on The original Employee Stock Plan was established in 1993. To schedule an in-person visit, please click on the link below your desired NWA Location. These markup elements allow the user to see how the document follows the The Term Sheet formed the basis for the Omnibus Agreement, which was executed on January 15, 2003, after the Independent Fiduciary received confirmation from the Department that the Proposed Exemption had been issued. Accordingly, this final exemption is issued solely by the Department. NWA is now open for in-person visits by Appointment Only. and services, go to Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction; and, (5) The availability of this exemption is subject to the express condition that the material facts and representations contained in the application are true and complete and accurately describe all material terms of the transactions, which are the subjects of the exemption. The Plans will be granted a Put Option with respect to each share of Pinnacle Stock contributed to the Plans, which may be exercised by the Independent Fiduciary at any time. If previous valuations or analyses do not comport with these conditions, the Independent Fiduciary must perform any additional work necessary to make the valuations and analyses consistent with the conditions of this exemption. The closing date of the purchase and sale of shares with respect to which the Put Option has been exercised will be the 30th calendar day after such notice is given. No commissions, fees, costs, charges or other expenses will be borne by the Independent Fiduciary or the Plans in connection with any acquisition, holding or disposition of Pinnacle shares to or from the Plans, other than the underwriters' discount or other broker-dealer fees or commissions charged in any sale of such shares. documents in the last year, by the Energy Department These negotiations resulted in agreements (Agreements) between Northwest and each of its unions under which Northwest would contribute to the Employee Stock Plan a newly created, special class of stock (the Series C Preferred Stock) in an amount that would equal the monetary value of certain wage and other concessions agreed to by the unions. are not part of the published document itself. offers a preview of documents scheduled to appear in the next day's For example, the Plans obtained a Put Option, corporate governance rights, voting rights in Pinnacle and the right to initiate an IPO or sale of Pinnacle Stock. Contact Contact Customer Service If you need assistance with the Registration or Login process of our Web site, please email websupport@nwadmin.com. Indeed, during the 1990's, Northwest contributed to its pension plans millions of dollars more than the required amount of contributions. Northwest asserts that in valuing Pinnacle Stock, there are well-established valuation methodologies available to the valuation experts to assess the value of non-public securities like Pinnacle Stock. The Independent Fiduciary negotiated voting and governance rights to be accorded to the Plans that protect the interests of the Plans (. Employee Benefits Security Administration, Department of Labor. In addition, the Independent Fiduciary negotiated the right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. Federal Register issue. Read Our Story Our Approach On January 17, 2003, the Department published a notice in the Federal Register (68 FR 2578) of a proposed individual exemption (the Proposed Exemption). Northwest's presence in international markets has helped offset the losses in the U.S. domestic market. During the Hearing, employees of Northwest referenced an employee stock program that was established by the company in 1993. The Independent Fiduciary notes that the Proposed Exemption, in the first column of 68 FR 2580 (first full paragraph), makes reference to voting restrictions and limits on the ability of the Plans to dispose of the Pinnacle Stock, except pursuant to an initial public offering (IPO) initiated by Northwest or by exercise of the Put Option. The Independent Fiduciary and its advisors analyzed the voting, transfer and put right features of the Pinnacle Stock and engaged in significant negotiations on those features with Northwest. (k) A statement of past transactions involving Pinnacle Stock, including dates, amounts, price, and whether the transactions were at arms-length, as well as a description of any attempts to buy or sell Pinnacle Stock over the last five years, including a description of any previous plans for initial public offerings. Eclat furnished to the Independent Fiduciary its report and opinion as to the value of the contributed Pinnacle Stock at the time of the Initial Contribution on January 15, 2003 (January 15, 2003 Valuation). Northwest asserts that, if its current cash needs were not so great, Northwest would make its pension contributions in cash as it has in the past. NWA Corp. has the option to repurchase such shares in cash, by the issuance of additional Common Stock, or by the use of cash and stock. To schedule an in-person visit, please click on the link below your desired NWA Location. Northwest explained that the Omnibus Agreement granted the Plans additional rights in order to protect their interest in the Pinnacle Stock. On January 11, 2003, the Independent Fiduciary and its advisors conducted a telephone interview with Pinnacle's chief executive officer and chief financial officer as part of its due diligence. The President of the United States manages the operations of the Executive branch of Government through Executive orders. Hours of Operation: 8:00 a.m. - 5:00 p.m. PST. Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. See Omnibus Agreement at section 6.2. 2323 Eastlake Ave E Ste 400. In view of the comments requesting a hearing, on March 11, 2003, the Department published in the Federal Register (68 FR 11589) a notice of hearing on the Proposed Exemption. The Proposed Exemption was requested in an application filed on Start Printed Page 49793behalf of Northwest pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, August 10, 1990). The director designated by the Plans will have the right to serve on Pinnacle's audit committee to the extent permitted under applicable SEC and stock exchange rules. Finally, Northwest notes that regional airline stocks have generally been less volatile and better performing than the stocks of major airlines. Northwest notes that, while Fiduciary Counselors received and reviewed valuation information provided by Morgan Stanley & Co. Inc. (Morgan Stanley), Fiduciary Counselors retained Eclat to provide valuation services. Fiduciary Counselors, AIC and Eclat represent that the ASA between Northwest and Pinnacle provided the framework for the final valuation. (5) The guaranty to the Plans by Northwest Airlines Corporation of Northwest's obligation to honor the Put Option. 3. Based on the Eclat and AIC valuations, the Independent Fiduciary determined that the contribution of 1,938,000 shares of Pinnacle Stock should be valued at $43,821,894 as of January 15, 2003, the date the contribution occurred. See Omnibus Agreement at sections 5.1 and 5.2. Start Printed Page 49801. Several commenters asked if Northwest would manage Pinnacle in a manner that maximizes its value. Call 202.693.7773 or TTY 202.693.7755. The Independent Fiduciary retained an independent, expert airlines valuation firm, Eclat, to provide valuation services. Both the Minnesota law and the Delaware law relate to the repurchase of the stock issued by Northwest Airlines, Inc. and NWA Corp., respectively, and would not apply to the repurchase of stock of Pinnacle (the Pinnacle Stock). A total of 9.1 million shares of Series C Preferred Stock were contributed to the Employee Stock Plan. The addition of the regional jets has more than doubled the size of the airline. This document contains a final exemption issued by the Department of Labor (the Department) from certain prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and from certain taxes imposed by the Internal Revenue Code of 1986 (the Code). On August 1, 2003, Northwest issued a press release that announced its decision on the Series C Preferred Stock. on FederalRegister.gov 1. (b) A statement that the appraiser is independent of Pinnacle and Northwest, and that the appraiser has no interest in the securities issued by Pinnacle or Northwest. (3) any corporation or partnership of which such person is an officer, director, partner, or employee. Each Plan's percentage ownership reflects the relative size of each Plan to each other. The Independent Fiduciary negotiated the terms of the Put Option which provide downside protection by permitting the Plans to sell the Pinnacle Stock back to Northwest for the greater of the original value at which it was credited to the funding standard account or its fair market value at the time it is sold back to Northwest. 8. 68 FR 49792 - Northwest Airlines Pension Plan for Salaried Employees (Salaried Plan), the Northwest Airlines Pension Plan for Pilot Employees (Pilot Plan), and the Northwest Airlines Pension Plan for Contract Employees (Contract Plan) (Collectively, the Plans), Located in Eagan, MN As long as the Common Stock is publicly traded, no dividends accrue on the Series C Preferred Stock. In this regard, the Plans acquired Pinnacle Stock at a favorable price and the Plans obtained voting and management rights, anti-dilution rights, limits on Northwest's ability to terminate the ASA, rights to sell the Pinnacle Stock or dispose of it in an IPO in a variety of circumstances, and a protective Put Option. The Department asked whether Northwest intends to contribute cash or some other asset to satisfy the balance of the calendar year 2003 funding requirements of the Salaried and Contract Plans that will not be met by the Pinnacle Stock contribution as a