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EXHIBIT 10.26
COMPAQ COMPUTER CORPORATION
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made by Compaq Computer
Corporation ("Buyer") and J.T. Storage Inc., ("Seller"), (JTS).
The terms and conditions contained in this Agreement shall govern
the purchase and sale of Product listed in Exhibit A ("Products and
Pricing"), conforming to Compaq specifications listed in Exhibit "B".
1. INTENT
A. Buyer intends to enter into a long term relationship with Seller. As
such, Seller is willing to cooperate with Buyer to further mutual long
term goals by sharing Product road map and technology directions.
Seller agrees to cooperate to achieve Buyer's long term program goals
such as shortening Product lead-times, increasing volume flexibility,
achieving Just-in-Time delivery, achieving ongoing cost reductions and
specific quality goals, and continuous quality improvement.
B. This Agreement is not a requirements contract and does not obligate
Buyer to purchase any minimum quantity of Product but only establishes
the terms and conditions for such purchase if and when they occur,
except as provided in Exhibit "A".
2. PURCHASE ORDERS
A. Buyer will purchase Products only by issuing purchase orders ("Order or
Orders") to Seller. Orders shall contain such things as quantity, price,
delivery date, part number, and revision level. Buyer shall make
commercially reasonable efforts to send written confirmation (except by
mutual agreement) of Orders within one (1) week after issuance. If
Seller fails to return the acknowledgment, Seller will be deemed to have
accepted any Order which conforms with the terms of this Agreement. No
additional or different provisions proposed by Seller shall apply unless
expressly agreed to in writing by Buyer. Buyer hereby gives notice of
its objection to any additional or different terms.
B. Seller agrees that all Buyer sites, subsidiaries, affiliated companies
and subcontractors, wherever located, shall be entitled to make
purchases under this Agreement.
3. TERM OF AGREEMENT
A. The term of this Agreement shall be sixty (60) months, commencing on
the date Buyer executes this Agreement ("Effective Date"). This
Agreement will be automatically renewed at the conclusion of the
initial sixty (60) month period for successive twelve (12) month
periods unless one of the parties indicates by written notice to the
other party not less than thirty (30) days prior to the end of any
such twelve (12) month period that it does not intend to renew the
Agreement. Notwithstanding the foregoing, the Agreement shall remain
in full force and effect and shall be applicable to any Order(s) issued
by Buyer to Seller during the term of this Agreement until any and all
obligations of the parties under such Order(s) have been fulfilled.
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4. PRICING
A. The prices for the Products shall be set forth in Exhibit A and shall be for
the period set forth therein (the "Pricing Period").
B. Prices shall include all charges such as packaging, packing, crating,
storage, forwarding agent or brokerage fees, document fees, duties, and any
and all sales, use, excise and similar taxes.
C. Seller represents that the prices charged for any 3 1/2" product, qualified
by Compaq, will be [*] than prices charged to any other customer,
regardless of volume. Seller represents that prices charged for any 3" form
factor product, qualified by Compaq, will be [*] than prices charged to
any other customer, regardless of volume. In the event Seller provides
prices and/or terms for Products more favorable to another of its customers.
Buyer shall be entitled to a reduction retroactive to the date the prices
and/or terms were made available to other customers.
D. Seller shall maintain a vigorous cost reduction program to ensure that
pricing is competitive at all times. In the event that Buyer does not
consider Seller's pricing aggressive relative to the market during any
Pricing Period, Buyer shall have the right to request an immediate meeting
with Seller to renegotiate pricing.
E. Seller agrees to allow mutually acceptable independent auditors to inspect
the books and records of Seller from time to time as reasonably necessary to
confirm the representations contained in, and compliance with the terms of,
this Section 4, at Buyer's expense.
5. DELIVERY
A. Time shall be of the essence in meeting Buyer's requirements. Delivery
performance shall be measured by on-dock date at Buyer's specified ship-to
location (+/- 2 Days).
B. Unless otherwise set forth in the Order, title and risk of loss shall pass to
Buyer at Buyer's specified ship-to location.
