EXHIBIT 4(d)(2)
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FORBEARANCE AGREEMENT
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BACK BAY CAPITAL FUNDING, LLC
The "Lender"
TEXFI INDUSTRIES, INC.
The "Borrower"
AS OF DECEMBER 28, 1999
THIS FORBEARANCE AGREEMENT (hereinafter, this "Agreement") made this 28th
day of December, 1999 by and between:
BACK BAY CAPITAL FUNDING, LLC f/k/a Back Bay Capital, LLC (hereinafter, the
"Lender"), a Delaware limited liability company with its principal offices
located at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx; and
TEXFI INDUSTRIES, INC. (hereinafter, the "Borrower"), a Delaware corporation
with its principal office located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx.
Background
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Reference is made to a certain loan arrangement (hereinafter, the "Loan
Arrangement") maintained by and between the Lender and the Borrower evidenced
by, among other things, the following documents, instruments, and agreements
(hereinafter collectively, the "Loan Documents"). (Capitalized terms used in
this Agreement and not otherwise defined shall have the meanings as defined in
the Loan Documents):
1. Term Loan and Security Agreement (hereinafter, the "Loan Agreement")
dated August 28, 1998, as modified by a certain Forbearance Agreement dated
February 28, 1999, as amended and extended as of May 28, 1999, September 28,
1999, and October 8, 1999;
2. Term Note (hereinafter, the "Term Note") dated August 28, 1998 made by
the Borrower payable to the Lender;
The Borrower has defaulted under the Loan Agreement and the Term Note and the
Lender has, among other things, (i) notified the Borrower of the occurrence of
an Event of Default, (ii) accelerated all Liabilities and declared them to be
immediately due and payable in full, and (iii) commenced suit against the
Borrower in the Commonwealth of Massachusetts, Suffolk County Superior Court,
Civil Action No. 99-6050-F (hereinafter, the "Civil Action"). The Borrower has
requested that the Lender forbear from exercising its rights and remedies upon
default. The Lender has agreed to so forbear, but only upon the terms and
conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is hereby agreed by and between the Lender and
the Borrower, as follows:
Acknowledgment of Indebtedness
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1. The Borrower hereby acknowledges and agrees that it is currently
unconditionally liable to the Lender for the following amounts
(hereinafter all amounts due as set forth in this Paragraph 1 shall be
referred to collectively as the "Obligations")/1/:
1. Term Note: Principal $12,285,544.26
Current Pay Interest $ 41,527.78
[Exclusive of interest to be paid pursuant
to Paragraph 4(a), below]
2. PIK Interest $ 47,983.67
3. Collateral Monitoring Fee $ 38,500.00
4. Appraisal Fees $ 32,580.11
e. Legal Fees and Expenses [Estimate] $ 65,000.00
f. All Current Pay Interest and PIK Interest hereafter
accruing under the Term Note, and all costs, expenses,
and costs of collection (including attorneys' fees)
hereafter incurred by the Lender in connection with the
Loan Arrangement.
Waiver of Claims
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2. The Borrower, for itself and on behalf of its officers, directors,
employees, attorneys, representatives, administrators, successors, and
assigns hereby acknowledges and agrees that it has no offsets,
defenses, claims, or counterclaims against the Lender or its officers,
directors, employees, attorneys, representatives, parent, affiliates,
successors, and assigns with respect to the Obligations, or otherwise,
and that if the Borrower now has, or ever did have, any offsets,
defenses, claims, or counterclaims against the Lender or its officers,
directors, employees, attorneys, representatives, parent, affiliates,
successors, and assigns, whether known or unknown, at law or in
equity, from the beginning of the world through this date and
_________________________
/1/ The following amounts are calculated as of December 10, 1999
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through the time of execution of this Agreement, all of them are
hereby expressly WAIVED, and the Borrower hereby RELEASES the Lender
and its officers, directors, employees, attorneys, representatives,
parent, affiliates, successors, and assigns from any liability
therefor.