result of the Letter Agreement. The Public Inspection page The comments expressed concern that Northwest is exposed to bankruptcy risk and that the Pinnacle Stock would have greatly reduced value if Northwest were to file for bankruptcy, because Pinnacle serves Northwest. Northwest expects that the Start Printed Page 49807board, like any board fulfilling its fiduciary duties, will seek to maximize the value of the enterprise. Northwest will no longer guarantee a minimum operating margin in 2008. Accordingly, Northwest notes that, consistent with the Omnibus Agreement's terms, the Additional Initial Contribution will be treated as a credit balance and be applied toward future contributions to the Contract Plan. northwest airlines pension plan phone numberfarmington hills police. documents in the last year, 480 Northwest Response: Northwest states that, because there is a potential for a conflict of interest, the Proposed Exemption required that Northwest appoint an independent fiduciary who is vested with the discretion to determine whether the Plans should acquire, hold or dispose of Pinnacle Stock. According to the IF Report, Eclat estimates that Pinnacle's value to the Northwest domestic system is between $520 million and $540 million annually as the carrier exists today. Enter the nine-digit employee number and press #. The Application has been available for public inspection at the Department in Washington, DC. rendition of the daily Federal Register on FederalRegister.gov does not Northwest represents that the contribution was effected after the date on which the Department had completed work on the Proposed Exemption. Wall Street analysts also look favorably on ExpressJet, the Continental Airlines regional airline partner. Payment will be made to Fiduciary Counselors, which will remit 75% to AIC. (m) An analysis of the marketability, or lack thereof of the Pinnacle Stock, with specific reference to any restrictions, understandings, agreements, or obligations limiting the Plans' ability to dispose of the Pinnacle Stock. Northwest will obtain an amendment of the Omnibus Agreement so that the Independent Fiduciary will have first priority to sell Pinnacle Stock in an initial public offering, if certain conditions exist. On February 14, 2003, Northwest obtained formal written confirmation from the bank lenders that none of the rights afforded to the Plans in the Omnibus Agreement nor the exercise of such rights would violate the Credit Agreement. The length of the Deferral varies based upon a function of (1) the liquidity of Northwest (as defined in the Omnibus Agreement) and (2) the value of Pinnacle Stock contributed to the Plans. (e) A statement of the relevance or significance accorded to the valuation methodologies taken into account. Contact; Member Login Become a Member. This value was further discounted by 4.48%, to Start Printed Page 49799$318,498,136, to reflect Northwest's ability to delay payment on the put for up to 6 months. Because many of the comments raise common concerns, Northwest organized its responses to address these common concerns. documents in the last year, by the Engineers Corps and the Environmental Protection Agency The closing date may be further deferred and deferred payments may be made by Northwest as agreed to by the Independent Fiduciary if Northwest posts collateral in an amount and on terms satisfactory to the Independent Fiduciary. Fiduciary Counselors assumed that since Northwest could take up to 180 days to settle the option that it would. Eclat was provided with Pinnacle's audited financial statements for the years 2000 and 2001. An additional provision that would prohibit Northwest from using its rights under the Series A Preferred Share to block a Transfer of Pinnacle Stock following an Early Termination Event. The result was a net value of $339,178,820.00 for the purposes of determining the value of the stock contributed on January 15, 2003. documents in the last year, 973 The monthly contributions required to be made to the Pilot Plan pursuant to the pilot collective bargaining agreement are waived for the 2004 and 2005 Plan Year. There will be no change in their personnel assigned to this engagement or in the manner in which the fees are split between the two organizations. If the markets return, substantial upside will benefit the Plans. In doing so, Fiduciary Counselors' legal obligations run exclusively to the Plans, not to Northwest. 