Exhibit 4.2
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
August 31, 2005 by and among (i) ATC Healthcare, Inc., a Delaware corporation
(the "Company"), (ii) each of each of the following parties, Xxxxxx Xxxxxxxx, an
individual with a principal residence located at 000 Xxxxx Xxx, Xxxxxxxx, Xxx
Xxxx 00000, Xxxxxx Xxxxxxxx, an individual with a principal residence located at
000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, and Xxxxxx Xxxxxx, an individual
with a principal residence located at 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxx
00000 (each sometimes referred to as, an "Investor" and collectively as, the
"Investors"), and (iii) each person or entity that subsequently becomes a party
to this Agreement pursuant to, and in accordance with, the provisions of Section
11 hereof (collectively, the "Investor Permitted Transferees" and each
individually an "Investor Permitted Transferee").
WHEREAS, each of the Investors previously sold assets to the Company
and received certain debt obligations as partial consideration for such asset
sale and which debt obligations (which debt obligation is referred to herein
with respect to each Investor as, the "Debt") are currently evidenced by
Subordinated Promissory Notes of the Company's subsidiaries, ATC Healthcare
Services, Inc. and ATC Staffing Services, Inc., dated April 22, 2005, each in
the principal amount of Two Million Seven Hundred Thousand Dollars ($2,700,000),
for an aggregate principal amount of Eight Million One Hundred Thousand Dollars
($8,100,000) (individually a "Subordinated Note" and collectively, the
"Subordinated Notes"); and
WHEREAS, pursuant to an Agreement dated as an even date herewith
between the Company and the Investors (the "Debt Agreement"), the Investors have
each agreed to cancel their Subordinated Notes in exchange for an unfunded
promise of the Company to transfer newly issued Series B Preferred Stock of the
Company under conditions and at times as set forth in the Debt Agreement; and
WHEREAS, in connection with the Debt Agreement, the Company has
established a grantor trust (the "Trust") under that certain Grantor Trust
Agreement Under Installment Sales Arrangement dated as of an even date herewith
by and between the Company and the Trustee thereunder (the "Trust Agreement"),
pursuant to which the Company has issued, or will issue, a total of Four
Thousand Fifty (4,050) shares (the "Trust Shares") of its newly created 5%
Convertible Series B Preferred Stock (the "Series B Preferred Stock"), with such
Series B Preferred Stock being held under the Trust, subject to the claims of
Company's creditors in the event of Company's Insolvency, as defined in the
Trust Agreement, until any such shares of Series B Preferred Stock are released
by the Trust for the Company to issue appropriate certificates in the name of
each Investor and/or their respective beneficiaries in a manner and at times as
specified the Debt Agreement, the Trust Agreement and the Certificate of
Designation for the Series B Preferred Stock that the Company filed with the
Secretary of State of the State of Delaware; and
WHEREAS, in connection with the execution and delivery of the Debt
Agreement, the Company has agreed with the Investors to provide them with the
rights set forth in this Agreement with respect to the underlying Shares of the
Company's Common Stock to be issued upon the conversion of any shares of the
Company's Series B Preferred Stock that are released to any of the Investors in
accordance with the Debt Agreement and the Trust Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings
provided therefor below or elsewhere in this Agreement as described below:
"Board" shall mean the board of directors of the Company.
"Closing" or "Closings" shall mean any closing of the
conversion of any shares of Series B Preferred Stock that has been issued to an
Investor in accordance with the terms of the Debt Agreement and the Trust
Agreement into shares of the Company's Class A Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and all of the rules and regulations promulgated thereunder.
"Investors" shall mean, collectively, the Investors and the
Investor Permitted Transferees; provided, however, that the term "Investors"
shall not include any of the Investors or any Investor Permitted Transferee that
ceases to own or hold any Registrable Shares.
"Majority Holders" shall mean, at the relevant time of
reference thereto, those Investors holding and/or having the right to acquire,
as the case may be, more than fifty percent (50%) of the Registrable Shares held
by all of the Investors.
"Qualifying Holder" shall have the meaning ascribed thereto in
Section 11 hereof.
"Registrable Shares" shall mean the shares of Class A Common
Stock to be issued upon the conversion of any shares of the Series B Preferred
Stock that are released and issued to an Investor under the terms of the Trust
Agreement, provided, however, that such term shall not include any of such
shares of Common Stock that become or have become eligible for resale pursuant
to Rule 144.
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act and any successor or substitute rule, law or provision.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended, and all of the rules
and regulations promulgated thereunder.