Ratification of Loan Documents; Further Assurances
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3. The Borrower:
a. Hereby ratifies and confirms all and singular the terms and
conditions of the Loan Documents. The Borrower further
acknowledges and agrees that, except as specifically modified in
this Agreement, all terms and conditions of the Loan Documents
shall remain in full force and effect; and
b. Shall, from and after the execution of this Agreement, execute
and deliver to the Lender whatever additional documents,
instruments, and agreements that the Lender reasonably may
require in order to vest or perfect the Loan Documents and the
collateral granted therein more securely in the Lender and to
otherwise give effect to the terms and conditions of this
Agreement.
Conditions Precedent
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4. In order to induce the Lender to enter into this Agreement, and as
precondition to the Lender's forbearance:
a. The Borrower shall, upon the execution of this Agreement, pay to
the Lender all accrued and unpaid Current Pay Interest through
and including November 30, 1999 in the amount of $253,319.44.
b. The Borrower hereby ratifies the prior payment to the Lender of
the unpaid balance of the Anniversary Fee through an increase to
the outstanding principal balance of the Term Note.
c. The Borrower shall have entered into, prior to or simultaneously
with the execution of this Agreement, a forbearance agreement
(the "Tranche A Forbearance Agreement") on terms and conditions
satisfactory to the Lender, in the Lender's sole and exclusive
discretion, with BankBoston, N. A., in its capacity as agent (in
such capacity, together with its successors in such capacity, the
"Agent") on behalf of certain Lenders (the "Tranche A Lenders"),
and the Tranche A Lenders with respect to the Loan and Security
Agreement (the "Tranche A Loan Agreement") dated as of August 28,
1998
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entered into by and between the Borrower, the Agent, and the
Tranche A Lenders.
d. The Lender shall have entered into, prior to or simultaneously
with the execution of this Agreement, a letter agreement with the
Agent confirming the terms and conditions, when applicable, under
which the Intercreditor Agreement dated August 28, 1998 between
the Agent and the Lender will be amended to address the Working
Capital Infusions, as described in Paragraph 6(d) below.
Submission of Projections
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5. The Borrower has submitted to the Lender financial projections
(hereinafter, "Projections") dated December 3, 1999 of the Borrower's
cash availability for the period from November, 1999 through May,
2000, a copy of which is annexed hereto marked Exhibit "A".
a. The Borrower hereby warrants and represents to the Lender that
the Projections contain the Borrower's best, good faith
determination of its projected cash availability for the period
represented in the Projections; and
b. The Borrower shall use its reasonable best efforts to (i) meet
the financial performance benchmarks contained in the Projections
or on which the Projections are based, and (ii) operate its
business in accordance with the Projections and the assumptions
on which they are based, including without limitation, payment of
all past due, current, and future real estate taxes and other
liens and assessments with respect to the Borrower's real and
personal property.
Working Capital Infusions
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6. The Borrower has advised the Lender that the Projections include,
among other things, cash availability based in part on the Borrower's
receipt of additional subordinated debt or equity infusions during the
period from January 15, 2000 through the Termination Date (as defined
in Paragraph 8(c), below).
a. The Borrower shall receive, on or about the 15th day of January,
2000, but in no event later than January 20, 2000, additional
subordinated debt or an equity infusion in the amount of
$500,000.00;
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b. The Borrower shall receive, on or about the 15th day of February,
2000, but in no event later than February 21, 2000, additional
subordinated debt or an equity infusion in the amount of
$500,000.00;
c. The Borrower shall receive, on or about the 15th day of March,
2000, but in no event later than March 20, 2000, additional
subordinated debt or an equity infusion in the amount of
$500,000.00;
d. Each new infusion of subordinated debt or equity shall be through
a subordinated last-out participation in the loans under the
Tranche A Loan Agreement which increases the "Borrowing Base"
under, and as defined in, the Tranche A Loan Agreement by a like
amount. Such participation shall be subordinate in collateral
priority and repayment terms to the Obligations, and otherwise on
terms and conditions satisfactory to the Lender, in the Lender's
sole and exclusive discretion.
