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'Real Housewives of Orange County' alum Meghan King and her ex-husband Jim Edmonds have side-stepped a potentially nasty custody battle ... the estranged couple has reached an agreement out of court ... TMZ has confirmed.

Jim's rep, Steve Honig tells TMZ ... “The custody hearing has been called off, and both sides have reached an agreement that is in the best interests of the children.”

This comes after Meghan temporarily lost custody of the three children she shares with Jim ... she allegedly gave one of their twin sons unprescribed medication. She allegedly asked a school nurse to administer it.

As we reported ... Meghan allegedly gave 6-year-old son, Hayes , Ritalin multiple times, despite the child not having an ADHD diagnosis.

The situation reportedly

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