NETGRAVITY, INC.
XXXX X. XXXXXX EMPLOYMENT AGREEMENT
This Agreement is made by and between NetGravity, Inc. (the "Company"), and
Xxxx X. Xxxxxx ("Executive") as of April 20, 1999.
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITIONS; EMPLOYMENT COMMENCEMENT DATE; BOARD MEMBERSHIP;
DUTIES. Executive's employment with the Company pursuant to this Agreement
shall commence on April 20, 1999 (the "Employment Commencement Date"). As of
the Employment Commencement Date, the Company shall employ the Executive as
the President and Chief Executive Officer of the Company. The period of
Executive's employment hereunder is referred to herein as the "Employment
Term." During the Employment Term, Executive shall render such business and
professional services in the performance of his duties, consistent with
Executive's position within the Company, as shall reasonably be assigned to
him by the Board.
(b) BOARD MEMBERSHIP. It is expected that Executive shall be
appointed as a member of the Board of Directors (the "Board") on or shortly
following May 27, 1999. It is expected that Executive will be elected
Chairman of the Board within six to nine months following his Employment
Commencement Date. Upon becoming a member of the Board, Executive may
propose the addition of two new members to the Board, subject to Board and/or
stockholder approval.
(c) OBLIGATIONS. During the Employment Term, Executive shall
devote his full business efforts and time to the Company. Executive agrees,
during the Employment Term, not to actively engage in any other employment,
occupation or consulting activity for any direct or indirect remuneration
without the prior approval of the Board; provided, however, that Executive
may serve in any capacity with any civic, educational or charitable
organization, or as a member of corporate Boards of Directors or committees
thereof upon which Executive currently serves plus one additional Board of
Directors of a company that does not compete with the Company, without the
approval of the Board.
2. EMPLOYEE BENEFITS.
(a) GENERAL. During the Employment Term, Executive shall be
eligible to participate in the employee benefit plans maintained by the
Company that are applicable to other senior management to the full extent
provided for under those plans. Moreover, Executive shall be eligible for
fringe benefits, expense reimbursement and perquisites equivalent to those of
Chief Executive Officers at typical comparable companies.
(b) RELOCATION EXPENSE REIMBURSEMENT. If Executive chooses to
relocate his principal residence closer to the Company's offices, the Company
will reimburse Executive up to $100,000 for the following reasonable costs:
(i) Transaction costs associated with buying Executive's
new residence (closing costs, inspections, title insurance, brokerage and
related fees, etc.).
(ii) Transaction costs associated with selling
Executive's old residence (closing costs, inspections, title insurance,
brokerage and related fees, etc.).
(iii) Moving household furnishings and personal effects.
Executive will be fully grossed-up by the Company for any imputed income
required to be recognized with respect to this reimbursement so that the
economic effect to Executive, after taking into account any tax deductions
available to Executive, is the same as if this reimbursement was provided to
Executive on a non-taxable basis.
3. AT-WILL EMPLOYMENT. Executive and the Company understand and
acknowledge that Executive's employment with the Company constitutes
"at-will" employment. Subject to the Company providing severance benefits as
specified herein, Executive and the Company acknowledge that this employment
relationship may be terminated at any time, upon written notice to the other
party, with or without good cause or for any or no cause, at the option
either of the Company or Executive.
4. COMPENSATION.
(a) BASE SALARY. While employed by the Company, the Company
shall pay the Executive as compensation for his services a base salary at the
annualized rate of $325,000 (the "Base Salary"). The Compensation Committee
of the Board shall review the Base Salary at least annually, and after such
review may increase, but not decrease, the Base Salary. The Base Salary
shall be paid periodically in accordance with normal Company payroll
practices and subject to the usual, required withholding.
(b) BONUSES. Executive shall receive a bonus on account of the
Company's 1999 fiscal year equal to 50% of the Base Salary paid to Executive
in 1999. In subsequent fiscal years, Executive shall be eligible a target
bonus equal to 50% of Base Salary for the fiscal year (the "Target Bonus")
(with a greater payment based on achievement in excess of the target
milestones) based upon performance criteria specified by the Compensation
Committee of the Board of Directors; provided, however, that the payment of
any such bonuses shall be subject to Executive's employment with the Company
through the end of such fiscal years (which year-end employment requirement
is further subject to the severance, death and disability provisions hereof).
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(c) EQUITY COMPENSATION.
(i) EMPLOYMENT-BASED VESTING STOCK OPTION. Executive
shall receive a nonstatutory stock option to purchase a total of seven
hundred thousand (700,000) shares of Company common stock with a per share
exercise price of $30.375 (the "Employment Commencement Date Stock Option").
