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Exhibit 10.B
MARKETING AND DISTRIBUTION AGREEMENT
THIS STRATEGIC MARKETING AND DISTRIBUTION AGREEMENT ("Agreement") is
entered into by and between Rubbermaid Incorporated, Home Products Division, an
Ohio corporation having its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("Rubbermaid") and Innova Pure Water, Inc. a Florida
corporation having its principal place of business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Innova").
WHEREAS, Innova has a proprietary line of existing water filtration
products and the capacity to manufacture those products more particularly
described in Exhibit A ("Product") for Rubbermaid; and has the know-how and the
ability to develop and produce new water filtration products, some of which are
covered by existing or pending patents; and
WHEREAS, Rubbermaid desires to utilize Innova's technology, know-how and
capability to meet some of its requirements for water filtration products;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties, intending to be legally bound
hereto, agree as follows:
1 . Term of Agreement. The term of this Agreement shall commence on July
21, 1997 ("Commencement Date") and, except as otherwise provided herein, shall
continue until twenty four (24) months after the date on which either party
provides the other with written notice of termination. Should such notice be
provided by Rubbermaid, Rubbermaid may allow Innova to re-enter the market with
product not bearing the Rubbermaid name during the 24 month period by mutual
agreement, and provide to Innova the option with Rubbermaid consent to acquire
product associated assets which may have been purchased by Rubbermaid including
but not limited to tooling and packaging, at the termination of the 24 month
period. Should such notice be provided by Innova the provisions of Paragraph 2
shall continue to apply during the 24 month termination period.
2. Marketing Rights/Territory. Innova hereby grants to Rubbermaid during
the term of this Agreement and Rubbermaid acknowledges and accepts the exclusive
right to market and distribute Product throughout the United States, Canada,
Mexico, Australia, Japan and the countries of Central America, South America,
and Europe listed on ▇▇▇▇▇▇▇ "▇" ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇") in all consumer
channels of trade, and the nonexclusive right to market and distribute Product
throughout the rest of the world in all channels of trade and in all other
channels of trade within the Territory, except as herein excluded or modified
and with the exception of pre-existing agreements between Innova and:
a. GT Merchandising and Licensing, Inc. Television direct sales &
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ private label.
b. Fun Design, Inc. Water Bottles for the youth market containing
figural designs.
c. The Rose Group, Inc. Baby Bottles and Sippy Cups incorporating
water filtration.
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▇. ▇▇▇▇▇▇▇ Family Products, Inc. Markets Bottles containing an Innova
Filter in conjunction with Tote/Carrying Bags.
e. AC International and Abingdon & Associates - London Licensed to
market Bike Bottles with filter to the Bicycle market.
▇. ▇▇▇▇▇▇▇ - Japan Sells Innova's older retail product as provided by
list to Rubbermaid
g. New Zealand. Distribution agreement in place.
h. Korea. Distribution agreement in place.
i. Israel. Distribution agreement under negotiation.
j. Innova retains the right to market product without the Rubbermaid
name on a nonexclusive basis in the following channels of trade:
i. Premiums and Incentives
ii. Electronic Sales
iii. Direct Response Sales
k. Innova retains the right to market product without the Rubbermaid
name on an exclusive basis in the following channels of trade:
i. Schools and bookstores
ii. Non-Consumer Military
iii. Advertising Specialties (except for retail private label
products)
iv. Catalog (Mail Order) (Rubbermaid Catalog Excluded)
Any use of the Rubbermaid name will be subject to approval by Rubbermaid.
In the event that Innova, either directly or through a third party, elects
to enter markets other than those exclusively granted to Rubbermaid under this
Agreement, Rubbermaid shall have a right of first refusal to obtain said markets
as its exclusive market. Innova shall provide Rubbermaid with written notice of
said market entrance. Rubbermaid shall have thirty (30) days from the date it
receives said notice to notify Innova of its decision to refrain from exercising
its right of first refusal or to exercise its right of first refusal, in which
event this Agreement shall be amended to reflect the addition of said market.
