Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”) is entered into as of the 23rd day of
July, 2004 by and between Protection One, Inc., a Delaware
corporation, Protection One Alarm Monitoring, Inc., a Delaware
corporation, Security Monitoring Services, Inc. (d/b/a CMS), a
Florida corporation (“Company”) and Anthony Wilson
(“Executive”).
W I T N E S S E T H
:
WHEREAS, Protection One Alarm
Monitoring, Inc. and Executive agreed to employment terms
pursuant to a Change in Control Agreement dated December 13,
2000 and amended such agreement under an Amendment to Change in
Control Agreement dated June 20, 2003 and a retention bonus
letter dated June 20, 2003 (such Change in Control Agreement,
as amended, together with the retention bonus letter, hereinafter
referred to as the “Prior Employment Agreement”);
and
WHEREAS, the Board (as defined in
Section 1) has determined that it is in the best interest of
the Company, its creditors and its stockholders to assure that the
Company will have the continued dedication of Executive during and
after the period of the Company’s, POAMI’s (as defined
in Section 1) and POI’s (as defined in Section 1)
anticipated Restructuring (as such term is defined in
Section 1) of their indebtedness and capital stock
notwithstanding the possibility or occurrence of a Change in
Control (as defined in Section 1), to provide Executive with
assurance of continued employment beyond the expiration of the
Prior Employment Agreement and to provide compensation and benefits
arrangements which are competitive with those of other
comparable and similarly situated corporations;
and
WHEREAS, the Company is a direct and
wholly owned subsidiary of POAMI, which is, in turn, a direct and
wholly owned subsidiary of POI, and each entity will receive
substantial direct or indirect value from Executive; and
WHEREAS, during the period of
anticipated Restructuring, Executive’s continued high
performance and retention is critical to ensure that each of the
Company, POAMI, and POI maintains its value; and
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WHEREAS, Executive has agreed to
enter into this Agreement because the Company has satisfied all of
its obligations under the Prior Employment Agreement, including
without limitation, the making of payments upon the change in
control of POI on February 17, 2004; and
WHEREAS, each of the board of
directors of the Company, of POAMI, and of POI has authorized the
Company, POAMI, and POI respectively, to enter into this
Agreement.
NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants and
agreements herein contained, the Company, POAMI, POI and Executive
hereby agree as follows:
1.
Definitions . As used in this Agreement, the following
terms shall have the respective meanings set forth
below:
(a)
“Board” means the Board of Directors of POI, as the
case may be, whether prior to or after the
Restructuring.
(b)
“ Bonus Amount ” means:
(A) for a
Date of Termination occurring in fiscal year 2004, the average of
the annual incentive bonuses payable by the Company to or for the
benefit of or deferred by Executive for the 2002 and 2003 fiscal
years of the Company; and
(B)
for a Date of Termination occurring after fiscal year 2004, the
average of the annual incentive bonuses payable by the Company to
or for the benefit of or deferred by Executive for the last three
(3) completed fiscal years of the Company immediately
preceding the Date of Termination or Change in Control.
(c)
“ Cause ” means:
(A) the
willful and continued failure of Executive to perform substantially
his duties with the Company (other than any such failure resulting
from Executive’s incapacity due to physical or mental illness
or any such failure subsequent to Executive being delivered a
Notice of Termination without Cause by the Company or Executive
delivering a Notice of Termination for Good Reason to the Company)
that is not remedied within 30 days after a written demand for
substantial performance is delivered to Executive by the Chairman
of the Board, the Chairman of the Compensation Committee of POI or
the Chief Executive Officer of POI which specifically identifies
the manner in which Executive has not substantially performed
Executive’s duties and that such failure if not remedied
constitutes “Cause” under this Agreement,
or
(B)
Executive’s conviction by a court of law, Executive’s
admission in a legal proceeding that he is guilty or
Executive’s plea of nolo contendre , in each case,
with respect to a felony.
For purposes of this subsection (c), no act
or failure to act by Executive shall be considered
“willful” unless done or omitted to be done by
Executive in bad faith and without reasonable belief that
Executive’s action or omission was in, or not opposed to, the
best interests of the Company.
