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MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT ("Master Agreement") is made and entered into
as of this 9th day of February, 2000 ("Effective Date") by and between QWEST
COMMUNICATIONS CORPORATION, a Delaware corporation or its Affiliates (as
defined herein) (collectively referred to as "Qwest"), having a principal
place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Qwest"), and JATO COMMUNICATIONS CORP., a Delaware corporation ("Jato"),
having a principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. (Qwest and Jato are collectively referred to herein as the
"Parties", or individually as a "Party").
WHEREAS, Jato desires to purchase from Qwest, and Qwest desires to sell to
Jato, on a preferred provider basis, certain wholesale telecommunications,
Internet and data services (collectively, the "Qwest Services").
WHEREAS, Qwest desires to purchase from Jato, and Jato desires to sell to
Qwest, on a preferred provider basis, digital subscriber line ("DSL")
services (collectively, the "Jato Services").
WHEREAS, Qwest desires to purchase an equity interest in Jato.
NOW THEREFORE, the Parties agree as follows:
1. DEFINITIONS.
(1) Backbone Transport - "Backbone Transport" shall collectively refer to
Qwest's asynchronous transfer mode ("ATM") and DS-3 and OC-n leased private
line services.
(2) DSL Services - "DSL Services" shall mean those digital subscriber line
services furnished by a Party.
(3) Frame Relay Services - "Frame Relay Services" shall refer to Qwest's frame
relay services.
(4) IP Services - "IP Services" shall collectively refer to dedicated Internet
access ("DIA") services, web hosting services, and virtual private network
("VPN") services (including, without limitation, network, customer premises
equipment ("CPE"), dial and DSL).
(5) Metro Backhaul - "Metro Backhaul" shall mean local services utilized to
provide connectivity from Jato's central offices where Jato's DSL equipment
is located to Jato switching centers in cities where Qwest's backbone
service areas overlap.
(6) Qwest Agreements - "Qwest Agreements" shall collectively refer to the
Wholesale Agreement (as defined in Section 2.1(1)) and the IP Agreement (as
defined in Section 2.1(2)).
2. MASTER AGREEMENT; SERVICES.
2.1 MASTER AGREEMENT. The parties shall concurrently with the execution of
this Master Agreement enter into the following ancillary agreements: (i) the
stock purchase agreement and related documents (the "Equity Agreements"); and
(ii) the following agreements (each, a "Service Agreement," and collectively
referred to as the "Services Agreements"). The parties agree that the terms
and conditions of this Master Services Agreement will be incorporated into
the Services Agreements in full by this reference:
(1) Qwest Wholesale Services Agreement (the "Wholesale Agreement") for the
provision of Backbone Transport and Frame Relay Services by Qwest;
(2) Qwest Web Master Internet Services Agreement (the "IP Agreement") for the
provision of IP Services (other ancillary professional services furnished
by Qwest that are related to the IP Services will be handled in a separate
professional services agreement, to be negotiated in good faith by the
Parties); and
(3) Jato Services Agreement (the "Jato Agreement") for the provision of DSL
Services to Qwest by Jato.
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The Parties acknowledge and agree that certain Services Agreements may not be
finalized and executed by the Parties on or before the Effective Date.
Accordingly, the Parties agree to negotiate in good faith and execute those
Services Agreements that have not been executed as of the Effective Date. If
the Parties are unable, after good faith negotiations, to execute any Service
Agreement, the Parties agree: (i) that such failure shall not constitute a
default under this Master Agreement, and (ii) that the amount of Jato's Usage
Commitment and Prepayment Amount shall be reduced pro rata by the amount of
the Qwest Agreements which the Parties were unable to execute.
