Exhibit 10.1
November 2, 2008
Akorn, Inc.
1925 West Field Court
Suite 300
Lake Forest, IL 60045
Attn: Arthur S. Przybyl, CEO
and Jeffrey A. Whitnell, CFO
Gentlemen:
General Electric Capital Corporation (“GE Capital” or the “Agent”), an affiliate
of GE Healthcare Financial Services, Inc., is pleased to provide its commitment
to provide a $25,000,000 senior secured revolving credit facility (the “Credit
Facility”) to Akorn, Inc. (the “Company”), to refinance existing indebtedness
and to provide financing for ongoing working capital, capital expenditure needs
and expenses relating to the Credit Facility, on the terms and conditions set
forth herein and in the attached Summary of Indicative Terms and Conditions
dated November 2, 2008 (the “Term Sheet”) and the Fee Letter (as defined in the
Term Sheet).
The Term Sheet, together with this letter, hereinafter are referred to as the
“Commitment Letter.” This commitment is based upon our understanding of the
transactions described in the Term Sheet and upon the information that you have
provided to us.
Company agrees to pay all reasonable costs and out-of-pocket expenses incurred
in connection with the diligence, syndication, preparation, negotiation,
execution, and enforcement of this Commitment Letter and the documentation for
the Credit Facility (the “Credit Facility Documentation”), regardless of whether
such Credit Facility Documentation is executed, including without limitation,
the legal fees of counsel to Agent and GE Capital Markets, Inc. (the “Lead
Arranger”).
Company further agrees to indemnify and hold harmless the Agent, all other
agents under the Credit Facility, the Lead Arranger, their affiliates, and their
officers, directors, employees, agents and attorneys (each an “Indemnified
Party”) against any and all losses, claims, damages, costs, expenses (including
reasonable fees, time charges and expenses of attorneys) or liabilities of every
kind whatsoever (collectively, the “Indemnified Obligations”) to which any of
the Indemnified Parties may become subject in connection with this commitment
letter, except that Company shall not be liable for any Indemnified Obligations
of any Indemnified Party to the extent any of the foregoing is determined by a
court of competent jurisdiction to have arisen from the gross negligence or
willful misconduct of any Indemnified Party. This Indemnity Obligation will
continue notwithstanding any termination of this commitment.
Company agrees that in any action arising in connection with this Commitment
Letter or any transaction contemplated hereby the only damages that may be
sought from Agent, all other agents and lenders under the Credit Facility, Lead
Arranger or any of their affiliates or any Indemnified Party are those which are
direct and reasonably foreseeable as the probable result of any breach hereof.
The Agent, all other agents and lenders under the Credit Facility, the Lead

 