(d)
“Change in Control” means
(i)
the occurrence of any one of the following events after the earlier
of the date the Restructuring is consummated or December 31,
2005:
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(A)
individuals who, as of the date the Restructuring is consummated,
constitute the Board (or, in the case no Restructuring is
consummated by December 31, 2005, the individuals who
constitute the Board as of such date) (the “Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date the Restructuring is consummated (or, in the
case no Restructuring is consummated by December 31, 2005,
December 31, 2005), whose election or nomination for election
was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by
approval of the proxy statement of POI in which such person is
named as a nominee for director, without written objection to such
nomination) or, prior to the date that a Restructuring is
consummated, as elected at any time by Quadrangle Group shall be an
Incumbent Director.
(B)
any “person” (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934
(the “Exchange Act”) and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
is or becomes a “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of POI representing more than thirty-three and one-third
percent (33 1 / 3 %) of the combined voting
power of POI’s then outstanding securities eligible to vote
for the election of the Board (the “POI Voting
Securities”); provided, however , that the event
described in this paragraph (B) shall not be deemed to be
a Change in Control if such beneficial owner is any of the
following or becomes a beneficial owner as a result of any of the
following:
I.
one or more Current Debt Holder or a syndicate or group in which
one or more Current Debt Holders, collectively, beneficially own a
majority of POI Voting Securities beneficially owned by such
syndicate or group;
II.
any employee benefit plan (or related trust) sponsored or
maintained by POI or any of its Subsidiaries or one or more Current
Debt Holder;
III.
any underwriter temporarily holding securities pursuant to an
offering of such securities;
IV.
a person involved in a Non-Qualifying Transaction (as defined in
paragraph (C));
V.
an entity (x) controlled by Executive or a group of persons
consisting, at the time of such acquisitions, of Executive and
other employees of POI or any of its Subsidiaries or (y) of
which the majority of common equity securities, at the time of such
acquisitions, is owned by Executive or a group of persons
consisting of Executive and other employees of POI or any of its
Subsidiaries; or
VI.
any event in which a Current Debt Holder continues to be directly
or indirectly the beneficial owner of a greater number of shares of
POI than that held by any other person as a result of the event
described in this paragraph (B) or has the right to
direct the vote of a greater number of voting securities for
directors (or the equivalent) of POI than any other person as a
result of the event described in this
paragraph (B);
(C)
the consummation of a merger, consolidation, statutory share
exchange, sale of all or substantially all of the assets of the
Company or POI, sale of all or substantially all of the voting
securities of the Company or similar form of corporate transaction
(whether in one transaction or a series of transactions) involving
the Company or POI (a “Business Combination”), unless
immediately following such Business Combination:
I.
more than 50% of the total voting power of (x) the corporation
that owns, leases or controls all or substantially all of the
assets of the Company or POI resulting from such
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Business
Combination (the “Surviving Corporation”), or
(y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the
voting securities eligible to elect directors (or the equivalent)
of the Surviving Corporation (the “Parent
Corporation”), is represented by POI Voting Securities that
were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which such POI
Voting Securities were converted pursuant to such Business
Combination);
II.
no person (other than (a) one or more Current Debt Holder,
(b) any employee benefit plan (or related trust) sponsored or
maintained by one or more Current Debt Holder, the Surviving
Corporation or the Parent Corporation or (c) a syndicate or
group in which one or more Current Debt Holders, collectively,
beneficially own a majority of the total voting power of the
subject voting securities beneficially owned by such syndicate or
group) is or becomes the beneficial owner, directly or indirectly,
of more than thirty-three and one-third percent (33
1
/
3
%) of the total
voting power of the outstanding voting securities eligible to elect
directors (or the equivalent) of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation);
and
III.
at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the
Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination
which satisfies all of the criteria specified in (I), (II) and
(III) above shall be deemed to be a “Non-Qualifying
Transaction”); or
(D)
POI or the Company substantially completes a plan of complete
liquidation or dissolution whether in one transaction or a series
of transactions;
(ii) in
connection with the Restructuring, the occurrence of any one of the
following events:
(A)
on the date the Restructuring is consummated, any
“person” (as such term is defined in
Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than a Current Debt Holder (or a syndicate or group in which
one or more Current Debt Holders, collectively, beneficially own a
majority of the total voting power of POI Voting Securities
beneficially owned by such syndicate or group) is or becomes a
“beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of POI
representing more than thirty-three and one-third percent
(33 1 / 3 %) of POI Voting Securities
and is the largest holder of POI Voting Securities issued in
connection with the Restructuring;
(B)
the consummation of a Business Combination, unless immediately
following such Business Combination:
I.