2.2 QWEST DSL SERVICES. Qwest anticipates that it will be able to provide
Jato with wholesale DSL Services by ▇▇ ▇▇▇▇, although Qwest's inability to
provide Jato DSL Services by such date shall not constitute a breach of this
Master Agreement or any Service Agreement. If Qwest is able to furnish Jato
with wholesale DSL Services, Qwest shall so notify Jato and the Parties will
negotiate in good faith a mutually agreeable amendment to the Wholesale
Agreement (the "DSL Amendment"). The DSL Amendment will confer upon Qwest
"preferred provider" status (as described herein) for those DSL Services
which Jato orders outside of its then-current service region, which the
Parties will mutually identify. Each DSL facility which Jato orders under the
DSL Amendment will have a minimum facility term of at least one (1) year.
Jato will use reasonable efforts, but does not guarantee, to supply Qwest
with a minimum of at least fifteen thousand (15,000) business-class DSL
subscribers during the Initial Term. Jato acknowledges and agrees that it
must meet its revenue commitment for "Allotment" DSL Services by the
appropriate milestones as provided in Section 4. In designating Qwest as its
"preferred provider" of DSL Services, Qwest will be Jato's first choice as a
DSL Service provider in the cities and central offices identified in the DSL
Amendment (that are identified as Qwest facility-based DSL networks and which
do not overlap with Jato's then-existing facilities-based DSL services).
Jato may award business to other providers if, after Qwest's "first right to
satisfy any order," Qwest is unable to meet Jato's end user service
requirements or service delivery schedules.
2.3 JATO DSL SERVICES. In the Jato Agreement, Qwest will designate Jato as
a Qwest "preferred provider" of DSL services during the Initial Term as the
"last mile" access connection to Qwest's data communication networks to be
identified by the Parties. In designating Jato its "preferred provider" of
DSL services, Jato will be Qwest's first choice as a DSL service provider in
the cities and central offices identified in the Jato Agreement, that do not
overlap with Qwest's DSL providers' existing as of the date of execution of
the Master Agreement and existing DSL footprint, and which do not overlap
areas where Qwest has deployed or plans to deploy its own facilities-based
DSL services. Qwest may award business to other providers if, after a right
of first refusal, Jato is unable to meet end customer service requirements or
service delivery schedules. Qwest shall make reasonable efforts to supply
Jato with a minimum of seventy five thousand (75,000) business-class DSL
subscribers during the Initial Term. The subscriber commitment in the
previous sentence *** a "take or pay" arrangement. Qwest will purchase each
circuit on a one (1) year term commitment. A specific requirement of pricing
is that Jato will always *** wholesale ILEC pricing for comparable services.
2.4 METRO BACKHAUL. The Parties agree to negotiate in good faith and
execute an agreement for Metro Backhaul Services within and outside the US
West, Inc. ("US West") territories. The Parties acknowledge and agree that
Qwest's ability to provide Metro Backhaul to Jato within the US West
territories is contingent upon the consummation of Qwest's proposed merger
with US West, which is subject to certain legal and regulatory approvals and
restrictions (the "US West Merger"). Jato acknowledges and agrees that
Qwest's current inability to provide Metro backhaul to Jato shall not
constitute a breach of this Master Agreement or any Qwest Agreement. In the
event the US West Merger is consummated and Qwest, as a result of such
merger, is reasonably able to provide Metro backhaul in the US West territory
to Jato, Qwest shall so notify Jato and the Parties will negotiate in good
faith a mutually agreeable amendment to an existing Qwest Agreement or new
services agreement.
3. TERM; TERMINATION.
3.1 The term of this Master Agreement shall commence on the Effective Date
and remain in effect for five and one-half (5.5) Annual Periods (as defined
herein) (the "Initial Term"). After the expiration of the Initial Term,
this Master Agreement shall continue so long as a Services Agreement remains
in effect unless and until terminated by either Party (the Initial Term and
any extension by way of existing Services Agreement shall be collectively
referred to as the "Term"). As used herein, "Annual Period" shall refer to:
(i) the twelve (12) consecutive month period commencing on the Effective Date
of this Agreement ("First Annual Period"); and (ii) to each subsequent twelve
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(12) month period of the Term commencing on the anniversary date of the First
Annual Period (the last 6 month period of the Initial Term shall also be
deemed an Annual Period).