5. By permitting the contribution of Pinnacle Stock, Northwest is able to preserve needed cash so that it can withstand several years of losses. Northwest noted that the description of the Put Option in the first and second columns at 68 FR 2580 of the Federal Register notice accurately describes the structure of the Put Option as described in Northwest's Application. We provide retirement plan recordkeeping, administration, actuarial, consulting, compliance and participant services to over 1,100 companies with 425,000 participants and $45 billion in retirement savings. Under the Omnibus Agreement, Northwest controls the timing of the IPO until the earlier of July 1, 2006 or the occurrence of an early termination event. Once the Plans own 50% of the Pinnacle Stock, the Plans' director will exercise additional approval rights relating to the company's bylaws and capital structure. As further noted in the Preamble, the parties to the Agreement shall notify the Department within 30 days of any decision regarding the resignation, termination or change in control of the Independent Fiduciary. Pursuant to its engagement letter with Northwest, the scope of Fiduciary Counselors' engagement includes determining whether to accept the Contribution on behalf of the Plans, and if so, to value the Pinnacle Stock for Plan funding purposes. Thus, Northwest notes that the holding of Pinnacle Stock by the Plans can fit within the overall investment strategy adopted for the Plans. At the time a participant exercises conversion rights, the Series C Preferred Stock is converted to Common Stock, the Common Stock is sold and cash is allocated to participant accounts. Please specify which news release when placing your request. Found inside Page 25Although the number has been sliding dramatically since the late 1980s, nearly twenty-nine thousand most of their pension plans in 2005; a year later, in August 2006, Delta shed its pilots' plan, and Northwest Airlines threatened to About the Plan Plan Documents Important Mailings News and Media Glossary of Terms 10% for . In addition, the Independent Fiduciary reviewed a number of other documents, including SEC Form S-1 filed with the Securities Exchange Commission on February 25, 2002 registering shares of Pinnacle Stock for an IPO and the Airline Services Agreement dated March 1, 2002. The notice also invited interested persons to submit comments on the proposed exemption and/or to request that a public hearing be held. In particular, the risk and the liquidity of the Pinnacle Stock were taken into account and are explained in the reports issued by Fiduciary Counselors and Eclat. 1, 1995) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. documents in the last year, 16 Finally, the Department notes that the Independent Fiduciary's satisfaction of its obligations in connection with the determination of the fair market value of the Pinnacle Stock as previously described by the Department in the Preamble to the final exemption is a critical factor in the Department's decision to grant a final exemption. Equally important, Fiduciary Counselors negotiated for special rights associated with the Plans' acquisition of Pinnacle Stock that limit the risks associated with Pinnacle Stock. Page 53 of 61. The Employee Stock Plan covers in general terms Northwest's employees employed from August 1, 1993 through 1996, including employees represented by Air Line Pilots Association (ALPA), International Association of Machinists and Aerospace Workers (IAM), International Brotherhood of Teamsters (IBT), Airline Technical Support Association (ATSA), Northwest Airlines Meteorologists Association (NAMA), Transport Workers Union of America (TWUA) and management employees. These guidelines contemplate that a certain amount of assets will be allocated to securities with risk and return characteristics similar to Pinnacle Stock. Pinnacle contributed over $500 million in revenue to Northwest in 2002 and is expected to grow its regional jet flying approximately 30 percent per year through 2005. Signed at Washington, DC this 14th day of August 2003. Eclat provided additional information in support of its view that the discount rates, and other factors used in determining the fair market value of the Pinnacle Stock were reasonable and theoretically sound. Ellen A. Hennessy will Start Printed Page 49805continue as President of Fiduciary Counselors and, as majority shareholder of Fiduciary Group, will continue to control management decisions with respect to Fiduciary Counselors. The IF Report represents that, in the January 15, 2003 Valuation, Eclat determined that the net equity value (before discounts) of Pinnacle was $412,923,928.00. In this regard, beginning at such time as the Plans hold more than 50% of the issued and outstanding Pinnacle Stock, and until the earlier of (i) the date the Plans hold less than 25% of such shares or (ii) the Put Option with respect to such shares has terminated, the affirmative vote of the Plan s director will be required to (1) approve the election, appointment and compensation of any new Chief Executive Officer (CEO), (2) approve any modification or other changes to the Note Pinnacle has issued to Northwest (3) approve any amendment to Pinnacle s bylaws that affects the Plans shares of Pinnacle Stock in a manner different from other shares of Pinnacle Stock or otherwise amends the Series A Preferred Stock, and (4) unless Pinnacle is publicly traded, approve the issuance of shares of capital stock of Pinnacle or otherwise effect changes in the capital structure of Pinnacle. 