more than 50% of the total voting power of (x) the corporation
that owns, leases or controls all or substantially all of the
assets of the Surviving Corporation, or (y) if applicable, the
Parent Corporation, is represented by POI Voting Securities that
were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which such POI
Voting Securities were converted pursuant to such Business
Combination);
II.
no person (other than (a) one or more Current Debt Holder,
(b) any employee benefit plan (or related trust) sponsored or
maintained by one or more Current Debt Holder, the Surviving
Corporation or the Parent Corporation or (c) a syndicate or
group in which one or more Current Debt Holders, collectively,
beneficially own a majority of the total voting power of the
subject voting securities beneficially owned by such syndicate
or
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group) is or
becomes the beneficial owner, directly or indirectly, of more than
thirty-three and one-third percent (33 1 / 3 %) of the total voting power
of the outstanding voting securities eligible to elect directors
(or the equivalent) of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation); and
III.
at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the
Board’s approval of the execution of the initial agreement
providing for such Business Combination; or
(C)
POI or the Company substantially completes a plan of complete
liquidation or dissolution whether in one transaction or a series
of transactions.
(iii) the
occurrence of any one of the following events prior to the earlier
of the date the Restructuring is consummated or December 31,
2005:
(A)
individuals who, as of the date hereof or as otherwise elected by
Quadrangle Group, constitute the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the date hereof, whose election or nomination for
election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of POI in which such person is
named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director.
(B)
any “person” (as such term is defined in
Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than a Current Debt Holder (or a syndicate or group in which
one or more Current Debt Holders beneficially own a majority of the
debt of POI and POAMI beneficially owned by such syndicate or
group) is or becomes a “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act as if such
rule applied to ownership of debt), directly or indirectly, of
more than thirty-three and one-third (33 1 / 3 %) of the total debt of POI
and POAMI;
(C)
any “person” (as such term is defined in
Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than a Current Debt Holder (or a syndicate or group in which
one or more Current Debt Holders, collectively, beneficially own a
majority of the total voting power of the POI Voting Securities
beneficially owned by such syndicate or group) is or becomes a
“beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of POI
representing more than fifty percent (50%) of POI Voting
Securities; or
(D) the
consummation of a Business Combination, unless immediately
following such Business Combination:
I.
more than 50% of the total voting power of (x) the corporation
that owns, leases or controls all or substantially all of the
assets of the Surviving Corporation, or (y) if applicable, the
Parent Corporation, is represented by POI Voting Securities that
were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which such POI
Voting Securities were converted pursuant to such Business
Combination);
II. no
person (other than one or more Current Debt Holder or any employee
benefit plan (or related trust) sponsored or maintained by one or
more Current Debt Holder (or a syndicate or group in which one or
more of such persons, collectively, beneficially own a majority of
the total voting power of the subject voting securities
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beneficially
owned by such syndicate or group), the Surviving Corporation or the
Parent Corporation) is or becomes the beneficial owner, directly or
indirectly, of more than thirty-three and one-third percent
(33 1 / 3 %) of the total voting power
of the outstanding voting securities eligible to elect directors
(or the equivalent) of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation); and
III.
at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business
Combination were Incumbent Directors at the time of the
Board’s approval of the execution of the initial agreement
providing for such Business Combination.
It is the intent of the parties that
if an event that would constitute a “Change in Control”
under this Agreement occurs at POAMI, a “Change in
Control” shall have occurred for the purpose of this
Agreement. Upon the occurrence of an event described in the
preceding sentence, unless the context otherwise requires, for
purposes of this Agreement, POAMI shall be substituted for the
defined term “POI” in the definition of “Change
in Control” together with appropriate changes to other
references in the definition of “Change in Control” to
give effect to the parties’ intent;
(e)
“ Citicorp Group ” means Citibank International
plc, any fund that is controlled by the foregoing and, as
applicable, their respective partners, members, subsidiaries and
affiliates (including without limitation, any other entities
controlled by or under common control with such entities), where
the assets of each such partner, member, subsidiary or affiliate
primarily consist of POI Voting Securities and/or debt of POI or
POAMI.
(f)
“ Current Debt Holders ” means Quadrangle Group,
Citicorp Group and MacKay Shields Group.
