Company Name: McDonald's Corp.
Public Availability Date: February 13, 2008
Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January18, 2008
BY HAND DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: McDonald's CorporationShareholder Proposal Submitted by Trinity Health,
Dominican Sisters, St. Mary of the Springs, Catholic Health East, Catholic
Healthcare West, Dominican Sisters of Springfield Illinois, The Sisters of St.
Francis of Philadelphia and The Sinsinawa Dominicans, Inc.
Ladies and Gentlemen:
I am the Executive Vice President, General Counsel and Secretary of McDonald's
Corporation ("McDonald's"), and I am submitting this letter pursuant to Rule
14a-8(j) under the Securities Exchange Act of 1934 to notify the Securities and
Exchange Commission of McDonald's intention to exclude from its proxy materials
for its 2008 annual meeting of shareholders a shareholder proposal (the
"Proposal") submitted by Trinity Health as primary filer, with each of the
following serving as co-filers of the Proposal: Dominican Sisters, St. Mary of
the Springs; Catholic Health East; Catholic Healthcare West; Dominican Sisters
of Springfield Illinois; The Sisters of St. Francis of Philadelphia; and The
Sinsinawa Dominicans, Inc. Unless otherwise noted, each of the filers are
referred to individually as a "Proponent" and collectively as the "Proponents."
We request confirmation that the staff will not recommend to the Commission that
enforcement action be taken if McDonald's excludes the Proposal from its 2008
proxy materials in reliance on Rules 14a-8(i)(10), 14a-8(i)(7) and 14a-8(i)(3).
A copy of the Proposal and supporting statement, together with related
correspondence between McDonald's and the Proponents, are attached as Exhibit 1.
Pursuant to Rule 14a-8(j), I am furnishing the staff with six copies of this
letter and the attached exhibits. Copies of this letter and the exhibits are
also being provided simultaneously to the Proponents.
McDonald's currently intends to file its definitive proxy materials with the
Commission on or about April 7, 2008.
The Proposal
The Proposal seeks shareholder approval of the following resolution:
"RESOLVED: shareholders urge the Board of Directors to adopt principles for
comprehensive health care reform (such as those based upon principles reported
by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable)."
Rule 14a-8(i)(10): The Proposal Has Been Substantially Implemented
Rule 14a-8(i)(10) permits a company to exclude a shareholder proposal from its
proxy soliciting materials if "the company has already substantially implemented
the proposal." The purpose of the exclusion is "to avoid the possibility of
shareholders having to consider matters which already have been favorably acted
upon by the management...." See Release No. 34-12598 (July 7, 1976).
The staff has consistently stated that a proposal has been "substantially
implemented" when the company's particular policies, practices and procedures
compare favorably with the guidelines in the proposal. See Texaco, Inc. (March
28, 1991) and Release No. 34-20091 (August 16, 1983). This standard does not
require that each and every aspect of a proposal be implemented, but instead
considers a proposal to be substantially implemented when the company has
policies and procedures in place relating to the subject matter of the proposal,
or has implemented the essential objectives of the proposal. See Exxon Mobil
Corporation (March 17, 2006) (permitting exclusion of a proposal requesting that
the company establish policies designed to achieve the long-term goal of making
the company the recognized leader in low-carbon emissions in both production and
products where the company had previously issued a report detailing the
company's commitment to emissions reduction); PPG Industries, Inc. (January 19,
2004) (permitting exclusion of a proposal requesting that the board issue a
policy statement publicly committing to the elimination of animal testing in
favor of in vitro alternatives where the company had publicly issued an animal
welfare policy committing the company to use alternatives to animal testing);
Freeport-McMoRan Copper & Gold Inc. (March 5, 2003) (permitting exclusion of a
proposal requesting amendment of the company's social and human rights policy
and publication of a report to shareholders on the implementation of the policy
where the company had already adopted a human rights policy and annually issued
a report on the policy); and The Gap, Inc. (March 16, 2001) (permitting
exclusion of a proposal requesting a report on child labor practices of the
company's suppliers where the company had an established code of vendor conduct,
monitored compliance, published information relating thereto and discussed labor
issues with shareholders).