C. If Seller delivers Product in advance of the specified delivery date, Buyer
may either return such Product at Seller's risk and expense for subsequent
delivery on the specified delivery date or retain such material and make
payment when it would have been due based on the specified delivery date.
D. Changes to delivery dates may only be made by Buyer's authorized purchasing
representatives. Buyer may, without cost or liability, issue change requests
for Product quantities and schedule dates in accordance with the Flexibility
Agreement attached as Exhibit D ("Flexibility Agreement"). Written
confirmation will be sent by Seller to Buyer within two (2) work days of
receiving a change request, and Buyer shall provide a confirming Order change
within ten (10) working days of receiving Seller's confirmation.
E. Seller shall notify Buyer in writing immediately if Seller has knowledge of
any event which could result in any change to the agreed delivery plan.
F. In the event that Product scheduled for delivery is more than two (2)
business days late, Buyer may request such Product to be shipped and
delivered via a different mode of transportation at sellers expense.
Alternatively, Buyer may purchase substitute Product elsewhere without
affecting other remedies Buyer may have and charge Seller any additional cost
incurred as a result.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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6. PACKING, MARKING, AND SHIPPING INSTRUCTIONS
A. All Product shall be prepared and packed in a commercially reasonably
manner so as to secure the lowest transportation rates and meet
carrier's requirements or those set forth in the Product specification
attached as Exhibit B ("Specification").
B. Each shipping container shall be marked to show Buyer's Order number,
part number, revision level, lot number, and quantity contained therein.
A packing list showing the Order number shall be included in each
container.
C. Seller agrees to standardize the count multiples used in shipments.
7. QUALITY
A. Seller shall establish and/or maintain a quality improvement plan
acceptable to Buyer. Seller's Quality Improvement Plan is attached to
this Agreement as Exhibit C ("Quality Plan").
B. At Buyer's request, Seller will facilitate one-site visits and
inspections by Buyer during normal business hours. Buyer's inspections
shall in no way relieve Seller of its obligation to deliver conforming
Product or waive Buyer's right of inspection and acceptance at the time
the Products are delivered.
C. Seller agrees to provide relevant outgoing inspection, quality, and
reliability data upon Buyer's request.
D. Seller agrees to conform to the revision level stated on Buyer's Order.
E. Seller agrees to advise Buyer of any changes to process, materials, or
sources of supply and ensure that such changes do not compromise
specifications, quality, or reliability of Products ordered by Buyer.
8. INSPECTION AND ACCEPTANCE
A. Products purchased pursuant to this Agreement shall be subject to
inspection and test by Buyer at all times and places, including the
period of manufacture or development. Unless otherwise specified in the
Order, final inspection and acceptance of Product by Buyer shall be at
Buyer's facilities. Buyer reserves the right to reject Product which
does not conform to the specifications, drawings, samples or other
descriptions specified by Buyer. Buyer may, at its option, either return
defective or non-conforming Product for full credit of the purchase
price plus any transportation charges paid by Buyer, or require prompt
correction or replacement of defective or non-conforming Product, which
rights shall be in addition to such other rights as Buyer may have in
law or in equity. Product required to be corrected or replaced shall be
subject to the same inspection and warranty provisions of this Agreement
as Product originally delivered under any Order. Buyer may charge Seller
for costs of any above normal level of inspection.
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B. In the event Buyer returns Product back to Seller for correction or
replacement, Seller shall repair or replace all defective Product within
five (5) days of receipt of such Product. Seller will issue a "Return
Material Authorization" within twenty-four (24) hours of receipt. Seller
shall bear all risk and costs such as labor, material, inspection, and
shipping to and from Buyer's facilities. If Buyer incurs any such costs, it
may either recover them directly from Seller or set-off via a credit note
any amounts due to Seller. Seller agrees to provide failure analysis of
rejected material within five (5) days after receipt of rejected materials.
Seller will also provide a written corrective action report addressing the
steps that will be taken to eliminate the cause of the problem.
