured, marketed, distributed or planned in writing by the Company at the time of termination of Employee’s employment with the Company. The Employee’s ownership of no more than 5% of the outstanding voting stock of a publicly traded company shall not constitute a violation of this Section 5(b).
6. Inventions and Discoveries.
(a) Disclosure. The Employee shall promptly and fully disclose to the Company, with all necessary detail, all developments, know-how, discoveries, inventions, improvements, concepts, ideas, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written by the Employee (whether or not at the request or upon the suggestion of the Company, solely or jointly with others), during the period of his employment with the Company that (i) result from, arise out of, or relate to any work, assignment or task performed by the Employee on behalf of the Company, whether undertaken voluntarily or assigned to the Employee within the scope of his responsibilities to the Company, or (ii) were developed using the Company’s facilities or other resources or in Company time, or (iii) result from the Employee’s use or knowledge of the Company’s Confidential Information, or (iv) relate to the Company’s business or any of the products or services being developed, manufactured or sold by the Company or that may be used in relation therewith (collectively referred to as “Inventions”). The Employee hereby acknowledges that all original works of authorship that are made by the Employee (solely or jointly with others) within the above terms and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. The Employee understands and hereby agrees that the decision whether or not to commercialize or market any Invention developed by the Employee solely or jointly with others is within the Company’s sole discretion and for the Company’s sole benefit and that no royalty shall be due to the Employee as a result of the Company’s efforts to commercialize or market any such Invention.
(b) Assignment and Transfer. The Employee agrees to assign and transfer to the Company all of the Employee’s right, title and interest in and to the Inventions, and the Employee further agrees to deliver to the Company any and all drawings, notes, specifications and data relating to the Inventions, and to sign, acknowledge and deliver all such further papers, including applications for and assignments of copyrights and patents, and all renewals thereof, as may be necessary to obtain copyrights and patents for any Inventions in any and all countries and to vest title thereto in the Company and its successors and assigns and to otherwise protect the Company’s interests therein. The Employee shall not charge the Company for time spent in complying with these obligations. If the Company is unable because of the Employee’s mental or physical incapacity or for any other reason to secure the Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, then the Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Employee’s agent and attorney in fact, to act for and in the Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by the Employee.
(c) Records. The Employee agrees that in connection with any research, development or other services performed for the Company, the Employee will maintain careful, adequate and contemporaneous written records of all Inventions, which records shall be the property of the Company.
7. Company Documentation. The Employee shall hold in a fiduciary capacity for the benefit of the Company all documentation, disks, programs, data, records, drawings, manuals, reports, sketches, blueprints, letters, notes, notebooks and all other writings, electronic data, graphics and tangible information and materials of a secret, confidential or proprietary information nature relating to the Company or the Company’s business that are in the possession or under the control of the Employee.
8. Injunctive Relief. The Employee acknowledges that his compliance with the agreements in Sections 5, 6 and 7 hereof is necessary to protect the good will and other proprietary interests of the Company and that he is one of the principal executives of the Company and conversant with its affairs, its trade secrets and other proprietary information. The Employee acknowledges that a breach of any of his agreements in Sections 5, 6 and 7 hereof will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law; and the Employee agrees that in the event of any breach of the aforesaid agreements, the Company and its successors and assigns shall be entitled to injunctive relief and to such other and further relief as may be proper.
9. Supersedes Other Agreements. This Agreement supersedes and is in lieu of any and all other employment arrangements between the Employee and the Company, but shall not supersede any existing confidentiality, nondisclosure, invention assignment or non-compete agreement between the Employee and the Company.
10. Amendments. Any amendment to this Agreement shall be made in writing and signed by the parties hereto.
11. Enforceability. If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted or as if such provision had not been originally incorporated herein, as the case may be.
12. Construction. This Agreement shall be construed and interpreted in accordance with the internal laws of the Commonwealth of Pennsylvania.
13. Assignment.
(a) By the Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. This Agreement may be assigned by the Company without the consent of the Employee.
(b) By the Employee. This Agreement and the obligations created hereunder may not be assigned by the Employee, but all rights of the Employee hereunder shall inure to the benefit of and be enforceable by his heirs, devisees, legatees, executors, administrators and personal representatives.
14. Notices. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when mailed by certified mail, return receipt requested, or delivered by a national overnight delivery service addressed to the intended recipient as follows:
If to the Company:
Marinus Pharmaceuticals, Inc.
00 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxx XX 00000
Attention: Chairman of the Board
If to the Employee:
Xxxxxxxxxxx X. Xxxxxxx
0000 Xxxx Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Any party may from time to time change its address for the purpose of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents.
15. Waivers. No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver of that claim or right unless the waiver is supported by consideration and is in writing and executed by the aggrieved party hereto or his or its duly authorized agent. A waiver by any party hereto of a breach or default by the other party hereto of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provisions shall remain in full force and effect.
16. Section 409A. It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, any future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject the Employee to payment of interest or any additional tax under Code section 409A. The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly. In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax. In addition, to the extent that any Internal Revenue Service guidance issued under Section 409A would result in
the Employee being subject to the payment of interest or any additional tax under Section 409A, the parties agree, to the extent reasonably possible, to amend this Agreement in order to avoid the imposition of any such interest or additional tax under Section 409A, which amendment shall have the minimum economic effect necessary and be reasonably determined in good faith by the Company and the Employee.
17. Survival of Covenants. The provisions of Sections 5, 6, 7 and 8 hereof shall survive the termination of this Agreement. Furthermore, any other provision of this Agreement that, by its terms, is intended to continue beyond the termination of the Employee’s employment shall continue in effect thereafter.
(Signature page follows.)
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first above written.
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MARINUS PHARMACEUTICALS, INC. | |
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By: |
/s/ Xxxxxxx X. Xxxxxxxx |
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Title: |
Director |
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/s/ Xxxxxxxxxxx X. Xxxxxxx | |
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Xxxxxxxxxxx X. Xxxxxxx | |