The Employment Commencement Date Stock Option shall be for a term of ten
years (or shorter upon termination of employment or consulting relationship
with the Company) and, subject to accelerated vesting as set forth elsewhere
herein, shall vest at the rate of 1/48 of the original seven hundred thousand
(700,000) shares on the twentieth day of each month following the Employment
Commencement Date, so as to be 100% vested on the four year anniversary
thereof, conditioned upon Executive's continued employment or consulting
relationship with the Company as of each vesting date. Except as specified
otherwise herein, this option grant is in all respects subject to the terms,
definitions and provisions of the Company's 1998 Stock Plan (the "Stock
Plan") and the standard form of stock option agreement thereunder to be
entered into by and between Executive and the Company (the "Employment
Commencement Date Option Agreement"), both of which documents are
incorporated herein by reference.
(ii) PERFORMANCE-BASED VESTING STOCK OPTION. Executive
shall receive a non-statutory stock option to purchase a total of three
hundred thousand (300,000) shares of Company common stock with a per share
exercise price of $30.375 (the "Performance-Based Stock Option"). The
Performance-Based Stock Option shall be for a term of ten years (or shorter
upon termination of employment or consulting relationship with the Company)
and, subject to accelerated vesting as set forth elsewhere herein, shall vest
as to 1/24 of the original three hundred thousand (300,000) shares on May 20,
2001 and as to the same amount of shares on the twentieth day of each month
thereafter, so as to be 100% vested on the four year anniversary of the
Employment Commencement Date; provided, however that the Performance-Based
Option shall have its vesting accelerated 100% in the event that the closing
sales price of the Company's stock on Nasdaq (or at the successor exchange
upon which the Company's shares of common stock are principally traded) is
$40 or higher (with the $40 target adjusted appropriately for any stock
splits or stock dividends effected by the Company without receipt of
consideration), for thirty (30) calendar days within any sixty (60) calendar
day period, conditioned upon Executive's continued employment or consulting
relationship with the Company as of any such vesting dates. Except as
specified otherwise herein, this option grant is in all respects subject to
the terms, definitions and provisions of the Stock Plan and the standard form
of stock option agreement thereunder to be entered into by and between
Executive and the Company (the "Performance-Based Option Agreement"), both of
which documents are incorporated herein by reference.
(iii) SUBSEQUENT AWARDS. During the Employment Term,
Executive shall be eligible to receive annual stock and stock option grants
equal to or greater than the median grants made to Chief Executive Officers
of typical comparable companies, as determined in good faith by the Board's
compensation committee.
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(iv) REGISTRATION ON FORM S-8. All shares of Company
common stock to be issued upon the exercise of options granted to Executive
shall be registered with the Securities Exchange Commission on Form S-8.
(d) SEVERANCE.
(i) TERMINATION PRIOR TO THE CHANGE OF CONTROL PERIOD.
In the event that prior to the beginning of the six month period immediately
preceding the Company entering into a written agreement resulting in a
"Change of Control" (as defined below) (the period beginning six months prior
to the Company entering into a written agreement resulting in a Change of
Control and continuing thereafter shall be referred to herein as "Change of
Control Period"), Executive's employment with the Company is involuntarily
terminated by the Company without "Cause" or is voluntarily terminated by
Executive for "Good Reason" (both as defined below), then (i) Executive's
stock options shall have their vesting accelerated to the same extent as such
options would have vested (based on service-based vesting provisions solely
and not on the minimum $40 share price vesting or on change of control
vesting) had Executive remained employed by the Company for an additional
eighteen months, (ii) Executive's stock options shall have their
post-termination exercisability provisions extended by eighteen months, (iii)
Executive shall receive a lump-sum payment equal to 150% of the sum of his
Base Salary plus Target Bonus, less applicable withholding, promptly
following such termination of employment, and (iv) Executive and his covered
dependents shall receive coverage under the Company's health and other
welfare benefit plans for a period of eighteen (18) months, or, if and to the
extent ineligible under the terms of such plans, Executive shall receive an
amount equal to the Company's costs of providing such benefits; provided,
however, that Executive will be fully grossed-up by the Company for any
imputed income required to be recognized with respect to the payments made in
lieu of welfare benefit plan coverage so that the economic effect to
Executive is the same as if these payments were provided to Executive on a
non-taxable basis.