3.2 In addition to any other termination remedies set forth in the Qwest
Agreements, Jato may terminate: (i) the Master Agreement (but not the Equity
Agreement) prior to the expiration of the Initial Term if Jato has attained
its twenty-five million ($25,000,000.00) Usage Minimum (as defined below) and
has satisfied in full all minimum facility service terms associated with the
Qwest Services; or (ii) a Qwest Agreement prior to the expiration of the such
Qwest Agreement if Jato attains the minimum revenue commitment associated
with such Qwest Agreement(s) and has satisfied in full all minimum facility
service terms associated with the Qwest Services. Qwest may terminate the
Jato Agreement in accordance with its terms. A Party wishing to terminate
any agreement hereunder must give the non-terminating Party thirty (30)
calendar days prior written notice of the intended date of such termination.
4. USAGE COMMITMENTS.
4.1 USAGE MINIMUM; ANNUAL REVENUE SHORTFALL CHARGE. Jato shall pursuant to
the terms and conditions of the Qwest Agreements and this Master Agreement,
purchase Qwest Services during the Initial Term of at least twenty-five
million dollars ($25,000,000.00) ("Usage Minimum"), which is calculated as
having a present value of sixteen million dollars ($16,000,000.00) (the "PV
Usage Minimum"), which amount shall be paid to Qwest *** in accordance with
Section 5. Jato shall purchase Qwest Services in accordance with the total
amount of revenue commitments ("Annual Totals") at the Annual Period
milestones set forth in Table 4.1 below:
Table 4.1 Usage Minimums for Qwest Services.
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Annual Period
---------------------------------------------------------------------------------------------------------------------
# 1 # 2 # 3 # 4 # 5 # 6
Service Months 0-12 Months 13-24 Months 25-36 Months 37-48 Months 49-60 Months 61-66 Totals
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Backbone
Transport *** *** *** *** *** *** ***
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Frame Relay *** *** *** *** *** *** ***
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IP Services *** *** *** *** *** *** ***
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* Overallotment
(including
Metro Backhaul,
DSL Services,
and other
services) *** *** *** *** *** *** ***
---------------------------------------------------------------------------------------------------------------------
Annual Totals *** *** *** *** *** *** ***
---------------------------------------------------------------------------------------------------------------------
* Jato's total Actual Usage of Metro Backhaul Services shall not exceed ***
during the Initial Term.
If at the end of each Annual Period, Jato's Actual Usage as measured during
such Annual Period of the Qwest Services is less than the Annual Total
minimum set forth in Table 4.1, Jato will be liable for a shortfall charge
equal to the difference between the Annual Total minimum and Jato's
aggregate, Actual Usage (as defined herein) invoiced under the Qwest
Agreements (the "Annual Shortfall Charge"). (By way of example, and not
limitation, if Jato's aggregate, Actual Usage at the end of the second Annual
Period is ***, Jato will be liable for an Annual Shortfall Charge in the
amount of *** (calculated as ***)). Qwest shall, within a reasonable period
of time after the conclusion of the Annual Period and upon thirty (30)
calendar days written notice to Jato, reduce the Prepayment Amount by an
amount equal to the Annual Shortfall Charge, or alternatively if the
remaining Prepayment Amount is insufficient to cover the full amount of the
Annual Shortfall Charge, invoice Jato for the Annual Shortfall Charge.
