ex106.htm


    Exhibit
      10.6

     

     

     

    EMPLOYMENT
      AGREEMENT

     

    EMPLOYMENT
      AGREEMENT (this “Agreement”), effective as of May 1, 2007 (“Effective Date”),
      between Pegasi Energy Resources Corporation, a Texas corporation (the
“Company”), and Richard A. Lindermanis (the “Employee”).

     

    WHEREAS,
      the Board of Directors of the Company (the “Board”) has determined that it is in
      the best interests of the Company and its shareholders to employ the Employee
      in
      the position set forth below, and the Employee desires to serve in that
      capacity.

     

    WHEREAS,
      it is anticipated that the Company will merge or otherwise combine its business
      with a publicly traded shell company (“Pubco” or “Parent”) and that following
      the completion of that merger (the “Shell Merger”), the Employee will be
      employed by Pubco on the terms as are set forth herein.

     

    NOW,
      THEREFORE, in consideration of the foregoing premises, the Company and Employee
      hereby agree as follows:

     

    1.     Employment
      Period. The Company shall employ the Employee, and the Employee shall
      serve the Company, on the terms and conditions set forth in this Agreement,
      for
      the period commencing on the date of the Shell Merger and ending three years
      after such date (the “Initial Term” and, together with any subsequent term of
      Employment, the “Employment Period”). The term of employment hereunder will
      automatically be renewed for successive one-year terms (each such term a
“Renewal Term”) unless either party shall, at least 90 days before the last day
      of the Employment Period, provide written notice to the other party that the
      Employment Period will not be extended.

     

    2.     Position
      and Duties.

     

    (a)  The
      Employee shall serve as Sr. Vice President, CFO, Secretary and Treasurer of
      the
      Company, reporting to the Board, with such duties and responsibilities as are
      customarily assigned to such position and such other duties and responsibilities
      not inconsistent therewith as may be assigned to him from time to time by the
      Board.

     

    (b)  During
      the Employment Period, and excluding any periods of vacation and sick leave
      to
      which the Employee is entitled, the Employee shall devote his full-time efforts
      to the business and affairs of the Company and use his best efforts to carry
      out
      such responsibilities faithfully and efficiently. It shall not be considered
      a
      violation of the foregoing for the Employee to (i) serve on corporate, civic
      or
      charitable boards or committees, (ii) deliver lectures or fulfill speaking
      engagements, (iii) manage personal investments, (iv) engage in other business
      activities, so long as such activities do not materially interfere with the
      performance of his responsibilities as an employee of the Company in accordance
      with this Agreement or violate the provisions of Section 8 of this Agreement.
      The Company acknowledges that the Private Placement Memorandum prepared in
      connection with the Shell Merger describes certain personal investments and/or
      business activities of Employee, and Company hereby consents to same and
      acknowledges that Employee’s pursuit of such business activities does not
      conflict with the Company’s business or violate the Covenant Not to Compete set
      forth in Section 7 below.

     

    
      
        
        

      

      
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    3.    
      Compensation.

     

    (a)  Base
      Salary. During the first contract year of the Initial Term, the
      Employee shall receive an annual base salary (the “Annual Base Salary”) of
      $210,000. Employee will receive an annual salary review by the Board, or an
      authorized committee thereof, on or before each anniversary of the Effective
      Date. The Annual Base Salary shall be payable in accordance with the Company’s
      payroll practices as in effect from time to time. As part of the referenced
      annual salary review, the Board or an authorized committee thereof may increase
      (but not decrease) the Annual Base Salary above the foregoing amounts at its
      discretion.

     

    (b)  Bonus.
      In addition to the Annual Base Salary, the Board (or its designated
      compensation committee) may award Employee an annual bonus at its discretion.
      Employee acknowledges that Company does not currently intend to award Employee
      any bonuses until Company is profitable.

     

    (c)  Benefits.
      During the Employment Period, the Employee and the Employee’s direct
      family shall be entitled to participate in all benefit programs of the Company
      or Parent, including, but not limited to, health insurance coverage, as well
      as
      all welfare benefit plans, practices, policies and programs provided by the
      Company or Parent, including, but not limited to any comprehensive dental plan,
      retirement plans and profit sharing programs the Company or Parent may provide
      to other employees from time to time.