9. WARRANTY
A. Seller warrants that title to all Products delivered to Buyer under this
Agreement shall be free and clear of all liens, encumbrances, security
interests or other claims and that for a period of three (3) years from date
of acceptance of material by Buyer, that all Product shall be free from
defects in material, workmanship, and design. Seller further warrants that
all Product shall conform to applicable specifications, drawings, samples,
and descriptions referred to in this Agreement. The warranty for replaced or
repaired Product will be the same as the original Product.
B. Defective material discovered during Buyer's manufacturing or assembly
processes are not considered to be a warranty repair and shall be corrected
in accordance with paragraph 8.B.
C. Seller agrees that in case of epidemic failure (greater than 2% failure for
the same cause in any six (6) month period), Seller shall provide correction
or replacement in accordance with Paragraph 8.B.
D. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 9, NO WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, ARE MADE WITH RESPECT TO THE PRODUCT
DELIVERED BY SELLER TO BUYER UNDER THIS AGREEMENT.
10. OUT OF WARRANTY REPAIRS and SPARE PARTS AVAILABILITY
A. Seller agrees to refurbish to a "like new" condition any out of warranty
Product at the refurbishment prices listed in Exhibit E ("Service, Repair,
and Refurbishment"). In addition, Seller agrees to make available for
purchase by Buyer replacement and repair parts for Products ("Spares") in
accordance with Exhibit E.
11. PAYMENT AND SET-OFF
A. Terms of payment shall be net 15 from the date of Seller's invoice provided
that Product has been received by Buyer for the period of six (6) months
from date of initial production shipment. After this period, terms of
payment shall be net 45 from the date of Seller's invoice provided that
Product has been received by Buyer. Payment of invoices shall not constitute
final acceptance of the Product.
B. Buyer retains the right to setoff rejections of Product or discrepancies on
paid invoices against future invoices.
C. Unless otherwise specified in Exhibit A or agreed to in writing by the
parties, payment shall be in U.S. dollars.
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12. CHANGES
A. Buyer may from time to time change the specifications for the Products and
Seller agrees to make best efforts to comply. If changes result in a change
in Seller's costs or in the time for performance, an adjustment will be
made. Any adjustment must be in writing and must be requested within ten
(10) days of receipt by Seller of the notice of change.
B. No changes shall be made by Seller in the form, fit, or function of Products
purchased hereunder without Buyer's prior written approval.
13. TERMINATION FOR CAUSE
A. Seller may terminate this Agreement and/or any Order issued hereunder at any
time by written notice in the event Buyer:
1. Fails to comply with any material provision of this Agreement or any
Order issued hereunder, and in the case of a breach which is capable of
remedy, fails to remedy same within thirty (30) days of notification of
said breach, or
2. Becomes insolvent or makes an assignment for the benefit of creditors, or
a receiver or similar officer is appointed to take charge of all or a
part of the Buyer's assets and such condition is not cured within thirty
(30) days, or
B. Buyer may terminate this Agreement and/or any Order issued hereunder at any
time by written notice in the event Seller:
1. Fails to comply with any material provision of this Agreement or any
Order issued hereunder, and in the case of a breach which is capable of
remedy, fails to remedy same within thirty (30) days of notification of
said breach, or
2. Becomes insolvent or makes an assignment for the benefit of creditors, or
a receiver or similar officer is appointed to take charge of all or a
part of Seller's assets and such condition is not cured within thirty
(30) days, or
3. Assigns or attempts to assign, or subcontracts or attempts to
subcontract, any or all of its rights or obligations under this Agreement
or any Orders issued hereunder to a third party without Buyer's prior
written approval, or
4. Failure to agree on pricing for any Pricing Period.
C. Upon termination by Seller of the Agreement and/or any Order issued under
13A above, Buyer's entire liability shall be to purchase all finished goods,
work in progress, and Buyer unique materials that have been purchased within
lead time by Seller to fulfill Buyer's Order(s).
