<PAGE>


                                   EXHIBIT 4.2

        CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS AND PREFERENCES
                   OF THE SERIES B Convertible Preferred Stock

                               ELECTRIC CITY CORP.


It is certified that:

A. The name of the corporation is Electric City Corp., a Delaware corporation
(hereinafter the "Company").

B. The certificate of incorporation of the Company, as amended, authorizes the
issuance of 5,000,000 shares of Preferred Stock, $0.01 par value per share, and
expressly vests in the Board of Directors of the Company the authority provided
therein to issue all of said shares in one or more series and by resolution or
resolutions to establish the designation and number and to fix the relative
rights and preferences of each series to be issued.

C. The Board of Directors of the Company, pursuant to the authority expressly
vested in it, has adopted the following resolutions creating a class of Series B
Preferred Stock:

         RESOLVED, that a portion of the 5,000,000 authorized shares of
Preferred Stock of the Company shall be designated as a separate series
possessing the rights and preferences set forth below:

         1. DESIGNATION AND AMOUNT. The shares of such series shall have a par
value of $0.01 per share and shall be designated as "Series B Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting the
Series B Preferred Stock shall be up to 2,000. The Series B Preferred Stock
shall be offered for sale at a purchase price of $1,000 per share (the "Purchase
Price").

         2. DIVIDENDS. Notwithstanding anything to the contrary herein, the
Series B Preferred Stock is subordinate to the Company's Series A Preferred
Stock, when issued. The holders of the outstanding shares of Series B Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, dividends at an annual rate
of 8% percent of the Purchase Price. Such dividends shall be deemed to accrue on
the Series B Preferred Stock and be cumulative, whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. All dividends declared upon the Series B Preferred Stock shall be
declared pro rata per share. If there shall not have been a sum sufficient for
the payment therefor set apart, the deficiency shall first be paid before any
dividend or other distribution shall be paid or declared and set apart with
respect to any other class of the Company's capital stock, now or hereafter
outstanding. All accrued cash dividends shall be immediately due and payable on
the date such shares of Series B Preferred Stock are converted into shares of
Common Stock, par value $0.0001 per share ("Common Stock") in accordance with
Section 5 hereof. Dividends may be paid in cash or additional shares of Common
Stock of the Company, as may be determined, from time to time, in the sole
discretion of the Board of Directors. The Company shall not be required to pay
any dividends on the

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outstanding shares of the Series B Preferred Stock prior to the Conversion Date
(as defined below) for such shares.

         For purposes of this Certificate, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase of shares of Common Stock or other equity securities of the Company
(other than repurchases of Common Stock or other equity securities held by
employees or consultants of the Company upon termination of their employment or
services pursuant to agreements providing for such repurchase) for cash or
property payable other than in shares of Common Stock or other equity securities
of the Company.

         3. LIQUIDATION, DISSOLUTION OR WINDING UP

           (a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, before any distribution may be made
with respect to Common Stock or any other series of capital stock except Series
A Preferred Stock which is senior to Series B, holders of each share of Series B
Preferred Stock shall be entitled to be paid out of the assets of the Company
available for distribution to holders of the Company's capital stock of all
classes, whether such assets are capital, surplus, or capital earnings, such
amount equal to the Purchase Price plus all accrued cash dividends
(collectively, the "Liquidation Amount").

           (b) If the assets of the Company available for distribution to its
shareholders shall be insufficient to pay the holders of shares of Series B
Preferred Stock the full amount of the Liquidation Amount to which they shall be
entitled, the holders of shares of Series B Preferred Stock shall share ratably
in any distribution of assets according to the amounts which would be payable
with respect to the shares of Series B Preferred Stock held by them upon such
distribution if all amounts payable on or which respect to said shares were paid
in full.

           (c) The holders of Series B Preferred Stock shall have no priority or
preference with respect to distributions made by the Company in connection with
the repurchase of shares of Common Stock issued to or held by employees,
directors or consultants upon termination of their employment or services
pursuant to agreements providing for the right of said repurchase between the
Company and such persons.

         4. VOTING RIGHTS. Except as otherwise required by law, and except as
set forth in Section 8 of this Certificate, the holders of Series B Preferred
Stock shall not be entitled to vote upon any matter relating to the business or
affairs of the Company or for any other purpose.

