Exhibit 10.17
BUSINESS LOAN AGREEMENT
This Agreement dated as of February 28, 2003, is among Bank of America
N.A. (the "Bank"), California Water Service Group ("Borrower 1"), CWS Utility
Services ("Borrower 2"), and New Mexico Water Service Company ("Borrower 3"). In
this Agreement, all of the Borrowers are sometimes referred to collectively as
the "Borrower."
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Facility No. 1 Commitment") is Ten Million Dollars ($10,000,000).
(b) This is a revolving line of credit. During the availability period, the
Borrower may repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the principal balance outstanding to
exceed the Facility No. 1 Commitment. If the Borrower exceeds this
limit, the Borrower will immediately pay the excess to the Bank upon
the Bank's demand.
1.2 Availability Period. The line of credit is available between the date
of this Agreement and April 30, 2005, or such earlier date as the availability
may terminate as provided in this Agreement (the "Facility No. 1 Expiration
Date"). It is provided, however, that this line of credit will not be available
to Borrower 3 until Borrower 3 (a) has completed that certain water treatment
plant project in New Mexico (the "NM Project") that Borrower 3 is engaged in as
of the date of this Agreement and (b) has provided to the Bank, in form and
content acceptable to the Bank, a guaranty of the indebtedness of California
Water Service Company to the Bank. It is further provided that upon the
satisfaction of the foregoing conditions and so long as no event of default has
occurred and is then continuing under this Agreement, this line of credit will
be made available to Borrower 3 only if (i) Borrower 3 uses the proceeds of the
first advance it requests hereunder to repay in full all amounts then
outstanding under any and all credit facilities that Borrower 3 had obtained to
finance the NM Project and thereupon terminates all such facilities or (ii)
provides the Bank with evidence acceptable to the Bank that all such credit
facilities have been repaid in full and terminated.
1.3 Repayment Terms.
(a) The Borrower will pay interest on March 31, 2003 and then monthly
thereafter until payment in full of any principal outstanding under
this line of credit. Any interest period for an optional interest rate
(as described below) shall expire no later than the Facility No. 1
Expiration Date.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Facility No. 1 Expiration Date.
1.4 Interest Rate.
(a) The interest rate is a rate per year equal to the Bank's Prime Rate
minus the Applicable Margin (as defined below).
(b) The Prime Rate is the rate of interest publicly announced from time to
time by the Bank as its Prime Rate. The Prime Rate is set by the Bank
based on various factors, including the Bank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customers at, above, or below the Prime Rate. Any change in the Prime
Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Prime Rate.
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1.5 Optional Interest Rates. Instead of the interest rate based on the rate
stated in the paragraph entitled "Interest Rate" above, the Borrower may elect
the optional interest rates listed below for this Facility No. 1 during interest
periods agreed to by the Bank and the Borrower. The optional interest rates
shall be subject to the terms and conditions described later in this Agreement.
Any principal amount bearing interest at an optional rate under this Agreement
is referred to as a "Portion." The following optional interest rates are
available:
(a) The LIBOR Rate plus the Applicable Margin as defined below.
1.6 Applicable Margin. The Applicable Margin shall be the following amounts
per annum, based upon the Debt to Capitalization Ratio (as defined below) as
calculated on a consolidated basis from Borrower 1's most recent financial
statements received by the Bank as required in the Covenants section; provided,
however, that until the Bank receives the first financial statement, such
amounts shall be those indicated for pricing level 2 set forth below:
Applicable Margin
Pricing (in percentage points per annum)
Level Ratio Prime Rate - LIBOR Rate +
----------- ----------------------------- ------------------ -------------------
1 less than 0.50:1.00 0.75 1.00
2 equal to or greater than 0.50 1.25
0.50:1.00 and
less than 0.60:1.00
3 equal to or greater than 0.25 1.50
0.60:1.00
"Debt to Capitalization Ratio" means the ratio of Funded Debt to the sum of Net
Worth plus Funded Debt. "Funded Debt" means all outstanding liabilities for
borrowed money and other interest-bearing liabilities of Borrower 1, including
current and long-term debt. "Net Worth" means the value of Borrower 1's total
assets (including leaseholds and leasehold improvements and reserves against
assets) less its total liabilities, including but not limited to accrued and
deferred income taxes.
