Contract
Exhibit
10.4
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PERVASIP CORP. THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS
NOTE IS REGISTERED WITH THE AGENT PURSUANT TO SECTION 11.4(B) OF THE PURCHASE
AGREEMENT (AS DEFINED BELOW). TRANSFER OF ALL OR ANY PORTION OF THIS
NOTE IS PERMITTED SUBJECT TO THE PROVISIONS SET FORTH IN SUCH SECTION 11.4(B)
WHICH REQUIRE, AMONG OTHER THINGS, THAT NO TRANSFER IS EFFECTIVE UNTIL THE
TRANSFEREE IS REFLECTED AS SUCH ON THE REGISTRY MAINTAINED WITH THE AGENT
PURSUANT TO SUCH SECTION 11.4(B).
AMENDED AND RESTATED SECURED
TERM NOTE
FOR VALUE
RECEIVED, PERVASIP CORP. (f/k/a eLEC Communications Corp.), a New York
corporation (the “Company”), hereby promises to
pay to VALENS OFFSHORE SPV II, CORP. (the “Holder”) or its registered
assigns or successors in interest, the sum of Six Hundred Thousand Dollars
($600,000), together with any accrued and unpaid interest hereon, on September
28, 2010 (the “Maturity
Date”) if not sooner paid.
This Note
amends and restates in its entirety (and is given in substitution for and not in
satisfaction of) that certain $600,000 Secured Term Note made by the Company in
favor of Holder on September 28, 2007.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of September 27,
2007 (as amended, restated, modified and/or supplemented from time to time, the
“Purchase Agreement”)
among the Company, the Holder, each other Purchaser and LV Administrative
Services, Inc., as administrative and collateral agent for the Purchasers (the
“Agent” together with
the Purchasers, collectively, the “Creditor
Parties”).
The
following terms shall apply to this Note:
ARTICLE
I
CONTRACT
RATE AND AMORTIZATION
1.1 Contract
Rate.
(a) Subject
to Sections 2.2 and 3.9, interest payable on the outstanding principal amount of
this Note (the “Principal
Amount”) shall accrue at a rate per annum equal to the “prime rate”
published in The Wall Street Journal from time to time (the “Prime Rate”), plus two percent
(2.0%) (the “Contract
Rate”). The Contract Rate shall be increased or decreased as
the case may be for each increase or decrease in the Prime Rate in an amount
equal to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in the Prime Rate. The Contract
Rate shall not at any time be less than nine and three-quarters percent
(9.75%). Interest shall be calculated on the basis of a 360 day
year.
(b) During
the period beginning on the date hereof through and including May 31, 2009, the
Company shall pay interest on the Principal Amount in kind (the “PIK Interest”). The
PIK Interest shall accrue monthly, in arrears, commencing on June 1, 2008, and
on the first business day of each consecutive calendar month thereafter, through
and including May 31, 2009. The PIK Interest shall be added to the
Principal Amount and payable on the Maturity Date. At the option of
the Holder, the increased portion of the Principal Amount shall be evidenced by
a note (a “PIK Note”) in
form and substance reasonably satisfactory to the Holder; provided, however,
that such PIK Note shall not be necessary to evidence such portion of the
Principal Amount nor shall the absence of such PIK Note relieve the Company of
its obligation to pay such portion of the Principal Amount to the
Holder.
(c) On and
after June 1, 2009, interest shall be payable monthly in arrears, commencing on
July 1, 2009, on the first business day of each consecutive calendar month
thereafter through and including the Maturity Date, and on the Maturity Date,
whether by acceleration or otherwise.
1.2 Contract Rate
Payments. The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date and shall be
subject to adjustment as set forth herein.
1.3 Principal
Payments. Amortizing payments of the Principal Amount shall be
made by the Company on October 1, 2009 and on the first business day of each
succeeding month thereafter through and including the Maturity Date (each, an
“Amortization
Date”). Subject to Article III below, commencing on the first
Amortization Date, the Company shall make monthly payments to the Holder on each
Amortization Date, each such payment in the amount of $15,000 together with any
accrued and unpaid interest on such portion of the Principal Amount plus any and
all other unpaid amounts which are then owing to the Holder under this Note, the
Purchase Agreement and/or any other Related Agreement (collectively, the “Monthly
Amount”). Any outstanding Principal Amount together with any
accrued and unpaid interest and any and all other unpaid amounts which are then
owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity
Date.
