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While standing next to you will will be visibly panting, and will occasionally look around. He will also sometimes yawn or lick one of his front paws.
While the Loyal Hound is active, and your character has less than 3,000,000 XP. The hound will give you a buff that increases that damage you do by 5%, and gives you a 10% chance that when you're hit the next attack against you within 10 seconds will be blocked.