Exhibit 10.3

[FORM OF EXECUTIVE OFFICER]

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”), effective as of
            ,          (the “Effective Date”), is made by and between FARMER
BROS. CO., a Delaware corporation (the “Company”), and
                             (the “Executive”).

WHEREAS, the Company considers it essential to foster the continued employment
of well qualified, senior executive management personnel; and

WHEREAS, the Company has determined that appropriate steps should be taken to
foster such continued employment by setting forth the benefits and compensation
to be awarded to such personnel in the event of a voluntary or involuntary
termination within the meaning of this Agreement; and

WHEREAS, the Company further recognizes that the possibility of a Change in
Control of the Company exists and that such possibility, and the uncertainty and
questions that it may raise among executive management, may result in the
departure or distraction of executive personnel to the detriment of the Company;
and

WHEREAS, the Company has further determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company’s executive management, including the Executive, to their
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:

1. Term of Agreement. The term of this Agreement shall commence as of the date
hereof and expire on the close of business on             , 20    ; provided,
however, that (i) commencing on January 1,          and each January 1
thereafter, the term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately preceding
year, the Company (provided no Change in Control has occurred and no Threatened
Change in Control is pending) or the Executive shall have given notice that it
or the Executive, as the case may be, does not wish to have the Term extended;
(ii) if, prior to a Change in Control, the Executive ceases for any reason to be
an employee of the Company, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate and be of
no further effect.

2. Definitions

(a) “Base Salary” shall mean the Executive’s salary, which excludes Bonuses, at
the rate in effect when an event triggering benefits under Section 3 of this
Agreement occurs.

(b) “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed
to such term in Rule 13d-3 of the Exchange Act.

(c) “Board” or “Board of Directors” shall mean the Board of Directors of Farmer
Bros. Co., or its successor.

 

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(d) “Bonus(es)” shall mean current cash compensation over and above Base Salary
whether awarded under the Company’s Incentive Compensation Plan or otherwise
awarded.

(e) “Cause” shall mean:

(i) the Executive’s material fraud, malfeasance, or gross negligence, willful
and material neglect of Executive’s employment duties or Executive’s willful and
material misconduct with respect to business affairs of the Company or any
subsidiary of the Company or

(ii) Executive’s conviction of or failure to contest prosecution for a felony or
a crime involving moral turpitude.

A termination of Executive for “Cause” based on clause (i) of the preceding
sentence can be made only by delivery to Executive of a resolution duly adopted
by the affirmative vote of not less than three quarters of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive’s counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in the
good faith opinion of the Board, the Executive had committed an act constituting
“Cause” as herein defined and specifying the particulars thereof in
detail. Nothing herein will limit the right of the Executive or [his/her]
beneficiaries to contest the validity or propriety of any such determination. A
termination for Cause based on clause (ii) above shall take effect immediately
upon giving of the termination notice. No act or omission shall be deemed
“willful” if it was due primarily to an error in judgment or ordinary
negligence.

(f) “Change in Control” shall mean:

(i) An acquisition by any Person (as such term is defined in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) thereof) of Beneficial Ownership of the
Shares then outstanding (the “Company Shares Outstanding”) or the voting
securities of the Company then outstanding entitled to vote generally in the
election of directors (the “Company Voting Securities Outstanding”), if such
acquisition of Beneficial Ownership results in the Person beneficially owning
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) fifty
percent (50%) or more of the Company Shares Outstanding or fifty percent
(50%) or more of the combined voting power of the Company Voting Securities
Outstanding; excluding, however, any such acquisition by a trustee or other
fiduciary holding such Shares under one or more employee benefit plans
maintained by the Company or any of its subsidiaries; or

(ii) The approval of the stockholders of the Company of a reorganization,
merger, consolidation, complete liquidation, or dissolution of the Company, the
sale or disposition of all or substantially all of the assets of the Company or
any similar corporate transaction (in each case referred to in this
Section 2(f) as a “Corporate Transaction”), other than a Corporate Transaction
that would result in the outstanding common stock of the Company immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
affiliate thereof) at least fifty percent (50%) of the outstanding common stock
of the Company or such surviving entity or parent or affiliate thereof
immediately after such Corporate Transaction; provided, however, if the
consummation of such Corporate Transaction is subject, at the time of such
approval by stockholders, to the consent of any government or governmental
agency, the Change in Control shall not occur until the obtaining of such
consent (either explicitly or implicitly); or

 

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(iii) A change in the composition of the Board such that the individuals who, as
of the Effective Date, constitute the Board (such Board shall be hereinafter
referred to as the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, for purposes of this
Section 2(f) that any individual who becomes a member of the Board subsequent to
the Effective Date whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of those individuals
who are members of the Board and who were also members of the Incumbent Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but, provided, further,
that any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, including any
successor to such Rule), or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board, shall not be so
considered as a member of the Incumbent Board.

