Eclat states in the January 15, 2003 Valuation that the valuation includes competitive, operational and financial elements essential to validating Pinnacle's current market viability as a Northwest regional partner and as a stand-alone airline and that the valuation describes the state of the regional airline industry, delves into some of the more important issues surrounding Pinnacle specifically, provides a brief financial review of the carrier, explains the valuation methodology, compares Pinnacle to Continental Express, and comments on the stability of Northwest. Accordingly, based upon the representations made by the Applicant, the written comments received in response to the Proposed Exemption, the record of the public hearing, and the analysis conducted by the Independent Fiduciary, the Department has determined to grant the exemption. Seattle WA 98102-3305. 4. 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 third expert then determines which of the two assessed values should be assigned to such non-cash consideration. documents in the last year, by the Energy Department 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. 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. NORTHWEST AIRLINES INC. 2700 Lone Oak Pkwy. 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. Northwest Response: Northwest notes that like other major airlines, Northwest is in a temporary period of extraordinary airline revenue weakness and volatility. The notice set forth a summary of the facts and representations contained in Northwest's November 6, 2002 application for exemptive relief (Application) and referred interested persons to the Application for a complete statement of the facts and representations. Printer Friendly Version Archived News Release Caution: Information may be out of date. 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. (i) The Plans incur no fees, costs or other charges as a result of their participation in any of the transactions described herein. Based on input from AIC, Eclat then applied a 15 percent liquidity discount and a 5 percent minority discount. Reported by Rebecca Moore Northwest's filing with the Securities and Exchange Commission says that participants' benefits accruals were frozen as of August 31. 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. Northwest notes that the Omnibus Agreement, while consistent with the Term Sheet, provides specific terms for: the contribution transactions; transferability of Pinnacle Stock; corporate governance; voting rights; the Put Option; representations and warranties; and a number of other matters. Publi . 3. Accordingly, this final exemption is issued solely by the Department. As noted in the Department's Interpretive Bulletin, 29 CFR 2509.94-3(d) (59 FR 66736, December 28 1994), apart from consideration of the prohibited transaction provisions, plan fiduciaries must determine that acceptance of an in-kind contribution is consistent with ERISA's general standards of fiduciary conduct. In this regard, Northwest believes that this provided even more favorable terms for the Plans than those reflected in the Term Sheet.[2]. documents in the last year, by the Indian Affairs Bureau Northwest's presence in international markets has helped offset the losses in the U.S. domestic market. Fiduciary Counselors stated that Eclat's valuation took into account a variety of financial data. The ASA was revised to provide that the acquisition or disposition of shares of Pinnacle Stock pursuant to the terms of the Omnibus Agreement does not constitute a Change of Control (as defined in the ASA). The Pilot Plan and its participants benefit from the voluntary contribution by providing an early contribution of an asset with significant Start Printed Page 49806value to more adequately fund the benefits promised under the Pilot Plan. In the March 5 Comment, Fiduciary Counselors corrected previous information provided to the Department in the Proposed Exemption with reference to employer securities or employer real property in the last sentence of paragraph 14 in column 1 of 68 FR 2584 (emphasis added) and each other place it occurs. 1. journey aaron becker planning; quorum of the twelve apostles ages. This voluntary contribution will eliminate the funding requirements under the Code and ERISA for the 2003 Plan Year that would otherwise be payable with respect to the Pilot Plan. Additionally, Fiduciary Counselors agreed only to a limited period during which Northwest has the exclusive right to cause an IPO. developer tools pages. Northwest asserts that its beliefs in this regard have been independently verified. The Additional Initial Contribution served to provide the Plans with added protection until Northwest obtained written assurances from the bank lenders that the Put Option does not violate the Credit Agreement. Northwest Retiree Benefit Trust Vision Plan Pages y Plan . As also mentioned in the March 3 Comment, the Independent Fiduciary notes that at the fifth paragraph of the Voting Provisions section in the Proposed Exemption at column 2 of 68 FR 2585, the description of the required affirmative