(ii) FOLLOWING THE CHANGE OF CONTROL PERIOD. In the
event that, on or after the commencement of the Change of Control Period,
Executive's employment with the Company is involuntarily terminated by the
Company without "Cause" or is voluntarily terminated by Executive for "Good
Reason" (both as defined below), then (i) Executive's stock options shall
have their vesting 100% accelerated, (ii) Executive's stock options shall
have their post-termination exercisability provisions extended by twenty-four
months, (iii) Executive shall receive a lump-sum payment equal to 200% of the
sum of his Base Salary plus Target Bonus, less applicable withholding,
promptly following such termination of employment, and (iv) Executive and his
covered dependents shall receive coverage under the Company's health and
other welfare benefit plans for a period of twenty-four (24) months, or, if
and to the extent ineligible under the terms of such plans, Executive shall
receive an amount equal to the Company's costs of providing such benefits;
provided, however, that Executive will be fully grossed-up by the Company for
any imputed income required to be recognized with respect to the payments
made in lieu of welfare benefit plan coverage so that the economic effect to
Executive is the same as if these payments were provided to Executive on a
non-taxable basis.
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For the purposes of this Agreement, "Cause" means fraud or intentional
misconduct with is materially harmful to the Company.
For the purposes of this Agreement, "Good Reason" means (i) the failure
of the Company to appoint Executive Chairman of the Board by Xxxxx 0, 0000,
(xx) a reduction in Executive's Base Salary, Target Bonus or benefits, (iii)
the relocation of the Company's headquarters more than thirty (30) miles from
its current location or, (iv) a reduction in title, authority, status,
obligations or responsibilities, including, without limitation, any change
which results in Executive not serving as President, Chief Executive Officer
and Director, and on and after March 2, 2000, Chairman of the Board, of a
publicly-traded corporation. For example, if after a Change of Control
Executive remains Chief Executive Officer of and a director of NetGravity,
but NetGravity becomes a wholly-owned, privately held subsidiary of a larger
company, Executive may resign for Good Reason. Notwithstanding the
foregoing, Executive will not terminate his employment for Good Reason
pursuant to clause (iv) above for such period following the Change of Control
as may be requested by the corporation surviving after the Change of Control,
provided that such period shall not exceed six (6) months, and at the end of
such period, if any, he may resign for Good Reason. During any such
requested period of continued employment, Executive shall provide transition
services, provided that he is allowed to continue to serve in a capacity
substantially equivalent to Chief Executive Officer of the Company (which as
a result of the Change of Control may be a division or wholly-owned
subsidiary of another entity) and to receive the full benefits of employment
(including, without limitation, salary and bonus) under this Agreement.
For the purposes of this Agreement, "Change of Control" is defined as:
(a) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(b) A change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of the date hereof,
or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors at the
time of such election or nomination (but shall not include an individual
whose election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the Company); or
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or
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(d) the consummation of the sale or disposition by the
Company of all or substantially all the Company's assets.
5. CHANGE OF CONTROL VESTING ACCELERATION. In the event of a Change
of Control, Executive's Performance-Based Stock Option shall become 100%
vested and any remaining unvested stock options held by Executive shall have
their vesting accelerated by an amount equal to 50% of the remaining unvested
shares; provided, however, that if Executive remains employed by the Company
for one year following the date of a Change of Control, all of Executive's
stock options shall become 100% vested.
6. GOLDEN PARACHUTE EXCISE TAX. In the event that the benefits
provided for in this Agreement or otherwise payable to the Executive
constitute "parachute payments" within the meaning of Section 280G of the
Code and will be subject to the excise tax imposed by Section 4999 of the
Code, then the Executive shall receive (i) a payment from the Company
sufficient to pay such excise tax, and (ii) an additional payment from the
Company sufficient to pay the excise tax and federal and state income taxes
arising from the payments made by the Company to Executive pursuant to this
sentence (together, the "Full Gross-Up Amount"); provided, however, that the
total amount of the payment to Executive under this Section 6 shall not
exceed the greater of (i) $2,500,000, or (ii) one-half of the Full Gross-Up
Amount. The determination of Executive's excise tax liability and the
amount, if any, required to be paid under this Section 6 shall be made in
writing by the Company's independent auditors (the "Accountants"). For
purposes of making the calculations required by this Section 6, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The
Company and the Executive shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 6.
7. TOTAL DISABILITY OF EXECUTIVE. Upon Executive's becoming
permanently and totally disabled (as defined in accordance with Internal
Revenue Code Section 22(e)(3) or its successor provision) during the term of
this Agreement, then (i) Executive's stock options shall have their vesting
accelerated to the same extent as such options would have vested (based on
service-based vesting provisions solely and not on the minimum $40 share
price vesting or on change of control vesting) had Executive remained
employed by the Company for an additional twelve (12) months, (ii) Executive
shall receive a lump-sum payment equal to 100% of the sum of his Base Salary
plus Target Bonus, less applicable withholding, and (iii) Executive and his
covered dependents shall receive coverage under the Company's health and
other welfare benefit plans for a period of twelve (12) months, or, if and to
the extent ineligible under the terms of such plans, Executive shall receive
an amount equal to the Company's costs of providing such benefits; provided,
however, that Executive will be fully grossed-up by the Company for any
imputed income required to be recognized with respect to the payments made in
lieu of welfare benefit plan coverage so that the economic effect to
Executive is the same as if these payments were provided to Executive on a
non-taxable basis.