1.4 Optional
Redemption. The Company may prepay this Note (“Optional Redemption”) by
paying to the Holder a sum of money equal to one hundred percent (100%) of the
Principal Amount outstanding at such time together with accrued but unpaid
interest thereon and any and all other sums due, accrued or payable to the
Holder arising under this Note, the Purchase Agreement or any other Related
Agreement (the “Redemption
Amount”) outstanding on the Redemption Payment Date (as defined
below). The Company shall deliver to the Holder a written notice of
redemption (the “Notice of
Redemption”) specifying the date for such Optional Redemption (the
“Redemption Payment Date”), which date shall be ten (10) business days after the
date of the Notice of Redemption (the “Redemption
Period”). On the Redemption Payment Date, the Redemption
Amount must be paid in good funds to the Holder. In the event the
Company fails to pay the Redemption Amount on the Redemption Payment Date as set
forth herein, then such Redemption Notice will be null and void. If
any Notes issued pursuant to the Purchase Agreement, in addition to this Note,
are outstanding (collectively, the “Outstanding Notes”) and the
Company pursuant to this Section 1.4 elects to make an Optional Redemption, then
the Company shall take the same action with respect to all Outstanding Notes and
make such payments to all holders of Outstanding Notes on a pro rata basis based
upon the Redemption Amount of each Outstanding Note.
ARTICLE
II
EVENTS
OF DEFAULT
2.1 Events of
Default. The occurrence of any of the following events set
forth in this Section 2.1 shall constitute an event of default (“Event of Default”)
hereunder:
(a) Failure to
Pay. The Company fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Company
fails to pay any of the other Obligations (under and as defined in the Master
Security Agreement) when due, and, in any such case, such failure shall continue
for a period of three (3) days following the date upon which any such payment
was due;
(b) Breach of
Covenant. The Company or any of its Subsidiaries breaches any
covenant or any other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of fifteen (15) days
after the occurrence thereof.
(c) Breach of Representations
and Warranties. Any representation, warranty or statement made
or furnished by the Company or any of its Subsidiaries in this Note, the
Purchase Agreement or any other Related Agreement shall at any time be false or
misleading in any material respect on the date as of which made or deemed
made.
(d) Default Under Other
Agreements. The occurrence of any default (or similar term) in
the observance or performance of any other agreement or condition relating to
any indebtedness or contingent obligation of the Company or any of its
Subsidiaries (including, without limitation, the Subordinated Debt (as defined
below)) beyond the period of grace (if any), the effect of which default is to
cause, or permit the holder or holders of such indebtedness or beneficiary or
beneficiaries of such contingent obligation to cause, such indebtedness to
become due prior to its stated maturity or such contingent obligation to become
payable;
(e) Bankruptcy. The
Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to
exist the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, without challenge within ten (10) days of the filing thereof,
or failure to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing;
(f) Judgments. Attachments
or levies in excess of $250,000 in the aggregate are made upon the Company or
any of its Subsidiary’s assets or a judgment is rendered against the Company’s
property involving a liability of more than $250,000 which shall not have been
vacated, discharged, stayed or bonded within thirty (30) days from the entry
thereof;
(g) Insolvency. The
Company or any of its Subsidiaries shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
(h) Change of
Control. A Change of Control (as defined below) shall occur
with respect to the Company, unless Holder shall have expressly consented to
such Change of Control in writing. A “Change of Control” shall mean
any event or circumstance as a result of which (i) any “Person” or “group” (as
such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in
effect on the date hereof), other than the Holder, is or becomes the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of 35% or more on a fully diluted basis of the then
outstanding voting equity interest of any Company (other than a “Person” or
“group” that beneficially owns 35% or more of such outstanding voting equity
interests of the Company on the date hereof), (ii) the Board of Directors of the
Company shall cease to consist of a majority of the Company’s board of directors
on the date hereof (or directors appointed by a majority of the board of