         5. CONVERSION RIGHTS FOR THE SERIES B PREFERRED STOCK; OPTIONAL
PURCHASE OF ADDITIONAL SHARES OF COMMON STOCK. The holders of Series B Preferred
Stock shall have conversion rights as follows ("Conversion Rights"):

           (a) Shares of Series B Preferred Stock may be converted after the
closing date (the "Closing Date") of the issuance of the Series B Preferred
Stock.

           (b) Each share of Series B Preferred Stock may be converted into the
number of fully-paid and non-assessable shares of Common Stock of the Company
calculated in accordance with the following formula ("Conversion Rate"):


                                      -2-
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           The number of shares issuable upon conversion of one share of
Series B Preferred Stock shall be determined by dividing the Purchase Price by
the Conversion Price, where:

             (i) The Purchase Price is defined in Section 1 hereof; provided
that, for purposes of this Section 5(b), in the event that the Company elects to
pay the dividends in additional registered shares of Common Stock, the dividend
amount per share will be added to the Purchase Price for each such share of
Series B Preferred Stock;

             (ii) the Conversion Price equals the lesser of (x) 110% of the
lowest of the Closing Bid Prices (defined below) for the Common Stock for the
five (5) trading days prior to the date of issuance of the Series B Preferred
Stock being converted (the "Maximum Price"), or (y) 75% (the "Conversion
Percentage") of the average of the three (3) lowest Closing Bid Prices for the
Common Stock for the thirty (30) consecutive trading days immediately preceding
the Conversion Date (as herein defined), as reported on the National Association
of Securities Dealers OTC Bulletin Board Market (or on such other national
securities exchange or market as the Common Stock may trade at such time);
notwithstanding anything in this paragraph to the contrary, if the registration
statement covering the resale of the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock has not been declared effective
within 180 days (the "Due Date") after the date of issuance of the Series B
Preferred Stock, then the Conversion Percentage shall decrease by 2% for each
month (that is, each thirty (30) day period beginning on the 30th day after the
Due Date) or partial month in which the said registration statement has not been
declared, or does not remain, effective;

             (iii) for purposes hereof, the term "Closing Bid Price" shall mean
for any security as of any date, the last closing bid price for such security on
the OTC: Bulletin Board Market as reported by Bloomberg, or, if the OTC Bulletin
Board Market is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
or, if no last closing bid or trade price is reported for such security by
Bloomberg, the closing bid price shall be determined by reference to the closing
bid price as reported on the principal trading market, and if not so reported
shall be determined from the average of the bid prices of any market makers for
such security as reported in the "pink sheets" published by the National
Quotation Bureau, Inc. If the closing bid price cannot be calculated for such
security on such date on any of the foregoing bases, the closing bid price of
such security on such date shall be the fair market value as mutually agreed by
the Company and the holders of a majority of the outstanding shares of Series B
Preferred Stock.

           (c) In the event the holders of the Series B Preferred Stock have not
exercised the Conversion Rights set forth herein within three years after the
date of issuance of the Series B Preferred Stock (the "Final Date"), the Series
B Preferred Stock shall automatically be converted as if the holders had
exercised their Conversion Rights on the Final Date.

           (d) If the Common Stock issuable upon the conversion of the Series B
Preferred Stock shall be changed into the same or different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification, stock split, stock dividend, or similar event, then and in
each such event, the holder of each share of Series B Preferred Stock shall have
the right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such capital
reorganization, reclassification or

                                      -3-
<PAGE>


other change which such holder would have received had its shares of Series B
Preferred Stock been converted immediately prior to such capital reorganization,
reclassification or other change.

           (e) If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for in Section 5(d) above), or a
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties, stock and/or
assets to any other person or entity (any of which events is herein referred to
as a "Reorganization"), then as a part of such Reorganization, provision shall
be made so that the holders of the Series B Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series B Preferred Stock, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such Reorganization, to which such holder
would have been entitled if such holder had converted its shares of Series B
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Series B
Preferred Stock after the Reorganization, to the end that the provisions of this
Section 5 (including adjustment of the number of shares issuable upon conversion
of the Series B Preferred Stock) shall be applicable after that event in as
nearly equivalent a manner as may be practicable.