(g) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

(h) “Disability” shall mean the Executive’s inability as a result of physical or
mental incapacity to substantially perform [his/her] duties for the Company on a
full-time basis for a period of six (6) months.

(i) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

(j) “Involuntary Termination” shall mean a termination of the Executive’s
employment by the Company that occurs for reasons other than for Cause,
Disability or death.

(k) “Threatened Change in Control” shall mean any bona fide pending tender offer
for any class of the Company’s outstanding Shares, or any pending bona fide
offer to acquire the Company by merger or consolidation, or any other pending
action or plan to effect, or which would lead to, a Change in Control of the
Company as determined by the Incumbent Board. A Threatened Change in Control
Period shall commence on the first day the actions described in the preceding
sentence become manifest and shall end when such actions are abandoned or the
Change in Control occurs.

(l) “Shares” shall mean the shares of common stock of the Company.

(m) “Resignation for Good Reason” shall mean a termination of the Executive’s
employment by the Executive due to:

(i) a significant reduction of the Executive’s responsibilities, duties or
authority;

(ii) a material reduction in the Executive’s Base Salary; or

(iii) a Company-required material relocation of the Executive’s principal place
of employment;

provided, however, that any such condition shall not constitute “Good Reason”
unless both (x) the Executive provides written notice to the Company describing
the condition claimed to constitute Good Reason in reasonable detail within
ninety (90) days of the initial existence of such condition, and (y) the Company
fails to remedy such condition within thirty (30) days of receiving such written
notice thereof; and provided, further, that in all events the termination of the
Executive’s employment with the Company shall not be treated as a termination
for “Good Reason” unless such termination occurs not more than one (1) year
following the initial existence of the condition claimed to constitute “Good
Reason.

 

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3. Events That Trigger Benefits Under This Agreement. The Executive shall be
eligible for the compensation and benefits described in Section 4 of this
Agreement as follows:

(a) A Change in Control occurs and Executive’s employment is Involuntarily
Terminated or terminated by Resignation for Good Reason within twenty-four
(24) months following the occurrence of the Change in Control; or

(b) A Threatened Change in Control occurs and the Executive’s employment is
Involuntarily Terminated or terminated by Resignation for Good Reason during the
Threatened Change in Control Period.

4. Benefits Upon Termination. If the Executive becomes eligible for benefits
under Section 3 above, the Company shall pay or provide to the Executive the
following compensation and benefits:

(a) Salary. The Executive will receive as severance an amount equal to [his/her]
Base Salary at the rate in effect on the date of termination for a period of
twenty-four (24) months, such payment to be made in installments in accordance
with the Company’s standard payroll practices, such installments to commence,
subject to Section 9(j)(ii), in the month following the month in which the
Executive’s Separation from Service occurs. The Executive shall also receive a
payment equal to one hundred percent (100%) of the Executive’s target Bonus for
the fiscal year in which the date of termination occurs (or, if no target Bonus
has been assigned to the Executive as of the date of termination, the average
Bonus paid by the Company to the Executive for the last three (3) completed
fiscal years or for the number of completed fiscal years that Executive has been
in the employ of the Company if fewer than three, prior to the termination
date), such payment to be made, subject to Section 9(j)(ii), in a lump sum
within thirty (30) days after the end of the Company’s fiscal year in which the
Executive’s date of termination occurs. As used herein, a “Separation from
Service” occurs when the Executive dies, retires, or otherwise has a termination
of employment with the Company that constitutes a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard
to the optional alternative definitions available thereunder.