2. EFFECTIVENESS; TERMINATION. This Agreement shall become effective
and legally binding with respect to an Investor only if a Closing with respect
to a conversion of any shares of Series B Preferred Stock that have been issued
to an Investor under the terms of the Debt Agreement and the Trust Agreement
occurs and only with respect to Registrable Shares which have been purchased at
a Closing by such Investor.
3. REGISTRATION.
4. The Company agrees that (i) at least one (1) month prior to any scheduled
release of shares of Series B Preferred Stock to the Investors under the
Trust Agreement, it will prepare and file with the SEC a registration
statement on Form S-3 or its equivalent or (ii) if the Company is not then
legally permitted to file with the SEC a registration statement on Form S-3
with respect to resales of its shares, at least three (3) months prior to
any scheduled release of shares of Series B Preferred Stock to the
Investors under the Trust Agreement it will prepare and file with the SEC a
registration statement on Form S-1 or its equivalent for the purpose of
registering for resale by, and for the account of, the Investors as selling
stockholders under the Securities Act, all of the Registrable Shares
attributable to the shares of Series B Preferred Stock to be released to
the Investors (in any case, a "Registration Statement"). In the case of
unscheduled ------------ --------- releases, the Company shall file a
Registration Statement as promptly as possible after it becomes aware of
the release or probability of a release. The Registration Statement shall
permit the Investors to offer and sell, on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act, any or all of the
Registrable Shares. The Company shall cause the Registration Statement to
become effective as soon as practicable and in any case no later than four
months after the release of the shares of Series B Preferred Stock. The
Company shall be required to use reasonable efforts to keep the
Registration Statement effective until such date that is the earlier of (i)
the date when all of the Registrable Shares registered thereunder shall
have been sold or (ii) the second anniversary of the date of the release of
the shares of Series B Preferred Stock. The offer and sale of the
Registrable Shares pursuant to the Registration Statement shall not be
underwritten.
5. OBLIGATIONS OF THE COMPANY. In connection with the Company's
obligation under Section 3 hereof to file the Registration Statement with the
SEC and to use its best efforts to cause the Registration Statement to become
effective as soon as practicable, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Shares covered by the
Registration Statement;
Furnish or otherwise make available to the Investors such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
(including, without limitation, prospectus amendments and supplements as are
prepared by the Company in accordance with Section 4(a) above) as the Investors
may reasonably request in order to facilitate the disposition of such Investors'
Registrable Shares;
Notify the Investors, at any time when a prospectus relating
to the Registration Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in or relating to the Registration Statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading; and, thereafter, the Company will promptly prepare (and, when
completed, give notice to each Investor) a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements therein
not misleading; provided that upon such notification by the Company, the
Investors will not offer or sell Registrable Shares until the Company has
notified the Investors that it has prepared a supplement or amendment to such
prospectus and delivered copies of such supplement or amendment to the selling
Investors (it being understood and agreed by the Company that the foregoing
proviso shall in no way diminish or otherwise impair the Company's obligation to
promptly prepare a prospectus amendment or supplement as above provided in this
Section 4(c) and deliver copies of same as above provided in Section 4(b)
hereof); and
Use commercially reasonable efforts to register and qualify
the Registrable Shares covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
appropriate in the opinion of the Company, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions, and provided further that (notwithstanding anything in this
Agreement to the contrary with respect to the bearing of expenses) if and only
to the extent that any jurisdiction in which any of such Registrable Shares
shall be qualified requires that expenses incurred in connection with the
qualification therein of any such Registrable Shares be borne by the selling
Investors, then the selling Investors shall, to the extent required by such
jurisdiction, pay their pro rata share of such qualification expenses.
6. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Investors shall furnish to the Company such information regarding them and
the securities held by them as the Company shall reasonably request and as shall
be required in order to effect any registration by the Company pursuant to this
Agreement.
7. EXPENSES OF REGISTRATION. All expenses incurred in connection with
the registration of the Registrable Shares pursuant to this Agreement (excluding
underwriting, brokerage and other selling commissions and discounts), including
without limitation all registration and qualification and filing fees, printing,
and fees and disbursements of counsel for the Company, shall be borne by the
Company.
8. DELAY OF REGISTRATION. The Investors shall not take any action to
restrain, enjoin or otherwise delay any registration as the result of any
controversy which might arise with respect to the interpretation or
implementation of this Agreement.