directors in effect immediately prior to such appointment) or (iii) the Company
or any of its Subsidiaries merges or consolidates with, or sells all or
substantially all of its assets to, any other person or entity;
(i) Indictment;
Proceedings. The indictment or threatened indictment of the
Company or any of its Subsidiaries or any executive officer of the Company or
any of its Subsidiaries under any criminal statute, or commencement or
threatened commencement of criminal or civil proceeding against the Company or
any of its Subsidiaries or any executive officer of the Company or any of its
Subsidiaries pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of the Company or
any of its Subsidiaries;
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(j) The Purchase Agreement and
Related Agreements. (i) An Event of Default shall occur under
and as defined in (A) the Purchase Agreement or any other Related Agreement, (B)
that certain Securities Purchase Agreement dated as of November 30, 2005 between
the Company and Valens Offshore SPV I, Ltd. (as assignee of Laurus Master Fund,
Ltd.) (as amended, modified or supplemented from time to time, the “November 2005 Purchase Agreement”) or any
other Related Agreement (as defined in the November 2005 Purchase
Agreement)(collectively, the “November 2005 Related Agreements”), (C) that
certain Securities Purchase Agreement dated as of May 31, 2006 (as amended,
modified and/or supplemented from time to time, the “May 2006 Purchase Agreement”) by and
between the Company and Valens Offshore SPV I, Ltd. (as assignee of Laurus
Master Fund, Ltd.) or any other Related Agreement (as defined in the May 2006
Purchase Agreement)(collectively, the “May 2006 Related Agreements”), and/or
(D) that that certain Securities Purchase Agreement dated as of the date hereof
(as amended, modified and/or supplemented from time to time, the “May 2008 Purchase Agreement” and
together with the Purchase Agreement, November 2005 Purchase Agreement and May
2006 Purchase Agreement, collectively, the “Valens Purchase Agreements”
and each a “Valens Purchase
Agreement”) by and among the Company, the purchasers from time to time
party thereto and LV Administrative Services, Inc., as administrative and
collateral agent, or any other Related Agreement (as defined in the May 2008
Purchase Agreement)(collectively, the “May 2008 Related Agreements”
and together with the Related Agreements, November 2005 Related Agreements and
May 2006 Related Agreements, collectively, the “Valens Related Agreements” and
each a “Valens Related
Agreement”), (ii) the Company or any of its Subsidiaries shall breach any
term or provision of any Valens Purchase Agreement or any other Valens Related
Agreement in any material respect and such breach, if capable of cure, continues
unremedied for a period of fifteen (15) days after the occurrence thereof, (iii)
the Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, any Valens Purchase Agreement or any other
Valens Related Agreement, (iv) any proceeding shall be brought to challenge the
validity, binding effect of any Valens Purchase Agreement or any other Valens
Related Agreement or (v) any Valens Purchase Agreement or any other Valens
Related Agreement ceases to be a valid, binding and enforceable obligation of
the Company or any of its Subsidiaries (to the extent such persons or entities
are a party thereto);
(k) the
occurrence of an Event of Default under and as defined in any document,
instrument or agreement by and between the Company and/or any guarantor of the
Company’s indebtedness (the “Credit Parties”) and
LV Administrative Services, Inc., as administrative and collateral agent, Valens
Offshore SPV I, Ltd. and/or Valens Offshore SPV II, Corp. (and their respective
assignees, collectively the “Creditor Parties”)
shall constitute an Event of Default under and as defined in each other
document, instrument and agreement by and between any Credit Party and any
Creditor Party;
(l) Stop
Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Company shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice;
(m) Failure to Deliver
Replacement Note. The Company is required to issue a
replacement Note to the Holder and the Company shall fail to deliver such
replacement Note within seven (7) business days; or
(n) Subordinated
Debt. The Company or any of its Subsidiaries shall take or
participate in any action which would be prohibited under the provisions of any
subordination agreement governing any indebtedness for borrowed money of the
Company or any of its Subsidiaries which has been subordinated in right of
payment to the obligations hereunder (“Subordinated Debt”) or make
any payment on the Subordinated Debt to a person or entity that was not entitled
to receive such payments under the provisions of any subordination agreement
governing such Subordinated Debt.