(g)
“ Date
of Termination ” means:
(A) if
Executive’s employment is to be terminated for Disability,
30 days after Notice of Termination is given (provided that
Executive shall not have returned to the performance of
Executive’s duties on a full-time basis during such
30 day period);
(B)
if Executive’s employment is to be terminated by the Company
for Cause or by Executive for Good Reason, the date specified in
the Notice of Termination;
(C)
if Executive’s employment is to be terminated by the Company
for any reason other than Cause, the date specified in the Notice
of Termination, which shall be 90 days after the Notice of
Termination is given, unless an earlier date has been expressly
agreed to by Executive in writing;
(D) if
Executive’s employment terminates by reason of death, the
date of death of Executive; or
(E)
if Executive’s employment is terminated by Executive in a
Non-Qualifying Termination, the date specified in Executive’s
Notice of Termination, but not more than 30 days after the
Notice of Termination is given, unless expressly agreed to by the
Company in writing.
(h)
“ Disability ” means termination of
Executive’s employment by the Company due to
Executive’s absence from Executive’s duties with the
Company on a full-time basis for at least one-hundred-eighty (180)
consecutive days as a result of Executive’s incapacity due to
physical or mental illness, unless within 30 days after Notice
of Termination is given to Executive following such absence
Executive shall have returned to the full-time performance of
Executive’s duties.
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(i)
“ Good Reason ” shall mean termination of
Executive’s employment by Executive based on any of the
following events:
(A)
any change in the duties or responsibilities (including reporting
responsibilities) of Executive that is inconsistent in any material
and adverse respect (which may be cumulative) with
Executive’s position(s), duties, responsibilities or status
with the Company as described herein (including any adverse
diminution of such duties or responsibilities), provided,
however , that Good Reason shall not be deemed to occur upon a
change in duties or responsibilities (other than reporting
responsibilities) that is solely and directly due to POI no longer
being a publicly traded entity;
(B)
the failure to reappoint or reelect Executive to any position held
by Executive without Executive’s consent;
(C)
a material breach of this Agreement by POI, POAMI or the Company
including but not limited to reduction in Executive’s Annual
Base Salary (as defined in Section 4(a)) or other reduction in
medical, dental, life or disability benefits (except to the extent
such reductions apply consistently to all other senior executives);
or
(D)
the relocation by the Company of Executive’s principal
workplace location more than 50 miles from the workplace location
principally used by Executive as of the date hereof.
Executive must provide Notice of Termination of
employment within one-hundred-eighty (180) days following
Executive’s knowledge of an event or facts constituting Good
Reason (or the last of such events or facts if cumulative) or such
event or facts shall not constitute Good Reason under this
Agreement.
(j)
“ MacKay Group ” means MacKay Shields, LLC and
any fund that is controlled by the foregoing and, as applicable,
their respective partners, members, subsidiaries and affiliates
(including without limitation, any other entities controlled by or
under common control with such entities), where the assets of each
such partner, member, subsidiary or affiliate primarily consist of
POI Voting Securities and/or debt of POI or POAMI.
(k)
“ Non-Qualifying Termination ” means a
termination of Executive’s employment under any circumstances
not qualifying as a Qualifying Termination, including without
limitation any termination by the Company for Cause, any
termination by Executive without Good Reason or for no reason at
all or any termination on account of death, Disability or
Retirement.
(l)
“ Notice of Termination ” means a written notice
of termination of employment given by one party to the other party
pursuant to Section 16(b).
(m)
“ POAMI ” means Protection One Alarm
Monitoring, Inc., a Delaware corporation, and its successors
and assignees.
(n)
“ POI ” means Protection One, Inc., a
Delaware corporation, and its successors and assignees.
(o)
“ Quadrangle Group ” means Quadrangle Group LLC,
POI Acquisition I, Inc., POI Acquisition, LLC, Quadrangle
Master Funding Ltd., any fund that is controlled by the foregoing
and, as applicable, their respective partners, members,
subsidiaries and affiliates (including without limitation, any
other entities controlled by or under common control with such
entities), where the assets of each such partner, member,
subsidiary or affiliate primarily consist of POI Voting Securities
and/or debt of POAMI, or POI.
(p)
“ Qualifying Termination ” means a termination
of Executive’s employment (i) by the Company other than
for Cause, including by the Company providing notice of nonrenewal
of this Agreement or
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(ii) by Executive for Good
Reason. Termination of Executive’s employment on
account of death, Disability or Retirement shall not be treated as
a Qualifying Termination.