9. INDEMNIFICATION.
(b) To the extent permitted by law, the Company will indemnify
and hold harmless each selling Investor, any investment banking firm acting as
an underwriter for the selling Investors, any broker/dealer acting on behalf of
any selling Investors and each officer and director of such selling Investor,
such underwriter, such broker/dealer and each person, if any, who controls such
selling Investor, such underwriter or broker/dealer within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and will reimburse such
selling Investor, such underwriter, broker/dealer or such officer, director or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission made in connection with
the Registration Statement, any preliminary prospectus or final prospectus
relating thereto or any amendments or supplements to the Registration Statement
or any such preliminary prospectus or final prospectus, in reliance upon and in
conformity with written information furnished expressly for use in connection
with the Registration Statement or any such preliminary prospectus or final
prospectus by the selling Investors, any underwriter for them or controlling
person with respect to them.
To the extent permitted by law, each selling Investor will
severally and not jointly indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any investment banking firm acting as underwriter for the Company or the
selling Investors, or any broker/dealer acting on behalf of the Company or any
selling Investors, and all other selling Investors against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
controlling person, underwriter, or broker/dealer or such other selling Investor
may become subject to, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement or any preliminary prospectus or final
prospectus, relating thereto or in any amendments or supplements to the
Registration Statement or any such preliminary prospectus or final prospectus,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent and only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, in reliance upon and in conformity with written information
furnished by the selling Investor expressly for use in connection with the
Registration Statement, or any preliminary prospectus or final prospectus; and
such selling Investor will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter, broker/dealer or other selling Investor in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the liability of each selling Investor hereunder shall
be limited to the proceeds (net of underwriting discounts and commissions, if
any) received by such selling Investor from the sale of Registrable Shares
covered by the Registration Statement, and provided, further, however, that the
indemnity agreement contained in this Section 8(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of those selling Investor(s) against
which the request for indemnity is being made (which consent shall not be
unreasonably withheld).
Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party desires, jointly with
any other indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the indemnifying parties
with the consent of the indemnified party which consent will not be unreasonably
withheld, conditioned or delayed. In the event that the indemnifying party
assumes any such defense, the indemnified party may participate in such defense
with its own counsel and at its own expense, provided, however, that the counsel
for the indemnifying party shall act as lead counsel in all matters pertaining
to such defense or settlement of such claim and the indemnifying party shall
only pay for such indemnified party's expenses for the period prior to the date
of the indemnifying party's participation in such defense. The failure to notify
an indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
8, but the omission so to notify the indemnifying party will not relieve him of
any liability which he may have to any indemnified party otherwise other than
under this Section 8.
Notwithstanding anything to the contrary herein, the
indemnifying party shall not be entitled to settle any claim, suit or proceeding
unless in connection with such settlement the indemnified party receives an
unconditional release with respect to the subject matter of such claim, suit or
proceeding and such settlement does not contain any admission of fault by the
indemnified party.
10. LIQUIDATED DAMAGES. If (a) within six (6) months after the date of
the release of shares of Series B Preferred Stock to the Investors a
Registration Statement relating to the resale of such shares has not been
declared effective, the Company will pay to each Investor to compensate the
Investor for damages caused by such breach that are not readily ascertainable in
an amount equal to twenty-five percent of the value of the Registrable
Securities that the Investor is unable to resell as a result of such breach
(valued as of the date of the release of the Series B Preferred Stock to which
the Registrable Securities relate based on the five day average closing price of
the Common Stock of the Company on the American Stock Exchange (or other
principal market for such stock) through the date immediately prior to the
release date or, if there is no such market, by the Board in its reasonable
discretion). The obligation to make such payment shall not excuse the Company
from its ongoing obligation to register the resale of the Registrable Securities
thereafter and the Investor shall have all rights at law or equity with respect
to any subsequent breach by the Company of its obligations hereunder.
11. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investors to sell the Registrable Shares to
the public without registration, the Company agrees to use commercially
reasonable efforts: (i) to make and keep public information available, as those
terms are understood and defined in the General Instructions to Form S-3, or any
successor or substitute form, and in Rule 144, (ii) to file with the SEC in a
timely manner all reports and other documents required to be filed by an issuer
of securities registered under the Securities Act or the Exchange Act, (iii) as
long as any Investor owns any Warrants or Registrable Shares, to furnish in
writing upon such Investor's request a written statement by the Company that it
has complied with the reporting requirements of Rule 144 and of the Securities
Act and the Exchange Act, and to furnish to such Investor a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as may be reasonably requested in availing
such Investor of any rule or regulation of the SEC permitting the selling of any
Registrable Shares without registration and (iv) undertake any additional
actions reasonably necessary to maintain the availability of the Registration
Statement or the use of Rule 144.