           (f) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of the Series B Preferred Stock, the Company, at its expense,
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of such Series B Preferred
Stock a certificate executed by the president and chief financial officer
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment are based. The Company shall, upon
written request at any time of any holder of Series B Preferred Stock, furnish
or cause to be furnished to such holder a certificate setting forth (A) the
Conversion Price at the time in effect, and (B) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of Series B Preferred Stock.

           (g) Holders of Series B Preferred Stock may exercise their right to
convert the Series B Preferred Stock by telecopying an executed and completed
notice to the Company and delivering the original notice in the form annexed
hereto as Exhibit A ("Notice of Conversion") and the certificate representing
the Series B Preferred Stock (once fully converted, unless specifically
requested otherwise by the Company) by express courier. Each business date on
which a Notice of Conversion is telecopied to and received by the Company in
accordance with the provisions hereof shall be deemed a "Conversion Date." Such
holders of Series B Preferred Stock which have sent a Notice of Conversion to
the Company shall, if requested by the Company, deliver the originally executed
Series B Preferred Stock certificates to the Company within three business days
from the Conversion Date. The Company will transmit, or instruct its transfer
agent to transmit, the certificates representing shares of Common Stock issuable
upon conversion of any share of Series B Preferred Stock (together with the
certificates representing the Series B Preferred Stock not so converted, if
the prior certificate was delivered to the Company) to the holder thereof via
express courier, by electronic transfer or otherwise, within three business
days after the Company has received the facsimile Notice of Conversion. In
addition to any other remedies which may be available to the holders of
shares of Series B

                                      -4-
<PAGE>


Preferred Stock, in the event that the Company fails to deliver, or has
failed to contact its transfer agent within two business days to deliver,
such shares of Common Stock within such three business day period, the holder
will be entitled to revoke the relevant Notice of Conversion by delivering a
notice to such effect to the Company whereupon the Company and the holder
shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion. The Notice of Conversion and Series B
Preferred Stock certificates representing the portion of the Series B
Preferred Stock converted shall be delivered as follows:

                           Electric City Corp.
                           1280 Landmeir Road
                           Elk Grove, Illinois  60007
                           Telephone: (847) 437-1666
                           Facsimile: (847) 437-4969
                           Attention: John Mitola, CEO

           (h) Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of any Series B Preferred Stock certificate(s), and of
indemnity reasonably satisfactory to the Company, the Company shall execute and
deliver new certificates for Series B Preferred Stock of like tenure and date.
However, the Company shall not be obligated to reissue such lost or stolen
certificates for shares of Series B Preferred Stock if the holder
contemporaneously requests the Company to convert such Series B Preferred Stock
into Common Stock.

                  (i) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. In lieu of any fractional
share to which the holder would be entitled for this paragraph, the number of
shares of Common Stock to be received shall be rounded to the nearest whole
share.

                  (j) In the event some but not all of the shares of Series B
Preferred Stock represented by a certificate or certificates are converted, the
Company may require the holder to surrender the said certificate(s) to the
Company within three (3) business days after such a conversion; if so, the
Company shall execute and deliver to or to the order of the holder, at the
expense of the Company, a new certificate representing the number of shares of
Series B Preferred Stock which were not converted.

                  (k) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient or as may be available to effect the conversion of all outstanding
shares of the Series B Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all the then outstanding shares of the Series B Preferred
Stock, the Company shall use its best efforts to take such corporate action as
may be necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.

         6. REDEMPTION.

           (a) The Company may redeem any or all of the outstanding shares of
the Series B Preferred Stock on any date (the "Redemption Date") set by the
Board of Directors of


                                      -5-
<PAGE>

the Company for such redemption at any time at the Redemption Price, as that
term is defined below, for each share of Series B Preferred Stock, to be paid in
cash on the Redemption Date, PROVIDED, that (except as hereinafter provided) the
Company shall not send a Redemption Notice, as that term is defined below, to
any of the holders of Series B Preferred Stock, unless it has good and clear
funds, for payment of the Redemption Price for the shares of Series B Preferred
Stock it intends to redeem, in a bank account controlled by the Company.

           (b) The Redemption Price shall be an amount equal to 125% of the
Purchase Price, plus an amount equal to all accrued but unpaid dividends,
whether or not declared, to but excluding the Redemption Date;

           (c) The Redemption Price shall be payable in cash.