Countries assigned to Rubbermaid on an exclusive basis require Rubbermaid
to prepare a business plan to generate sales within a six month time frame.
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In connection with the grant of the marketing licenses to Rubbermaid
hereunder, the parties further agree as follows:
a. Innova hereby grants Rubbermaid on a right of first refusal basis
the right to market any newly developed products of Innova. If
accepted, Rubbermaid will provide an addendum to its product
forecast and launch the product specified within one year.
b. The grant of exclusive marketing rights in Canada is subject to
payment by Rubbermaid of all costs incurred by Innova's current
Canadian distributor not to exceed $20,000 for the release of such
distributor's rights to market Innova products in Canada.
c. Rubbermaid intends to introduce one or more of the Products listed
on Exhibit A, which will be selected by Rubbermaid via written
notice to Innova, via direct response sales/infomercial under the
Rubbermaid name within ninety days after Commencement Date. At the
time of said selection, a new Exhibit A shall be prepared with all
Product not selected by Rubbermaid for its initial launch being
moved to the section of Exhibit A entitled Possible Future
Product. Rubbermaid may, at its option, elect to launch one or
more Possible Future Products by providing Innova of written
notice of the same. All Product and all Possible Future Product
shall be subject to the exclusivity provisions of Paragraph 2.
Until Rubbermaid launches each Product, Innova may continue any
current or prospective sales opportunities excluding KMart, Target
and Wal-Mart.
d. On or before August 15, 1997, Rubbermaid will provide to Innova a
product production requirement schedule through November 1997,
which will be integrated into the other forecast requirements.
Said schedule shall not be deemed to be a commitment on
Rubbermaid's part to purchase said quantities of Product unless
and until said quantities are made a part of Rubbermaid's firm 30
day release schedule.
e. On or before October 15, 1997, Innova will supply to Rubbermaid a
suggested future product list of new products with an estimated
time to complete.
f. By December 31, 1997, Rubbermaid will select and prioritize the
additional products that Rubbermaid would like to introduce in
order in preference and by specific dates.
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g. Anything in this Agreement to the contrary notwithstanding, during
the term of this Agreement Innova shall not market or manufacture
for itself or any third party for sale in the consumer channel of
trade assigned to Rubbermaid Product, Possible Future Product, or
any other water filtration product substantially similar in
functionality and design to any water filtration product
manufactured by or for Rubbermaid, except as set forth in the
exception listing in the first portion of Paragraph 2.
3. Product Specifications. Innova shall produce Product in accordance
with Product specifications contained in Exhibit A hereto (as amended from time
to time by mutual agreement) and an appropriate product PROOF including
packaging which will be submitted and approved by Rubbermaid.
4. Product Packaging. Innova shall package Product in point of purchase
packaging and shipper cartons in accordance with the packaging specifications
contained in Exhibit C hereto; the cost of which is incorporated within the
Product pricing. Rubbermaid may require Innova to modify the existing packaging
as specified in Exhibit C. All packaging design, art, photography and plates,
etc. required to modify existing packaging or to create new packaging will be
either supplied by or paid by Rubbermaid. All Product pricing changes required
due to changes in packaging are subject to the mutual agreement of the parties
as called for under Paragraph 5.
5. Product Price. The price to be paid to Innova by Rubbermaid for
Product is set forth on Exhibit D. Innova shall provide Rubbermaid with 90 days
prior notice of any requested price change. The parties must mutually agree
upon any such price change in order for it to be effective. In the event that
the parties are unable to reach agreement on pricing, either party may
terminate this Agreement as effective 90 days after notice of termination.
During the 90 day termination period, pricing in effect prior to the requested
price change shall apply.
6. Limited Price Adjustment. Rubbermaid will pay Innova an additional
$0.10 per unit for the first 10 million units of Product purchased by
Rubbermaid.
