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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
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X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1998
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER: 0-15188
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INTERSOLV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-0990382
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9420 KEY WEST AVE.
ROCKVILLE, MARYLAND 20850
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(301) 838-5000
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the average of the high and low price of the Common
Stock on June 15, 1998 as quoted by NASDAQ was $306,000,000.
The number of shares outstanding of the registrant's Common Stock $0.01 par
value on June 15, 1998 was 22,666,732 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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EXPLANATORY NOTE TO AMENDMENT TO FORM 10-K
Intersolv, Inc. (the "Company") filed its Annual Report on Form 10-K for
the fiscal year ended April 30, 1998 with the Securities and Exchange Commission
on July 9, 1998 (the "Report"). The Report, as permitted by General Instruction
G(3) to Form 10-K, incorporated by reference to the Company's definitive proxy
statement to be filed by August 28, 1998 the information required to be included
in Part III of the Report. On June 17, 1998, the Company entered into a merger
agreement with Micro Focus Group Plc pursuant to which Micro Focus Group Plc
will acquire the Company (the "Merger"). In view of the anticipated Merger, the
Company currently does not contemplate holding an annual meeting of stockholders
prior to the completion of the Merger or filing a definitive proxy statement
with respect to an annual meeting of stockholders. Accordingly, the Company is
hereby amending the Report to provide the information previously contemplated to
be provided by incorporation by reference to a definitive proxy statement with
respect to an annual meeting of stockholders.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company has a classified Board of Directors consisting of three Class A
directors, three Class B directors and three Class C directors, who will serve
until the Annual Meetings of Stockholders to be held in 1999, 2000 and 1998,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, directors are elected for a full term of three years to
succeed those directors whose terms expire at the Annual Meeting date.
The following information relates to the directors of the Company.
CLASS C DIRECTORS WITH TERM EXPIRING IN 1998:
Mr. Thomas Faulders, III (Director since 1997), 48, is the Chairman of the
Board of Axiom, Inc. From April 1995 to March 1998, he was the Executive Vice
President and Chief Financial Officer of BDM International, Inc. Prior to
joining BDM, Mr. Faulders was Vice President and Chief Financial Officer of
COMSAT Corporation from 1992 to 1995. From 1985 to 1992, Mr. Faulders was a
senior executive with MCI Communications Corporation. Mr. Faulders is also on
the boards of MLC Holding, Inc., Universal Systems and Technology, Inc. and the
Ronald Reagan Institute of Emergency Medicine.
Mr. Robert N. Goldman (Director since 1986), 49, was elected President and
Chief Executive Officer of Object Design, Inc. in November, 1995. He has been a
director of Object Design since August, 1995. Prior to joining Object Design,
Mr. Goldman was Chairman of Trinzic Corporation from 1992 to 1995. Trinzic was
formed by the merger of Aion Corporation and AICorp in 1992. From 1986 to 1992,
Mr. Goldman served as President and Chief Executive Officer of AICorp. From 1983
to 1986, Mr. Goldman served as President and Chief Operating Officer of Cullinet
Software. Mr. Goldman is a member of the Board of Directors of Citrix Systems,
Inc., Parametric Technology Corporation and Systemsoft Corporation.
Mr. Gary G. Greenfield (Director since 1992), 43, was elected President and
Chief Executive Officer in October 1996. Mr. Greenfield has served as President
of the Company since 1995. From 1992 to 1996 he was also the Company's Chief
Operating Officer. From 1989 to 1992 he was Executive Vice President, Product
Operations. He served as Vice President, Marketing from 1987 to 1988, served as
Senior Vice President, Product Services and Operations from 1988 to 1989 and
briefly served as Chief Financial Officer in 1991. Mr. Greenfield is also a
director of Hyperion Solutions, a manufacturer of financial application software
products.
CLASS A DIRECTORS WITH TERMS EXPIRING IN 1999:
Mr. Kevin J. Burns (Director since 1986), 49, was elected Chairman of the
Board of the Company in 1990 and in October 1997 became non-employee Chairman.