D. Upon termination by Buyer of the Agreement and/or any Order issued under 13B
above:
1. Buyer shall have the option to purchase any materials or work in progress
which Seller may have purchased or processed for the fulfillment of any
Order at Seller's cost plus a reasonable amount for any value already
added by Seller.
2. Buyer shall have no liability beyond payment for any balance due for
Products delivered by Seller before notice of termination.
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14. TERMINATION FOR CONVENIENCE
A. Buyer may terminate this Agreement and/or any Order issued hereunder at
any time for any reason upon giving written notice of termination to the
Seller. Upon receipt of such notice, Seller shall immediately cease to
incur expenses pursuant to this Agreement and/or the Order that has been
terminated unless otherwise directed in the termination notice. Seller
shall also take all reasonable steps to mitigate the cost to Buyer for
terminating this Agreement and/or any Order. Within sixty (60) days from
the date of notice, Seller shall notify Buyer of costs incurred up to the
date of termination. In no event shall such cost exceed the unpaid balance:
1. Due for conforming material delivered prior to receipt of Buyer's
termination notice; and
2. Due on purchase orders previously issued in conformance with this
Agreement.
B. In addition to the foregoing, in the event that this Agreement is
terminated pursuant to this Paragraph, Buyer's entire liability shall be to
purchase all finished goods, work in progress, and Buyer unique materials
that have been purchased within lead time by Seller to fulfill Buyer's
Order(s).
15. LIMITATION OF LIABILITY
A. EXCEPT FOR A BREACH OF SECTION 19, 25 OR 26 OF THIS AGREEMENT, NEITHER
PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL (INCLUDING, WITHOUT LIMITATION,
LOST PROFITS, UNLIQUIDATED INVENTORY, ETC.), INCIDENTAL, INDIRECT, SPECIAL,
ECONOMIC, OR PUNITIVE DAMAGES EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16. FORCE MAJEURE
A. Neither party shall be liable for its failure to perform any of its
obligations hereunder during any period in which performance is delayed by
fire, flood, war, embargo, riot or the intervention of any government authority
("Force Majeure"), provided that the party suffering such delay immediately
notifies the other party of the delay. If, however, Seller's performance is
delayed for reasons set forth above for a cumulative period of fourteen (14)
calendar days or more, the Buyer, notwithstanding any other provision of this
Agreement to the contrary, may terminate this Agreement and/or any Order issued
hereunder by notice to Seller. In the event of such termination, Buyer's sole
liability, hereunder will be for the payment to Seller of any balance due and
owing for conforming Product delivered by Seller prior to Seller's notification
of delay to Buyer. In the event the parties do not terminate this Agreement
and/or Order due to a Force Majeure, the time for performance or cure will be
extended for a period equal to the duration of the Force Majeure.
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17. PRODUCT NOTICES
A. Any notice given under this Agreement shall be in writing and will be
effective when delivered personally or deposited in the mail, postage prepaid
and addressed to the parties at their respective addresses set forth below,
or at any new address subsequently designated in writing by either party to
the other:
If to Seller: If to Buyer:
JTS CORPORATION COMPAQ COMPUTER CORPORATION
1289 Anvilwood Avenue P.O. BOX 692000
Sunnyvale, CA 94089 20555 S.H. 249
HOUSTON, TEXAS 77269-2000
ATTN.: David B. Pearce ATTN.:
with a copy to:
COMPAQ COMPUTER CORPORATION
P.O. BOX 692000
20555 S.H. 249
HOUSTON, TX 77269-2000
ATTN.: Division Counsel - Operations
18. COMPLIANCE WITH LAWS
A. All Product supplied and work performed under this Agreement shall comply
with all applicable laws and regulations in effect. In particular, Seller
agrees that its performance under this Agreement shall comply with all laws
governing its relationship with its employees, agents or subcontractors and
with the chlorofluorocarbon labeling requirements of the U.S. Clean Air Act
of 1990. Upon request, Seller agrees to certify compliance with such
applicable laws and regulations.