     

    (d)  Expenses.
      During the Employment Period, the Employee shall be entitled to receive
      prompt reimbursement for all reasonable expenses incurred by the Employee in
      carrying out the Employee’s duties under this Agreement, provided that the
      Employee complies with the policies, practices and procedures of the Company
      for
      submission of expense reports, receipts and similar documentation of such
      expenses.

     

    (e)
      Vacation. During the Employment Period, the Employee shall be entitled
      to a paid annual vacation of four weeks and other fringe benefits on such terms
      and conditions as may be determined by the Board or authorized committee thereof
      from time to time.

     

    4.     Termination
      of Employment.

     

    (a) 
Death
      or Disability.
The Employee’s employment shall terminate automatically upon the
      Employee’s death during the Employment Period. The Company shall be entitled to
      terminate the Employee’s employment because of the Employee’s Disability during
      the Employment Period. “Disability” means that (i) the Employee has been unable,
      for a period of three (4) consecutive months in any given twelve (12) month
      period, to perform the Employee’s duties under this Agreement, as a result of
      physical or mental illness or injury, and (ii) a physician selected by the
      Company or its insurers, and acceptable to the Employee or the Employee’s
      guardian or legal representative, has determined that the Employee’s incapacity
      is total and permanent. A termination of the Employee’s employment by the
      Company for Disability shall be communicated to the Employee by written notice,
      and shall be effective on the 60th day after receipt of such notice by the
      Employee (the “Disability Effective Date”), unless the Employee is able to, and
      does, return to full-time performance of the Employee’s duties before the
      Disability Effective Date.

     

    
      
        
        

      

      
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    (b)      
      By the Company.

     

    (A)            The
      Company may terminate the Employee’s employment during the
      Employment Period for Cause or without Cause. “Cause” means:

     

    (i)  Employee
      having, in the reasonable judgment of the Company, committed an act which if
      prosecuted and resulting in a conviction would constitute a fraud, embezzlement,
      or any felonious offense (specifically excepting simple misdemeanors not
      involving acts of dishonesty and all traffic violations);

     

    (ii)   
       the
      Employee’s theft, embezzlement, misappropriation of or intentional and malicious
      infliction of damage to the Company’s property or business
      opportunity;

     

    (iii)    
      the
      Employee’s repeated abuse of alcohol, drugs or other substances as determined by
      an independent medical physician; or

     

    (iv)  
       the
      Employee’s engagement in gross dereliction of duties, refusal to perform
      assigned duties consistent with his position, his knowing and willful breach
      of
      any material provision of this Agreement continuing after written notice from
      the Company or repeated violation of the Company’s written policies after
      written notice.

     

    (B)     A
      termination of the Employee’s employment by the Company for Cause shall be
      effectuated by giving the Employee written notice (“Notice of Termination for
      Cause”) of the termination, setting forth the conduct of the Employee that
      constitutes Cause. Termination of employment by the Company for Cause shall
      be
      effective on the date when the Notice of Termination for Cause is given, unless
      the notice sets forth a later date (which date shall in no event be later than
      60 days after the notice is given). Employee will be immediately advised of
      any
      allegations of conduct covered by clause (A) above and will be provided a period
      of fifteen (15) days from the date of the written notice to defend himself
      against such allegations and to take any appropriate remedial action. If
      Employee shows that the allegations are untrue or takes appropriate remedial
      action to address the allegations, the Company will not terminate the Employee’s
      employment for Cause.

     

    (C)     A
      termination of the Employee’s employment by the Company without Cause shall be
      effected by giving the Employee written notice of the termination at least
      3
      months (90 days) prior to the termination date.

     

    (c)       By
      the Employee.