4.2 ACTUAL USAGE OF SPECIFIC SERVICES DOES NOT MEET EXPECTATIONS AT THE END
OF THE INITIAL TERM. If at the end of the Initial Term, Jato's Actual Usage
(as defined herein) of any of the specific Qwest Services (except Metro
Backhaul services) is less than the Usage Minimum set forth in Table 4.1,
Qwest will invoice Jato at the conclusion of the Initial Term for the
Services Shortfall Charge (as defined herein) and Jato shall be liable for
and pay the Services Shortfall Charge within thirty (30) calendar days of
after receipt of Qwest's invoice. The Services Shortfall Charge shall be an
amount equal to the difference between the Usage Minimum and the Actual Usage
invoiced
***Text Omitted and Filed Separately
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200.83 and 240.24b-2
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under the Qwest Agreement for specific Qwest Services, in addition to being
liable for the payment of unpaid Actual Usage charges (if any). "Actual
Usage" shall mean all recurring charges, usage charges and other qualifying
charges applicable to the Qwest Services accruing to Jato's account under the
Qwest Agreements, before application of all eligible discounts and excluding
all taxes, surcharges, fees and other amounts owing for or related to,
credits, uncollectable Jato charges, pass-through charges, installation
charges, local loops and any other charges expressly excluded in the
applicable Qwest Agreements. (By way of example, and not limitation, if
Jato's aggregate, Actual Usage of Frame Relay Services at the end of the
Initial Term is ***, Jato will be liable for a Services Shortfall Charge in
the amount of *** (calculated as ***)).
4.3 JATO TERMINATES QWEST SERVICE OR AN AGREEMENT FOR CAUSE.
If Jato terminates a Qwest Service or a Qwest Agreement for "cause" (as
described in the Qwest Agreements) prior to the end of the Initial Term and
prior to the satisfaction of the Usage Minimum during each of the Annual
Periods, the amount of revenue associated with the terminated Qwest
Service(s) or Qwest Agreement(s), as the case may be (collectively, the
"Terminated Revenue"), shall be reallocated on a pro rata basis amongst the
non-terminated Qwest Services. If as a result of terminating the Qwest
Service(s) or the Qwest Agreement(s), Jato is unable to meet its Usage
Minimum in any given Annual Period set forth in Table 4.1, Qwest shall reduce
Jato's Usage Minimum accordingly for such Annual Period by the amount of the
Terminated Revenue.
4.4 JATO TERMINATES AN AGREEMENT FOR CONVENIENCE OR QWEST TERMINATES FOR
CAUSE.
If Jato terminates the Qwest Agreements for "convenience" (i.e., for any
reason other than "cause" as described in the Qwest Agreements) or Qwest
terminates the Qwest Agreements for "cause" (as described in the Qwest
Agreements) prior to the end of the Initial Term and prior to the
satisfaction of the Usage Minimum during each of the Annual Periods, Jato
shall pay to Qwest upon termination an amount equal to: (i) the Shortfall
Charge for the terminated Qwest Services during the Annual Period in which
the Qwest Agreement is terminated; plus (ii) the Usage Minimum for the
terminated Qwest Services for each additional Annual Period remaining in the
Initial Term, in addition to being liable for the payment of unpaid Actual
Usage charges (if any). (By way of example, and not limitation, if Jato
terminates the Frame Relay Services of the Wholesale Agreement for
convenience during month fifty (50) of the Initial Term (i.e., Annual Period
#5) and has had *** of Actual Usage in Frame Relay Services as of the
effective date of such termination, Jato shall be liable for and pay an
amount equal to ***, which is calculated as follows: (i) *** (which is the
Shortfall Charge for the current Annual Period, calculated as the difference
between the Frame Relay Usage Minimum of *** minus the Frame Relay Actual
Usage of ***), plus (ii) *** (which is the Usage Minimum for the terminated
Frame Relay Services for the remaining Annual Period (i.e., Annual Period #6)
of the Initial Term.)
5. PREPAYMENT.
5.1 Subject to the completion of Jato's IPO, Jato shall prepay Qwest,
within ten (10) business days after Jato's IPO, sixteen million dollars
($16,000,000.00) (the "Prepayment Amount") to be applied against the purchase
of Qwest Services under the Wholesale Agreement and IP Agreement (and any
other Qwest Service Agreement(s) between the Parties), calculated as having a
value of twenty-five million dollars ($25,000,000.00) over the Initial Term.