(q)
“ Restructuring ” means shall mean any
transaction or series of transactions that effectuates any
reorganization, recapitalization, consolidation, business
combination, merger, or other similar transaction or any
transaction that effectuates any material amendment to, or other
material change in, POAMI’s or POI’s obligations or
indebtedness for borrowed money as of the date hereof (including
accrued or accreted interest thereon) excluding changes in
beneficial ownership of such indebtedness, but including, without
limitation, (i) any amendment or modification to POI’s
revolving credit facility, 7.375% Senior Unsecured Notes due 2005
or 8.125% Senior Subordinated Notes due 2009 or that modifies any
material payment term or any material financial or operating
covenant or that provides for a forbearance of any material payment
obligation or material covenant, in each case, such that an amount
that otherwise would be due and payable (according to its terms, by
put, upon default and acceleration or otherwise) is delayed or
otherwise extended for at least twelve months or that converts a
material amount of POI’s or POAMI’s obligations or
indebtedness for borrowed money as of the date hereof (including
accrued or accreted interest thereon) to equity and/or to a
security junior to the claim’s existing priority or is
otherwise compromised, or any cash tender offer or any combination
thereof; or (ii) (A) any merger, consolidation,
reorganization, recapitalization, business combination or other
transaction pursuant to which POI is acquired by, or combined with,
any person, group of persons, partnership, corporation or other
entity other than a Current Debt Holder (an “Acquiror”)
or (B) the acquisition, directly or indirectly by an Acquiror
(or by one or more persons acting together with an Acquiror
pursuant to a written agreement or otherwise), in a single
transaction or a series of transactions, of (x) all or a
preponderance of the assets or operations of POI, or all or any
material portion of any operating division of POI or (y) all,
substantially all, or a majority of the outstanding or newly issued
shares of POI’s (or any of its Subsidiary’s) capital
stock (or any securities convertible into, or options, warrants or
other rights to acquire such capital stock); in each case, whether
accomplished out-of-court or through the confirmation of any plan
of reorganization pursuant to Section 1129 of the United
States Bankruptcy Code, whether the requisite consents were
obtained in-court or out-of-court.
(r)
“ Retirement ” means Executive’s
termination of his employment on or after his attainment of age
65.
(s)
“ Subsidiary ” means any corporation or other
entity in which POI has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then
outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or
in which POI has the right to directly or indirectly receive 50% or
more of the distribution of profits or 50% or more of the assets
upon liquidation or dissolution.
2.
Employment and
Duties .
(a)
Term of Employment . The Company agrees to employ
Executive, and Executive agrees to enter into employment with the
Company, in accordance with the terms and provisions of this
Agreement, for the Term of this Agreement. The execution of
this Agreement shall constitute acceptance by Executive and the
Company that Executive’s employment shall not terminate as a
result of any Change in Control prior to the date hereof.
Upon termination of Executive’s employment (regardless of
whether such termination constitutes a Qualifying Termination or
Non-Qualifying Termination), Executive shall be relieved of any
obligation to continue to perform the duties described in
Section 2(b) effective as of the Date of
Termination. The termination of the employment relationship
by either party for any reason or for no reason at all shall not
constitute a breach of this Agreement, but certain obligations and
benefits shall survive such termination of employment as set forth
in Section 19.
(b)
Duties . During the period of Executive’s
employment under this Agreement, Executive shall serve as President
of the Company. Executive shall devote Executive’s full
business time and attention to the affairs of the Company and his
duties as President of the Company. Executive shall have such
duties as are appropriate to Executive’s position as
President of the Company, will be responsible for the financials,
planning, organizing, and directing the development of
relationships with dealers providing them state-of-the-art
residential, commercial, audio, or video services, developing
management staff to oversee day to day operations and shall have
such authority as required to enable Executive to perform these
duties. Consistent with the foregoing, Executive
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shall comply with all reasonable
instructions of the Chief Executive Officer and boards of directors
of the Company, POAMI and POI. Executive shall report to the
Chief Executive Officer (or other officer who is a Senior Vice
President or higher) of POI or POAMI (or other parent
company). In addition, during the period of Executive’s
employment under this Agreement, Executive may serve as an officer
and/or director of a Subsidiary or Subsidiaries if requested to do
so by the Board. Executive may resign from the board of
directors of any Subsidiaries at any time in his sole and absolute
discretion.
3.
Term of Agreement . The Term of this Agreement shall
commence on the date of this Agreement and shall continue until the
earlier of (i) the first anniversary of the date of this
Agreement or (ii) th
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