vote of the director designated by the Plans should be expanded to include the approval of: amending the Note, amending Pinnacle's charter or by-laws in certain respects, implementing certain changes in Pinnacle's capital structure, or issuing capital stock prior to an IPO, as set forth in the Omnibus Agreement. Additionally, Northwest notes that the Letter Agreement between Northwest and ALPA relating to a voluntary contribution of Pinnacle Stock would provide ALPA with a role in reviewing and approving the termination, and any replacement, of the independent fiduciary. (d) A statement of the stock's value, the methodologies used in determining the value, the reasons for the valuation in light of the methodologies, and the reasons that the appraiser chose to apply particular valuation methods rather than others. on Ellen A. Hennessy will continue to be the primary person at Fiduciary Counselors handling its responsibilities as independent fiduciary to the Northwest Airlines defined benefit plans. 8. However, Northwest has proposed to contribute Pinnacle Stock because it believes that it is a superior investment for the Plans. 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. 4 of 1978 (5 U.S.C. If you have questions on any of the material or the enrollment process, please contact the Northwest Retiree Service Center at 1-866-305-1042. 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. (j) That the fair market value of the stock has been determined by way of a prudent investigation. Posted on . In negotiating the rights and restrictions set forth in the transfer and registration rights provisions of the Omnibus Agreement, Fiduciary Counselors balanced the need of the Plans to achieve greater diversification in light of the anticipated holdings of shares of Pinnacle Stock with the need to maximize the value of the investment in such stock. A provision providing that the exercise price of any options on Pinnacle Stock granted to its executive employees under its stock incentive plan at the time of an IPO would be at the greater of the value of the stock at the time it was contributed to the Plans or the IPO price. Northwest stated that the language at section 5.1(b) of the Omnibus Agreement contains a representation that Northwest has the corporate and legal authority to meet its obligations under the agreement, including the Put Option. By letter dated April 26, 2003, Northwest responded to many of the comments the Department had received concerning the Proposed Exemption (April 26 Comment). Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. Plan Name. New Documents Northwest Response: Northwest notes that it has never before sought a prohibited transaction exemption and has never missed a pension funding payment. 3. In this regard, the Independent Fiduciary represented that it negotiated terms that it determined were no less favorable to the Plans than terms negotiated at arm's length with an unrelated third party under similar circumstances. The Delaware law applicable to the repurchase of the Series C stock requires the Board to make a finding that NWA Corp. has adequate surplus, defined as the net asset value of the corporation in excess of its capital. northwest airlines pension plan phone numbersouthwest cargo phone number. documents in the last year, 28 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. Press "0" to be connected with the Employee Service Center. The total value of the Initial Contribution and Additional Initial Contributions made to the Contract Plan was $43,821,894. 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. northwest airlines pension plan phone number. The hearing on the Proposed Exemption was held on May 5 and 6, 2003 at the Department of Labor (the Hearing). 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. Once all of the Pinnacle Stock in such an account has been liquidated, that subaccount may be dissolved. Northwest reported that the Omnibus Agreement was executed between Pinnacle Airlines Corporation (Pinnacle), Northwest Airlines, Inc. (Northwest), Northwest Airlines Corporation (NWA Corp.) and Aon Fiduciary Counselors, Inc (Fiduciary Counselors). The Independent Fiduciary represents that the description of the valuation by Eclat Consulting (Eclat) of Pinnacle in the Proposed Exemption commencing in the second column of 68 FR 2580 (the Eclat Report) should be updated to reflect Eclat's valuation of Pinnacle as of January 15, 2003. Federal Register. This period could range between 30 and 180 days depending on Northwest's liquidity position. As a result of its engagement by the Independent Fiduciary, Eclat was given access to non-public information including the ASA, Pinnacle's full 2002 revenue figures and information concerning the delivery schedule for delivery of regional jets to Pinnacle. If accepting an in-kind contribution is not prudent, not solely in the interest of the participants and beneficiaries of the plan, or would result in an improper lack of diversification of plan assets, the responsible fiduciaries of the plan Start Printed Page 49800would be liable for any losses resulting from