After the initial Product launch with Rubbermaid's retail customers
and filling the "pipeline", and three months of sustained production rate of
three hundred thousand (300,000) units per month, should termination notice be
given by Rubbermaid, Rubbermaid shall pay Innova, at the time of termination
notice, $500,000 less any revenues paid as a result of this $0.10 per unit
payment to that date. If during the 24-month termination notice period, total
unit sales by Rubbermaid exceeds 5 million, the $0.10 per unit payment will
continue up to and including 10 million units of Product or such lesser
quantities as may be sold by Rubbermaid.
7. Production and Marketing Efficiency. The parties shall dedicate human
resources and work jointly to identify raw material, process and conversion
cost improvement opportunities and determine the cost benefits. Savings brought
forth by any means will be equally divided between the parties. Innova shall
use the lowest cost acceptable suppliers identified by either party for all raw
materials and freight provided such raw materials permit Innova to meet
specifications set forth in Exhibit A. Except in the case where Rubbermaid
supplies raw materials as provided for below, if Innova elects to use a
supplier other than the
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lowest cost acceptable supplier Innova shall reduce Product pricing in an
amount equal to 50% of the difference between the lowest cost supplier and the
supplier utilized by Innova. Rubbermaid may, at its option at any time, on
thirty (30) days prior written notice to Innova, require Innova to purchase raw
materials directly from Rubbermaid under the terms of Rubbermaid's standard
security agreement and related documentation, so long as such supply
requirement does not create a liability for Innova as a result of contract
default with an existing supplier, and Rubbermaid is the lowest cost supplier
of an equal quality material.
Should Rubbermaid direct Innova to use certain suppliers, and such
suppliers fail to perform related to quality or timely delivery which impact
Innova's ability to respond to Rubbermaid's needs, Innova will not be held
accountable for such failure, and Rubbermaid agrees to reimburse Innova with
all associated costs incurred.
8. Sales Forecasts. Rubbermaid will provide Innova with an annual
forecast by Product. This forecast does not represent a financial commitment by
Rubbermaid to purchase said quantities of Product unless and until said
quantities are made a part of Rubbermaid's firm 30 day release schedule. To the
degree possible, each party will keep the other advised of pending changes, or
problems of any kind to provide the maximum amount of time for reaction and
cure. Additionally:
a) A 13 week rolling Product forecast will be provided by Rubbermaid
and updated weekly. These forecasts do not represent a commitment
by Rubbermaid to purchase said quantities of Product unless and
until said quantities are made a part of Rubbermaid's firm 30 day
release schedule.
b) Should additional tooling be required to meet the delivery
requirements, such condition will be communicated to Rubbermaid
within 15 days.
c) The details of the 9 week and 13 week forecast will be revised to
more specific 30 day release schedule to which Innova will respond
to the degree possible and immediately note exceptions, if any, to
Rubbermaid.
d) In the event that Rubbermaid's firm 30 day release schedule
requires quantities of Product which are less than 75% of the, 9
week forecast and should purchased goods inventory be accumulated
based upon the 9 week forecast and remain unused, the associated
carrying costs will be passed on to Rubbermaid.
9. Product Shipping. Depending upon Rubbermaid's desires and Innova's
warehousing and shipping capability, Innova may ship either to Rubbermaid for
distribution or directly to the customer, at Rubbermaid's option.
a. Initially, Innova will ship to Rubbermaid by truckload for
distribution to the customer.
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b. FOB point factory, Clearwater, FL unless Innova advises Rubbermaid
of a change. All freight charges will be collect or 3rd party
billing to Rubbermaid.
10. Billing and Payment Procedure. Rubbermaid will pay Innova in advance,
an amount of money approximating Rubbermaid's firm 30 day release schedule,
which will be periodically increased or decreased in accordance with release
schedules. Innova will invoice Rubbermaid for Product upon shipments and
Rubbermaid will pay such invoices within 30 days. Innova agrees to grant
Rubbermaid a security interest in all work in process and finished Product
inventories related to Rubbermaid's orders to secure repayment of any
preshipment payment by Rubbermaid. The parties shall execute a security
agreement in the form attached hereto as Exhibit F to effectuate the grant of
such security interest.