(b) Qualified and Non-Qualified Plan Coverage. Subject to the eligibility
provisions of the plans, the Executive shall continue to participate in the
tax-qualified and non-qualified retirement, savings and employee stock ownership
plans of the Company during the twenty four (24) month period following the
Executive’s date of termination unless the Executive commences Employment prior
to the end of the twenty four (24) month period, in which case, such
participation shall end on the date of [his/her] new employment. The Executive
shall inform the Company promptly upon commencing new employment.

(c) Health, Dental, and Life Insurance Coverage. The health, dental, and life
insurance benefits coverage provided to the Executive at [his/her] date of
termination shall be continued by the Company during the twenty-four (24) month
period following the Executive’s date of termination unless the Executive
commences employment prior to the end of the twenty four (24) month period and
qualifies for substantially equivalent insurance benefits with the Executive’s
new employer , in which case, such insurance coverages shall end on the date of
qualification. The Executive shall inform the Company promptly of [his/her]
qualification for any of such insurance coverages. . The Company shall provide
for such insurance coverages at its expense at the same level and in the same
manner as if the Executive’s employment had not terminated (subject to the
customary changes in such coverages if the

 

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Executive retires under a Company retirement plan, reaches age 65, or similar
events and subject to Executive’s right to make any changes in such coverages
that an active employee is permitted to make). Any additional coverages the
Executive had at termination, including dependent coverage, will also be
continued for such period on the same terms, to the extent permitted by the
applicable policies or contracts. Any costs the Executive was paying for such
coverages at the time of termination shall be paid by the Executive by separate
check payable to the Company each month in advance. If the terms of any benefit
plan referred to in this Section do not permit continued participation by the
Executive, the Company will arrange for other coverage at its expense providing
substantially similar benefits. If the Executive is covered by a split-dollar or
similar life insurance program at the date of termination, [he/she] shall have
the option in [his/her] sole discretion to have such policy transferred to him
upon termination, provided that the Company is paid for its interest m the
policy upon such transfer.

(d) Outplacement Services. The Company shall provide the Executive with
outplacement services by a firm selected by the Executive, at the expense of the
Company, in an amount up to $25,000.

(e) No Mitigation Obligation. The Company hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable
employment following termination of Executive’s employment by the Company and
that the non-solicitation covenant contained in Section 6 may further limit the
employment opportunities for the Executive. Accordingly, the payment of the
compensation and benefits by the Company to the Executive in accordance with the
terms of this Agreement is hereby acknowledged by the Company to be reasonable,
and the Executive will not be required to mitigate the amount of any payment
provided for this Agreement by seeking other employment or otherwise, nor will
any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise, except as expressly provided in the first
sentence of Section 4(c).

5. Parachute Payments. Notwithstanding anything contained in this Agreement to
the contrary, in the event that the compensation and benefits provided for in
this Agreement to Executive together with all other payments and the value of
any benefit received or to be received by Executive:

(a) constitute “parachute payments” within the meaning of Section 280G of the
Code, and

(b) but for this Section, would be subject to the excise tax imposed by
Section 4999 of the Code, the Executive’s compensation and benefits pursuant to
the terms of this Agreement shall be payable either:

(i) in full, or

(ii) in such lesser amount which would result in no portion of such compensation
and benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by Executive on an after-tax basis, of the greatest amount of
compensation and benefits under this Agreement, notwithstanding that all or some
portion of such compensation and benefits may be subject to the excise tax
imposed under Section 4999 of the Code. Unless the Company and Executive
otherwise agree in writing, any determination required under this Section 5
shall be made in writing by the Company’s independent public accountants serving
immediately before the Change in Control (the “Accountants”), whose
determination shall be conclusive and binding upon Executive and the Company for
all purposes. For purposes of making the calculations required by this
Section 5, the Accountants may make reasonable assumptions and approximations

 

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concerning applicable taxes and may rely on reasonable good faith
interpretations concerning the applications of Section 280G and 4999 of the
Code. The Company shall cause the Accountants to provide detailed supporting
calculations of its determination to Executive and the Company. Executive and
the Company 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 5.

6. Obligation Not to Solicit

(a) Executive hereby agrees that while Executive is receiving compensation and
benefits under this Agreement, Executive shall not in any manner attempt to
induce or assist others to attempt to induce any officer, employee, customer or
client of the Company to terminate its association with the Company, nor do
anything directly or indirectly to interfere with the relationship between the
Company and any such persons or concerns.