           (d) Except as otherwise provided in Section 6(a), not less than five
days prior to the Redemption Date, the Company shall send, by facsimile
transmission and by first class mail, postage prepaid, a notice (the "Redemption
Notice") to each holder of Series B Preferred Stock, which notice shall contain
all instructions and materials necessary to enable such holders to tender Series
B Preferred Stock pursuant to the redemption. Such notice shall (i) state that a
redemption is being effected, (ii) specify the Redemption Date, (iii) state that
holders will be required to surrender the certificate or certificates
representing such shares, properly endorsed, in the manner and at the place
specified in the notice prior to the close of business on the business day prior
to the Redemption Date, (iv) state that holders may convert all or any portion
their shares of Series B Preferred Stock into shares of Common Stock, provided
that the Company receives the Notice of Conversion within one full business day
after the time the Redemption Notice was received by such holder and that all
other shares shall be deemed to have been redeemed by the Company on the
Redemption Date at the Redemption Price plus all accrued but unpaid cash
dividends whether or not declared. The Company may not redeem any portion of the
Series B Preferred Stock that has been converted on or prior to the date of the
Redemption Notice. In the event the Company fails to deliver the Redemption
Price plus accrued and unpaid cash dividends on or before the Redemption Notice
shall be null and void and the Company will relinquish its redemption rights
provided by this section.

           (e) On the Redemption Date, unless the Company defaults in the
payment for the shares of Series B Preferred Stock tendered pursuant to the
redemption, dividends will cease to accrue with respect to the shares of Series
B Preferred Stock tendered. All rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Redemption
Date.

           (f) After receipt of the Redemption Notice, the holders of Series B
Preferred Stock may convert all or any portion of their shares of Series B
Preferred Stock into shares of Common Stock, PROVIDED that the Company receives
the Notice of Conversion (including by facsimile) within one full business day
after the time the Redemption Notice was received by such holder.

           (g) The Company may, at its option, at any time after the mailing of
the Redemption Notice pursuant to Section 6 (d) above, deposit the aggregate
amount payable upon redemption of the Series B Preferred Stock with a bank or
trust company (the "Depositary") designated by the Board of Directors of the
Company, to be held in trust by the Depositary for


                                      -6-
<PAGE>


payment to the holders of the shares to be redeemed. Upon such deposit, the
Company shall be released and discharged from any obligation to pay the
Redemption Price of the shares to be redeemed, and the holders of the shares
instead shall have the right to receive from the Depositary only, and not from
the Company, the amount payable upon redemption of the shares on surrender to
the Depositary of the certificates representing the shares. Any money so
deposited with the Depositary that is not claimed after one year from the
Redemption Date shall be repaid to the Company by the Depositary on demand, and
the holder of any of the shares shall thereafter look only to the Company for
any payment to which the holder may be entitled. Any interest which accrues on
money deposited with the Depositary shall belong to the Company and shall be
paid to the Company from time to time by the Depositary.

         7. NO REISSUANCE OF SERIES B PREFERRED STOCK. Any share or shares of
Series B Preferred Stock acquired by the Company by reason of purchase,
conversion or otherwise shall be canceled, shall return to the status of
authorized but unissued preferred stock of no designated series, and shall not
be reissuable or re-sellable by the Company as Series B Preferred Stock.

         8. RESTRICTIONS AND LIMITATIONS

           (a) The Company shall not amend its certificate of incorporation
without the approval by the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock if such amendment would:

             (i) reduce the relative seniority rights of the holders of Series B
Preferred Stock as to the payment of dividends in relation to the holders of any
other caital stock of the Company other than Series A Preferred Stock, or create
any other class or series of capital stock entitled to seniority as to the
payment of dividends in relation to the holders of Series B Preferred Stock
other than Series A Preferred Stock;

             (ii) reduce the amount payable to the holders of Series B Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company, or change the relative seniority of the liquidation preferences
of the holders of Series B Preferred Stock to the rights upon liquidation of the
holders of other capital stock of the Company other than Series A Preferred
Stock, or change the dividend rights of the holders of Series B Preferred Stock;

             (iii) cancel or modify the conversion rights of the holders of
Series B Preferred Stock provided for in Section 5 herein; or

             (iv) cancel or modify the rights of the holders of the Series B
Preferred Stock provided for in this Section 8.