11. Nonconforming Product. Innova shall, within thirty (30) days of the
submission of a claim by Rubbermaid to Innova for non-conforming Product,
credit Rubbermaid with the full purchase price of any unit of Product if it or
its packaging is found not to be in conformance with the specifications set
forth in Exhibits A or C, and approved product PROOF provided that such unit of
Product is, at Innova's option and expense, returned to Innova. Innova has the
right to inspect the product before it is returned. In addition, within thirty
(30) days of the submission of a claim by Rubbermaid to Innova that Rubbermaid
has incurred customer imposed penalties for the receipt of late or
non-conforming Product, reimburse Rubbermaid for the amount of said penalties,
provided Rubbermaid has not previously approved that aspect of the product or
packaging deemed non-conforming. No penalty shall be assessed for delivery
delays beyond Innova's control. Product not conforming to the specifications
contained on Exhibits A or C shall be disposed of in a manner mutually agreed
upon between the parties.
12. New Products. In the event that Innova, either at Rubbermaid's
request or of its own initiative, develops water filtration products other than
Product defined herein ("New Products"), it shall first offer the same to
Rubbermaid. Should Rubbermaid elect to pursue the marketing and distribution of
New Products the parties will negotiate in good faith regarding the allocation
of the costs for the development and manufacturing of New Products. In the
event that Rubbermaid elects to market and distribute New Product, this
Agreement shall be amended accordingly.
13. Default by Innova. Innova shall have 30 days from receipt of due
notice from Rubbermaid to cure any of the following events of default brought
to its attention before Rubbermaid may immediately terminate this Agreement for
cause as herein provided.
a. Product manufactured by Innova consistently fails to meet the
mutually agreed upon then current Product specifications contained
on Exhibits A or C; or
b. Product prices are not competitive with prices available at retail
from other qualified sources meeting similar requirements on an
ongoing basis whose product meets the quality standards set forth
in the Agreement, and Innova is unwilling or unable to meet these
prices;
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c. Innova fails to meet ninety percent (90%) of the expected on time
and complete delivery levels based on the release schedules for
existing (not new) production Products provided by Rubbermaid and
accepted by Innova. Innova will not unreasonably withhold such
acceptance provided the release is within the capacity of Innova
to produce and is in line with prior forecasts to which exceptions
have not been taken. Innova further assumes that no Product
deviations from previous shipments are involved. The thirty day
remedial period IS automatically triggered after the first 30 days
of failure to meet delivery schedule without formal notice by
Rubbermaid.
d. Innova attempts to assign this Agreement or any rights hereunder,
without Rubbermaid's prior written consent; or there is a
fundamental change in the control of Innova without Rubbermaid's
prior written consent, which is unacceptable to Rubbermaid. An
exception is the exercise of warrants by Innova Holdings, LLC,
which is a matter of public record.
e. Innova ceases to function as a going concern; or ceases to conduct
its operation in the normal course of business; or a receiver for
it is appointed; or it otherwise takes advantage of any insolvency
law; or
f. Innova breaches any other material provision of this Agreement.
14. Default by Rubbermaid. Within twelve (12) months of Commencement
Date, should Rubbermaid fail to achieve a minimum distribution with 25% of mass
merchant accounts including at least one of the "majors", Innova shall have the
right to terminate this agreement. Further, should Rubbermaid fail to make
payments as provided for in this agreement Innova may terminate this agreement,
providing due notice has been given and 30 days are allowed for the cure of the
default.
15. Post-termination Procedures. Upon termination of this Agreement,
Rubbermaid and Innova shall develop a strategy to minimize finished Product and
raw and finished material inventories ordered and committed by Rubbermaid in its
firm 30 day release schedule remaining in Innova's possession.