The Applicable Margin shall be in effect from the date the most recent financial
statement is received by the Bank until the date the next financial statement is
received; provided, however, that if the Borrower fails to timely deliver the
next financial statement, the Applicable Margin from the date such financial
statement was due until the date such financial statement is received by the
Bank shall be the highest pricing level set forth above.
1.7 Letters of Credit. This line of credit may be used for financing:
(a) standby letters of credit with a maximum maturity of 365 days but not
to extend more than 180 days beyond the Facility No. 1 Expiration Date.
The standby letters of credit may include a provision providing that
the maturity date will be automatically extended each year for an
additional year unless the Bank gives written notice to the contrary.
(h) The amount of the letters of credit outstanding at any one time
(including the drawn and unreimbursed amounts of the letters of credit)
may not exceed Five Million Dollars ($5,000,000).
(c) In calculating the principal amount outstanding under the Facility No.
1 Commitment, the calculation shall include the amount of any letters
of credit outstanding, including amounts drawn on any letters of credit
and not yet reimbursed.
(d) The Borrower agrees:
(i) Any sum drawn under a letter of credit may, at the option of
the Bank, be added to the principal amount outstanding under
this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
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(ii) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of
credit.
(iii) the issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's written approval and
must be in form and content satisfactory to the Bank and in
favor of a beneficiary acceptable to the Bank.
(iv) to sign the Bank's form Application and Agreement for
Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as applicable.
(v) to pay any issuance and/or other fees that the Bank notifies
the Borrower will be charged for issuing and processing
letters of credit for any Borrower.
(vi) to allow the Bank to automatically charge any Borrower's
checking account for applicable fees, discounts, and other
charges.
2. OPTIONAL INTEREST RATES
2.1 Optional Rates. Each optional interest rate is a rate per year.
Interest will be paid on the last day of each month during the interest period.
At the end of any interest period, the interest rate will revert to the rate
stated in the paragraph(s) entitled "Interest Rate" above, unless the Borrower
has designated another optional interest rate for the Portion. No Portion will
be converted to a different interest rate during the applicable interest period.
Upon the occurrence of an event of default under this Agreement, the Bank may
terminate the availability of optional interest rates for interest periods
commencing after the default occurs.
2.2 LIBOR Rate. The election of LIBOR Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the LIBOR Rate will be in effect will
be one or two weeks, or one, two, three, four, five, six, seven, eight,
nine, ten, eleven, or twelve months. The first day of the interest
period must be a day other than a Saturday or a Sunday on which the
Bank is open for business in New York and London and dealing in
offshore dollars (a "LIBOR Banking Day"). The last day of the interest
period and the actual number of days during the interest period will be
determined by the Bank using the practices of the London inter-bank
market.
(b) Each LIBOR Rate Portion will be for an amount not less than One Hundred
Thousand Dollars ($100,000).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the average per annum
interest rate at which U.S. dollar deposits would be offered
for the applicable interest period by major banks in the
London inter-bank market, as shown on the Telerate Page 3750
(or any successor page) at approximately 11:00 a.m. London
time two (2) London Banking Days before the commencement of
the interest period. If such rate does not appear on the
Telerate Page 3750 (or any successor page), the rate for that
interest period will be determined by such alternate method as
reasonably selected by the Bank. A "London Banking Day" is a
day on which the Bank's London Banking Center is open for
business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
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Liabilities, as defined in Federal Reserve Board Regulation D,
rounded upward to the nearest 1/100 of one percent. The
percentage will be expressed as a decimal, and will include,
but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate Portion no later
than 12:00 noon Pacific time on the LIBOR Banking Day preceding the day
on which the London Inter-Bank Offered Rate will be set, as specified
above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at
least three days before the LIBOR Rate takes effect.