Satisfaction of Obligations
---------------------------
7. The Borrower has indicated to the Lender that it intends to satisfy
all amounts due under the Loan Arrangement in full through the
proceeds of a refinancing loan from a replacement lender, additional
infusions of equity, or the sale of the Borrower's assets. In that
regard, the Borrower shall, to the extent not otherwise confidential,
keep the Lender apprised of all material developments in connection
with the Borrower's efforts to consummate the refinancing, the equity
infusion, or the sale of assets and provide the Lender with copies of
any notices or other communication relating to thereto.
Repayment of the Obligations
----------------------------
8. From and after the execution of this Agreement, the Obligations shall
be repaid, as follows:
a. Monthly Payments. Interest shall continue to accrue on the
outstanding principal balance of the Term Note at the rate of
Sixteen (16%) percent per annum. Monthly payments of Current Pay
Interest shall continue to be made on the Term Note each month:
(i) On the seventh day of January, 2000;
(ii) On the first day of February, 2000;
(iii) On the first day of March, 2000; and
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(iv) On the first day of April, 2000.
b. PIK Interest. PIK Interest shall continue to accrue in
accordance with the terms of the Loan Agreement;
c. Termination Date. The entire outstanding balance of the
Obligations, including all principal, interest (accrued and
hereafter accruing, Current Pay and PIK), other fees, and
reasonable and necessary charges, costs, expenses, and costs of
collection (including reasonable attorneys' fees), shall be paid
in full, if not sooner payable upon the occurrence of a
Termination Event (as defined in Paragraph 12, below), on or
before 5:00 P.M. Boston time on Friday, April 30, 2000
(hereinafter, the "Termination Date").
Alternative Payments
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9. Notwithstanding the terms and conditions of Paragraph 6(b) (a Working
Capital Infusion) or Paragraph 8(a) (Monthly Payments of Current Pay
Interest), in the event that the Working Capital Infusion of
$500,000.00 due on or about February 15, 2000 has not been received on
or before February 21, 2000, then the Borrower shall pay to the Lender
$100,000.00 in principal on each of February 21, 2000, March 20, 2000,
and April 20, 2000.
a. If the Borrower makes the foregoing payments, then no Termination
Event shall occur as a result of the failure of the Borrower to
have complied with the terms of Paragraph 6(b);
b. The Borrower shall remain obligated to make the monthly payments
of Current Pay Interest on March 1, 2000, and April 1, 2000;
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c. The Borrower shall remain obligated to make the
payment of $100,000.00 in principal on March 2000, even if an
additional Working Capital Infusion is received in March, 2000.
Financial Reporting Requirements
--------------------------------
10. In addition to any other reporting requirements
contained in the Loan Agreement, the Borrower shall use its good faith
best efforts to:
a. Submit the following information to the Lender
by the specified dates and times:
(i) As and when submitted to the Tranche A
Lenders, via telecopier, a copy of the
"Borrowing Base Certificate" provided to
the Agent or the Tranche A Lenders;
(ii) As and when requested by the Lender, such
other and further information that the Lender reasonably may
require from time to time.
b. Confirm in writing with the submission of each
financial report that all of the information contained therein
is, to the best of the Borrower's knowledge, true, accurate, and
complete.
c. Permit the Lender to conduct field audits,
appraisals, and examinations of the Borrower's business
operations and assets, as and when deemed necessary or
appropriate by the Lender. The Borrower shall reimburse the
Lender on demand for the reasonable expenses of One (1) of each
(i) field audit, (ii) appraisal, and (iii) examination.
Forbearance by Lender
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11. The Lender shall forbear from enforcing its rights
and remedies as a result of the Borrower's defaults, until the earlier
of (i) the occurrence of a Termination Event, as defined in Paragraph
12, below, or (ii) the Termination Date.
a. In particular, upon the execution of this
Agreement and satisfaction of each of the Conditions Precedent
set forth in Paragraph 4, above, the Lender shall postpone the
hearing in the Civil Action on the Lender's request for
injunctive relief, currently scheduled for Tuesday, December 28,
1999 at 2:00 P. M., until on or after January 21, 2000.