Qwest shall not be liable to pay Jato any accrued interest on the Prepayment
Amount, provided however, that interest shall accrete on the Outstanding
Prepayment Balance Amount monthly (the "Accretion Interest"), such Accretion
Interest shall be calculated at an annual accretion rate of *** percent (the
"Accretion Rate"), and be added to the Prepayment Amount. Accretion will not
commence until after Qwest receives the Prepayment Amount. Upon Qwest
calculating Jato's monthly interest accretion, Qwest shall invoice Jato
monthly for Jato's use of the Qwest Services and, upon thirty (30) days after
the date of such invoice, decrease the Prepayment Amount by the undisputed
amount of Qwest's invoice. Pursuant to Section 4 herein, any undisputed
shortfall charges or early termination fees set forth in this Master
Agreement or any Qwest Agreement may be applied against and drawn down from
the Prepayment Amount, so long as Qwest gives Jato thirty (30) calendar days
prior written notice and other detailed written documentation supporting such
charges or fees. So long as the Prepayment Amount has not been fully drawn
down by Qwest, Qwest shall not be entitled to: (i) suspend the Qwest Services
or terminate the Qwest Agreements for non-payment of any invoices; or (ii)
request additional security pursuant to Section 6.3 of the
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Wholesale Agreement. Once the Prepayment Amount has been fully exhausted,
Jato shall be responsible for paying its Qwest invoices in accordance with
the "payment" sections of the Qwest Agreements.
5.2 Until Jato prepays the Prepayment Amount or if, during the Initial
Term, the aggregate amount of the Qwest invoices exceeds the Prepayment
Amount, Qwest shall invoice Jato monthly for Jato's use of the Qwest Services
for the balance of the Initial Term, and Jato shall be responsible for paying
such invoices in accordance with the "payment" sections of the Qwest
Agreements. The Parties shall each submit detailed quarterly reports
indicating, among other things, the amount of Jato's Actual Usage, Usage
Minimum, the Prepayment Amount, and interest accretion (although the failure
of Qwest to submit or demand such report shall not be deemed a default or any
waiver of any right hereunder).
5.3 Until Jato consummates its IPO, the provisions set forth in Section 5.1
shall not apply, and Qwest shall invoice Jato for Qwest Services used by Jato
in the manner set forth in the Qwest Agreements, and Jato shall be
responsible for complying with all of the payment provisions contained in the
Qwest Agreements. The failure of Jato to consummate its IPO shall not
relieve Jato of any of its obligations hereunder (except that Jato shall not
be responsible for providing the Prepayment Amount to Qwest). All Qwest
Services purchased by Jato, whether pre-Jato IPO or post-Jato IPO, shall
count towards and contribute to the Usage Minimums. Upon consummation of the
US West Merger, the Parties shall negotiate in good faith and execute
amendment(s) to an existing Qwest Agreement and/or new services agreement(s),
such that, any backbone transport, DSL services, frame relay services, IP
services, and metro backhaul services purchased thereafter from US West by
Jato shall count towards and contribute to the Usage Minimums, subject to the
Metro Backhaul cap of *** set forth in Section 4.1.
6. CONFIDENTIALITY.
Neither Party shall make any disclosure of this Master Agreement, the
Services Agreement, or the transactions contemplated hereby without first
obtaining the written approval of the other Party, except to the extent that
additional disclosure may be required by law, in which case, the Party
required to make such disclosure will give the other Party prior notice
thereof. The provisions of this paragraph shall be binding upon the Parties
and shall survive any termination of this Master Agreement, any or all of the
Service Agreements, or any other agreement between the Parties and shall
remain in effect for a period of twelve (12) months following conclusion of
the Term. The Parties agree that they will not make public announcements
(i.e., other than to a Party's advisors) or issue press releases regarding
this Master Agreement or the transactions contemplated hereunder without the
prior written consent of the other Party.