The Proposal is excludable pursuant to Rule 14a-8(i)(10) as McDonald's has
already adopted principles relating to health care reform in the U.S. As an
employer-provider of health care to a large and diverse workforce, McDonald's
has long been concerned about the need to improve the U.S. health care system.
McDonald's memorialized its concern and initiatives on this issue by adopting
the Health Care Principles attached as Exhibit 2, and which can be found on
McDonald's web site at http://www.mcdonalds.com/usa/good/people/health care
principles.html. The Health Care Principles provide in part that:
McDonald's recognizes that the U.S. health care system needs improvement on
many fronts, including inadequate and consistent access to health care, the high
cost of health care, the lack of generally accepted quality standards and the
complexity in using the health care system;
McDonald's wants to participate in developing a solution;
Any solution should build on the current voluntary market-based system with
the aim of expanding access for individuals who are not eligible for such
programs; and
Health care reform needs to be addressed at the federal level for consistency
and efficiency purposes.
The Proposal urges McDonald's board of directors to adopt principles for
comprehensive health care reform. By adopting the Health Care Principles,
McDonald's and its management have already "acted favorably" on the subject
matter of the Proposal. Further, because McDonald's Health Care Principles
compare favorably with the health care reform guidelines requested by the
Proposal, the Proposal is excludable pursuant to Rule 14a-8(i)(10).
Rule 14a -8(i)(7): Ordinary Business Operations
Rule 14a-8(i)(7) permits the exclusion of a shareholder proposal that "deals
with a matter relating to the company's ordinary business operations." According
to the Commission's release accompanying the 1998 amendments to Rule 14a-8, the
underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual meeting." See Release No. 34-40018 (May 21, 1998).
The Commission's 1998 release established two "central considerations"
underlying the ordinary business exclusion. The first is that "certain tasks are
so fundamental to management's ability to run a company on a day-to-day basis
that they could not, as a practical matter, be subject to direct shareholder
oversight." The second is that a proposal should not "seek[] to `micro-manage'
the company by probing too deeply into matters of a complex nature upon which
shareholders, as a group, would not be in a position to make an informed
judgment."
While we believe the Proposal is excludable pursuant to Rules 14a-8(i)(10) for
the reasons set forth above, we also believe the Proposal is excludable pursuant
to Rule 14a-8(i)(7) as it seeks to (i) force McDonald's into the national
political debate surrounding implementation of a universal health care system,
and (ii) involve our shareholders in the management of McDonald's health care
costs.
The Proposal Seeks to Engage McDonald's in the Political and Policy Debate
Regarding Universal Health Care
The Proposal clearly seeks to involve McDonald's in the current political and
policy debate relating to universal health care. On their face, the principles
listed in the Proposal seek to commit McDonald's to a position on the entire
U.S. health care system. The principles proposed by the Proponents state, for
example, that health care coverage should be universal and that health insurance
should be affordable and sustainable for "society."
Other statements by the Proponents are even more direct in establishing the
Proponents' political agenda. The Proponents argue that "access to affordable,
comprehensive health care insurance is the most significant social policy issue
in America" and "has become a core issue in the 2008 presidential campaign," and
quotes a New York Times article stating that "the American Cancer Society
redirected its entire $15 million advertising budget `to the consequences of
inadequate health coverage' in the United States."
Even the letter to McDonald's from the representative of Trinity Health, the
lead Proponent, makes clear that the Proposal seeks to utilize McDonald's proxy
statement to conduct a referendum on national health care policy. In that
letter, Trinity Health's representative states that "[w]e are interested in the
role that McDonald's, as a large and influential company, can play in the
national effort for universal access to quality health care that is accessible,
affordable and provides for accountability and equitable financing for all
stakeholders."
When assessing a proposal under Rule 14a-8(i)(7), the staff considers both the
resolution and the supporting statement as a whole. See Staff Legal Bulletin No.
14C (June 28, 2005). Here, the Proposal and the Proponents' accompanying
statements easily can be viewed as an effort to draw attention to a political
issue favored by the Proponents.
