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EXHIBIT 10.15
AGREEMENT OF PURCHASE AND SALE
This Agreement of Purchase and Sale (the "Agreement"), is made and
entered into as of January 24, 1997, by and between ACR Group, Inc., a Texas
corporation (the "Seller"), and St. James Capital Partners, L.P., a Delaware
limited partnership (the "Purchaser"), and sets forth the terms and conditions
of the sale and purchase of a $1,400,000 10% Convertible Promissory Note,
substantially in the form attached hereto as Exhibit A (the "Note"). For
purposes of this Agreement, the term "Seller" is defined to mean ACR Group,
Inc. and each of its subsidiaries.
WHEREAS, the Seller desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase and accept from the Seller, the Note in the
form of Exhibit A, on the terms and subject to the conditions set forth herein,
the obligations of which of the Seller are secured by the Borrower Security
Agreement, the Subsidiary Security Agreement, the Subsidiary Guaranty and the
Collateral Agreement, each dated as of the date hereof and attached as Exhibits
B, C, D and E, respectively (the "Security Documents").
WHEREAS, the Seller and the Purchaser desire to make certain
representations, warranties and agreements in connection with the purchase and
sale of the Note contemplated hereby.
WHEREAS, the Seller desires to sell to the Purchaser warrants (the
"Warrants"), to purchase shares of Seller's common stock, par value $.01 per
share (the "Common Stock"), which Warrants shall have the terms and be subject
to the conditions set forth in the Form of Warrants attached hereto as Exhibit
F (the "Warrants").
WHEREAS, the Seller desires to grant to the Purchaser certain
registration rights in respect to the shares of Seller's Common Stock that may
be acquired on the conversion of the Note or the exercise of the Warrants,
which registration rights shall have the terms and be subject to the conditions
set forth in the Registration Rights Agreement attached hereto as Exhibit G
(the "Registration Rights Agreement"; this Agreement, the Note, the Security
Documents, the Warrants and the Registration Rights Agreement are collectively
referred to as the "Transaction Documents").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of the Note and the Warrants. Subject to
the terms of this Agreement, the Seller agrees to and does hereby issue, sell
and deliver the Note and the Warrants to the Purchaser at the Closing (as
defined herein), and Purchaser agrees to and does hereby purchase and accept
the Note and the Warrants from the Seller.
1.2 Consideration for Purchase of the Note. Subject to the terms
of this Agreement, the Purchaser hereby agrees to pay to the Seller at Closing,
by check or wire transfer to the account of the Seller, $1,400,000, as the
consideration for the purchase of the Note (the "Note Consideration").
1.3 Consideration for Purchase of the Warrants. Subject to the
terms of this Agreement, the
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Purchaser hereby agrees to pay to the Seller at Closing, by check or wire
transfer to the account of the Seller, $280.00, or $0.001 per Warrant, as the
consideration for the purchase of the Warrants (the "Warrants Consideration";
the Note Consideration and the Warrants Consideration are collectively referred
to as the "Consideration").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to the Purchaser as follows:
2.1 Organization, Standing, and Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted. Seller is licensed and qualified to do business as a
foreign corporation in each jurisdiction in which the character of Seller's
properties, owned or leased, or the nature of its activities makes such
qualification or license necessary, except where failure to be so licensed and
qualified would not have a material adverse effect on Seller's business.
2.2 Authority; No Defaults. Seller has all requisite corporate
power and authority to enter into the Transaction Documents and to consummate
the transactions contemplated thereby. The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on the part
of Seller. The Transaction Documents have been executed and delivered by
Seller and constitute the valid and binding obligation of Seller, enforceable
in accordance with their terms, subject to bankruptcy, insolvency, moratorium
and other similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law). The execution and delivery of the
Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with or result in a breach
of or the acceleration of any obligation under, or constitute a default or
event of default (or event which, with notice or lapse of time or both, would
constitute a default) under, any provision of any charter, bylaw, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, judgment,
decree, ordinance or regulation, or any restriction to which any property of
Seller is subject or by which Seller is bound, the effect of which would be
materially adverse to Seller. Seller is not, nor is it alleged to be, in
material violation or default of any applicable law, statute, order, rule or
regulation promulgated or judgment entered by any court, administrative agency
or commission or other governmental agency or instrumentality, domestic or
foreign (a "Governmental Entity"), relating to or affecting the operation,
conduct or ownership of the property or business of Seller.