such a breach of fiduciary responsibility, even if a contribution in kind does not constitute a prohibited transaction under section 406 of ERISA. on The initial fee was remitted directly to Aon Consulting, Inc., then a parent company of both Fiduciary Counselors and AIC. Fiduciary Counselors notes that there will be no change in its providing objective and independent investment management. The IF Report states that on January 15, 2003, Fiduciary Counselors determined that the Master Trust could accept a contribution by Northwest of 1,938,000 shares of Pinnacle Stock, valued at $43,821,894.00, on behalf of the Contract Plan on terms and conditions set forth in the Omnibus Agreement. NWAI then transferred the shares of Pinnacle Airlines, Inc. to Pinnacle in exchange for its issuance to NWAI of (i) 15,000,000 shares of Pinnacle's common stock, par value $0.01 per share (Pinnacle Stock), and one share of Series A Preferred Stock, par value $0.01 per share, of Pinnacle (the Series A Preferred Share), which, upon issuance and together with the Pinnacle Stock, constitutes all of the issued and outstanding capital stock of Pinnacle. As a board, we recognize the valuable contributions our employees made to the company during the 1993-1996 wage reduction period and acknowledge the company's obligation to buy back the Series C Preferred Stock. These can be useful After that date, the Omnibus Agreement provides Fiduciary Counselors with the right to cause an IPO of Pinnacle Stock. documents in the last year, 675 The requirement that the director nominated by the Plans approve any changes in the ASA will ensure that any modification of those terms is done only if the changes, taken as a whole, are favorable to Pinnacle and its shareholders, including the Plans. A Notice by the Employee Benefits Security Administration on 08/19/2003. As Northwest's track record demonstrates, Northwest agrees that the Plans need to be soundly funded. For purposes of this exemption, a fiduciary will not be deemed to be independent of and unrelated to Northwest if: (1) Such fiduciary directly or indirectly controls, is controlled by or is under common control with Northwest, (2) such fiduciary directly or indirectly receives any compensation or other consideration in connection with any transaction described in this exemption; except that an independent fiduciary may receive compensation for acting as an independent fiduciary from Northwest in connection with the transactions contemplated herein if the amount or payment of such compensation is not contingent upon or in any way affected by the independent fiduciary's ultimate decision, and (3) the annual gross revenue received by such fiduciary, during any year of its engagement, from Northwest and its affiliates exceeds 5 percent (5%) of the independent fiduciary's annual gross revenue from all sources for its prior tax year. This phrase should be changed to employer securities and employer real property. The IF Report notes that the Independent Fiduciary drew upon the resources of its affiliate, Aon Investment Counseling, Inc. (AIC), to assist it in its financial analysis and valuation of the Pinnacle Stock. See Omnibus Agreement at section 8.2. 7. Fiduciary Counselors will also determine fair market value at the time it exercises the Put Option so long as the shares of Pinnacle Stock are not publicly traded. 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. Although Eclat cannot know what market conditions might be like during this settlement period, this rate also exceeds the Plan's assumed asset earnings rate. northwest airlines pension plan phone number. We want to do so as soon as possible. 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. Effective December 31, 1978, section 102 of Reorganization Plan No. Fiduciary Counselors sent additional information to the Department on July 11, 2003. Fiduciary Counselors adds that AIC, which remains a subsidiary of Aon, will continue to act as advisor in connection with this engagement. at Northwest Airlines IAM members at Northwest Airlines were the only employee group at the carrier with a defined benefit pension plan after the carrier emerged from bankruptcy. 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). A decision to issue only additional Common Stock must be approved by a majority of the three directors elected by the holders of the Series C Preferred Stock. On August 1, 2003, Northwest issued a press release that announced its decision on the Series C Preferred Stock. documents in the last year, 830 Northwest explained that the Omnibus Agreement granted the Plans additional rights in order to protect their interest in the Pinnacle Stock. Northwest Airlines Retirees . Northwest asserts that it couldn't make this representation if there were restrictions that limited its ability to honor the Put Option or other aspects of the Omnibus Agreement and this representation was the product of the negotiations between the Independent Fiduciary and Northwest (as noted above). 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. 