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Arranger and their affiliates shall not be liable under this Commitment Letter
or any Credit Facility Documentation or in respect of any act, omission or event
relating to the transaction contemplated hereby or thereby, on any theory of
liability, for any special, indirect, exemplary, consequential or punitive
damages.
This Commitment Letter and Fee Letter are for Company’s confidential use only
and may not be disclosed by the Company to any person other than to the
Company’s subsidiaries and to its and their respective employees, attorneys and
financial advisors (but not commercial lenders) and then only in connection with
the proposed transaction and on a confidential basis, except where in the
Company’s reasonable judgment, disclosure is required by law or by regulations
of any exchange on which the Company’s securities are traded or where the
Agent’s consent to the proposed disclosure is provided. Subject to the preceding
sentence, Agent reserves the right to review and approve, in advance, all
materials, press releases, advertisements, and other disclosures with respect to
the financing transaction contemplated hereby, that you or your affiliates
prepare that contain Agent’s or any affiliate’s name or describe Agent’s
financing commitment.
The Term Sheet is intended to be indicative of the principal terms of the Credit
Facility and does not purport to specify all of the terms, conditions,
representations and warranties, covenants and other provisions that will be
contained in the final Credit Facility Documentation.
If this Commitment Letter, the Fee Letter or any act, omission or event
hereunder or thereunder becomes the subject of a dispute, each of the
undersigned hereby waive trial by jury. Each of the undersigned hereby consent
and agree that the state or federal courts located in New York County, State of
New York shall have exclusive jurisdiction to hear and determine any claims
pertaining to this Commitment Letter, the Fee Letter or any transaction relating
hereto, any other financing related thereto, and any investigation, litigation
or proceeding related to or arising out of any such matters, provided that the
parties acknowledge that any appeals from those courts may have to be by a court
located outside of such jurisdiction. Each of the undersigned hereby expressly
submit and consent in advance to such jurisdiction in any action or suit
commenced in any such court, and hereby waive any objection which any of them
may have based on lack of personal jurisdiction, improper venue or inconvenient
forum. This Commitment Letter and the Fee Letter shall be governed by and shall
be construed in accordance with the laws of the State of New York applicable to
contracts made and performed in that state.
This Commitment Letter and the Fee Letter supersede all prior discussions,
writings, indications of interest and proposals with respect to the Credit
Facility previously delivered to you or your affiliates by Agent or any of its
affiliates. Please indicate your acceptance of this commitment and return a
signed copy of this Commitment Letter and the Fee Letter to Agent. This
commitment will expire at 5:00 p.m., Chicago time, on November 4, 2008 unless on
or prior to such time Agent shall have received a copy of this Commitment Letter
and the Fee Letter executed by you and payment of the Existing Expenses (as
defined in the Fee Letter). Notwithstanding acceptance of this Commitment
Letter, the commitment herein will automatically terminate unless definitive
Credit Facility Documentation is executed on or before January 28, 2009. Upon
expiration or termination of the commitment contained herein, Agent, Lead
Arranger and their affiliates shall have no liability or obligation hereunder.
Termination of this commitment shall not affect your obligations hereunder,
including to pay any fees, costs or expenses provided for herein or in any other
agreements entered into between you and Agent. Notwithstanding any of the
foregoing, the Credit Facility Documentation shall not be executed until on or
after January 2, 2009.

 

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We look forward to working with you and the rest of the management team of
Akorn, Inc. on this transaction.
Sincerely,
GENERAL ELECTRIC CAPITAL CORPORATION,
An Affiliate of GE Healthcare Financial Services, Inc.
By: /s/ Dennis Cloud                                        
Title: Duly Authorized Signatory
ACCEPTED AND AGREED
AKORN, INC.

         
By:
  /s/ Arthur S. Przybyl
 
Arthur S. Przybyl    
Its:
  Pres & CEO    
Date:
  11/3/08    

 

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Summary of Indicative Terms and Conditions (“Term Sheet”)
Akorn, Inc.
$25,000,000 Senior Secured Credit Facility
November 2, 2008

     
BORROWER:
  Akorn, Inc. ( “Company”)
 
   
ADMINISTRATIVE AGENT:
  General Electric Capital Corporation (“GE Capital” or “Agent”)
 
   
SOLE LEAD ARRANGER
AND BOOKRUNNER:
  GE Capital Markets, Inc. (“GECM”)
 
   
LENDERS:
  A syndicate of financial institutions (including GE Capital) arranged by GECM.
 
   
SENIOR SECURED
CREDIT FACILITY:
 
A $25,000,000 senior secured revolving credit facility (the “Credit Facility”),
which will include a letter of credit subfacility for up to $5,000,000 (the “LC
Subfacility”).
 
   
REVOLVING CREDIT
AVAILABILITY:
 
Availability under the Credit Facility would be limited to a borrowing base
which, based upon GE Capital’s due diligence to date, is expected to be up to
the lesser of (i) the sum of (a) 85% of net amount of eligible accounts
receivable, plus (b) the lesser of (x) 50% of the Company’s eligible finished
goods inventory valued at the lower of cost (using an average cost method) or
market value and (y) 85% of the net orderly liquidation value of the Company’s
eligible finished goods inventory as determined by an appraisal firm acceptable
to Agent; provided that the maximum amount of such eligible finished goods
inventory which may be included as part of the borrowing base may not exceed an
amount equal to 75% of the aggregate borrowing base, plus (c) 85% of Company’s
net orderly liquidation value of the eligible equipment, plus (d) 50% of
Company’s distressed value of the eligible real estate or (ii) $25,000,000 Agent
will retain the right from time to time to establish or modify reserves against
availability, advance rates, and standards of eligibility. The value of
inventory shall be subject to quarterly appraisals, and the value of equipment
and real estate shall be subject to annual appraisals.
 