12. DEFERRAL AND LOCK-UP. Notwithstanding anything in this Agreement to
the contrary, if the Company shall furnish to the selling Investors a
certificate signed by the President or Chief Executive Officer of the Company
stating that the Board of Directors of the Company has made the good faith
determination (i) that continued use by the selling Investors of the
Registration Statement for purposes of effecting offers or sales of Registrable
Shares pursuant thereto would require, under the Securities Act, premature
disclosure in the Registration Statement (or the prospectus relating thereto) of
material, nonpublic information concerning the Company, its business or
prospects or any proposed material transaction involving the Company, (ii) that
such premature disclosure would be materially adverse to the Company, its
business or prospects or any such proposed material transaction or would make
the successful consummation by the Company of any such material transaction
significantly less likely and (iii) that it is therefore advisable to suspend
the use by the Investors of such Registration Statement (and the prospectus
relating thereto) for purposes of effecting offers or sales of Registrable
Shares pursuant thereto, then the right of the selling Investors to use the
Registration Statement (and the prospectus relating thereto) for purposes of
effecting offers or sales of Registrable Shares pursuant thereto shall be
suspended for a period (the "Suspension Period") of not more than 90 days after
delivery by the Company of the certificate referred to above in this Section 10.
During the Suspension Period, none of the Investors shall offer or sell any
Registrable Shares pursuant to or in reliance upon the Registration Statement
(or the prospectus relating thereto).
13. TRANSFER OF REGISTRATION RIGHTS. Any Investor under this Agreement
may transfer or assign the Investors rights to any person provided such person
agrees to become a party to, and bound by, all of the terms and conditions of,
this Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit A hereto. None of the rights of any
Investor under this Agreement shall be transferred or assigned to any Person
that acquires Registrable Shares in the event that and to the extent that such
Person is eligible to resell such Registrable Shares pursuant to Rule 144(k) of
the Securities Act (or any successor or substitute rule) or may otherwise resell
such Registrable Shares pursuant to an exemption from the registration
provisions of the Securities Act.
14. ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof, and it also supersedes any and all prior negotiations,
correspondence, agreements or understandings with respect to the subject matter
hereof.
15. MISCELLANEOUS.
(c) This Agreement may not be amended, modified or terminated,
and no rights or provisions may be waived, except with the written consent of
the Majority Holders and the Company.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, and shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors or assigns, provided that the terms and
conditions of Section 11 hereof are satisfied. This Agreement shall also be
binding upon and inure to the benefit of any transferee of any of the
Registrable Shares provided that the terms and conditions of Section 11 hereof
are satisfied. Notwithstanding anything in this Agreement to the contrary, if at
any time any Investor shall cease to own any Registrable Shares, all of such
Investor's rights under this Agreement shall immediately terminate.
(1) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by courier (overnight or same day) or telecopy or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
All correspondence to the Company shall be addressed in
the manner set forth in the Subscription Agreement.
All correspondence to any Investor shall be sent to such
Investor at the address set forth in the Subscription Agreement.
Any entity may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
The parties acknowledge and agree that in the event of any
breach of this Agreement, remedies at law may be inadequate, and each of the
parties hereto shall be entitled to seek specific performance of the obligations
of the other parties hereto and such appropriate injunctive relief as may be
granted by a court of competent jurisdiction.
This Agreement may be executed in a number of counterparts, an
of which together shall for all purposes constitute one Agreement, binding on
all the parties hereto notwithstanding that all such parties have not signed the
same counterpart.
[Intentionally Left Blank - Signatures follow on the next page.]
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date and year first above written.
ATC HEALTHCARE, INC.
By:
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Xxxxxx X. Xxxxxx
Senior Vice President/Chief Financial
Officer
INVESTORS:
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XXXXXX XXXXXXXX
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XXXXXX XXXXXXXX
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XXXXXX XXXXXX
EXHIBIT A
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Instrument of Adherence
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Reference is hereby made to that certain Registration Rights
Agreement, dated as of August 31, 2005 among ATC Healthcare, Inc., a Delaware
corporation (the "Company"), the Investors and the Investor Permitted
Transferees, as amended and in effect from time to time (the "Registration
Rights Agreement"). Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.
The undersigned, in order to become the owner or holder of
___________ shares of the 5% Convertible Series B Preferred Stock of the Company
and/or _______ shares of the Class A Common Stock of the Company, hereby agrees
that, from and after the date hereof, the undersigned has become a party to the
Registration Rights Agreement in the capacity of an Investor Permitted
Transferee, and is entitled to all of the benefits under, and is subject to all
of the obligations, restrictions and limitations set forth in, the Registration
Rights Agreement that are applicable to Investor Permitted Transferees. This
Instrument of Adherence shall take effect and shall become a part of the
Registration Rights Agreement immediately upon execution.
Executed as of the date set forth below.
Signature:
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Print Name:
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Accepted:
ATC HEALTHCARE, INC.
By:
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Name:
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Title:
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Date:
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