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8. DEATH OF EXECUTIVE. If Executive dies while employed by the
Company pursuant to this Agreement, then (i) Executive's stock options shall
have their vesting accelerated to the same extent as such options would have
vested (based on service-based vesting provisions solely and not on the
minimum $40 share price vesting or on change of control vesting) had
Executive remained employed by the Company for an additional twelve (12)
months, (ii) Executive's estate or designated beneficiary shall receive a
lump-sum payment equal to 100% of the sum of his Base Salary plus Target
Bonus, less applicable withholding, and (iii) Executive's covered dependents
shall receive coverage under the Company's health and other welfare benefit
plans for a period of twelve (12) months, or, if and to the extent ineligible
under the terms of such plans, Executive's covered dependents shall receive
an amount equal to the Company's costs of providing such benefits; provided,
however, that Executive's covered dependents will be fully grossed-up by the
Company for any imputed income required to be recognized with respect to the
payments made in lieu of welfare benefit plan coverage so that the economic
effect to them is the same as if these payments were provided to them on a
non-taxable basis.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive
upon Executive's death and (b) any successor of the Company. Any such
successor of the Company shall be deemed substituted for the Company under
the terms of this Agreement for all purposes. As used herein, "successor"
shall include any person, firm, corporation or other business entity which at
any time, whether by purchase, merger or otherwise, directly or indirectly
acquires all or substantially all of the assets or business of the Company.
None of the rights of Executive to receive any form of compensation payable
pursuant to this Agreement shall be assignable or transferable except through
a testamentary disposition or by the laws of descent and distribution upon
the death of Executive following termination without cause. Any attempted
assignment, transfer, conveyance or other disposition (other than as
aforesaid) of any interest in the rights of Executive to receive any form of
compensation hereunder shall be null and void.
10. NOTICES. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if (i)
delivered personally, (ii) one (1) day after being sent by Federal Express or
a similar commercial overnight service, or (iii) three (3) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors in interest at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
If to the Company: NetGravity, Inc.
0000 X. Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxx, XX 00000
ATTN: Chief Financial Officer
If to Executive: Xxxx X. Xxxxxx
at the last residential address known by the Company.
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11. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
12. PROPRIETARY INFORMATION AGREEMENT. Executive agrees to enter into
the Company's standard Proprietary Information Agreement (the "Proprietary
Information Agreement") upon commencing employment hereunder.
13. ENTIRE AGREEMENT. This Agreement, the Stock Plan, the Employment
Commencement Date Option Agreement, the Performance-Based Option Agreement
and the Proprietary Information Agreement represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersede and replace any and
all prior agreements and understandings concerning Executive's employment
relationship with the Company.
14. ARBITRATION AND EQUITABLE RELIEF.
(a) Except as provided in Section 14(d) below, Executive agrees
that any dispute or controversy arising out of, relating to, or in connection
with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof shall be settled by arbitration
to be held in San Mateo County, California, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of
the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any
court having jurisdiction.
(b) The arbitrator shall apply California law to the merits of
any dispute or claim, without reference to rules of conflict of law. The
arbitration proceedings shall be governed by federal arbitration law and by
the Rules, without reference to state arbitration law. Executive hereby
expressly consents to the personal jurisdiction of the state and federal
courts located in California for any action or proceeding arising from or
relating to this Agreement and/or relating to any arbitration in which the
parties are participants.
(c) The Company and Executive shall each pay one-half of the
costs and expenses of such arbitration, and shall separately pay its counsel
fees and expenses.
(d) Executive understands that nothing in Section 14 modifies
Executive's at-will status. Either the Company or Executive can terminate the
employment relationship at any time, with or without cause.
(e) EXECUTIVE HAS READ AND UNDERSTANDS SECTION 14, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR
IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH, OR
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TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE
RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE
COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT
OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL
STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT
OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND
HOUSING ACT, AND LABOR CODE SECTION 201, ET SEQ;
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
15. LEGAL FEE REIMBURSEMENT. The Company agrees to pay Executive's
reasonable legal fees associated with entering into this Agreement upon
receiving invoices for such services.
16. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement
may only be amended, canceled or discharged in writing signed by Executive
and the Company.
17. WITHHOLDING. The Company shall be entitled to withhold, or cause
to be withheld, from payment any amount of withholding taxes required by law
with respect to payments made to Executive in connection with his employment
hereunder.
18. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California.
19. EFFECTIVE DATE. This Agreement is effective April 20, 1999.
20. ACKNOWLEDGMENT. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement:
NETGRAVITY, INC.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
EXECUTIVE
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
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