(b) In the event that the Executive engages in any activity in violation of
Section 6(a), all compensation and benefits described in Section 4 shall
immediately cease.

7. Confidentiality. The terms of this Agreement are to be of the highest
confidentiality. In order to insure and maintain such confidentiality, it is
agreed that neither party, including all persons and entities under a party’s
control, shall, directly or indirectly, publicize or disclose to third persons
the terms of this Agreement or the substance of negotiations with respect to it;
provided, however, that nothing herein shall be construed to prevent disclosures
which are reasonably necessary to enforce the terms of this Agreement or which
are otherwise required by law to be made to governmental agencies or others;
moreover, nothing herein shall be construed to prevent the parties hereto, or
their attorneys, from making such disclosures for legitimate business purposes
to their respective insurers, financial institutions, accountants and attorneys
or, in the case of a corporation, limited liability company or partnership, to
its respective officers, directors, employees, managers, members and agents or
any of its respective subsidiaries, group or divisions, provided that each such
recipient of such disclosures agrees to be bound by the requirements concerning
disclosure of confidential information as set forth in this Paragraph 7.

8. Settlement of Disputes; Arbitration

(a) All disputes arising under or in connection with this Agreement, shall be
submitted to binding arbitration in Los Angeles County before an arbitrator
selected by mutual agreement of the parties. If the parties are unable to agree
mutually on an arbitrator within thirty (30) days after a written demand for
arbitration is made, the matter shall be submitted to JAMS/ENDISPUTE (“JAMS”) or
successor organization for binding arbitration in Los Angeles County by a single
arbitrator who shall be a former California Superior Court judge. The arbitrator
shall be selected by JAMS in an impartial manner determined by it. Except as may
be otherwise provided herein, the arbitration shall be conducted under the
California Arbitration Act, Code of Civil Procedure §1280 et seq. The parties
shall have the discovery rights provided in Code of Civil Procedure §§1283.05
and 1283.1. The arbitration hearing shall be commenced within ninety (90) days
of the appointment of the arbitrator, and a decision shall be rendered by the
arbitrator within thirty (30) days of the conclusion of the hearing. The
arbitrator shall have complete authority to render any and all relief, legal and
equitable, appropriate under California law, including the award of punitive
damages where legally available and warranted. The arbitrator shall award costs
of the proceeding, including reasonable attorneys’ fees, to the party or parties
determined to have substantially prevailed, but such award for attorneys’ fees
shall not exceed One Hundred Thousand Dollars ($100,000). Judgment on the award
can be entered in a court of competent jurisdiction.

 

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(b) The foregoing notwithstanding, if the amount in controversy exceeds
$200,000, exclusive of attorneys’ fees and costs, the matter shall be litigated
in the Los Angeles County Superior Court as a regular civil action except that a
former California Superior Court Judge selected by JAMS in an impartial manner
shall be appointed as referee to determine, sitting without a jury (a jury being
waived by all parties hereto), all issues pursuant to California Code of Civil
Procedure §638(1). Judgment entered on the decision of the referee shall be
appealable as a judgment of the Superior Court. The prevailing party shall be
entitled to receive its reasonable attorneys’ fees and costs from the other
party, but such award for attorneys’ fees shall not exceed One Hundred Thousand
Dollars ($100,000).

9. Miscellaneous

(a) Notices. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and shall be deemed to
have been duly given when delivered personally or seven days after mailing if
mailed first class by registered or certified mail, postage prepaid, addressed
as follows:

 

If to the Company:    Farmer Bros. Co    20333 South Normandie Avenue   
Torrance, CA 90502    Attn: Chief Executive Officer with a copy to:    John M.
Anglin, Esq.    Anglin, Flewelling, Rasmussen, Campbell & Trytten LLP    199
South Los Robles Avenue, Suite 600    Pasadena, CA 91101-2459
If to the Executive:   

 

  

 

  

 

or to such other address as any party may designate by notice to the others.