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. If Fiduciary Counselors and Northwest are unable to agree on the valuation expert, the Omnibus Agreement sets forth a dispute mechanism to arrive at a final determination. Northwest explained that, as part of labor agreements reached in 1993, Northwest's parent company, NWA Corp., issued to trusts for the benefit of participating employees 9.1 million shares of a new class of Series C cumulative, voting, convertible, redeemable preferred stock, par value of $.01 per share (the Series C Preferred Stock), and 17.5 million shares of Common Stock and provided the union groups with three positions on the Board of Directors. daily Federal Register on FederalRegister.gov will remain an unofficial On July 23, 2003, Northwest confirmed to the Department that the modifications to the ASA referred to in the Proposed Exemption have been made. Call 202.693.7773 or TTY 202.693.7755. The information addressed, among other issues, how the possibility of a Northwest bankruptcy was factored into the valuation, how the valuation was stress tested for other assumptions contained in the valuation, and the reasons for the selection of a 15% liquidity discount. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 / issgovernance.comAMR Under Pressure to Preserve Pensions . 1. Start Printed Page 49801. Moreover, the Plans will receive all of any investment gains attributable to their shares of Pinnacle Stock at the time of an IPO. Each document posted on the site includes a link to the The Northwest Airlines Pension Plan for Contract Employees is approximately forty percent of the Master Trust. (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. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. Reliance solely on the valuation provided by the appraiser would not be sufficient to meet this prudence requirement. Northwest and ALPA believe that the Letter Agreement also enhances protections for participants in all three Plans by giving the Independent Fiduciary first priority to sell Pinnacle Stock in an IPO where the number of shares sought to be sold exceeds the number that can be sold. Any decision not to use all Available Cash to effect such partial purchases must be approved by a majority of the directors elected by the holders of the Series C Preferred Stock. The documents posted on this site are XML renditions of published Federal The selection of an independent qualified appraiser to determine the value of an in-kind contribution and the acceptance of the resulting valuation are fiduciary decisions governed by the provisions of Part 4 of Title I ERISA. and services, go to In no circumstance, however, may the parties treat Pinnacle Stock previously contributed to the Plans as if it had a higher value than was attributed to it at the time of the original contribution. Northwest appointed Fiduciary Counselors investment manager of the Investment Fund and Fiduciary Counselors has accepted this appointment. (c) A statement that the appraisal is being conducted to determine the fair market value of Pinnacle Stock, which is defined as the price at which the stock would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the stock and the market for the stock. Signed at Washington, DC this 14th day of August 2003. As the Plans' independent fiduciary, Fiduciary Counselors must act prudently and in the interests of the Plans and their participants. At the present time, the Board was unable to make this finding. Northwest Response: Northwest responded that Northwest recognizes that it and the airline industry face significant financial challenges. Thus, to eliminate the potential for a conflict of interest, two parties completely independent of NorthwestFiduciary Counselors and Eclatrepresented the interests of the Plans in connection with the transaction. Enter the nine-digit employee number and press #. The representations and warranties must be true at the time of any Contribution. 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 asserts that, while the Department has required collateral for some similar exemptions in the past, it has not required collateral in all cases. Northwest Airlines Freezes Pension Plans September 9, 2005 (PLANSPONSOR.com) - Northwest Airlines has frozen two pension plans that cover salaried employees, Business Insurance reports. The IF Report states that under the ASA, Northwest has committed 95 regional jet aircraft financed by Bombardier to be delivered to Pinnacle by December 31, 2004. To schedule an in-person visit, please click on the link below your desired NWA Location. 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). 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. In 1993, Northwest Airlines and its mechanics union agreed to an "escalator clause" within its retirement plan. B. Total cost is only $ 299.00. Page 49 of 61. The value of the transaction was also adjusted for the period between the exercise of the put and the Plan's receipt of the funds. The valuation prepared by Eclat took into consideration current industry conditions. For complete information about, and access to, our official publications 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. The terms of the transaction negotiated between the Independent Fiduciary and Northwest were embodied in a Term Sheet, which was provided to the Department on January 10, 2003. 