McDonald's acknowledges that shareholder proposals relating to a company's
ordinary business operations may not be excludable if they focus on
"sufficiently significant social policy issues." See Staff Legal Bulletin No.
14A (July 12, 2002). However, even a proposal that seeks to address a
significant policy issue is excludable under Rule 14a-8(i)(7) if the proposal
seeks to involve the company in the political or legislative process relating to
an aspect of the company's ordinary business operations, including health care
benefits. See, e.g., International Business Machines Corporation (January 21,
2002)(permitting exclusion of a proposal that directed management to report to
shareholders on the average annual cost for employee health benefits in the
United States and join with other corporations in support of a national health
insurance system); Chrysler Corporation (February 10, 1992) (permitting
exclusion of a proposal requesting that the company "actively support and lobby
for UNIVERSAL HEALTH coverage"); and Brown Group, Inc. (March 29, 1993)
(permitting exclusion of a proposal seeking formation of a board committee to
evaluate the impact of various health care reform proposals on the company).
A Company's Health Care Benefits and Related Costs are Ordinary Business
Operations
The Proponents seek to relate the Proposal to McDonald's business by citing the
"rising healthcare costs borne" by McDonald's and the Proponents' concern
regarding health care costs' "adverse affect [sic] on shareholder value." The
Proponents also state that increasing health care costs lead companies to shift
costs to employees, which "can reduce employee productivity, health and morale."
To the extent that the Proposal requests that McDonald's adopt principles
relating to its own health care costs and benefits, the Proposal relates to an
integral part of McDonald's ordinary business operations.
The staff has consistently treated a company's health care costs and related
employee benefits as a matter of the company's ordinary business operations. In
General Motors Corporation (March 24, 2005), the staff permitted the exclusion
of a proposal requesting that the company establish a committee of the board "to
develop specific reforms for the health cost problem." Similarly, in Exelon
Corporation (February 21, 2007), the staff permitted exclusion of a proposal to
require the board to implement "rules and regulations" that would limit the
ability of management to reduce retiree benefits, noting that focus of the
proposal was on the ordinary business matter of general employee benefits.
Likewise, in Wal-Mart Stores, Inc. (March 24, 2006), the staff permitted
exclusion of a proposal seeking to require the board of directors to produce a
report on the use of public assistance by the company's employees, noting that
the proposal related to employee benefits and therefore to the company's
ordinary business operations.
The excludability of the Proposal under Rule 14a-8(i)(7) is already well
established. In late 2006, certain of the Proponents submitted a similar
proposal to a number of companies, requesting that "the company report...on the
implications of rising health care expenses and how it is positioning itself to
address this public policy issue without compromising the health and
productivity of its workforce." In every case, the staff permitted the company
to exclude the proposal as relating to ordinary business operations. See, e.g.,
General Motors Corporation (April 11, 2007 and March 9, 2007); Target
Corporation (February 27, 2007); Federated Department Stores, Inc. (February 26,
2007); 3M Company (February 20, 2007); and Kohl's Corporation (January 8, 2007).
While these prior proposals requested that the company issue a report on health
care costs, the Proposal requests that McDonald's adopt "principles" relating to
health care reform, including principles relating to costs and benefits. The
Proponents' recasting of the action requested of the board should not lead to a
different result under Rule 14a-8(i)(7). As noted by the statements referenced
above, the Proposal could be construed as relating to McDonald's health care
costs and employee benefits, a matter of ordinary business, and thus is
excludable.
The Proposal is Excludable Under 14a-8(i)(7)
The staff's prior no-action letters demonstrate that, whether a proposal
requests a report, formation of a board committee, or adoption of a policy or
"principles," if the purpose or effect of the proposal is to (i) draw the
company into a pending national political or legislative debate (e.g., the U.S.
government's implementation of a universal health care system), or (ii) involve
shareholders in the company's day-to-day, ordinary business operations (e.g.,
management of health care costs or provision of employee benefits), the proposal
is excludable under Rule 14a-8(i)(7). Accordingly, whether the Proposal is
construed as relating to the current political discussion of universal health
care, or instead to McDonald's health care costs, the Proposal should be deemed
excludable under Rule 14a-8(i)(7).
