REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
8, 1999 between nSTOR TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), and_________________ (the "Investor").
RECITALS
In connection with the Subscription Agreement of even date herewith
between the Investor and the Company (the "Subscription Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Subscription
Agreement, to issue and sell to the Investor shares (the "Shares") of the
Company's Series E Preferred Stock, $.01 par value per share (the "Preferred
Stock") and Warrants (the "Warrants") to purchase shares of the Company's common
stock, $.05 par value per share ("Common Stock"). The Company has agreed to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "Securities Act"), and applicable state securities
laws with respect to the Common Stock issuable upon conversion of the Preferred
Stock and the exercise of the Warrants.
TERMS OF AGREEMENT
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investor hereby agree as
follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Register", "registered" and "registration" refer
to a registration effected by preparing and filing a Registration Statement or
Statements on Form S-3 or another form acceptable to Investor in compliance with
the Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415") and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission ("SEC").
(ii) "Registration Statement" means a registration
statement under the Securities Act.
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(iii) "Registerable Securities" means the shares of
Common Stock issuable upon exercise of the Warrants and conversion of the
Preferred Stock.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Subscription
Agreement.
2. Registration.
(a) The Company shall prepare and file with the SEC as soon as
reasonably practicable following the consummation by it of the transactions
contemplated by that certain Purchase Agreement dated March 2, 1999 among the
Company, W. Xxxxx Xxxxx, the Xxxxx Family Trust and the Xxxxx Children's Trust
of 1993, as amended, a registration statement on Form S-3 covering all of the
shares of Common Stock that are issuable upon conversion of the Preferred Stock
and exercise of the Warrants.
(b) The Company represents and warrants that it meets the
requirements for the use of Form S-3 for registration of the sale by the
Investor of the Registerable Securities and the Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
(c) Notwithstanding the registration of the resale of
Registrable Securities in accordance with Section 2.(a), if at any time of offer
and sale of such Registrable Securities such securities can be sold pursuant to
Rule 144 promulgated under the Securities Act ("Rule 144") in the manner, amount
and on such terms as the Investor wishes to offer and sell such securities, the
Investor may endeavor to offer and sell such securities pursuant to Rule 144.
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall:
(a) Prepare and file with the SEC promptly (but in no event
later than the applicable time periods set forth in Section 2.(a)) a
Registration Statement or Statements with respect to the Registrable Securities
and thereafter use its best efforts to cause the Registration Statement to
become effective as soon as possible after such filing, and keep the
Registration Statement effective at all times until such date as is two years,
after the date such Registration Statement is first ordered effective by the
SEC. In any case, the Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) filed by the Company
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective for the time periods set
forth in Section 3.(a);
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(c) Furnish to the Investor (i) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto
and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as the Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by the Investor;
(d) Use reasonable efforts to register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investor may reasonably
request, prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements, take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times that the Registration Statement is required to be effective under Section
3.(a) hereof and take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3.(d), (ii)
subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause more than nominal expense or burden to the Company or
(v) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders;
(e) As promptly as practicable after becoming aware of such
event, notify the Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits 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, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to the
Investor as the Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify the Investor of the issuance by the SEC of any stop order or other
suspension of effectiveness of the Registration Statement at the earliest
possible time;
(g) Permit a single firm of counsel designated as selling
stockholders' counsel by the Investor and other persons participating in the
offering to review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC, and
shall not file any document in a form to which such counsel reasonably objects;
(h) Make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to the Registration
Statement and any attorney, accountant or other agent retained by the Investor
or underwriter (collectively, the "Inspectors"), all pertinent financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the
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"Records"), as shall be reasonably necessary to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence (making such confidential information
known only to officers, agents or employees thereof who have a need to know),
shall not use any information so obtained for any purpose other than preparation
or review of the registration statement, and shall not make any disclosure
(except to an Investor or underwriter) of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is requested pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector or Investor until and unless the
Investor or Inspector shall have entered into confidentiality agreements (in a
form as is customary in similar circumstances) with the Company with respect
thereto, substantially in the form of this Section 3.(h). The Investor agrees
that he shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4.(a) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Investor, to
undertake, at Investor's expense, appropriate action to prevent disclosure of,
or to obtain a protective order for, such information;
(i) Use its best efforts either to cause all the Registrable
Securities covered by the Registration Statement to be listed on the American
Stock Exchange or other national securities exchange and on each additional
national securities exchange on which similar securities issued by the Company
are then listed, if any, if the listing of such Common Stock is then permitted
under the rules of such exchange or secure designation of all the Common Stock
covered by the Registration Statement as a National Association of Securities
Dealers Automated Quotations System ("NASDAQ") "national market system security"
within the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the quotation of the Common Stock
on the NASDAQ National Market System; or, if, despite the Company's best efforts
to satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Common Stock;
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(j) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(k) Cooperate with the Investor to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be sold in the denominations or amounts
as the case may be, and registered in such names as the Investor may reasonably
request; and
(l) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. Obligations of the Investor. In connection with the registration of
the Registrable Securities, the Investor shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Investor that the Investor shall furnish to the Company such information
regarding itself and the intended method of disposition of the Common Stock held
by it as shall be reasonably required to effect the registration of the Common
Stock and shall execute such documents in connection with such registration as
the Company may reasonably request. At least fifteen (15) days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor
(the "Requested Information"). For each day that the Requested Information is
not received beginning five business days from the date of its request, the
Company shall have the right to extend the period for filing set forth Section
2.(a) hereof by one day.