(e) The Borrower may not elect a LIBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) The Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of a LIBOR Rate Portion are not
available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR
Rate Portion.
(g) Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason
of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement.
(h) The prepayment fee shall be in an amount sufficient to compensate the
Bank for any loss, cost or expense incurred by it as a result of the
prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the
deposits from which such funds were obtained. The Borrower shall also
pay any customary administrative fees charged by the Bank in connection
with the foregoing. For purposes of this paragraph, the Bank shall be
deemed to have funded each Portion by a matching deposit or other
borrowing in the applicable interbank market, whether or not such
Portion was in fact so funded. 3. FEES AND EXPENSES
3.1 Fees.
(a) Late Fee. To the extent permitted by law, the Borrower agrees to pay a
late fee in an amount not to exceed four percent (4%) of any payment
that is more than fifteen (15) days late. The imposition and payment of
a late fee shall not constitute a waiver of the Bank's rights with
respect to the default.
(b) Unused Commitment Fee. The Borrower agrees to pay a fee on any
difference between the Facility No. 1 Commitment and the amount of
credit it actually uses, determined by the average of the daily amount
of credit outstanding during the specified period. The fee will be
calculated at the following percentage points per annum, based upon the
Debt to Capitalization Ratio (as defined in Paragraph 1.6 above). The
calculation of credit outstanding shall include the undrawn amount of
letters of credit. The Debt to Capitalization Ratio will be calculated
in the manner described in Paragraph 1.6; provided, however, that until
the Bank receives the first financial statement, the fee will be
calculated at the percentage points indicated for fee level 2 set forth
below:
Applicable Fee
Fee Level Ratio (in percentage points per annum)
---------------- ---------------------- ----------------------------------------
1 less than 0.50:1.00 .125
2 equal to or greater than
0.50:1.00 but .250
less than 0.60:1.00
3 equal to or greater than
0.60:1.00 .375
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This fee is due on April 1, 2003, and on the first day of each
following quarter until the expiration of the availability period.
The Applicable Fee shall be in effect from the date the most recent
financial statement is received by the Bank until the date the next
financial statement is received; provided, however, that if the
Borrower fails to timely deliver the next financial statement, the
Applicable Fee from the date such financial statement was due until the
date such financial statement is received by the Bank shall be the
highest fee level set forth above.
3.2 Expenses. The Borrower agrees to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and search
fees, appraisal fees, title report fees, and documentation fees.
3.3 Reimbursement Costs. The Borrower agrees to reimburse the Bank for any
expenses it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's in-house
counsel to the extent permitted by applicable law.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 Disbursements and Payments.
(a) Each payment by the Borrower will be made in immediately available
funds by direct debit to a deposit account as specified below or by
mail to the address shown on the Borrower's statement or at one of the
Bank's banking centers in the United States.
(b) Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
4.2 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and
telefax requests for the issuance of letters of credit given, or
purported to be given, by any one of the individuals authorized to sign
loan agreements on behalf of the Borrower, or any other individual
designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from
account number 14878-03863 owned by Borrower 1, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(i) The Borrower will indemnify and hold the Bank harmless from all
liability, loss, and costs in connection with any act resulting from
telephone or telefax instructions the Bank reasonably believes are made
by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement's termination, and will
benefit the Bank and its officers, employees, and agents.
4.3 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit deposit account number
14878-03863 owned by Borrower 1, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and
interest and any fees from the Borrower becomes due (the "Due Date").
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(b) Prior to each Due Date, the Bank will mail to the Borrower a statement
of the amounts that will be due on that Due Date (the "Billed Amount").
The ▇▇▇▇ will be mailed a specified number of calendar days prior to
the Due Date, which number of days will be mutually agreed from time to
time by the Bank and the Borrower. The calculations in the ▇▇▇▇ will be
made on the assumption that no new extensions of credit or payments
will be made between the date of the billing statement and the Due
Date, and that there will be no changes in the applicable interest
rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated as
follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by
the amount of the discrepancy. The Borrower will not be in
default by reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by
the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this
Agreement, the Bank may reverse the debit.