2.3 Approvals. There is no legal impediment to the execution and
delivery of the Transaction Documents by Seller or to the consummation of the
transactions contemplated thereby, and no filing or registration with, or
authorization, consent or approval of, a Governmental Entity, shareholders or
any other third party is necessary for the consummation by Seller of the
transactions contemplated thereby.
2.4 SEC Documents. Seller has made all filings with the
Securities and Exchange Commission ("SEC") that it has been required to make
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since February
28, 1995. Seller has provided to the Purchaser a true, complete and correct
copy of Seller's
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annual report on Form 10-K for the fiscal year ended February 29, 1996 together
with all amendments thereto, and any and all filings with the SEC made by
Seller (including all requested exhibits to such filings) since the filing of
said Form 10-K (all such documents that have been filed with the SEC, as
amended, are referred to as the "Seller SEC Documents"). As of their
respective dates, and except as amended, the Seller SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and none of the Seller SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Seller included in the Seller SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Form 10-Q) and fairly present
(subject, in the case of the unaudited statements, to normal recurring audit
adjustments) the consolidated financial position of Seller as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended. Except as set forth in the Seller SEC Documents, since
November 30, 1996, (i) there have been no material adverse changes in the
Seller's business, operations or financial condition and (ii) Seller's
operations have been conducted in the ordinary course of business except as
disclosed in writing to the Purchaser.
2.5 Litigation. Except as set forth in Seller SEC Documents, as
of the date of this Agreement, there is no suit, action, proceeding or
investigation pending or, to the best knowledge of Seller, threatened against
or affecting Seller (or any of its respective officers or directors in
connection with the business of Seller), nor is there any outstanding judgment,
order, writ, injunction or decree against Seller, which judgment would have a
material adverse effect on Seller. Seller is not subject to any court order,
writ, injunction, decree, settlement agreement or judgment that contains or
orders any on-going obligations, whether prohibitory or mandatory in nature,
the performance of which would have a material adverse effect on Seller.
2.6 Capitalization. Seller has authorized capital stock of (a)
25,000,000 shares of Common Stock of which there are 10,371,555 shares issued
and outstanding, and (b) 2,000,000 shares of preferred stock, par value $.0l
per share, ("Preferred Stock"), of which none are issued and outstanding. All
of the issued and outstanding shares of Common Stock were duly and validly
issued and are fully paid and non-assessable. None of the outstanding shares
of Common Stock have been issued in violation of any preemptive rights of the
current or past shareholders of Seller. As of the date hereof, the Seller has
reserved for issuance (i) an aggregate of 923,437 shares of Common Stock
issuable on issuance of stock options to employees, officers and directors,
(ii) an aggregate of 1,000,000 shares of Common Stock issuable on issuance of
stock options and warrants to persons other than those described above in (i),
and (iii) no shares of Common Stock are issuable on exercise of convertible
securities other than those listed in (i) and (ii) above. Except as set forth
on Schedule 2.6, or described above in (i), (ii) and (iii), and except for
shares that may be issued in connection with completed or pending acquisitions,
there are no outstanding options, warrants or rights to subscribe for, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of Seller or
contracts, commitments, understandings or arrangements by which Seller is or
may be obligated to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock. All of the Common Stock issued on the conversion of the Note and the
exercise of the Warrants will be fully paid, non-assessable and free and clear
of any preemptive rights and Encumbrances. As used in this Agreement, the term
"Encumbrance" means and includes (i) any
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security interest, mortgage, deed of trust, lien, charge, pledge, proxy,
adverse claim, equity, power of attorney, or restriction of any kind, including
but not limited to, any restriction or servitude on the use, transfer, receipt
of income, or other exercise of any attributes of ownership, and (ii) any
Uniform Commercial Code financing statement or other public filing, notice or
record that by its terms purports to evidence or notify interested parties of
any of the matters referred to in clause (i) that has not been terminated or
released by another proper public filing, notice or record.