         9. [Intentionally omitted]

         10. CERTIFICATE OF INCORPORATION. The statements contained in the
foregoing, creating and designating the said Series B issue of Preferred Stock
and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations and
restrictions shall, upon the effective date of said series, be deemed to be
included in and be a part of the Certificate of Incorporation of the Company
pursuant to the relevant provisions of the General Corporation Law of the State
of Delaware.



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         11. LIMITATION ON NUMBER OF CONVERSION SHARES.

         Notwithstanding anything to the contrary set forth herein or in the
Certificate of Designations, in no event shall any holder of the Series B
Preferred Stock be entitled to convert Series B Preferred Stock in excess of
such portion of the principal of the Series B Preferred Stock that, upon giving
effect to such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by such converting holder and its affiliates to exceed
4.9% of the outstanding shares of the Common Stock following such conversion.
For purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock with respect to which the determination of such proviso is being
made. Except as set forth in the preceding sentence, for purposes of this
Section, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. The limitations
imposed by this Section on conversion of Series B Preferred Stock shall no
longer apply, and the holder of the Series B Preferred Stock may convert all or
any portion of the Series B Preferred Stock, irrespective of the resulting
beneficial ownership of the Company's Common Stock, should any of the following
events occur: (I) The Company shall either: (i) become insolvent; (ii) admit in
writing its inability to pay its debts generally or as they become due; (iii)
make an assignment for the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a substantial part of its property or
business; or (II) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without the
Company's consent and such appointment is not discharged within sixty (60) days
after such appointment; or (III) Any governmental agency or any court of
competent jurisdiction at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed within sixty (60) days
thereafter; or (IV) Any money judgment, writ or Note of attachment, or similar
process in excess of $500,000 in the aggregate shall be entered or filed against
the Company or any of its properties or assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any
event later than five (5) days prior to the date of any proposed sale
thereunder; or (V) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty days after
such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in, any such
proceeding.



                                      -8-
<PAGE>



         12. RANKING.

             The Series B Preferred Stock shall, with respect to dividend rights
and rights on liquidation, winding up and dissolution, rank senior to any of the
(i) Common Stock and rank senior to or on parity with any preferred stock issued
after the date hereof and any other class or series of stock of the Company
except for Series A Preferred Stock, which is senior to Series B Preferred
Stock.

Signed and attested to on October 13, 2000.


                                            ELECTRIC CITY CORP.



                                            By: /s/ Jeffrey Mistarz
                                                --------------------------------
                                                (authorized signatory)


Attest:



         /s/ Greg M. Rice
----------------------------------------
         Secretary




                                      -9-
<PAGE>




                              NOTICE OF CONVERSION

                (To be Executed by the Registered Holder in order
                    to Convert the Series B Preferred Stock)

         The undersigned hereby irrevocably elects to convert ___ shares of
Series B Preferred Stock, Certificate No. ___ (the "Preferred Stock") into
shares of Common Stock of Electric City Corp. (the "Company"), according to the
conditions hereof, as of the date written below.

         The undersigned represents and warrants that

                  (i)      All offers and sales by the undersigned of the shares
                           of Common Stock issuable to the undersigned upon
                           conversion of the Series B Preferred Stock shall be
                           made pursuant to an exemption from registration under
                           the Securities Act of 1933, as amended (the
                           "Securities Act"), or pursuant to registration of the
                           Common Stock under the Act, subject to any
                           restrictions on sale or transfer set forth in the
                           purchase agreement between the Company and the
                           original holder of the Certificate submitted herewith
                           for conversion.

                  (ii)     Upon conversion pursuant to this Notice of
                           Conversion, the undersigned will not own of record
                           (within the meaning of the Securities Exchange Act of
                           1934, as amended) 4.9% or more of the then issued and
                           outstanding shares of the Company.


-----------------------------------         ------------------------------------
Date of Conversion                          Applicable Conversion Price


-----------------------------------         ------------------------------------
Number of shares of Common Stock            $ Amount of Conversion
issuable upon Conversion


Legal Name of Converting Holder:
                                 -----------------------------------------------



-------------------------------------------------------------------------
Signature/Title of Authorized Representative of Converting Holder


Address for Delivery of Shares:
                                --------------------------------------
                                --------------------------------------
                                --------------------------------------


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