Mr. Burns is also Managing Principal of Lazard Technology Partners. From 1986 to
1996, Mr. Burns was Chief Executive Officer of the Company. From 1986 to 1995,
Mr. Burns also served as President of the Company. From 1984 to 1986 he was
Executive Vice President and Chief Operating Officer, and from 1982 to 1984, he
was Executive Vice President of the Software Products Division of the Company.
Mr. Burns is also a director of Object Design, FTP Software and several private
information technology companies.
Mr. Richard A. Carpenter (Director since 1991), 55, served as Vice Chairman
of the Board from March to October 1991. In October 1991, he became President of
Carpenter Associates, a consulting firm. He served as Chief Executive Officer of
Index Technology Corporation from 1983 to 1991, and Chairman of the Board of
Index from 1990 to 1991.
Mr. Frank A. Sola (Director since 1994), 53, has been Chief Executive
Officer of Service Strategies, Inc. or its predecessor, Syndetics Corporation,
Inc., since 1987. From 1996 to 1997, he was Chairman and Chief Executive Officer
of Net Collaborative, Inc., a consulting firm specializing in Internet
integration services. Mr. Sola was a Vice President of Cullinet Software, Inc.
in 1986. From 1976 to 1985, Mr. Sola served as President and Chief Operating
Officer of Computer Partners, Inc.
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CLASS B DIRECTORS WITH TERMS TO EXPIRE IN 2000:
Mr. Michel Berty (Director since 1997), 59, founded MBY Consultant, Inc. in
April 1997. From 1972 to 1997, Mr. Berty was an executive of the Cap Gemini
Group and served as Chairman and Chief Executive Officer of Cap Gemini America
from 1993 to 1997. Mr. Berty is also Chairman of the Board of ZMAX and on the
boards of directors of Ascent Logic, Level 8, Mastech and Sapiens International.
Mr. Russell E. Planitzer (Director since 1982), 53, is currently Managing
Principal of Lazard Technology Partners, a private investment fund. From 1989 to
January 1998, he was Chairman of Computervision Corporation. He was also Chief
Executive Officer of Computervision Corporation from 1993 to 1996.
Mr. R. Craig Roos (Director since 1997), 52, is the former chairman and
Chief Executive Officer of LOCATE, which was sold to MobileMedia Communications
in 1996. From 1983 to 1996, Mr. Roos served in the capacity of Chief Executive
Officer, Chief Financial Officer and board member of LOCATE, as well as from
1993 to 1995, as Chairman of MobileMedia Corporation and MobileMedia
Communications, Inc.
There is no family relationship between any of the directors or officers.
There are no arrangements between any director or officer and any other person
pursuant to which he was selected as a director or officer.
The Board of Directors has a standing Audit Committee which held four
meetings during the fiscal year ended April 30, 1998. During such time, the
Audit Committee was composed of Messrs. Faulders and Roos. The principal
functions of the Audit Committee are to make recommendations to the Board of
Directors regarding the engagement of the Company's independent auditors, review
and approve any major accounting policy changes affecting the Company's
operating results, review the arrangements for and scope of the independent
audit and results of the audit and assure that the auditors are in fact
independent.
The Board of Directors has a standing Management Development and
Compensation Committee, composed of Messrs. Planitzer and Berty, which held five
meetings during the fiscal year ended April 30, 1998. The principal function of
the Management Development and Compensation Committee is to make recommendations
to the Board of Directors as to compensation arrangements, including the
granting of stock options.
The Board of Directors does not have a nominating committee.
During the fiscal year ended April 30, 1998, the Board of Directors held
six meetings. All directors attended at least 75% of the meetings which occurred
while they served on the Board of Directors. All directors attended at least 75%
of the meetings of committees on which they served.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
The Company pays each non-employee Board member an annual retainer of
$15,000, plus $1,500 and out-of-pocket expenses for attendance at each Board
meeting. Further, should any non-employee director be requested by the Company
to perform consulting services on the Company's behalf, then such director shall
be entitled to receive a fee equal to $1,500 per day for such services.