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b. If the Working Capital Infusion due under Paragraph
6(a), above, has been timely received by the Borrower, and so
long as no other Termination Event has occurred, then the Lender
shall further postpone the hearing in the Civil Action on the
Lender's request for injunctive relief until on or after February
2, 2000.
c. If the monthly payment of Current Pay Interest due
under Paragraph 8(a)(ii), above, has been timely made by the
Borrower, and so long as no other Termination Event has occurred,
then on or about February 3, 2000, the Lender shall file a notice
of voluntary dismissal, without prejudice, in the Civil Action.
d. The Lender agrees that the Borrower need not file
an Answer to the Lender's Complaint in the Civil Action until
Five (5) days after the occurrence of a Termination Event.
e. Nothing contained in this Agreement shall
constitute a waiver by the Lender of any Event of Default under
the Loan Documents, whether now existing or hereafter arising.
This Agreement shall only constitute an agreement by the Lender
to forbear from enforcing its rights and remedies upon the terms
and conditions set forth herein.
Termination Events
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12. The occurrence of any one or more of the following
events shall constitute a termination event (hereinafter, a
"Termination Event") under this Agreement:
a. The failure of the Borrower to promptly,
punctually, or faithfully perform any term or condition of this
Agreement (other than under Paragraph 10(a)(i) - - as to which,
see Paragraph 12(b), below) as and when due, it being expressly
acknowledged and agreed that TIME IS OF THE ESSENCE;
b. The failure of the Borrower to have submitted the
"Borrowing Base Certificate" required by Paragraph 10(a)(i),
above, for Three (3) consecutive days;
c. The failure of the Borrower to pay any amount
required to be paid to the Lender under this Agreement as and
when due, including without limitation, the failure of the
Borrower to pay all Obligations in full on or before 5:00 p.m.
Boston time on the Termination Date, it being expressly
acknowledged and agreed that TIME IS OF THE ESSENCE;
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d. The commencement of any case under the United
States Bankruptcy Code by or against the Borrower;
e. The occurrence of any event of default by the
Borrower under the Tranche A Forbearance Agreement, through the
failure of the Borrower to satisfy the Tranche A "Forbearance
Conditions" set forth therein or otherwise, unless the Tranche A
Lenders have not acted upon the event of default and are
continuing to make loans to the Borrower in accordance with the
Tranche A Loan Agreement.
Rights Upon Termination
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13. Upon the occurrence of any Termination Event:
a. The agreement of the Lender to forbear as set forth
in this Agreement shall automatically terminate and the Lender
may immediately commence enforcing its rights and remedies
pursuant to the Loan Documents, and otherwise;
b. All Obligations shall be immediately due and
payable in full, without demand, notice, or protest, all of which
are hereby expressly WAIVED; and
c. Interest shall thereafter accrue on the unpaid
principal balance of the Term Note at the rate of Nineteen (19%)
percent per annum.
Costs of Collection
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14. The Borrower shall reimburse the Lender on demand for
any and all reasonable and necessary costs, expenses, and costs of
collection (including reasonable attorneys' fees) hereafter incurred
by the Lender in connection with the protection, preservation, and
enforcement by the Lender of its rights and remedies.
Notices
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15. Any communication between the Lender and the Borrower
shall be forwarded via (i) telecopier or (ii) recognized overnight
courier, addressed as follows:
If to the Lender: Back Bay Capital Funding, LLC
00 Xxxxx Xxxxxx
00
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx,
Managing Director Telecopier No. (000) 000-0000
With a copy via telecopier to:
Xxxxxx X. Xxxxxxx, Esquire
Xxxxxx & Xxxxxxxxxx, LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
If to the Borrower:
Texfi Industries, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopier No. (000) 000-0000
With copies via telecopier to:
Xxxxx Xxxxx, Esquire
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopier No. (000) 000-0000
Xxxxxx Xxxxxx, Esquire
Xxxxxx Xxxxxxx, Arsht & Xxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx
P. O. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Telecopier No. (000) 000-0000
Waivers
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16. Non-Interference. From and after the occurrence of any
Event of Default, the Borrower agrees not to interfere with the
exercise by the Lender of any of its rights and remedies. The Borrower
further agree that they shall not seek to distrain or otherwise
hinder, delay, or impair the Lender's efforts to realize upon the
Collateral, or otherwise to enforce its rights and remedies pursuant
to the Loan Documents. The provisions of this Paragraph 16 shall be
specifically enforceable by the Lender.