Rule 14a-8(i)(3): Contrary to the Commission's Proxy Rules
Rule 14a-8(i)(3) permits exclusion of a proposal and supporting statement if
either is contrary to the Commission's proxy rules. One of the Commission's
proxy rules, Rule 14a-9, prohibits false or misleading statements in proxy
materials. The staff has indicated that a company may exclude a proposal where
"the resolution contained in the proposal is so inherently vague or indefinite
that neither the stockholders voting on the proposal, nor the company in
implementing the proposal (if adopted), would be able to determine with any
reasonable certainty exactly what actions or measures the proposal requires...."
See Staff Legal Bulletin No. 14B (September 15, 2004). As discussed above, the
Proposal seeks to have McDonald's board of directors adopt general principles
relating to comprehensive health care reform. If the staff is unable to concur
that McDonald's has substantially implemented the Proposal pursuant to Rule
14a-8(i)(10), as discussed above, we believe that the Proposal is so vague and
indefinite that it may be excluded pursuant to Rule 14a-8(i)(3).
The staff has consistently permitted the exclusion of proposals that relate to a
generic set of standards, principles or criteria that lack a precise definition
or ascertainable scope. For example, in Alaska Air Group (April 11, 2007), the
staff agreed that a proposal requesting the board of directors to amend the
company's governing documents to affirm that the shareholders could to "set
standards of corporate governance" could be excluded as vague and indefinite.
See also Johnson & Johnson (February 7, 2003)(permitting exclusion of a proposal
requesting a report on the company's progress concerning "the Glass Ceiling
Commission's business recommendations"); Occidental Petroleum Corp. (March 8,
2002) (permitting exclusion of a proposal requiring the implementation of a
company-wide policy consistent with the "Voluntary Principles on Security and
Human Rights in the Oil, Gas and Mining Industries"); and Puget Energy Inc.
(March 7, 2002) (permitting exclusion of a proposal requesting the board take
the necessary steps to implement a policy of "improved corporate governance").
Similarly, "comprehensive health care reform" is a generic term which lacks any
precise definition or ascertainable scope. The Proponents' reference to the
Institute of Medicine principles only compounds this problem by referring to
principles that are "universal," "continuous," "sustainable" and "equitable."
Over and above the actions McDonald's believes it has already taken to implement
the Proposal, neither McDonald's nor its board of directors would be certain as
to what actions McDonald's could, or should, take to adopt and implement these
principles.
Further, the Proposal is so vague and indefinite that McDonald's shareholders
would not be able to determine with any reasonable certainty exactly what
actions or measures the proposal requires. See, e.g., New York City Employees'
Retirement System v. Brunswick Corp., 789 F. Supp. 144, 146 (S.D.N.Y.
1992)("Shareholders are entitled to know precisely the breadth of the proposal
on which they are asked to vote."); and Dyer v. SEC, 287 F.2d 773,781 (8th Cir.
1961) ("It appears to us that the proposal, as drafted and submitted to the
company, is so vague and indefinite as to make it impossible for the board of
directors or the stockholders at large to comprehend precisely what the proposal
would entail."). Moreover, because the Proposal is so vague and indefinite,
McDonald's shareholders could be misled into believing that by approving the
Proposal, McDonald's was going to become a proponent or advocate of
comprehensive health care reform in the U.S. Because the proposal is so vague or
indefinite that neither our shareholders voting on the Proposal, nor McDonald's
in implementing the Proposal (if adopted), would be able to determine with any
reasonable certainty exactly what actions or measures the Proposal requires, the
Proposal is excludable pursuant to Rule 14a-8(i)(3).
Conclusion
For the reasons set forth above, it is our view that McDonald's may exclude the
Proposal from its proxy materials pursuant to Rules 14a-8(i)(10), 14a-8(i)(7)
and 14a-8(i)(3), and we request confirmation that the staff will not recommend
any enforcement action to the Commission if McDonald's so excludes the Proposal.