   
 
  The LC Subfacility would provide for the issuance of letters of credit for the
account of Company. Outstanding letters of credit will be reserved from
availability under the Credit Facility.

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INCREMENTAL FACILITY:
  The Company shall have the right to increase the size of the Credit Facility,
at Agent’s and Company’s mutual agreement, in an aggregate amount of up to
$10,000,000 (the “Incremental Facility”) at any time on or before the date which
is two years after the closing date, from existing Lenders and/or new Lenders
mutually acceptable to Agent and Company; provided that (i) no default or event
of default shall have occurred and be continuing, (ii) no commitment of any
Lender shall be increased without the consent of such Lender and (iii) Company
would be in pro forma compliance with all financial covenants. The Incremental
Facility shall become part of the Credit Facility.
 
   
USE OF PROCEEDS:
  To refinance existing indebtedness, to provide for working capital and for
general corporate purposes, and to fund certain fees and expenses associated
with the closing of the Credit Facility.
 
   
TERM:
  4 years.
 
   
INTEREST RATES:
  The outstanding principal balance under the Credit Facility shall bear
interest, at Company’s option, at a fluctuating rate equal to (a) the Base Rate
plus a margin to be determined, or (b) LIBOR plus a margin to be determined. The
interest rate margins applicable to Base Rate and LIBOR shall be determined by
the Agent in its sole discretion at the time of closing, such determination to
be made in good faith.
 
   
 
  The Base Rate will be a floating rate defined as the greater of (a) the rate
publicly quoted from time to time by The Wall Street Journal (or another
national publication selected by the Agent) as the “base rate on corporate loans
posted by at least 75% of the nation’s largest banks” and (b) the LIBOR Rate for
a one-month LIBOR period plus 100 basis points and (c) the Federal funds rate
plus 50 basis points. Notwithstanding the foregoing, in no event shall the Base
Rate be less than a floor to be determined by the Agent in its sole discretion
at the time of closing, such determination to be made in good faith.
 
   
 
  LIBOR will be defined as the offered rate per annum for deposits of Dollars
for the applicable Interest Period (as defined below) that appears on Reuters
Screen LIBOR01 Page as of 11:00 A.M. (London, England time) two (2) Business
Days prior to the first day in each Interest Period. If no such offered rate
exists, such rate will be the rate of interest per annum, as determined by the
Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which
deposits of Dollars in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in the
applicable Interest Period by major financial institutions reasonably
satisfactory to the Agent in the London interbank market for the applicable
Interest Period and for an amount

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  equal or comparable to the principal amount of the Loans to be borrowed,
converted or continued as LIBOR Rate loans on such date of determination.
Notwithstanding the foregoing, in no event shall LIBOR be less than a floor to
be determined by the Agent in its sole discretion at the time of closing, such
determination to be made in good faith.
 
   
 
  Interest Period means, with respect to any LIBOR Rate loan, the period
commencing on the Business Day the Loan is disbursed, converted or continued as
a LIBOR Rate loan and ending on the date one, two, three or six months
thereafter, as selected by the Company in its notice of borrowing, conversion or
continuation. No more than seven (7) Interest Periods shall be in effect at any
time.
 
   
 
  No loan may be converted into, or continued as, a LIBOR Rate loan at any time
when a default shall have occurred and be continuing.
 
   
 
  Interest on Base Rate loans will be payable monthly in arrears on the first
day of each month. Interest on LIBOR Rate loans will be payable at the end of
each Interest Period and, in addition, at the end of three months in the case of
a six month Interest Period. All interest will be calculated using a 360 day
year and actual days elapsed.
 