2.2 Default
Interest. Following the occurrence and during the continuance
of an Event of Default, the Company shall pay additional interest on this Note
in an amount equal to one percent (1.0%) per month, and all outstanding
obligations under this Note, the Purchase Agreement and each other Related
Agreement, including unpaid interest, shall continue to accrue interest at such
additional interest rate from the date of such Event of Default until the date
such Event of Default is cured or waived.
2.3 Default
Payment. Following the occurrence and during the continuance
of an Event of Default, the Agent may demand repayment in full of all
obligations and liabilities owing by the Company to the Holder under this Note,
the Purchase Agreement and/or any other Related Agreement and/or may elect, in
addition to all rights and remedies of the Agent under the Purchase Agreement
and the other Related Agreements and all obligations and liabilities of the
Company under the Purchase Agreement and the other Related Agreements, to
require the Company to make a Default Payment (“Default
Payment”). The Default Payment shall be one hundred ten
percent (110%) of the outstanding principal amount of this Note, plus accrued
but unpaid interest, all other fees then remaining unpaid, and all other amounts
payable hereunder. The Default Payment shall be due and payable
immediately on the date that the Agent has exercised its rights pursuant to this
Section 2.3.
ARTICLE
III
MISCELLANEOUS
3.1 Issuance of New
Note. Upon any partial redemption of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Company to the Holder for the principal balance of
this Note and interest which shall not have been converted or
paid. Subject to the provisions of Article II of this Note, the
Company shall not pay any costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.
3.2 Cumulative
Remedies. The remedies under this Note shall be
cumulative.
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3.3 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder hereof
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
3.4 Notices. Any
notice herein required or permitted to be given shall be given in writing in
accordance with the terms of the Purchase Agreement.
3.5 Amendment
Provision. The term “Note” and all references
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
3.6 Assignability. This
Note shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of the Holder and its successors and assigns, and may be
assigned by the Holder in accordance with the requirements of the Purchase
Agreement. The Company may not assign any of its obligations under
this Note without the prior written consent of the Holder, any such purported
assignment without such consent being null and void.
3.7 Cost of
Collection. In case of the occurrence of an Event of Default
under this Note, the Company shall pay the Holder’s reasonable costs of
collection, including reasonable attorneys’ fees.
3.8 Governing Law, Jurisdiction
and Waiver of Jury Trial.
(a) THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR
ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE
COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT
NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE COMPANY’S ACTUAL RECEIPT THEREOF.
(c) THE
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
3.9 Severability. In
the event that any provision of this Note 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 such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this
Note.
3.10 Maximum
Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum rate permitted by such law, any payments in excess of such maximum rate
shall be credited against amounts owed by the Company to the Holder and thus
refunded to the Company.
3.11 Security Interest and
Guarantees. The Holder and/or LV Administrative Services,
Inc., as administrative and collateral agent, has been granted a security
interest in certain assets of the Company and its Subsidiaries, and the
obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company, in each case, as more fully described in the Valens
Purchase Agreements and other Valens Related Agreements.
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3.12 Construction. Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.
3.13 Registered
Obligation. This Note shall be registered (and such
registration shall thereafter be maintained) as set forth in Section 11.4(b) of
the Purchase Agreement. Notwithstanding any document, instrument or
agreement relating to this Note to the contrary, transfer of this Note (or the
right to any payments of principal or stated interest thereunder) may only be
effected by (i) surrender of this Note and either the reissuance by the Company
of this Note to the new holder or the issuance by the Company of a new
instrument to the new holder or (ii) registration of such holder as an assignee
in accordance with Section 11.4(b) of the Purchase Agreement.
[Balance
of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, the
Company has caused this Amended and Restated Secured Term Note to be signed in
its name effective as of this 28th day of May, 2008.
PERVASIP
CORP. (f/k/a eLEC Communications Corp.)
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By: /s/ Xxxx X.
Xxxx
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Name:
Xxxx X. Xxxx
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Title:
Chief Executive Officer
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WITNESS:
/s/ Xxxxx
Xxxxxxxx
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