Non-employee directors currently are granted an option to purchase 5,000
shares of Common Stock at fair market value as of the date of the first meeting
of directors following each election or appointment of the director, and at each
subsequent first meeting of directors following each Annual Meeting of
Stockholders during such director's term. Each such option shall vest
immediately upon its being granted.
Additionally, each non-employee director shall be granted a non-statutory
stock option to purchase 15,000 shares of Common Stock (a) upon he or she
initially being elected or appointed to the Board and (b) upon each occasion of
he or she being elected to two additional consecutive full terms on the Board.
Each such option shall vest in equal annual installments over three years. The
exercise price for such options granted to directors shall be no less than the
then fair market value.
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Directors who are officers or employees of the Company do not receive
additional compensation for serving as a director or committee member.
Currently, such directors are Mr. Greenfield and Mr. Burns.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the compensation
paid by the Company to each of the executive officers during the past three
fiscal years, ended April 30.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION STOCK
FISCAL --------------------------- OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDED
--------------------------- ------ ------- ------- ------- ------------
($) ($) ($) (#)
Gary G. Greenfield............................ 1998 275,000 345,786 27,500 265,500
President and Chief Executive Officer 1997 275,000 68,612 27,500 200,000
1996 265,000 85,993 130,000
Kevin J. Burns................................ 1998 275,000 69,300 13,750 --
Chairman of the Board 1997 275,000 68,612 27,500 100,000
1996 275,000 89,238 130,000
Kenneth A. Sexton............................. 1998 175,000 149,448 17,500 75,000
Senior Vice President, Finance & 1997 175,000 31,188 17,500 23,000
Administration, Chief Financial Officer 1996 175,000 32,450 20,000
Panos Anastassiadis........................... 1998 210,000 181,922 90,000
Senior Vice President & General Manager, 1997 200,000 38,350 33,000
Data Connectivity 1996 166,000 86,362 80,000
Gary M. Wright................................ 1998 175,000 129,267 60,000
Senior Vice President & General Manager..... 1997 150,000 100,069 20,000
Enterprise Application Renewal 1996 104,875 33,825 25,000
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the stock options granted to the Company's
executive officers during the fiscal year ended April 30, 1998.
INDIVIDUAL GRANTS
---------------------------
OPTIONS % OF TOTAL
GRANTED ON OPTIONS GRANTED EXERCISE GRANT DATE
COMMON TO EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME STOCK FISCAL 1998 SHARE(1) DATE(6) VALUE(4)(5)
---- ---------- --------------- --------- ---------- -------------
# (%) ($/SHARE) ($)
Gary G. Greenfield................... 265,500 24.85 10.25 (2) $1,850,535(4)
Kevin J. Burns....................... 0 0
Kenneth A. Sexton.................... 75,000 7.02 10.25 (2) $ 522,750(4)
Panos Anastassiadis.................. 90,000 8.42 10.25 (2) $ 627,300(4)
Gary M. Wright....................... 40,000 3.74 10.25 (2) $ 278,800(4)
20,000 1.87 16.00 (3) $ 222,000(5)
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(1) The exercise price is the market price on the date the options were granted.
(2) These grants consisted of a combination of both Incentive and Non-Qualified
stock options and were made on May 29, 1997. Incentive Stock Options expire
ten years from their date of grant, while Non-Qualified Stock Options expire
ten years and one month from their date of grant.
(3) This grant was made on September 24, 1997 and expires ten years and one
month from the date of grant.
(4) Grants made on May 29, 1997: Grant date present value is determined using a
modified Black-Scholes option pricing model. The estimated values under the
model are based on assumptions, including an
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expected volatility of 62%, a risk-free rate of return of 6.66%, no
dividend yield and a time to exercise of seven years, and may not be
indicative of actual value. The actual value, if any, the option holder may
realize will depend on the excess of the actual market price of the stock
over the exercise price on the date the option is exercised. There is no
assurance that the value that may be realized by the option holder will be
at or near the value estimated by the Black-Scholes model.