   
 
  In any event, if the Agent or Requisite Lenders determine that LIBOR for any
Interest Period will not adequately reflect the cost to the Lenders of making or
maintaining LIBOR Rate Loans for such Interest Period, or that the Base Rate
will not adequately reflect the cost to the Lenders of making or maintaining
Base Rate Loans, LIBOR for such Interest Period and/or the Base Rate shall be
adjusted to such rate as the Agent or Requisite Lenders may, from time to time,
designate to Borrower (and in the case of Requisite Lenders, to Agent and
Borrower) in writing as the rate necessary to adequately reflect such cost to
the Lenders.
 
   
 
  At the election of the Agent or Requisite Lenders, upon the occurrence and
during the continuance of a default, the obligations shall bear interest at a
default rate of interest equal to an additional two percent (2%) per annum over
the rate otherwise applicable and such interest will be payable on demand. For
purposes of calculating interest, collections to the Credit Facility will be
credited one (1) business day following Agent’s receipt of good funds.
 
   
SECURITY:
  The Agent, for the benefit of itself and the Lenders, shall receive a first
priority perfected security interest in substantially all existing and
after-acquired real and personal property of the Company, its subsidiaries
(“Subsidiaries”) and any holding company (“Holdings”) formed to own the capital
stock or equity securities of Company (the “Collateral”), including, but not
limited to, all inventory, accounts,

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  equipment, fixtures, chattel paper, patents, trademarks, copyrights, all other
intellectual property, documents, instruments, deposit accounts, cash and cash
equivalents, investment property, general intangibles supporting obligations,
letter of credit rights, commercial tort claims, insurance policies, and other
personal property of Holdings, Company and its Subsidiaries and first mortgage
liens on all of the owned real property of Company and its Subsidiaries, and all
substitutions, accessions, products and proceeds of such property. The
Collateral will be free and clear of other liens, claims, and encumbrances,
except permitted liens and encumbrances acceptable to the Agent (to be set forth
in the Credit Facility Documentation).
 
   
 
  The Agent, for the benefit of itself and the Lenders, shall also receive a
first priority perfected pledge of all of the outstanding capital stock or other
equity securities of each of the Company’s Subsidiaries.
 
   
 
  Agent’s liens and security interests shall be evidenced by documentation
reasonably satisfactory to Agent, including search results, collateral releases
from prior lenders, landlord, mortgagee and bailee waivers, and in the case of
real estate collateral, title insurance policies (supported by surveys) in
amount, form and from an issuer reasonably satisfactory to Agent. All
obligations under the Credit Facility shall be cross-collateralized with each
other and with collateral provided by any subsidiary of Company or any other
guarantor.
 
   
 
  Notwithstanding the foregoing, the terms “subsidiary” and “subsidiaries” as
used herein shall exclude any product development ventures or other joint
ventures of the Company; provided that Agent may require such product
development ventures and/or other joint ventures to be deemed “subsidiaries” in
certain instances, including without limitation, requiring the pledge to Agent
of certain assets, if Agent reasonably determines that it (i) is necessary after
conducting its due diligence and (ii) is cost effective and time efficient to do
so.
 
   
GUARANTEES:
  Obligations under the Credit Facility will be guaranteed by all Subsidiaries
of Company.
 
   
CASH MANAGEMENT:
  Company’s customers would be directed to continue to make all payments to the
Company’s current lockbox/depository account (or to such other
lockbox/depositary account at a bank acceptable to Agent, if the current lockbox
account arrangement is not acceptable to Agent or is not able to be continued),
which shall be under the control of Agent and all deposit accounts of Company
and its Subsidiaries would be subject to control agreements in favor of Agent
having daily sweep mechanisms.

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VOLUNTARY
PREPAYMENTS:
 
The Company may voluntarily prepay any loans outstanding under the Credit
Facility, in each case, subject to concurrent payments of any applicable LIBOR
breakage costs. Prepayment of such loans shall be applied in the manner set
forth under Mandatory Prepayments below.
 
