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Solve : Outlook 2002 Template image problem?

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I'm trying to create a template to use as stationary incorporating TEXT and an image.
Every time I create the image then apply it with the text using stationary picker the image just shows the border and a red cross.

What type of image do I need to use and what PROPERTIES can it have?
How do I INCORPORATE it into the stationary? Does it need to be 'imbedded', if so how?

I have FOLLOWED the instructions but it doesn't work.
Can someone please give me a step by step SET of instructions.



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