(e) The Borrower may terminate this direct debit arrangement at any time by
sending written notice to the Bank at the address specified at the end
of this Agreement. If the Borrower terminates this arrangement, then
the principal amount outstanding under this Agreement will at the
option of the Bank bear interest at a rate per annum which is 0.5
percentage point higher than the rate of interest otherwise provided
under this Agreement.
4.4 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday, Sunday or other day on which commercial
banks are authorized to close, or are in fact closed, in the state where the
Bank's lending office is located, and, if such day relates to amounts bearing
interest at an offshore rate (if any), means any such day on which dealings in
dollar deposits are conducted among banks in the offshore dollar interbank
market. All payments and disbursements which would be due on a day which is not
a banking day will be due on the next banking day. All payments received on a
day which is not a banking day will be applied to the credit on the next banking
day.
4.5 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.
4.6 Default Rate. Upon the occurrence of any default under this Agreement,
all amounts outstanding under this Agreement, including any interest, fees, or
costs which are not paid when due, will at the option of the Bank bear interest
at a rate which is 2.0 percentage points higher than the rate of interest
otherwise provided under this Agreement. This may result in compounding of
interest. This will not constitute a waiver of any default.
5. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
5.1 Conditions to First Extension of Credit. Before the first extension of
credit:
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(a) Authorizations. If any Borrower or any guarantor is anything other than
a natural person, evidence that the execution, delivery and performance
by such Borrower and/or such guarantor of this Agreement and any
instrument or agreement required under this Agreement have been duly
authorized.
(b) Governing Documents. If required by the Bank, a copy of each Borrower's
organizational documents.
(c) Payment of Fees. Payment of all accrued and unpaid expenses incurred by
the Bank as required by the paragraph entitled "Reimbursement Costs."
(d) Good Standing. Certificates of good standing for each Borrower from its
state of formation and from any other state in which such Borrower is
required to qualify to conduct its business.
(e) Other Items. Any other items that the Bank reasonably requires.
6. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewal of these representations and
warranties as of the date of the request:
6.1 Formation. Each Borrower is duly formed and existing under the laws of
the state where organized.
6.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within each Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
6.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of each Borrower, enforceable against each Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
6.4 Good Standing. In each state in which each Borrower does business, it
is properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
6.5 No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which any Borrower is bound.
6.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank is sufficiently complete to give the Bank
accurate knowledge of the Borrower's (and any guarantor's) financial condition,
including all material contingent liabilities. Since the date of the most recent
financial statement provided to the Bank, there has been no material adverse
change in the business condition (financial or otherwise), operations,
properties or prospects of any Borrower (or any guarantor).
6.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against any Borrower which, if lost, would impair such Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
6.8 Permits, Franchises. Each Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
6.9 Other Obligations. No Borrower is in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, except as have been disclosed in
writing to the Bank.
6.10 Tax Matters. No Borrower has any knowledge of any pending assessments
or adjustments of its income tax for any year and all taxes due have been paid,
except as have been disclosed in writing to the Bank.
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6.11 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.
6.12 Insurance. The Borrower has obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this Agreement.
7. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
7.1 Use of Proceeds. To use Facility No. 1 only for working capital,
permitted acquisitions, general corporate purposes including issuance of standby
letters of credit, and to bridge capital expenditures.
7.2 Financial Information. To provide the following financial information
and statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time:
(a) Within 90 days of the fiscal year end, Borrower 1's annual financial
statements. These financial statements must be audited (with an opinion
satisfactory to the Bank) by a Certified Public Accountant acceptable
to the Bank. The statements shall be prepared on a consolidated and
consolidating basis.
(b) Within 60 days of the period's end, Borrower 1's quarterly financial
statements certified and dated by an authorized financial officer.
These financial statements may be company-prepared. The statements
shall be prepared on a consolidated and consolidating basis.
(c) Copies of the Form 10-K Annual Report, Form 10-Q Quarterly Report, and
Form 8-K Current Report for Borrower 1 within 10 days after the date of
filing with the Securities and Exchange Commission.