If you have any questions or need additional information, please free to contact
me at (630) 623-3373 or Denise Horne at (630) 623-3154. When a written response
to this letter is available, I would appreciate your sending it to me by fax at
(630) 623-0497 and to the Proponent by fax at (718) 504-4787.
Sincerely,
/s/
Gloria Santona
Executive Vice President, General Counsel and Secretary
cc: Trinity Health
Catherine Rowan
Dominican Sisters of St. Mary of the Springs
Catholic Health East
Catholic Healthcare West
Dominican Sisters of Springfield Illinois
The Sisters of St. Francis of Philadelphia
The Sinsinawa Dominicans, Inc.
Alan L. Dye
[APPENDIX]
December 3, 2007
James A. Skinner
Chief Executive Officer
McDonald's Corporation
McDonald's Plaza
Oak Brook, IL 60523-1928
Dear Mr. Skinner,
Trinity Health, with an investment position of over $2000 worth of shares of
common stock in McDonald's Corporation, looks for social and environmental as
well as financial accountability in its investments.
Proof of ownership of common stock in McDonald's Corporation is enclosed.
Trinity Health has continuously held stock in McDonald's for over one year and
intends to retain the requisite number of shares through the date of the Annual
Meeting.
Health care reform has been called the most critical domestic social issue of
our day. We are interested in the role that McDonald's, as a large and
influential company, can play in the national effort for universal access to
quality health care that is accessible, affordable and provides for
accountability and equitable financing for all stakeholders.
Acting on behalf of Trinity Health, I am authorized to notify you of Trinity
Health's intention to present the enclosed proposal for consideration and action
by the stockholders at the next annual meeting, and I hereby submit it for
inclusion in the proxy statement n accordance with Rule 14-a-8 of the General
Rules and Regulations of the Securities Exchange Act of 1934.
I will be the primary contact for this proposal, representing Trinity Health. We
look forward to discussing this proposal with the Company at your earliest
convenience.
Sincerely,
/s/
Catherine Rowan
Corporate Responsibility Consultant, representing Trinity Health
cc: Gloria Santona, Office of the Secretary
enc.
[INQUIRY LETTER]
HEALTH CARE REFORM PRINCIPLES
RESOLVED: shareholders urge the Board of Directors to adopt principles for
comprehensive health care reform (such as those based upon principles reported
by the Institute of Medicine:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable for
society.
5. Health insurance should enhance health and well being by promoting access to
high-quality care that is effective, efficient, safe, timely, patient-centered,
and equitable).
Consistently polls show that access to affordable, comprehensive health care
insurance is the most significant social policy issue in America (NBC News/Wall
Street Journal, the Kaiser Foundation and The New York Times/CBS News). Health
care reform also has become a core issue in the 2008 presidential campaign.
Many national organizations have made health care reform a priority. In 2007,
representing "a stark departure from past practice," the American Cancer Society
redirected its entire $15 million advertising budget "to the consequences of
inadequate health coverage" in the United States (New York Times, 8/31/07).
John Castellani, president of the Business Roundtable (representing 160 of the
country's largest companies), states that 52% of the Business Roundtable's
members say health costs represent their biggest economic challenge. "The cost
of health care has put a tremendous weight on the U.S. economy," according to
Castellani, "The current situation is not sustainable in a global, competitive
workplace." (BusinessWeek, July 3, 2007). The National Coalition on Health Care
(whose members include 75 of the United States' largest publicly-held companies,
institutional investors and labor unions), also has created principles for
health insurance reform. According to the National Coalition on Health Care,
implementing its principles would save employers presently providing health
insurance coverage an estimated $595-$848 billion in the first 10 years of
implementation.
Annual surcharges as high as $1160 for the uninsured are added to the total cost
of each employee's health insurance, according to Kenneth Thorpe, a leading
health economist at Emory University. Consequently, we shareholders believe that
the 47 million Americans without health insurance results in higher costs for
McDonald's and other U.S. companies providing health insurance to their
employees.
In our view, increasing health care costs have focused growing public awareness
and media coverage on the plight of active and retired workers struggling to pay
for medical care. Increasing health care costs leads companies to shift costs to
employees. This can reduce employee productivity, health and morale. We also
believe rising healthcare costs borne by the company have an adverse affect on
shareholder value.