16. Product Standards. All Product shall conform with all federal, state
and local statutes and regulations and all voluntary industry standards.
Filters and product's shall be certified by NSF International under NSF
Standard No. 42, class 2 or better performance. NSF certification will be
contracted by Rubbermaid with the full cooperation of Innova. Costs associated
with NSF certification will be paid by Rubbermaid.
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17. Patent Rights.
a. Should Rubbermaid be the subject of an action for patent
infringement of the rights of third parties by reason of making,
using or selling the Products identified herein, Innova shall be
solely responsible for the defense and damages resulting from such
suit and shall indemnify and hold Rubbermaid harmless from all
damages, costs, and liability resulting from such suit. Rubbermaid
shall have the right at its option and expense to participate
jointly with Innova in the defense of the action. Rubbermaid will
promptly notify Innova of any potential infringement of which they
become aware.
b. In the event Rubbermaid believes a third party is infringing upon
the patent rights in any country, Rubbermaid and Innova may bring
suit jointly to enjoin the same, sharing the costs of such suit
equally and sharing equally in any recovery resulting therefrom.
In the event that either party elects not to participate in such
suit, the other party shall have the right to bring suit at its
sole expense and to any recovery resulting therefrom. Should an
infringing party offer a settlement satisfactory to Innova, Innova
may elect to accept such settlement if satisfactory to both
parties to this agreement and apply 50% of the proceeds and
continuing royalties to the cost of the product supplied to
Rubbermaid. Alternatively, Rubbermaid shall at its option have the
right to pursue the infringing party at its costs and retain any
monies recovered over and above the settlement value which Innova
would otherwise have received.
c. Innova agrees to provide whatever assistance is necessary to
obtain assignments to Rubbermaid and Innova of the patent
applications filed internationally pursuant to this Agreement.
Rubbermaid may at its expense file patent applications in any
country in the Territory it so elects based upon the United States
Patent Rights of Innova. The parties agree to jointly own the
patent applications and subsequent patents which shall be
considered part of the patent rights subject to this Agreement. All
countries in which Rubbermaid elects to file patent applications
shall be considered part of the Territory as defined in this
Agreement with the responsibility to exploit said Territory.
d. In the event that Rubbermaid does not desire to seek protection in
any country, Innova shall have the right to do so at its sole
expense and to own the patent application and subsequent patent.
However, should Rubbermaid either fail to effectively develop any
market covered by a joint patent or choose to terminate this
agreement, Innova can recover all patent rights by reimbursing
Rubbermaid the cost of such patents prorated to the term of
protection remaining.
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Rubbermaid may not grant a license to a third party without the expressed
written approval and consent of Innova.
18. Information Systems. Each party shall be responsible for securing, at
its own expense, the computer software and hardware, as specified by
Rubbermaid, which it requires to transmit data to, or receive data from, the
other party in performing its obligations under this Agreement, provided the
(EDI) equipment and software is cost effective, practical, and current state of
the art. Innova presently has EDI capability covering purchase orders,
invoicing, and shipping information.
19. Access to Records. Innova shall provide Rubbermaid with the records
set forth on Schedule A and access to its books and records relating to the
manufacture and sale of Product. Said records shall be made available during
normal business hours on not less than fifteen (15) days prior written notice.
20. Confidentiality. Each party shall maintain in confidence and
safeguard the identity of the other party and all confidential business and
technical information which becomes available to it from the other in
connection with this Agreement in accordance with the terms of the
confidentiality agreement attached hereto as Exhibit E. Neither party shall
make any public announcement via press release or otherwise regarding the
relationship between the parties without the other party's prior consent.
However, as public companies both companies shall release appropriate notices
to the wire services within the time constraints imposed by the SEC.