(b) The Investor agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement hereunder.
(c) The Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3.(e)
or 3.(f), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3.(e) or 3.(f) and, if so directed by the Company, the Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in the Investor's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
(d) In the event the Investor determines to engage the
services of an underwriter, the Investor agrees to enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities.
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5. Expenses of Registration. All expenses (other than brokerage
commissions or discounts) incurred in connection with registrations, filings or
qualifications pursuant to Section 2, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees and
the fees and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investor shall bear the fees and
out-of-pocket expenses of the one legal counsel selected pursuant to Section
3.(g) hereof.
6. Indemnification.
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless the Investor, any underwriter (as
defined in the Securities Act) for the Investor, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each person, if
any, who controls any such underwriter within the meaning of the Securities Act
or the Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively "Claims") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or 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, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6.(d) with respect to the number of
legal counsel, the Company shall reimburse the Investor and each such
underwriters or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.(a) (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) with respect to any preliminary prospectus shall not
inure to the benefit of any such person from whom the person asserting any such
Claim purchased the Common Stock that are the subject thereof (or to the benefit
of any person controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented; (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or cause to
be delivered the prospectus made
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available by the Company; and (iv) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld.
(b) By the Investor. In connection with any Registration
Statement in which an Investor is participating, the Investor agrees to
indemnify and hold harmless, to the same extent and in the same manner set forth
in Section 6.(a), the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs (i) in reliance upon and in conformity with written information
furnished to the Company by the Investor expressly for use in connection with
such Registration Statement or (ii) the Investor's violation of Regulation M;
and the Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6.(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Investor, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Common Stock by the Investor.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable written opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party or other party represented by such
counsel in such proceeding. The Company
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shall pay for only one separate legal counsel for the Investor. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
(e) Contribution. To the extent any indemnification provided
for herein is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, no seller of Common Stock guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Common Stock who was not
guilty of such fraudulent misrepresentation and contribution by any seller of
Common Stock shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Common Stock.
7. Reports under Exchange Act. With a view to making available to the
Investor the benefits of Rule 144 or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without Registration, until such time as the Investor has sold all
the Registrable Securities pursuant to a Registration Statement or Rule 144, the
Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and such other information as may be reasonably requested to permit
the Investor to sell such securities pursuant to Rule 144 without Registration.
In addition, Investor shall continue to receive a monthly report from the
Company.
8. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement may not be
assigned unless the Company agrees to the assignment in writing.
9. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and
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either retroactively or prospectively), only with the written consent of the
Company and Investor. Any amendment of waiver effected in accordance with this
Section 9 shall be binding upon the Investor and the Company.
10. Miscellaneous.
(a) If the Company receives conflicting instructions, notices
or elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested, addressed
if to the Company, at nStor Technologies, Inc., 000 Xxxxxxx Xxxx., Xxxx Xxxx
Xxxxx, XX 00000, attn: Xxxx Xxxx, and if to the Investor, at the address set
forth under its name in the Subscription Agreement, or at such other address as
each such party furnishes by notice given in accordance with this Section
10.(b), and shall be effective, when personally delivered, upon receipt, and
when so sent by certified mail, four business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Florida applicable to the
agreements made and to be performed entirely within such state, without giving
effect to rules governing the conflict of laws. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
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(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
nSTOR TECHNOLOGIES, INC.
By:__________________________________
Xxxx Xxxx
Vice President
INVESTOR
_____________________________________
Name:________________________________
Address:_____________________________
_____________________________
Telephone:___________________________
Facsimile:___________________________
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