Supporting Statement
The Institute of Medicine, established by Congress as part of the National
Academy of Sciences, issued its principles for reforming health insurance
coverage in Insuring America's Health: Principles and Recommendations (2004). We
believe principles for health care reform, such as the IOM's, are essential if
public confidence in our company's commitment to its employees' health care
coverage is to be maintained. We ask shareholders to support this resolution.
[INQUIRY LETTER]
February12, 2008
BY HAND DELIVERY
Office of the Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: McDonald's CorporationShareholder Proposal Submitted by Trinity Health,
Dominican Sisters, St. Mary of the Springs, Catholic Health East, Catholic
Healthcare West, Dominican Sisters of Springfield Illinois, The Sisters of St.
Francis of Philadelphia and The Sinsinawa Dominicans, Inc. Adopt Principles for
Comprehensive Health Care Reform
Ladies and Gentlemen:
We previously submitted to the staff a letter, dated January 18, 2008,
requesting the staff's concurrence that the shareholder proposal referenced
above (the "Proposal") may be excluded from the 2008 proxy materials of
McDonald's Corporation ("McDonald's") under Rules 14a-8(i)(10), 14a-8(i)(7) and
14a-8(i)(3).
Trinity Health, the lead proponent, through its representative Catherine Rowan,
has informed McDonald's of the proponents' withdrawal of the Proposal. Attached
as Exhibit 1 are copies of correspondence from each of the proponents listed
above confirming that the Proposal has been withdrawn. Accordingly, McDonald's
also hereby withdraws its request for a no-action letter relating to the
Proposal.
In accordance with Rule 14a-8(j), we have enclosed six copies of this letter,
including the exhibit. A copy of this letter also is being provided
simultaneously to each of the proponents.
If you have any questions or require additional information, please do not
hesitate to contact me at (630) 623-3373.
Sincerely,
/s/
Gloria Santona
Executive Vice President,
General Counsel and Secretary
cc: Trinity Health
Catherine Rowan
Dominican Sisters of St. Mary of the Springs
Catholic Health East
Catholic Healthcare West
Dominican Sisters of Springfield Illinois
The Sisters of St. Francis of Philadelphia
The Sinsinawa Dominicans, Inc.
Alan L. Dye
Enclosures
[STAFF REPLY LETTER]
February13, 2008
Gloria Santona
Executive Vice President,
General Counsel and Secretary
McDonald's Corporation
2915 Jorie Boulevard
Oak Brook, IL 60523
Re: McDonald's Corporation
Dear Ms. Santona:
This is in regard to your letter dated February 12, 2008 concerning the
shareholder proposal submitted by Trinity Health; the Dominican Sisters, St.
Mary of the Springs, Columbus, OH; Catholic Health East; Catholic Healthcare
West; the Dominican Sisters of Springfield, IL; the Sisters of St. Francis of
Philadelphia; and Sinsinawa Dominicans, Inc. for inclusion in McDonald's proxy
materials for its upcoming annual meeting of security holders. Your letter
indicates that the proponents have withdrawn the proposal, and that McDonald's
therefore withdraws its January 18, 2008 request for a no-action letter from the
Division. Because the matter is now moot, we will have no further comment.
Sincerely,
/s/
Heather L. Maples
Special Counsel
cc: Trinity Health and co-proponents
c/o Catherine Rowan
Corporate Responsibility Consultant
766 Brady Ave., Apt. 635
Bronx, NY 10462
cc, cont.:
Sister Kathleen Coll, SSJ
Administrator, Shareholder Advocacy
Catholic Health East
System Office
3805 West Chester Pike
Suite 100
Newtown Square, PA 19073-2304
Susan Vickers, RSM
VP, Community Health
Catholic Healthcare West
185 Berry Street, Suite 300
San Francisco, CA 94107-1739
Regina McKillip, OP
Committee Member
Sinsinawa Dominicans, Inc.
Shareholder and Consumer Action Advisory Committee
585 County Rd. Z
Sinsinawa, WI 53824
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