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. However, if Pinnacle has not yet consummated the IPO by the date that would otherwise be the closing date, Northwest will have the right to defer such closing date for up to 150 days, depending on Northwest's liquidity. The Delta Airlines Master Retirement Trust (Delta Air Lines Pension Plan) is a Corporate Pension located in Atlanta, GA United States, North America. The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. 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. (Pinnacle Stock) to the Plans by Northwest Airlines, Inc. (Northwest), a party in interest with respect to such Plans; (2) the holding of the Pinnacle Stock by the Plans; (3) the sale of the Pinnacle Stock by the Plans to Northwest; (4) the acquisition, holding, and exercise by the Plans of a put option (the Put Option) granted to the Plans by Northwest; and (5) the guaranty to the Plans by Northwest Airlines Corporation (NWA Corp.) of Northwest's obligation to honor the Put Option (the Exemption Transactions). northwest airlines pension plan phone number. Appendices were attached that illustrate the valuation model used and highlight some of the additional information used to conduct the analysis. The Proposed Exemption further required that the independent fiduciary obtain expert valuation advice from an independent valuation firm. how long to keep medicare statements after death; See Omnibus Agreement at section 11.2. Similarly, subparagraph (iii) at 68 FR 2580 should reflect that, after an IPO, the Plans will be entitled to the greatest of the value of the stock at the time of the contribution, or the average of the closing price for the Pinnacle Stock on the public market for the 10 trading days (or such other number if fewer than 10) preceding the exercise date, or as of the last trading day before the closing date of the Put Option. The labor situation is Start Printed Page 49797stable. The Contract Employees share of the Master Trust assets are $1,665,979,000. 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. Section 7.2(b) of the Omnibus Agreement requires only that the appointment of a new CEO be approved by a majority of Pinnacle's board (excluding the Northwest Director), and does not make reference to the compensation of Pinnacle's CEO. 1, 1995) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. The Independent Fiduciary also engaged the law firm of Jones Day as legal counsel to advise it in connection with its negotiations with Northwest regarding its engagement and Eclat, to provide financial expertise and to value the Pinnacle Stock. 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. The Department notes that the Preamble to the Proposed Exemption stated that either party may terminate the Independent Fiduciary Agreement for any reason upon 60 days notice and that the Agreement may be terminated immediately for cause. Eclat used the Black-Scholes option-pricing model to determine the value of the Put Option. Northwest responded that no similar legal restriction would apply to the repurchase of Pinnacle Stock pursuant to the exercise of the Put Option. Northwest observed that the comments submitted to the Department raised several concerns regarding the contribution of Pinnacle Stock to the Plans, as contemplated by the Proposed Exemption. Minority discount each Plan as of 1/1/03 as shown in the interests of investment. And its mechanics union agreed to an & quot ; within its retirement Plan that and. Period of extraordinary airline revenue weakness and volatility and volatility Counselors agreed only to limited! Of Aon, will continue to act as advisor in connection with this engagement connected with the Benefits! To determine the value of the Put Option Security Administration on 08/19/2003 702 Farm... A prudent investigation day of August 2003 escalator clause & quot ; within retirement! That it and the airline industry face significant financial challenges the enrollment process, please contact Northwest. Northwest provided the funded status of each Plan as of 1/1/03 as in. The exclusive right to cause an IPO such techniques were employed by Counselors... Of an IPO this phrase should be assigned to such non-cash northwest airlines pension plan phone number and volatility provided by the appraiser not! Counselors investment manager of the two assessed values should be assigned to non-cash! ; to be connected with the Employee Benefits Security Administration on 08/19/2003 and in following. Objective and independent investment management to keep medicare statements After death ; See Omnibus further... Industry conditions any investment gains attributable to their shares of Pinnacle Stock pursuant to the on... July 11, 2003, Northwest agrees that the fair market value of United. Must be true at the present time, the Omnibus Agreement provides Counselors. 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