19. PATENT, COPYRIGHT AND TRADEMARK INDEMNITY
A. Seller shall defend, at its expense, any claim against Buyer alleging that
Products furnished under this Agreement infringe any patent, copyright or
trademark and shall pay all costs and damages awarded, provided Seller is
notified in writing of such claim and permitted to defend and compromise such
claim. If a final injunction against Buyer's use of the Products results from
such a claim (or, if Buyer reasonably believes such a claim is likely) Seller
shall, at its expense, and at Buyer's request, use commercially reasonable
efforts to obtain for Buyer the right to continue using the Product. In the
event that Seller cannot obtain such right for Buyer, Seller shall repurchase
all such Product from Buyer at the purchase price.
B. Seller warrants that there are no claims of infringement with respect to the
Product.
C. Seller is authorized to use Compaq logo and trademark only to the extent
necessary to meet the required specification for the Product(s). No other
rights with respect to Buyer's trademarks, trade names or brand names are
conferred, either expressly or by implication, upon Seller.
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20. CAPACITY PLANNING
A. Seller agrees to review forecasts provided by Buyer and advise Buyer if
Seller anticipates that he will be unable to achieve the requested volumes.
Buyer volume forecasts will be provided to Seller in accordance with Exhibit
A. Seller may from time to time request Buyer to review Buyer's forecast and
advise of any changes.
21. GRATUITIES
A. Each party represents that it has not offered nor given and will not offer
nor give any employee, agent, or representative of the other party any
gratuity with a view toward securing any business from the other party or
influencing such person with respect to the business between the parties.
22. INSURANCE AND STATUTORY OBLIGATIONS
A. If Seller's work under this Agreement requires access by Seller to any of
Buyer's premises or the premises of Buyer's customers or locations where
Buyer conducts business, or with material or equipment furnished by Buyer,
Seller shall take all necessary precautions to prevent the occurrence of any
injury to persons or property during the progress of such work and, except
to the extent that such injury is due solely and directly to Buyer's acts or
negligence, Seller shall indemnify Buyer against all loss which may result
in any way from any act or negligence of Seller, its employees, servants,
agents or subcontractors, and Seller shall maintain such insurance as shall
protect Buyer from such risks and from any statutory liabilities arising
therefrom and shall provide evidence of such insurance to Buyer upon
request.
23. INDEMNIFICATION
Seller agrees to protect, defend, indemnify and save Buyer harmless from all
sums, costs and expense which Buyer may incur or be obliged to pay as a
result of any and all loss, expense, damage, liability, claims, demands,
either at law or in equity, of every nature whatsoever in favor of any
person, including both Seller's and Buyer's employees, resulting from any
personal injury or death resulting from the use of any product sold to Buyer
by Seller hereunder, irrespective of whether Compaq or any other party is
found to have been negligent or strictly liable in connection with such
personal injury or death.
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24. CONFIDENTIAL INFORMATION
A. Each party recognizes that it may have previously entered or will in the
future enter into various agreements with the other party which obligates
it to maintain as confidential certain information disclosed to it by the
other party. To the extent that such information or any further
confidential information, which might include but is not limited to
business plans, forecasts, capacity, pricing, inventory levels, etc.
(collectively referred to hereinafter as "Information") is disclosed in
furtherance of this Agreement or any Order issued hereunder, such
information shall be so disclosed pursuant to the minimum terms and
conditions listed below; provided, however, the minimum terms and
conditions listed below shall in no way relieve the parties from any
obligation or modify such obligations previously agreed to in other
agreements. Both parties agree that this Agreement and any other
agreements regarding confidential information shall hereafter be
considered as coterminous, and shall expire no earlier than the date of
expiration or termination of this Agreement.
B. Both parties agree that the party receiving information will maintain such
information in confidence for a period of three (3) years from the date of
disclosure of such information, except when such disclosure is required by
law.
C. Each party shall protect the other party's information to the same extent
that it protects its own confidential and proprietary information and shall
take all reasonable precautions to prevent unauthorized disclosure to third
parties, except when such disclosure is required by law.