2.7 Subsidiaries. Schedule 2.7 sets forth a true, complete and
correct list of each subsidiary of Seller, including state or country of
organization and address of its principal executive offices. Each subsidiary
of Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite corporate power and authority to own, to lease or to operate its
properties and to carry on its business as it is now being conducted and is
duly qualified or licensed to do business in each jurisdiction in which the
character of its properties, owned or leased, or the nature of its activities
makes such qualification or license necessary, unless the failure to be so
licensed or qualified would not have a material, adverse effect on Seller.
Except as set forth in Schedule 2.7, all outstanding shares of capital stock
of each subsidiary of Seller were duly and validly issued and are fully paid,
nonassessable and owned by Seller or a subsidiary of Seller, free and clear of
all Encumbrances. There are no options, warrants or other rights, agreements
or commitments (including preemptive rights) obligating Seller or any of its
subsidiaries to issue, to sell or to transfer any shares of capital stock or
other securities of any subsidiary of Seller.
2.8 Liabilities. Except as set forth in Schedule 2.8, Seller has
no liabilities or obligations, either accrued, absolute, contingent, or
otherwise that have a material adverse effect on the value or business of
Seller, and Seller has no knowledge of any potential liability that it
reasonably believes would likely result in a material adverse effect on the
value or business of the Seller, other than those (a) reflected or reserved
against in the unaudited consolidated balance sheet of Seller at November 30,
1996 or disclosed in other Seller SEC Documents or (b) incurred in the ordinary
course of business since November 30, 1996.
2.9 Licenses, Permits, Authorizations, Etc. Seller holds all
approvals, authorizations, consents, licenses, orders, franchises, rights,
registrations and permits of any type required to operate its business as
presently conducted. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification of any such approval,
authorization, consent, license, order, franchise, right, registration or
permit.
2.10 Title to Assets; Encumbrances. Except as set forth in
Schedule 2.10:
2.10.1 Seller has good and indefeasible title to its assets,
whether real, personal or intangible, free and clear of all Encumbrances except
(i) as reflected in the Seller SEC Documents, (ii) liens for current taxes and
assessments not yet due or being contested in good faith by appropriate
proceedings, (iii) mechanic's liens arising under the operation of law for
actions contested in good faith or for which payment arrangements have been
made, (iv) liens granted or incurred by Seller in the ordinary course of its
business or financing of equipment, office space, furniture and computers in
the ordinary course of its business, and (v) easements, rights of way,
encroachments or other reductions or matters affecting title which do not
prevent the assets from being used for the purpose for which they are currently
being used;
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2.10.2 There are no parties in possession of any of the
assets of Seller other than personal property held by third parties in the
reasonable and ordinary course of business. Seller enjoys full, free and
exclusive use and quiet enjoyment of its assets and its rights pertaining
thereto. Seller enjoys peaceful and undisturbed possession under all leases
under which it is a lessee, and all such leases are legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with its terms.
2.11 Taxes and Returns. Seller has filed all required tax returns
and reports. Seller has paid all taxes, assessments and governmental charges
and penalties which it has incurred, except such as are being or may be
contested in good faith by appropriate proceedings. Seller is not delinquent
in the payment of any tax, assessment or governmental charge. No deficiencies
for any taxes have been proposed, asserted, or assessed against Seller, and no
requests for waivers of the time to assess any such tax are pending. For the
purposes of this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all federal, state,
local and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
2.12 Insurance. Each policy of property, fire and casualty,
product liability, worker's compensation, professional liability and title
insurance and other forms of insurance (except group, health and life policies)
and each bond issued or posted by any person with respect to any operations or
other activities of Seller is, to the knowledge of Seller, the legal, valid and
binding obligation of the insurer or bond issuer, enforceable in accordance
with its terms, and is in an amount and provides for coverage as is customary
in the ordinary business practices of Seller's industry.