   
MANDATORY
PREPAYMENTS:
 
In addition to regularly scheduled payments of principal, Company will be
required to make prepayments as follows: (a) promptly upon receipt thereof in
the amount of 100% of the net proceeds of (i) any sale or other disposition of
any assets of Company or its subsidiaries (net of amounts reinvested in
replacement assets within 180 days or required to pay taxes or other costs
applicable to the disposition), other than certain dispositions of other assets
to be agreed; (ii) any sales or issuances of debt securities of Company or any
of its subsidiaries and/or any other indebtedness for borrowed money incurred by
Company or any of its subsidiaries after the closing date (other than permitted
amounts and types of indebtedness, each to be agreed upon); and (iii) insurance
proceeds and condemnation awards to the extent not reinvested in the business;
and (b) fifty percent (50%) of any sales or issuances of equity (subject to
mutually agreeable customary exceptions) of Borrower or any of its subsidiaries.
Such prepayments shall be applied to reduce the outstanding principal balance of
the Credit Facility.
 
   
FEES:
  The fees payable to Agent as specified in the fee letter between Company and
Agent dated on or about the date hereof (the “Fee Letter”).
 
   
 
  An Unused Commitment Fee in a percentage to be determined on the average
unused daily balance of the Credit Facility (less any outstanding letters of
credit) such fee to be paid monthly on the first day of each calendar month. The
unused commitment fee percentage shall be determined by the Agent in its sole
discretion at the time of closing, such determination to be made in good faith,
and remains subject to credit approval.  
 
  Letter of credit fees for all letters of credit under the Credit Facility in
an amount equal to the LIBOR margin on the Credit Facility on the outstanding
face amount of all letters of credit such fee to be paid monthly on the first
day of each calendar month.
 
   
 
  All fees (other than the Agent’s Fee) will be calculated using a 360-day year
and actual days elapsed.
 
   
 
  The Company will pay all reasonable costs and expenses associated with due
diligence, the preparation, negotiation and execution of all documentation
executed in connection with the Credit Facility, and the administration and
syndication, if any, of the Credit Facility, including without limitation, the
legal fees of counsel to the Lead

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  Arranger and Agent regardless of whether or not the Credit Facility is closed,
and all enforcement costs and expenses of Agent and Lenders, and the
out-of-pocket cost (including fees and expenses) paid to third party auditors,
or a such reasonable per diem allowance as the Agent may from time to time
establish for in-house auditors plus out-of-pocket expenses.

     
LIBOR BREAKAGE:
  Any payment (or conversion) of a LIBOR loan other than at the end of its
Interest Period, will be subject to customary breakage provisions.
 
   
DOCUMENTATION:
  The loan documents will contain conditions precedent, affirmative, negative,
financial reporting and financial covenants, indemnities, events of default and
remedies, and other provisions, and Company will make representations and
warranties, all as required by Agent and Lenders and acceptable to the Company.
Transactions between Company and its officers, directors, employees and
affiliates shall be restricted in a manner acceptable to Agent, except
commercially reasonable transactions between Borrower and its employees
conducted in the ordinary course of business.
 
   
FINANCIAL COVENANTS:
 
Financial covenants at close may include, but shall not be limited to:
 
 
•     minimum liquidity
 
 
•     minimum tangible net worth
 
 
•     minimum fixed charge coverage ratio
 
 
•     minimum EBITDA
 
   
FINANCIAL STATEMENTS
& OTHER REPORTS:
 
Borrower shall deliver such financial statements and other reports as required
by Agent, including, without limitation, the following:
 
   
 
 
•     Monthly: a borrowing base certificate; inventory summaries; accounts
receivable agings; inventory, accounts receivable, and accounts payable
reconciliations; and monthly financials
 
   
 
 
•     Quarterly: field audits, inventory appraisals and quarterly financials.
 
   
 
 
•     Annual: annual financials, real property and fixed asset appraisals
(subject to certain provisions)
 
   
OTHER TERMS AND
CONDITIONS:
 
Other terms and conditions include, but are not limited to, the following:
 
   
 
 
•     The preparation, execution and delivery of a credit agreement and other
documents executed in connection therewith

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(collectively, with the credit agreement, the “Credit Facility Documentation”)
mutually acceptable to the Company and Agent, incorporating substantially the
terms and conditions as outlined in the Commitment Letter and this Term Sheet.
 