     

    (A)            The
      Employee may terminate employment with or without Good Reason.
      “Good Reason” means:

     

    
      
        
        

      

      
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    (i)  the
      assignment to the Employee of any duties inconsistent in any respect with
      paragraph (a) of Section 2 of this Agreement, other than actions that are not
      taken in bad faith and are remedied by the Company within thirty (30) days
      after
      receipt of notice thereof from the Employee;

     

    (ii)  any
      failure by the Company to comply with any provision of Section 3 of this
      Agreement, other than failures that are not taken in bad faith and are remedied
      by the Company within thirty (30) days after receipt of notice thereof from
      the
      Employee;

     

    (iii)  the
      occurrence of a Non-Negotiated Change in Control of the Company (as defined
      below); or

     

    (iv)  the
      Company’s material breach of this Agreement

     

    For
      purposes of this Agreement, “Non-Negotiated Change in Control” means any one or
      more of the following occurrences:

     

    (x)  Any
      individual, corporation (other than the Company, any trustees or other
      beneficiary holding securities under any employee benefit plan of the Company,
      or any Company owned, directly or indirectly, by the stockholders of the Company
      in substantially the same proportions as their ownership of stock of the
      Company), partnership, trust, association, pool, syndicate, or any other entity
      or any group of persons acting in concert becomes the beneficial owner (within
      the meaning of Rule 1 3d-3 under the Securities Exchange Act of 1934) of
      securities of the Company possessing more than fifty percent (50%) of the voting
      power for the election of directors of the Company;

     

    (y)  There
      shall be consummated any consolidation, merger, or other business combination
      involving the Company or the securities of the Company in which holders of
      voting securities of the Company immediately prior to such consummation own,
      as
      a group, immediately after such consummation, voting securities of the Company
      (or, if the Company does not survive such transaction, voting securities of
      the
      entity surviving such transaction) having less than fifty percent (5 0%) of
      the
      total voting power in an election of directors of the Company (or such other
      surviving corporation); or

     

    (z)
      There
      shall be consummated any sale, lease, exchange, or other transfer (in one
      transaction or a series of related transactions) of all, or substantially all,
      of the assets of the Company (on a consolidated basis) to a party which is
      not
      controlled by or under common control with the Company.

     

    (d)     
      A termination of employment by the Employee for Good Reason shall
      be
      effectuated by giving the Company written notice (“Notice of Termination for
      Good Reason”) of the termination, setting forth the event that constitutes Good
      Reason. A termination of employment by the Employee for Good Reason shall be
      effective on the fifth business day following
      the date when the Notice of Termination for Good Reason is given, unless the
      notice sets forth a later date (which date shall in no event be later than
      30
      days after the notice is given).

     

    
      
        
        

      

      
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    (e)  A
      termination of the Employee’s employment by the Employee without Good Reason
      shall be effected by giving the Company written notice of the termination at
      least thirty (30) days prior to the termination date.

     

    (f)  Notwithstanding
      anything in this Agreement to the contrary, in no event will any amount which
      otherwise would be payable under or pursuant to this Agreement be payable to
      Employee to the extent such amount, together with all other amounts payable
      and
      benefits provided to Employee under or pursuant to this Agreement and/or under
      any other plan(s), agreements and/or arrangement(s) arising out of Employee’s
      employment relationship with Company and/or any direct or indirect subsidiary
      of
      Company (including without limitation any such amounts payable by any affiliate
      of Company or any acquirer of any of the stock or assets of Company or any
      affiliate of such acquirer), if paid to Employee, would result in Employee
      receiving an “excess parachute payment” for purposes of Section 280G of the
      Internal Revenue Code of 1986, as amended. The determination of whether a
      payment under or pursuant to this Agreement would result in Employee receiving
      an excess parachute payment (but for the provisions of this Section 4) shall
      be
      made by counsel for Company reasonably selected by Company (after consultation
      with Company’s independent auditor) and acceptable to Employee.

     

    (g)  No
      Waiver. The failure to set forth any fact or circumstance in a Notice
      of Termination for Cause or a Notice of Termination for Good Reason shall not
      constitute a waiver of the right to assert, and shall not preclude the party
      giving notice from asserting, such fact or circumstance in an attempt to enforce
      any right under or provision of this Agreement.