(5) Grant made on September 24, 1997: Grant date present value is determined
using a modified Black-Scholes option pricing model. The estimated value
under the model is based on assumptions, including an expected volatility of
65%, a risk-free rate of return of 6.2%, no dividend yield and a time to
exercise of seven years, and may not be indicative of actual value. The
actual value, if any, the option holder may realize will depend on the
excess of the actual market price of the stock over the exercise price on
the date the option is exercised. There is no assurance that the value that
may be realized by the option holder will be at or near the value estimated
by the Black-Scholes model.
(6) All options granted become exercisable in equal annual installments over
four years, except to the extent that accelerated vesting may occur in
connection with a change of control.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information regarding the exercise
of stock options during the last fiscal year by the Company's executive
officers.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END(2)
SHARES --------------------------- ---------------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
Gary G. Greenfield....... 0 0 385,788 506,752 2,286,009 2,846,788
Kevin J. Burns........... 0 0 32,500 166,250 113,750 914,219
Kenneth A. Sexton........ 0 0 97,000 106,000 501,813 567,323
Panos Anastassiadis...... 0 0 155,750 159,750 894,469 811,844
Gary M. Wright........... 0 0 17,500 87,500 81,875 363,125
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(1) The amount "realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date of
exercise over the exercise price). However, because the executive officers
may keep the shares they acquired upon the exercise of the options (or sell
them at a different price), these amounts do not necessarily reflect cash
realized upon the sale of those shares.
(2) "In-the-Money Options" are options outstanding at the end of the last fiscal
year for which the fair market value of the Common Stock at the end of the
last fiscal year ($15.375 per share) exceeded the exercise price of the
options.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements with Messrs.
Burns, Greenfield, and Sexton providing for (i) annual base salaries, (ii)
participation in bonus plans, stock options and stock incentive plans as adopted
by the Company, and (iii) other customary benefits, including death and
disability payments. Following is a summary of the pertinent provisions of the
agreements.
The terms for Messrs. Greenfield and Sexton are for three years expiring
July 31, 2001, and are automatically extended for one year each August 1, unless
either the Company or the executive gives notice that the agreement is not to be
extended. If there is a change of control of the Company, as defined in Mr.
Greenfield and Mr. Sexton's agreements, the agreements shall be automatically
extended for a three year term commencing on the effective date of the change of
control. The term for Mr. Burns expires September 30, 1999, unless either the
Company or Mr. Burns gives notice as allowed by the agreement. At any time, the
Company may terminate the executive for cause, as defined in the agreements. If
the executive's termination of employment is (i) by the Company other than for
cause or disability, (ii) by the executive for good reason or (iii) during the
first year following a change of control, the Company shall be obligated to make
a lump
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sum payment to the executive. The lump sum payments to Messrs. Greenfield and
Sexton will be based on a multiple (the "Multiple") of their monthly base salary
and bonus (as defined in their agreements) computed on a monthly basis. The
Multiple for calculating the lump sum payments for Messrs. Greenfield and Sexton
is eighteen. Mr. Greenfield and Mr. Sexton would also receive certain employee
benefits or payments in respect of employee benefits for up to three years after
the change of control. The lump sum payment to Mr. Burns will be the remaining
unpaid salary and bonus as defined in his agreement. If the executive would be
subject to the excise tax under the Internal Revenue Code relating to payments
after a change of control, the payments shall be grossed up so that the Company
will make additional payments to the executive equal to the amount of the excise
tax plus the amount of the tax on such additional payments. In addition, if the
executive's employment is so terminated or if there is a change of control, all
outstanding stock options held by the executive shall vest.