   
 
 
•     Up to a to-be-determined amount may be drawn at close under the Credit
Facility (including issued letters of credit). In any event, after giving effect
to the funding at close, or creation of a reserve for, and payment of all costs
and expenses related to the closing, Company is required to have minimum
availability of a to-be-determined amount under the Credit Facility.
 
   
 
 
•     Satisfactory completion of Agent’s business, tax and legal due diligence
(including a review of existing and potential contracts with Serum for trials
related to ANDA for Hepatitis B, a review of background checks on significant
related parties, insurance review, customer and supplier calls, satisfactory
regulatory review and satisfactory review of all material pending or threatened
litigation or proceedings in court or any administrative forum).
 
   
 
 
•     The ownership, capital, corporate, tax, organizational and legal structure
of Borrower and its subsidiaries upon closing shall be satisfactory to Agent.
Any subordinated indebtedness shall be on terms and conditions, including
subordination provisions, acceptable to Agent.
 
   
 
 
•     Receipt and satisfactory review by Agent of the Company’s available
unaudited statements for each monthly period from January 2008 through
November 2008 and each monthly period thereafter ending 45 days or more prior to
the closing date. Agent shall have also received a pro forma closing balance
sheet, adjusted to give effect to the transaction contemplated hereby, that is
satisfactory to Agent.
 
   
 
 
•     The determination by Agent that there shall not have occurred any change,
development, or event that has or would reasonably be expected to have a
material adverse effect on (i) the operations, business, properties, prospects
or condition (financial or otherwise) of the Borrower, or the Borrower and its
subsidiaries taken as a whole, or (ii) the industry in which the Borrower or its
subsidiaries operate.
 
 
 
•     The determination by Agent of the absence of any material disruption of,
or material adverse change in, loan syndication, financial, banking or capital
markets conditions generally.
 
   
 
 
•     Both before and after giving effect to the closing, the absence of any
default or event of default under the Credit Facility

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Documentation or under any material contract or agreement of the Company or its
subsidiaries; and accuracy of representations and warranties in all material
respects.
 
   
 
 
•     There being no order or injunction or pending litigation in which there is
a reasonable possibility of a decision which would have a material adverse
affect on the Company or any of its subsidiaries and no pending litigation
seeking to enjoin or prevent the transactions contemplated hereby.
 
   
 
 
•     All material third-party, government and regulatory approvals and consents
necessary to consummate the proposed transactions shall have been obtained and
shall be final and non-appealable. Agent shall have received such resolutions,
consents, certificates, legal opinions and other documents as it shall have
reasonably requested with respect to the execution and delivery of the Credit
Facility Documentation, the related transactions and performance of the
obligations created thereunder.
 
   
 
 
•     Other conditions precedent specific to the transaction and typical of
facilities of this type, including Agent’s receipt of satisfactory corporate
approval of the financing as well as opinions of counsel satisfactory to Agent
as to, among other matters, valid corporate existence and authority, legality,
validity and binding effect of all loan, guaranty and security documents,
perfection of security interests, the absence of any violation of law or
regulation or conflict with any existing contracts. All governmental, regulatory
and other third-party approvals and consents required by Agent with respect to
the proposed transactions shall have been obtained and shall be final and
non-appealable.
 
   
 
 
•     The equity structure of all joint venture arrangements of Borrower shall
be acceptable to Agent.
 
   
 
 
•     Legal review satisfactory to Agent of the October 2008 Parexel audit of
the Company as to FDA compliance status, and confirmation satisfactory to Agent
that the Company shall have had no additional FDA issues since the audited
period.
 
   
ASSIGNMENTS AND
PARTICIPATIONS:
 
Lenders would have the right at any time to sell and assign interests and sell
participations under the Credit Facility in accordance with customary terms.
 
 

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REQUISITE LENDERS:
  Lenders holding greater than 50% of the loan exposure (including unfunded
commitments under the Credit Facility) under the Credit Facility.
 
   
 
  Certain amendments and waivers may require class votes or the consent of all
Lenders, as appropriate.
 
   
GOVERNING LAW:
  New York.

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