     

    (h)  Date
      of Termination. The “Date of Termination” means the date of the
      Employee’s death, the Disability Effective Date, the date on which the
      termination of the Employee’s employment by the Company for Cause or by the
      Employee for Good Reason is effective, or the date described in Section 4(b)(C)
      above in the event the Company gives the Employee notice of a termination of
      employment without Cause or the date described in Section 4(e) above in the
      event the Employee gives the Company notice of a termination of employment
      without Good Reason, as the case may be.

     

    5.     Obligations
      of the Company upon Termination.

     

    (a)     
      Termination for Reasons Other Than for Cause, Death or Disability,
or Good Reason. If, during the Employment Period, the
      Company terminates the Employee’s employment, for any reason other than for
      Cause, Death or Disability, or the Employee terminates his employment for Good
      Reason, the Company shall (i) pay two and one half (2 1/2) times the Employee’s
      accrued but unpaid portion of the Annual Base Salary (the “Accrued Obligations”)
      to the Employee in a lump sum in cash within ten (10) days after the Date of
      Termination, (ii) continue to pay (in periodic intervals consistent with
      Company’s regular payroll practices) pay two and one half (2 1/2) times the
      Annual Base Salary for the remainder of the Employment Period, and (iii) provide
      the benefits listed under Section 3 for the remainder of the Employment
      Period.

     

    
      
        
        

      

      
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    (b)  Termination
      as a Result of Employee’s Death or Disability. If the Employee’s
      employment is terminated by reason of the Employee’s death or Disability during
      the Employment Period, (i) the Company shall pay the Accrued Obligations to
      the
      Employee or the Employee’s estate or legal representative, as applicable, in a
      lump sum in cash within thirty (30) days after the Date of Termination, and
      (ii)
      the Company shall pay when originally due any Bonus due to the Employee, pro
      rated for the period until the Date of Termination, to the Employee or the
      Employee’s estate or legal representative.

     

    (c)  Termination
      for Cause or Other than for Good Reason. If the Employee’s employment
      is terminated by the Company for Cause during the Employment Period, or if
      the
      Employee terminates his employment during the Employment Period other than
      for
      Good Reason, the Company shall pay Employee the Accrued
      Obligations.

     

    6.     Non-exclusivity
      of Rights. Nothing in this Agreement shall prevent or limit the
      Employee’s continuing or future participation in any plan, program, policy or
      practice provided by the Company or any of its affiliated companies for which
      the Employee may qualify, nor, subject to paragraph (f) of Section 4, shall
      anything in this Agreement limit or otherwise affect such rights as the Employee
      may have under any contract or agreement with the Company or any of its
      affiliated companies. Vested benefits and other amounts that the Employee is
      otherwise entitled to receive under any plan, policy, practice or program of,
      or
      any contract or agreement with, the Company or any of its affiliated companies
      on or after the Date of Termination shall be payable in accordance with such
      plan, policy, practice, program, contract or agreement, as the case may be,
      except as explicitly modified by Section 4(f) of this Agreement, if
      applicable.

     

    7.    
      Covenant
      of Employee.

     

    (a)    
       Employee recognizes that the services to be performed by him pursuant to
      this Agreement are special, unique and extraordinary. The parties confirm that
      it is reasonably necessary for the protection of the Company’s goodwill that
      Employee agree, and accordingly, Employee does hereby agree and covenant (the
      “Covenant Not to Compete”), that Employee will not, directly or indirectly,
      except for the benefit of the Company:

     

    (i)     
      become
      an
      officer, director, more than 5% stockholder, partner, employee, proprietor,
      creditor or co-venturer of any corporation, firm or business engaged in the
      Territory (as hereinafter defined) in the same business as that of the Company
      (including the Company’s present and future subsidiaries and affiliates) as such
      business shall exist on the day hereof and during the Employment Period;
      or

     

    (ii)    
      solicit,
      or cause or authorize, directly or indirectly, to be solicited for employment
      for or on behalf of himself or third parties, any persons who were at any time
      during the Employment Period hereunder, employees of the Company (including
      the
      Company’s present and future subsidiaries and affiliates) (except for general
      solicitations made to the public at large); or

     

    (iii)  
      employ or cause or authorize, directly or indirectly, to be employed
      for
      or on
      behalf of himself or third parties, any such employees of the Company
(including
      the Company’s present and future subsidiaries and affiliates); or

     

    
      
        
        

      

      
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    (iv)  
       use the tradenames, trademarks, or trade dress of any of the
      products of the Company (including the Company’s present and future subsidiaries
      and affiliates); or any substantially similar tradename, trademark or trade
      dress likely to cause, or having the effect of causing, confusion in the minds
      of manufacturers, customers, suppliers and retail outlets and the public
      generally.

