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In this paper, we consider the problem of graceful performance degradation, for affine nonlinear systems. The method is an optimization based scheme, that gives a constructive way to reshape online the output reference for the post-fault system, and explicitly take into account the actuators and states saturations. The online output reference reshaping is associated with an online, model predictive control (MPC)-based, controller reconfiguration, that forces the post-fault system to track the new output reference. The effect of fault detection and diagnosis (FDD) uncertainties on the online controller reconfiguration stability are studied, to ensure at least boundedness of the closed-loop system's states. The reshaping and reconfiguration schemes are applied to the Caltech ducted fan numerical example, which is described by a non-minimum phase nonlinear model.