7. QWEST AFFILIATE.
For purposes of this Agreement, Qwest shall be considered to include any
"Qwest Affiliate," where a "Qwest Affiliate" shall mean any entity: (i) which
controls, is controlled by, or is under common control with Qwest; or (ii) in
which Qwest owns an equity interest of not less than ***.
8. MISCELLANEOUS.
(a) Any dispute relating to this Master Agreement shall be submitted for
binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association and judgment on any award entered therein may be
entered in any court of competent jurisdiction. The venue for any such
arbitration shall be Denver, Colorado.
(b) In the event that any portion of this Master Agreement is held to be
unenforceable, the unenforceable portion shall be construed as nearly as
possible to reflect the original intent of the Parties and the remainder of
the provisions shall remain in full force and effect.
(c) A Party's failure to insist upon strict performance of any provision of
this Master Agreement shall not be construed as a waiver of any of its rights
hereunder.
***Text Omitted and Filed Separately
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200.83 and 240.24b-2
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(d) Each Party hereto is an independent contractor. Nothing in this Master
Agreement shall constitute or create a joint venture, partnership, or any
other similar arrangement between Jato and Qwest. Neither Party is
authorized to act as agent or bind the other Party except as expressly stated
in this Master Agreement.
(e) Notwithstanding anything to the contrary herein, in no event shall a
Party shall be liable to the other for any direct, indirect, consequential,
exemplary, special, incidental or punitive damages, or for any lost profits
of any kind or nature whatsoever, even if foreseeable, arising out of or
resulting from the failure to finalize or execute any or all of the Services
Agreements, even if the Party has been advised, knew or should have know of
the possibility of such damages.
(f) Subject to and without limiting any express assignment rights set forth
in the Equity Agreement or the Services Agreements, Jato shall not assign
this Master Agreement without first obtaining the prior written consent of
Qwest, which consent shall not be unreasonably withheld or delayed.
(g) This Master Agreement will be governed by and interpreted under the
laws of the State of New York, without giving effect to applicable conflicts
of law principles. Any cause of action Jato may have with respect to the
Services must be commenced within one (1) year after the claim or cause of
action arises or such claim or cause of action is barred. In any proceeding
to enforce the terms of this Master Agreement, the Party prevailing shall be
entitled to recover all of its expenses, including, without limitation,
reasonable attorney's fees.
(h) Each Party will bear its own expenses in connection with this Master
Agreement, including the Service Agreements.
(i) The terms and conditions contained in a specific Service Agreement
shall apply only to and within that Service Agreement. In the event of any
conflict between any or all of the terms and conditions contained in a
specific Service Agreement and this Master Agreement, the terms and
conditions contained in a specific Service Agreement shall prevail and be the
definitive guide to interpretation of the intent and rights and obligations
of the Parties; provided, however, the provisions of Sections 2.1, 2.4, 3.1,
3.2, 4.1, 4.2, 4.3, 4.4, 5.1, 5.2 and 5.3 of this Master Agreement shall
supplement and prevail, to the extent inconsistent, those similar terms
contained in a specific Service Agreement.
(j) This Master Agreement, including the Service Agreements which are
referenced herein, constitutes the entire agreement between Jato and Qwest
with respect to the Services. This Master Agreement may only be amended in a
written agreement executed by authorized representatives of both Parties
hereto.
The rights of Qwest set forth in this Master Agreement shall inure to Qwest
and all of its affiliates. The Parties have caused this Agreement to be
executed and warrant that their respective signatories are authorized to
execute this Agreement as of the Effective Date.
QWEST COMMUNICATIONS CORPORATION JATO COMMUNICATIONS CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President Chief Financial Officer
Date: 02/09/00 Date: 02/09/00
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