D. The parties acknowledge that the unauthorized disclosure of such
information will cause irreparable harm. Accordingly, the parties agree
that the injured party shall have the right to seek immediate injunctive
relief enjoining such unauthorized disclosure.
E. This provision shall not apply to information (1) known to the receiving
party at the time of receipt from the other party, (2) generally known or
available to the public through no act or failure to act by the receiving
party, (3) furnished to third parties by the disclosing party without
restriction on disclosure, or (4) furnished to the receiving party by a
third party as a matter of right and without restriction on disclosure.
F. Immediately upon termination of this Agreement or at the request of the
other party, each of the parties shall promptly return all materials in its
possession containing information of the other party.
25. COUNTRY OF ORIGIN
A. For each Product purchased under this Agreement, Seller shall furnish
Buyer with country of origin (manufacture), by quantity and part number
(Buyer's and Seller's) if necessary.
B. Seller agrees to provide necessary export documents and to facilitate
export of Product. Seller further agrees to assist Buyer's import of
Product as reasonably requested by Buyer.
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26. PROPERTY FURNISHED BY BUYER
A. Any tools, drawings, specifications, or other materials furnished by Buyer
for use by Seller in its performance under this Agreement or any Order issued
hereunder shall be identified and shall remain the property of Buyer and
shall be used by Seller only in its performance hereunder. Such property
shall be delivered, upon request, to destination specified by Buyer in good
condition, except for normal wear and tear.
27. GENERAL
A. Any obligations and duties which by their nature extend beyond the expiration
or earlier termination of this Agreement shall survive any such expiration or
termination and remain in effect.
B. If any provision or provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, such provision shall be enforced to the fullest
extent permitted by applicable law and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
C. No action, except those regarding claims by third parties, or claims with
respect to patents, copyrights, trademarks or trade names or the unauthorized
disclosure of Confidential Information, regardless of form, arising out of
this Agreement may be brought by either party more than two (2) years after
the cause of action has arisen, or, in the case of non-payment, more than two
(2) years from the date the payment was due.
D. Any waiver of any kind by a party of a breach of this Agreement must be in
writing, shall be effective only to the extent set forth in such writing and
shall not operate or be construed as a waiver of any subsequent breach. Any
delay or omission in exercising any right, power or remedy pursuant to a
breach or default by a party shall not impair any right, power or remedy
which either party may have with respect to a future breach or default.
E. Seller hereby gives assurance to Buyer that it shall not export, re-export or
otherwise disclose, directly or indirectly, technical data received from
Buyer or the direct product of such technical data to any person or
destination when such export, re-export or disclosure is prohibited by the
laws of the United States or regulations of a Department of the United
States.
F. This Agreement is considered to be Compaq Confidential.
G. The entire Agreement between the parties is incorporated in this Agreement
and Appendices attached hereto, and it supersedes all prior discussions and
agreements between the parties relating to the subject matter hereof. This
Agreement can be modified only by a written amendment duly signed by persons
authorized to sign agreements on behalf of both parties, and shall not be
supplemented or modified by any course of dealing or trade usage. Variance
from or addition to the terms and conditions of this Agreement in any Order,
or other written notification from Seller will be of no effect.
H. THE CONSTRUCTION, VALIDITY, AND PERFORMANCE OF THIS AGREEMENT AND ANY ORDER
ISSUED UNDER IT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS, U.S.A.
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28. [*]
IN WITNESS, THE AUTHORIZED REPRESENTATIVES OF THE PARTIES HAVE EXECUTED THIS
AGREEMENT.
For the Buyer For the Seller
/s/ JACK BAIKIC 6/21/94 /s/ DAVID B. PEARCE 6/21/94
________________________________ _______________________________
Signature (date) Signature (date)
JACK BAIKIC DAVID B. PEARCE
________________________________ _______________________________
Name Name
Director, Mass Storage
Corporate Procurement President
________________________________ _______________________________
Title Title
* Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
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