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17. Jury Trial. The Borrower hereby makes the following
waiver knowingly, voluntarily, and intentionally, and understands that
the Lender, in entering into this Agreement or making any financial
accommodations to the Borrower, whether now or in the future, is
relying on such a waiver: THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
PRESENT OR FUTURE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE LENDER BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE
LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE
BORROWER, OR ANY OTHER PERSON, AND THE LENDER.
Entire Agreement
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18. This Agreement shall be binding upon the Borrower and
the Borrower's officers, directors, employees, representatives,
successors, and assigns, and shall inure to the benefit of the Lender
and the Lender's successors and assigns. This Agreement and all
documents, instruments, and agreements executed in connection herewith
incorporate all of the discussions and negotiations between the
Borrower and the Lender, either expressed or implied, concerning the
matters included herein and in such other documents, instruments and
agreements, any statute, custom, or usage to the contrary
notwithstanding. No such discussions or negotiations shall limit,
modify, or otherwise affect the provisions hereof. No modification,
amendment, or waiver of any provision of this Agreement, or any
provision of any other document, instrument, or agreement between the
Borrower and the Lender shall be effective unless executed in writing
by the party to be charged with such modification, amendment, or
waiver, and if such party be the Lender, then by a duly authorized
officer thereof.
Construction of Agreement
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19. In connection with the interpretation of this Agreement
and all other documents, instruments, and agreements incidental
hereto:
a. All rights and obligations hereunder and
thereunder, including matters of construction, validity, and
performance, shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts and are
intended to take effect as sealed instruments.
b. The captions of this Agreement are for convenience
purposes only, and shall not be used in construing the intent of
the Lender and the Borrower under this Agreement.
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c. In the event of any inconsistency between the
provisions of this Agreement and any other document, instrument,
or agreement entered into by and between the Lender and the
Borrower, the provisions of this Agreement shall govern and
control.
d. The Lender and the Borrower have prepared this
Agreement and all documents, instruments, and agreements
incidental hereto with the aid and assistance of their respective
counsel. Accordingly, all of them shall be deemed to have been
drafted by the Lender and the Borrower and shall not be construed
against either (i) the Lender, or (ii) the Borrower.
Illegality or Unenforceability
------------------------------
20. Any determination that any provision or application of
this Agreement is invalid, illegal, or unenforceable in any respect,
or in any instance, shall not affect the validity, legality, or
enforceability of any such provision in any other instance, or the
validity, legality, or enforceability of any other provision of this
Agreement.
Jurisdiction
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21. The Borrower and the Lender agree that any legal
action, proceeding, case, or controversy with respect to this
Agreement and the Obligations or any Loan Document shall be brought in
the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts and that such Courts shall have exclusive jurisdiction
with respect to such action. By execution and delivery of this
Agreement, the Borrower and the Lender, for themselves and in respect
of their property, accept, submit, and consent generally and
unconditionally, to the jurisdiction of the aforesaid courts.
a. The Borrower and the Lender WAIVE personal service
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of any and all process upon either of them, and irrevocably
consent to the service of process out of any of the
aforementioned courts in any such action or proceeding by the
mailing of copies thereof by certified mail, postage prepaid, to
them at their address set forth above, such service to become
effective five (5) business days after such mailing.
b. The Borrower and the Lender WAIVE any objection
-----
based on forum non conveniens and any objection to venue of any
action or proceeding instituted under this Agreement or any of
the Loan Documents and consent to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
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Informed Execution
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22. The Borrower warrants and represents to the Lender that
the Borrower:
a. Has read and understands all of the terms and
conditions of this Agreement;
b. Intends to be bound by the terms and conditions of
this Agreement; and
c. Is executing this Agreement freely and voluntarily,
without duress, after consultation with independent counsel of
the Borrower's own selection.
IN WITNESS WHEREOF, this Agreement has been executed this 28 day of December,
1999.
BACK BAY CAPITAL FUNDING, LLC TEXFI INDUSTRIES, INC.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
Xxxxxxx Xxxxxxx Xxxxxx X. Xxxxxxxxx
Title: Managing Director Title: EVP & CFO
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