During the 18 months following termination of employment described above
(except termination for cause), (i) Mr. Greenfield and Mr. Sexton shall provide
consulting services to the Company and be subject to certain non-competition
covenants and (ii) Mr. Burns shall be subject to certain non-competition
covenants. For such consulting services and non-competition agreement, the
Company shall pay Mr. Greenfield and Mr. Sexton a lump sum equal to eighteen
times their monthly base salary and bonus (as defined in their agreements)
computed on a monthly basis. Mr. Burns shall not receive additional
consideration for his non-competition agreement.
The annual compensation and target incentive compensation (or "IC") for
each effected officer for the fiscal year beginning May 1, 1998 is as follows:
Messrs. Greenfield and Sexton have annual base salaries of $325,000 and
$200,000, respectively. Mr. Greenfield has a target IC amount equal to his base
salary and a maximum IC amount of $415,000. Mr. Sexton has a target IC of
$125,000 and a maximum IC amount of $160,000. As of July 31, 1998, Mr. Burns'
unpaid salary and bonus for the remaining period covered by his agreement was
$345,833. The annual base salary and target incentive compensation may be
increased from time to time as determined by the Board of Directors, in its
discretion, upon a review that shall take place at least annually.
ITEMS 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is no person known by the Company to own beneficially more than 5% of
the outstanding Common Stock as of July 31, 1998. The table sets forth to the
Company's knowledge the beneficial ownership by each director and executive
officer, individually, and all directors and executive officers as a group, of
Common Stock as of July 31, 1998.
SHARES OF PERCENTAGE
COMMON STOCK OF
BENEFICIALLY COMMON STOCK
NAME OF BENEFICIAL OWNER OWNED (1)(2) OUTSTANDING
------------------------ ------------ ------------
Panos Anastassiadis......................................... 309,390 1.3%
Michel Berty................................................ 18,333 0.1%
Kevin J. Burns.............................................. 198,750 0.9%
Richard A. Carpenter........................................ 195,184 0.9%
John J. Cimral.............................................. 74,111 0.3%
C. Thomas Faulders, III..................................... 20,000 0.1%
Robert N. Goldman........................................... 40,999 0.2%
Gary G. Greenfield.......................................... 1,034,439(3) 4.3%
Russell E. Planitzer........................................ 29,999 0.1%
R. Craig Roos............................................... 15,000 0.1%
Kenneth A. Sexton........................................... 247,280 1.1%
Frank A. Sola............................................... 25,666 0.1%
Gary M. Wright.............................................. 96,912 0.4%
All directors and executive officers as a group (13
persons).................................................. 2,306,063 9.2%
(footnotes on following page)
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(1) Except as otherwise specifically noted, the number of shares stated as being
owned beneficially includes shares believed to be held beneficially by
spouses, minor children and grandchildren. The inclusion of shares deemed
beneficially owned in this report, however, does not constitute an admission
that the named stockholders are direct or indirect beneficial owners of such
shares.
(2) Includes 296,000, 18,333, 198,750, 30,999, 72,900, 20,000, 40,999,
1,025,290, 29,999, 15,000, 240,500, 25,666, 96,250 and 2,110,686 shares
subject to option which are held by Messrs. Anastassiadis, Berty, Burns,
Carpenter, Cimral, Faulders, Goldman, Greenfield, Planitzer, Roos, Sexton,
Sola, Wright and all directors and executive officers as a group,
respectively, and are exercisable within 60 days after July 31, 1998. These
option shares include 104,500, 6,667, 115,000, 6,667, 47,076, 10,000, 6,667,
398,003, 10,000, 6,667, 95,250, 6,667, 58,750 and 871,914 shares for Messrs.
Anastassiadis, Berty, Burns, Carpenter, Cimral, Faulders, Goldman,
Greenfield, Planitzer, Roos, Sexton, Sola, Wright and all directors and
executive officers as a group, respectively, which are anticipated to vest
in conjunction with the Merger.
(3) Includes 1,100 shares held by Mr. Greenfield as custodian for his daughter,
as to which shares Mr. Greenfield disclaims beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: August 20, 1998
INTERSOLV, INC.
By: /s/ KENNETH A. SEXTON
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Senior Vice President, Finance &
Administration and
Chief Financial Officer
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