     

    The
      solicitation or acceptance of orders outside the Territory for shipment to,
      or
      delivery in, any of part of the Territory shall constitute doing business in
      the
      Territory in violation of this Covenant.

     

    Employee
      acknowledges his intention that the Company shall have the broadest possible
      protection of the value of the business in the Territory consistent with public
      policy, and it will not violate the intent of the parties if any court should
      determine that, consistent with established precedent of the forum state, the
      public policy of such state requires a more limited restriction in geographical
      area or duration of the aforesaid covenant not to compete, contained in an
      appropriate decree.

     

    (b)  The
      term
      of Employee’s Covenant Not to Compete with the Company as set forth in this
      Section 7, shall commence on the date of Employee’s last day of employment with
      the Company, pursuant to this Agreement or otherwise, regardless of the reason
      for the termination of such employment, and shall terminate two years
      thereafter. The term of this Covenant Not to Compete as it relates to Employee
      under this Section is referred to hereinafter as “Employee’s Term.”

     

    (c)  The
      territory of this Agreement shall consist of all land at any time held under
      lease by the Company (or any affiliate) for mineral exploration or development
      (“Leased Land”) and all surrounding land within two (2) miles from any Leased
      Land (collectively, the “Territory”).

     

    8.            Confidentiality;
      Return of Property

     

    (a)      
      The Employee acknowledges that during the Employment Period he will
      receive
      confidential information from the Company, the Parent and subsidiaries of the
      Company (each
      a
“Relevant Entity”). Accordingly, the Employee agrees that during the Employment
      Period and thereafter, the Employee and his affiliates shall not, except in
      the
      performance of his obligations to the Company hereunder or as may otherwise
      be
      approved in advance by the Company, directly or indirectly, disclose or use
      (except for the direct benefit of the Company) any confidential information
      that
      he may learn or has learned by reason of his association with any Relevant
      Entity. Upon termination of this Agreement, the Employee shall promptly return
      to the Company any and all properties, records or papers of any Relevant Entity,
      that may have been in his possession at the time of termination, whether
      prepared by the Employee or others, including, but not limited to, confidential
      information and keys. For purposes of this Agreement, “confidential
      information” includes all data, analyses, reports, interpretations, forecasts,
      documents and information concerning a Relevant Entity and its affairs,
      including, without limitation with respect to clients, products, policies,
      procedures, methodologies, trade secrets and other
      intellectual property, systems, personnel, confidential reports, technical
      information, financial information, business transactions, business plans,
      prospects or opportunities, (i) that the Company reasonably believes are
      confidential or (ii) the disclosure of which could be injurious to a Relevant
      Entity or beneficial to competitors of a Relevant Entity, but shall exclude
      any
      information that (x) the Employee is required to disclose under any applicable
      laws, regulations or directives of any government agency, tribunal or authority
      having jurisdiction in the matter or under subpoena or other process of law,
      (y)
      is or becomes publicly available prior to the Employee’s disclosure or use of
      the information in a manner violative of the second sentence of this Section
      8(a), or (z) is rightfully received by Employee without restriction or
      disclosure from a third party legally entitled to possess and to disclose such
      information without restriction (other than information that he may learn or
      has
      learned by reason of his association with any Relevant Entity). For purposes
      of
      this Agreement, “affiliate” means any entity that, directly or indirectly, is
      controlled by, or under common control with, the Employee. For purposes of
      this
      definition, the terms “controlled” and “under common control with” means the
      possession, direct or indirect, of the power to direct or cause the direction
      of
      the management and policies of such person, whether through the ownership of
      voting stock, by contract or otherwise.