2.13 Hazardous Wastes and Substances. Except as set forth in
Seller SEC Documents, neither the operations of Seller nor the use of its
assets violates any applicable federal, state or local law, statute, ordinance,
rule, regulation, memorandum of understanding, order or notice requirement
pertaining to the collection, transportation, storage, treatment, discharge,
release or disposal of hazardous or non-hazardous waste or substances,
including without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as
amended from time to time on or before the Closing Date ("CERCLA") (including,
without limitation, as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986), and such regulations promulgated under CERCLA on
or before the Closing Date, (ii) the Resources Conservation and Recovery Act of
1976 (42 U.S.C. Sections 6901 et seq.), as amended from time to time ("RCRA")
on or before the Closing Date, and such regulations promulgated under RCRA,
(iii) any applicable federal, state or local laws or regulations relating to
the environment in effect on the Closing Date (collectively, the "Applicable
Environmental Laws"). Except as set forth in the Seller SEC Documents, none of
the operations of Seller has ever been conducted nor have any of its assets
been used in such a manner as to constitute a violation of any of the
Applicable Environmental Laws. Except as set forth in Seller SEC Documents, no
notice has been served on Seller by any person or Governmental Entity regarding
any existing, pending or threatened investigation or inquiry related to
violations under any Applicable Environmental Law, or regarding any claims for
corrective action, remedial obligations or contribution for removal costs or
damages under any Applicable Environmental Law or regarding the designation of
Seller or any of its affiliates as a potentially responsible party for any
facility under the Applicable Environmental Laws, nor, does any fact or
circumstance exist which, if disclosed publicly, would be reasonably likely to
result in the service on Seller of any such notice. Except as set forth on
Seller SEC Documents, there has been no action taken, or omitted to be taken by
Seller which has caused, or would be reasonably likely to cause, a "release" of
any "hazardous substance" at any "facility", without limitation, within the
meaning of such terms as
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defined in the Applicable Environmental Laws.
2.14 Use of Proceeds. Seller shall use the consideration for
purposes of funding the acquisition of all of the capital stock of Lifetime
Filter, Inc. ("Lifetime Filter") and the assets of the O'Leary Family
Partnership, Ltd. (the "O'Leary Partnership") pursuant to that certain Purchase
Agreement dated as of January 1, 1997 (the "Lifetime Agreement"), among Seller,
Lifetime Filter, Richard O'Leary, and the O'Leary Partnership.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Investment Intent. The Note and the Warrants are being
acquired for Purchaser's own account and not with a view to public distribution
and Purchaser acknowledges that the purchase and sale of the Note and the
Warrants is intended to be exempt from registration under the Securities Act by
virtue of Section 4(2) of the Securities Act.
3.2 Accredited Investor. The Purchaser is an accredited investor
within the meaning of Rule 501 under the Securities Act.
3.3 Restricted Securities. The Purchaser acknowledges that the
Note and the Warrants have not been registered under the Act and therefore
cannot be sold or transferred unless either they are subsequently registered
under the Act (as well as under any applicable state securities laws) or an
exemption from such registration is available. The Note and the Warrants will
be "restricted securities" under Rule 144 promulgated under the Act, and unless
and until registered under the Act, the Note and the Warrants may be subject to
limitations on resale set forth in Rule 144 or in administrative
interpretations of the Securities Act by the SEC or in other rules and
regulations in effect at the time of the proposed sale or other disposition of
the Note or the Warrants.
ARTICLE IV
THE CLOSING
4.1 Time and Place. The closing of the purchase and sale of the
Note and the Warrants (the "Closing") will take place on a date agreed to by
the parties (the "Closing Date"), at the offices of Gardere Wynne Sewell &
Riggs, L.L.P., unless another time and place are agreed to by the parties.
4.2 Conditions to the Obligation of Seller. The obligation of
Seller to effect the Closing is subject to the Purchaser delivering, or causing
to be delivered, to Seller at the Closing the Consideration.