2. Alternatively, Northwest could consider filing for bankruptcy, which would suspend most pension contributions, and could result in termination of some or all of the Plans.. Prior to valuing the put option, Eclat's estimate of the value of Pinnacle was $333,436,072, after application of an illiquidity discount of 15% and a minority discount of 5%. On May 20 and June 10, 2003, Northwest responded to certain issues raised during the Hearing that were not responded to in the April 26 Comment. Many of the commenters expressed concern about the effect of the Proposed Exemption on the Plans. In addition, changes to the ASA and other significant transactions must be approved by a majority of Pinnacle's directors, which majority must include the Plans' director. Northwest may not terminate Fiduciary Counselors as the Independent Fiduciary without the consent of ALPA and may not appoint a new Independent Fiduciary without the consent of ALPA. The Department also questioned whether such restrictions would similarly preclude Northwest from honoring the Put Option. on NARA's archives.gov. As a result of instructions given to State Street, after the contribution was made to the Investment Fund, the Contract Plan owns 83.5% of the Investment Fund, while the Salaried Plan owns 16.5% of the Investment Fund. Fiduciary Counselors states that the Omnibus Agreement provides: Fiduciary Counselors stated that, in conjunction with Northwest's contribution of Pinnacle stock to the Plans, Northwest has provided the Plans with a Put Option to protect them from a possible decline in Pinnacle's shares' value. This prototype edition of the The Contract Plan, the Salaried Plan and the Pilot Plan will have the same registration rights provided in the Omnibus Agreement dated January 15, 2003 between Pinnacle Airlines Corp., Northwest and Fiduciary Counselors. As previously mentioned in the March 3 Comment, the changes to the description of the Put Option in the Proposed Exemption are noted by the Independent Fiduciary who adds that the Proposed Exemption should be revised in accordance with the definition of Market Value in section 1.1 and the language of section 8.3 of the Omnibus Agreement. In the March 3 Comment, Northwest observed that there are three references to NWA Inc. in the second column at 68 FR 2584 that should reference Northwest (Northwest Airlines, Inc.), the wholly-owned subsidiary corporation of NWA Inc. First, the Plans must provide Northwest with an Offer Notice which shall contain an independent valuation of the consideration by a nationally recognized valuation expert acceptable to Fiduciary Counselors and Northwest. (j) That the fair market value of the stock has been determined by way of a prudent investigation. Alternatively, Northwest may arrange for the stock to be purchased by a third party. Northwest stated that it would not. See Omnibus Agreement at section 8.8. However, Northwest notes that it has received the consent of the Air Line Pilots Association (ALPA), the union representing Northwest pilots, to permit the Pilot Plan to hold Pinnacle Stock (see below for discussion of the Northwest and ALPA Letter Agreement). During the Hearing, the Department asked Northwest to provide information concerning the funded status of the Pilot Plan, Contract Plan and Salaried Plan at the end of 2002. The value of Pinnacle Stock is determined by an independent fiduciary, Fiduciary Counselors, based on the valuation provided by their independent valuation firm, Eclat. The 4.48% discount represents what Eclat used for Pinnacle's pre-tax cost of debt (9.6%) adjusted for a six-month period. northwest airlines pension plan phone numbersouthwest cargo phone number. In valuing the Pinnacle shares, it was necessary to assign a value, not only to Pinnacle, but also to the Put Option. If the Pinnacle Stock is not publicly traded, the Plans will receive the. Similarly, U.S. Airways did not reject its ASA with its regional airline partners Mesa and Chautauqua. This additional contribution was agreed upon as a result of a technical concern raised by Fiduciary Counselors regarding covenants in Northwest's $1.125 billion Credit and Guarantee Agreement dated October 24, 2000, as amended under which Northwest is the borrower (the Credit Agreement), with Northwest's bank lenders. Northwest notes that the board previously approved the Omnibus Agreement, which includes the Put Option, and no further action would be required of the board in the event that the Put Option is exercised by the Independent Fiduciary. See Omnibus Agreement at section 9.1(d). On June 27, 2003, ALPA and Northwest provided the Department with a Letter of Agreement between Northwest and the Northwest airline pilots represented by ALPA (the Letter Agreement) regarding the acquisition and holding of Pinnacle stock by the Northwest Pension Plan for Pilot Employees (the Pilot Plan). Comment: Some comments suggested that Northwest be required to post collateral in order to contribute Pinnacle Stock to the Plans. Northwest Airlines Pension Plan For Pilot Employees litigation, intellectual property, and other public records. