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A copy of this command-line tool can be found in follwing folder: "common\<gamename>\<gamefolder>\bin\xwad.exe". This tool can convert WAD, BMP, and SPR files to TGA, VTF, and accompanied VMT files.

Help from xwad run without any parameters:

		Automatically detects -basedir and -wadfile or -bmpfile based
		on the last parameter (it must be a WAD file or a BMP file.
		Creates VMTs for decals and creates VMTs for model decals.
	[-onlytex <tex name>]
	[-shader <shader name>]
		Specify the shader to use in the VMT file (default
		is LightmappedGeneric.
		If -vtex is specified, then it calls vtex on each newly-created
		.TGA file.
	[-vmtparam <ParamName> <ParamValue>]
		if -vtex was specified, passes the parameters to that process.
		Used to add parameters to the generated .vmt file
	-BaseDir <basedir>
	-game <basedir>
		Specifies where the root mod directory is.
	-WadFile <wildcard>
		-wadfile will make (power-of-2) TGAs, VTFs, and VMTs for each
		texture in the WAD. It will also place them under a directory
		with the name of the WAD. In addition, it will create
		.resizeinfo files in the materials directory if it has to
		resize the texture. Then Hammer's File->WAD To Material
		command will use them to rescale texture coordinates.
	-bmpfile <wildcard>
		-bmpfile acts like -WadFile but for BMP files, and it'll place
		them in the root materials directory.
	-sprfile <wildcard>
		Acts like -bmpfile, but ports a sprite.
	-Transparent (BMP files only)
		If this is set, then it will treat palette index 255 as a
		transparent pixel.
	-SubDir <subdirectory>
		-SubDir tells it what directory under materials to place the
		final art. If using a WAD file, then it will automatically
		use the WAD filename if no -SubDir is specified.
		Don't print out anything or wait for a keypress on exit.

ex: xwad.exe -vtex -BaseDir c:\hl2\dod -WadFile c:\hl1\dod\*.wad
ex: xwad.exe -vtex -BaseDir c:\hl2\dod -bmpfile test.bmp -SubDir models\props
ex: xwad.exe -vtex -vmtparam $ignorez 1 -BaseDir c:\hl2\dod -sprfile test.spr -SubDir sprites\props