4.3 Conditions to the Obligation of Purchaser. The obligation of
Purchaser to effect the Closing is subject to Seller delivering, or causing to
be delivered, to Purchaser at the Closing the following:
4.3.1 evidence, to the satisfaction of Purchaser, that the
transactions contemplated in the Lifetime Agreement have been
consummated;
4.3.2 copies, certified by the Secretary of State of the
State of Texas, of the Articles
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of Incorporation of Seller and all amendments thereto;
4.3.3 copies, certified by the Secretary of Seller as of the
Closing Date, of the bylaws of Seller and all amendments thereto;
4.3.4 copies, certified by a certificate of the Secretary
of Seller as of the Closing Date, of resolutions duly adopted by the
board of directors of Seller, authorizing the execution and delivery
by Seller of the Transaction Documents and all other agreements or
other documents contemplated thereby, the completion of the sale of
the Note and Warrants and the taking of all such other corporate
action as shall have been required as a condition to, or in connection
with, the sale of the Note and Warrants;
4.3.5 the Note;
4.3.6 the Security Documents and any related financing
statements;
4.3.7 the Warrants;
4.3.8 the Registration Rights Agreement;
4.3.9 an opinion of Robert D. Remy, counsel to Seller, in
form and substance acceptable to Purchaser;
4.3.10 written consent from all third parties requiring
prior approval of the transactions contemplated by this Agreement,
including the consents of NationsBank of Texas, N.A. and The Catalyst
Fund, Ltd.; and
4.3.11 (i) the certificates evidencing all of the issued and
outstanding capital stock of Valley Supply, Inc. together with the
associated stock powers executed in blank, (ii) the certificates
evidencing all of the issued and outstanding capital stock of
Ener-Tech Industries, Inc. together with the associated stock powers
executed in blank, (iii) the certificates evidencing all of the issued
and outstanding capital stock of Florida Cooling Supply, Inc. together
with the associated stock powers executed in blank, (iv) the
certificates evidencing all of the issued and outstanding capital
stock of Time Energy Systems Southwest, Inc. together with the
associated stock powers executed in blank, and (v) the certificates
evidencing all of the issued and outstanding capital stock of Lifetime
Filter, Inc, together with the associated stock powers executed in
blank.
ARTICLE v
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained in this Agreement shall
survive the Closing until the lesser of: (i) such time as the Purchaser is no
longer the owner of any of the Shares or (ii) 4 years.
5.2 Notices. All notices or other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in
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person, transmitted by telecopier (with receipt confirmed) or mailed by
registered or certified first class mail, postage prepaid, return receipt
requested to the parties hereto at the address set forth below (as the same may
be changed from time to time by notice similarly given) or the last known
business or residence address of such other person as may be designated by
either party hereto in writing.
(a) If to Seller:
ACR Group, Inc.
3200 Wilcrest Drive, Suite 440
Houston, Texas 77042
Attn: Mr. Alex Trevino, Jr., President
(b) If to Purchaser:
St. James Capital Partners, L.P.
c/o St. James Capital Corp.
1980 Post Oak Boulevard, Suite 2030
Houston, Texas 77056
Attn: John L. Thompson
5.3 Miscellaneous. This Agreement (i) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof, (ii) shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns and is not
intended to confer upon any other person any rights or remedies hereunder,
(iii) shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware and (iv) may be executed in two or
more counterparts which together shall constitute a single agreement.
5.4 Publicity. Seller and Purchaser promptly shall advise and
cooperate with the other prior to issuing, or permitting any of its directors,
officers, employees or agents to issue, any press release with respect to this
Agreement or the explicit transactions contemplated hereby. Notwithstanding
the foregoing, without the prior consent of the Purchaser, neither Seller nor
any of its directors, officers, employees or agents shall issue any press
release which includes the name of the Purchaser or any of the Purchaser'
affiliates.
5.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
5.6 Schedules. All statements contained in any exhibit, schedule,
appendix, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the transactions contemplated hereby, are
an integral part of this Agreement and shall be deemed representations and
warranties hereunder.
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which constitutes an original execution and, in the
aggregate, constitute a single document.
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SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date
first written above.
ACR GROUP, INC.
By: /s/ ALEX TREVINO, JR.
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Alex Trevino, Jr., President
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PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date first
written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its
General Partner
/s/ JOHN L. THOMPSON
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John L. Thompson, President
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