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. 5. This, together with the reporting planned by Fiduciary Counselors, will permit ALPA to monitor the Independent Fiduciary. [7] AIC valued the Put Option at $20,680,684 using a Black-Scholes American option-pricing model. Additionally, Fiduciary Counselors agreed only to a limited period during which Northwest has the exclusive right to cause an IPO. Northwest responded that no similar legal restriction would apply to the repurchase of Pinnacle Stock pursuant to the exercise of the Put Option. In considering whether to accept an in-kind contribution, the Independent Fiduciary's responsibilities include the following: 1. Northwest notes that specifically, if the Pinnacle Stock is not publicly traded, the Plans will receive the greatest of (i) the initial contribution value (the Floor Price), (ii) the fair market value as determined by the Independent Fiduciary at the time of the exercise of the Put Option, or, if greater, at the closing date of the Put Option, and, (iii) if a third party sale is elected by the Plans and Northwest does not exercise its right of first refusal, the proceeds from the sale of Pinnacle Stock held by the Plans to such third party. Northwest believes this is the best outcome for all Plan participants and beneficiaries. Fiduciary Counselors' duties also include the discretionary authority to manage the Pinnacle Stock as investment manager. Based on current client engagements, Fiduciary Counselors anticipates that the portion retained by it will comprise less than 5% of Fiduciary Counselors' gross revenue for 2003. The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. Phone: (206) 329-4900. In 2008, the target operating margin will be reset to a market-based percentage, but it will be no less than 10 percent and no higher than 14 percent. In the March 5 Comment, Fiduciary Counselors noted that, consistent with the statutory requirements of section 404(a) of ERISA, the reference in the Proposed Exemption to the best interests of the Plans participants and beneficiaries (emphasis added) should be changed to the interests of the Plans participants and beneficiaries. (j) A description of all of the factors taken into account in making the valuation, including any restrictions, understandings, agreements or obligations limiting the Plans' ability to dispose of the stock. Seattle WA 98102-3305. Any remaining Pinnacle stock will then be contributed to the Contract Plan. Eagan, MN 55121-1534. Browse deals and discounts on Northwest Airlines airfares, check flight status for departure and arrival times, and book available dates for low-cost tickets for your trip. Each of these plans is a Code section 401(k) plan that is tax qualified under section 401(a) of the Code and subject to ERISA. documents in the last year, 84 Defined Benefit Master Trust : C/O Delta Air Lines, Inc., 1030 Delta Boulevard, Atlanta, US-GA, 30354, US: 2012-12-18: Delta Pilots Disability and Survivorship Plan : C/O Delta Air Lines, Inc., 1030 Delta Boulevard, Atlanta, US-GA, 30354, US: 2012-12-04: Northwest Airlines Pension Plan for Salaried Employees Northwest sought the exemption to permit the Pinnacle Stock contribution as part of its overall strategy of managing the current economic uncertainty. To exercise the Put Option, the Independent Fiduciary must provide written notice to Northwest of its election to put to Northwest any or all of the shares of Pinnacle Stock then held by the Plans. Start Printed Page 49803Northwest stated [i]n the absence of an exemption, Northwest would have to consider the contribution of NWA Corp. stock or an IRS waiver. Comment: A number of commenters expressed a preference that pension contributions be made with cash rather than Pinnacle Stock. As a condition to any such contribution by Northwest, the Independent Fiduciary must determine on behalf of the Plans that the acceptance of the contributed shares is prudent and in the interests of the Plans' participants and beneficiaries and otherwise consistent with the fiduciary standards of ERISA. Less volatile and better performing than the stocks of major airlines your request this 14th day of 2003. Airways did not reject its ASA with its regional airline partners Mesa Chautauqua! A total of 9.1 million shares of Series C Preferred Stock were contributed its... A statement of the relevance or significance accorded to the Plans by Northwest airlines pension Plan Pilot., U.S. Airways did not reject its ASA with its regional airline stocks have generally been volatile! 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