21. Service Marks. Innova acknowledges that Rubbermaid owns the worldwide
rights to the ▇▇▇▇ RUBBERMAID and the distinctive elliptical panel with
parallel ends. Innova agrees that, on Product sold to Rubbermaid, Innova shall
use the ▇▇▇▇ and panel only in the manner and form prescribed by Rubbermaid. It
shall not use the ▇▇▇▇ or panel on any product, product packaging or literature
that is not sold directly to Rubbermaid, without the express written consent of
Rubbermaid.
The same provision will be provided to Innova, pertaining to its
trademarks and intellectual property which Rubbermaid shall agree to honor.
22. Independent Contractor Status. Innova is an independent contractor
for Rubbermaid. This Agreement does not constitute Innova as an agent or legal
representative of Rubbermaid for any purpose whatsoever. Innova is not granted
any right or authority to assume or create any obligation or responsibility,
express or implied, on behalf of or in the name of Rubbermaid or to bind
Rubbermaid in any manner or thing whatsoever. Nothing in this Agreement shall
be construed as creating a partnership or joint-venture between the parties.
Nor does this agreement convey any rights for patents and trademarks owned by
Innova beyond their use as a component and accommodation under this agreement.
23. Compliance and Laws. Innova represents and warrants to Rubbermaid
that it is in and shall remain in compliance with all applicable federal, state
and local statues and regulations regarding health, safety and the environment.
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24. Force Majeure. Neither party shall be liable to the other for delay
in the performance of its duties hereunder to the extent that such delay is the
result of an act of God or other conditions beyond that party's control such as
government regulation, embargo, fire, flood, accident, strike, or the like.
25. Entire Agreement. This Agreement, and to the extent not inconsistent
herewith the terms and conditions contained on the face of Rubbermaid's
purchase orders issued hereunder, constitutes the entire understanding between
the parties and there are no other promises or representations made except as
they appear in this Agreement. Further, any amendment or modification of the
terms hereof shall not be effective unless in writing and signed by both
parties.
26. Product Liability. Innova shall indemnify Rubbermaid and defend and
hold Rubbermaid harmless from and against any losses, costs, damages and
expenses whatsoever which Rubbermaid may sustain or incur on account of product
liability claims for defects in the design or manufacture of Product arising in
conjunction with the sale or use of Product. Rubbermaid shall promptly deliver
to Innova any notices or papers served upon it in any proceeding covered by
this indemnity. Innova shall not be responsible for misuse of the Product or
for improper representations made about the Product by Rubbermaid.
27. Insurance Coverage. Innova shall pay for and maintain comprehensive
general liability insurance with products liability, contractual and completed
operations coverages, policies for which shall list Rubbermaid as a named
additional insured and shall reflect minimum bodily injury limits of
$1,000,000.00, each occurrence, and $2,000,000.00, aggregate, and minimum
property damage limits of $500,000.00. Evidence of these coverages shall be
provided, in certificate form, coincident with or prior to execution of this
Agreement.
28. Waiver. The failure of either party to enforce at any time or for any
period of time a provision or provision hereof in accordance with its terms
shall not be construed to be a waiver of such provision(s) or of the rights of
such party thereafter to enforce each and every such Provision(s).
29. Severability. If any part of this Agreement shall be adjudged
invalid, it shall be considered to be severable and the remainder of the
Agreement shall continue in full force and effect to the extent practicable.
30. Applicable Law. This Agreement is subject to, and shall be construed
and interpreted in accordance with, the laws of the State of Ohio. The parties
agree that all disputes may be settled by mediation by which both parties will
make a sincere effort to settle in good faith.
31. Attorneys' Fees. In the event the obligations of the parties
expressed herein are the subject of litigation, the prevailing party shall be
entitled to recover from the other party all reasonable costs and expenses of
such litigation, including reasonable attorneys' fees and costs of appeal.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the dates set forth below.
RUBBERMAID INCORPORATED
By /s/
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Title
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Date 7/22/97
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INNOVA PURE WATER, INC..
By /s/
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Title Chairman
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Date July 21, 1997
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