     

    
      
        
        

      

      
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    (b)
            Injunction. Notwithstanding any other
      provisions of this Agreement, Employee acknowledges and agrees that in the
      event
      of a violation or threatened violation of any of the provisions of this Section
      8, Employer shall have no adequate remedy at law and shall therefore be entitled
      to enforce each such provision by temporary or permanent injunctive or mandatory
      relief obtained in any court of competent jurisdiction without the necessity
      of
      proving damage or posting any bond or other security, and without prejudice
      to
      any other remedies that may be available at law or in equity.

     

    9.     Successors.

     

    (a)  This
      Agreement is personal to the Employee and, without the prior written consent
      of
      the Company, shall not be assignable by the Employee otherwise than by will
      or
      the laws of descent and distribution. This Agreement shall inure to the benefit
      of and be enforceable by the Employee’s legal representatives.

     

    (b)  This
      Agreement shall inure to the benefit of and be binding upon the Company and
      its
      successors and assigns.

     

    (c)      
      It is anticipated that the Company will merge or otherwise combine
      its
      business with Pubco and that following the completion of the Shell Merger,
      the
      Employee will be employed by Pubco on the exact same terms as are set forth
      herein. The Company will take whatever action is required and execute any
      documents that may be required to further the intent of this Section
      9(c).

     

     10.              Miscellaneous.

     

    (a)      
      This Agreement shall be governed by, and construed in accordance with,
      the laws of the State of Texas, without reference to principles of conflict
      of
      laws. The captions of this Agreement are not part of the provisions hereof
      and
      shall have no force or effect. This Agreement
      may not be amended or modified except by a written agreement executed by the
      parties hereto or their respective successors and legal
      representatives.

     

    
      
        
        

      

      
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    (b)  All
      notices and other communications under this Agreement shall be in writing and
      shall be given by hand delivery to the other party or by registered or certified
      mail, return receipt requested, postage prepaid, addressed as
      follows:

     

    If
      to the
      Employee:

     

    1023
      Potomac Dr. 

    Houston,
      Texas 77057

     

    If
      to the
      Company:

     

    Pegasi
      Energy Resources Corporation 

    218
      North
      Broadway, Suite 204 

    Tyler,
      Texas 75702

     

    or
      to
      such other address as either party furnishes to the other in writing in
      accordance with this paragraph (b) of Section 10. Notices and communications
      shall be effective when actually received by the addressee.

     

    (c)  The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this Agreement.
      If any provision of this Agreement shall be held invalid or unenforceable in
      part, the remaining portion of such provision, together with all other
      provisions of this Agreement, shall remain valid and enforceable and continue
      in
      full force and effect to the fullest extent consistent with law.

     

    (d)  Notwithstanding
      any other provision of this Agreement, the Company may withhold from amounts
      payable under this Agreement all federal, state, local and foreign taxes that
      are required to be withheld by applicable laws or regulations.

     

    (e)  The
      failure of the Employee or the Company to insist upon strict compliance with
      any
      provision of, or to assert any right under, this Agreement shall not be deemed
      to be a waiver of such provision or right or of any other provision of or right
      under this Agreement.

     

    (f)       The
      Employee and the Company acknowledge that this Agreement supersedes any other
      agreement between them concerning the subject matter hereof.

     

    (g)  This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, and which together shall constitute one
      instrument.

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and, pursuant
      to the authorization of its Board, the Company has caused this Agreement to
      be
      executed in its name on its behalf, all as of the day and year first above
      written.

     

     

     

    
      	 	 	PEGASI
              ENERGY RESOURCES CORPORATION	 
	 	 	 	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/ Michael
              H.
              Neufeld	 
	 	 	Name:
              Michael H.
              Neufeld	 
	 	 	Title:
              President and
              CEO	 
	 	 	 	 
	 	 	EMPLOYEE:	 
	 	 	 	 
	 	 	/s/
              Richard A. Lindermanis	 
	 	 	Richard
              A. Lindermanis	 
	 	 	 	 


    

     

     

     

     

     

     

     

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