(b) Assignment. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective executors, administrators,
heirs, personal representatives, and successors, but, except as hereinafter
provided, neither this Agreement nor any right hereunder may be assigned or
transferred by either party thereto, or by any beneficiary or any other person,
nor be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy, or other legal process of any kind against the Executive,
[his/her] beneficiary or any other person. Notwithstanding the foregoing, any
person or business entity succeeding to substantially all of the business of the
Company by purchase, merger, consolidation, sale of assets, or otherwise, shall
be bound by and shall adopt and assume this Agreement and the Company shall
cause the assumption of this Agreement by such successor. If Executive shall die
while any amount would still be payable to Executive hereunder (other than
amounts that, by their terms, terminate upon the death of Executive) if
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of Executive’s estate.

(c) No Obligation to Fund. The agreement of the Company (or its successor) to
make payments to the Executive hereunder shall represent solely the unsecured
obligation of the Company (and its successor), except to the extent the Company
(or its successors) in its sole discretion elects in whole or in part to fund
its obligations under this Agreement pursuant to a trust arrangement or
otherwise.

 

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(d) Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California, without giving
effect to conflict of law principles.

(e) Amendment. This Agreement may only be amended by a written instrument signed
by the parties hereto, which makes specific reference to this Agreement.

(f) Severability. If any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provisions hereof.

(g) Withholding. The Company shall have the right to withhold any and all local,
state and federal taxes which may be withheld in accordance with applicable law.

(h) Other Benefits. Nothing in this Agreement shall limit or replace the
compensation or benefits payable to Executive, or otherwise adversely affect
Executive’s rights, under any other benefit plan, program, or agreement to which
Executive is a party.

(i) Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. The Company and Executive are parties to an
Employment Agreement executed concurrently herewith. Except as provided in
[Section 11] of the Employment Agreement, the provisions of the Employment
Agreement and this Agreement are cumulative.

(j) Section 409A

(i) It is intended that any amounts payable under this Agreement shall either be
exempt from or comply with Section 409A of the Code (including the Treasury
regulations and other published guidance relating thereto) (“Code Section 409A”)
so as not to subject the Executive to payment of any additional tax, penalty or
interest imposed under Code Section 409A. The provisions of this Agreement shall
be construed and interpreted to avoid the imputation of any such additional tax,
penalty or interest under Code Section 409A yet preserve (to the nearest extent
reasonably possible) the intended benefit payable to the Executive.

(ii) Notwithstanding any provision of this Agreement to the contrary, if the
Executive is a “specified employee” within the meaning of Treasury Regulation
Section 1.409A-1(i) as of the date of the Executive’s Separation from Service,
the Executive shall not be entitled to any payment or benefit pursuant to
Section 4 until the earlier of (i) the date which is six (6) months after the
Executive’s Separation from Service for any reason other than death, or (ii) the
date of the Executive’s death. Any amounts otherwise payable to the Executive
upon or in the six (6) month period following the Executive’s Separation from
Service that are not so paid by reason of this Section 9(j)(ii) shall be paid
(without interest) as soon as practicable (and in all events within thirty
(30) days) after the date that is six (6) months after the Executive’s
Separation from Service (or, if earlier, as soon as practicable, and in all
events within thirty (30) days, after the date of the Executive’s death). The
provisions of this Section 9(j)(ii) shall only apply if, and to the extent,
required to avoid the imputation of any tax, penalty or interest pursuant to
Code Section 409A.

 

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(iii) To the extent that any benefits or reimbursements pursuant to Section 4(c)
or Section 4(d) are taxable to the Executive, any reimbursement payment due to
the Executive pursuant to any such provision shall be paid to the Executive on
or before the last day of the Executive’s taxable year following the taxable
year in which the related expense was incurred. The benefits and reimbursements
pursuant to such provisions are not subject to liquidation or exchange for
another benefit and the amount of such benefits and reimbursements that the
Executive receives in one taxable year shall not affect the amount of such
benefits or reimbursements that the Executive receives in any other taxable
year.

[SIGNATURES FOLLOW]

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its duly authorized officers and the Executive has hereunder set
[his/her] hand, as of the date first above written.

 

Company:     FARMER BROS. CO.,     a Delaware corporation     By:  

 

    Name:  

 

    Title:  

 

Executive:    

 

    [Name of Executive]

 

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SCHEDULE OF EXECUTIVE OFFICERS

Roger M. Laverty III

Drew H. Webb

Jeffrey A. Wahba

 

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