(d) Borrower 1's annual financial projections covering a time period
acceptable to the Bank and specifying the assumptions used in creating
the projections. The projections shall be provided to the Bank by April
30th of each fiscal year beginning fiscal year 2004.
(e) Borrower 2's narrative business plan by April 30th of each fiscal year
beginning fiscal year 2004.
(f) Within 90 days of the fiscal year end, the annual financial statements
of California Water Service Company. These financial statements must be
audited (with an opinion satisfactory to the Bank) by a Certified
Public Accountant acceptable to the Bank. The statements shall be
prepared on an unconsolidated basis.
(g) Within 60 days of the period's end, the quarterly financial statements
of California Water Service Company, certified and dated by an
authorized financial officer. These financial statements may be
company-prepared. The statements shall be prepared on an unconsolidated
basis.
(h) The annual financial projections of California Water Service Company
covering a time period acceptable to the Bank and specifying the
assumptions used in creating the projections. The projections shall be
provided to the Bank by April 30th of each fiscal year beginning fiscal
year 2004.
(i) Within the period(s) provided in (a) and (b) above, a compliance
certificate of the Borrower signed by an authorized financial officer
of the Borrower setting forth (i) the computation (on a consolidated
basis) of the Debt to Capitalization Ratio (as defined in Paragraph 1.6
above) at the end of the period covered by the financial statements
then being furnished and (ii) whether there existed as of the date of
such financial statements and whether there exists as of the date of
the certificate, any default under this Agreement and, if any such
default exists, specifying the nature thereof and the action the
Borrower is taking and proposes to take with respect thereto.
7.3 Out of Debt Period. To repay in full the advances outstanding under
Facility No. 1 for a period of at least thirty (30) consecutive days in
each Line-Year. "Line-Year" means the period between the date of this
Agreement and December 31, 2003, and each subsequent one-year period
(if any). For purposes of this paragraph, "advances" does not include
undrawn amounts of outstanding letters of credit.
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7.4 Other Debts. Not to have outstanding or incur any direct or contingent
liabilities or lease obligations (other than those to the Bank), or
become liable for the liabilities of others, without the Bank's written
consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities, lines of credit and leases in existence on the date of
this Agreement disclosed in writing to the Bank.
(e) Additional debts and lease obligations for the acquisition of fixed
assets, to the extent permitted under Paragraph 7.5(d) below.
(f) Additional debts assumed in connection with acquisitions permitted
under Paragraph 7.8(b) below.
(g) Additional obligations of any Borrower consisting of first mortgage
bonds or unsecured senior notes substantially similar in structure to
those certain first mortgage bonds and unsecured senior notes that are
obligations of California Water Service Company and are outstanding as
of the date of this Agreement.
7.5 Other Liens. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property any Borrower now or later
owns, except:
(a) Liens and security interests in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Additional purchase money security interests in assets acquired after
the date of this Agreement, if the total principal amount of debts
secured by such liens does not exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) in the aggregate at any one time for all the
Borrowers.
(e) Liens securing first mortgage bonds permitted under the preceding
paragraph.
7.6 Maintenance of Assets.
(a) Not to sell, assign, lease, transfer or otherwise dispose of any part
of any Borrower's business or any Borrower's assets except in the
ordinary course of such Borrower's business. It is provided, however,
that this negative covenant shall not be deemed to prohibit sales by
Borrower 2 of those certain parcels of real property previously
transferred or sold to Borrower 2 by California Water Service Company
because such parcels were not essential to the regulated water
operations of California Water Service Company.
(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets
for less than fair market value, or enter into any agreement to do so.
(c) Not to enter into any sale and leaseback agreement covering any of its
fixed assets.
(d) To maintain and preserve all rights, privileges, and franchises each
Borrower now has.
(e) To make any repairs, renewals, or replacements to keep each Borrower's
properties in good working condition.
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7.7 Loans. Not to make any loans, advances or other extensions of credit to
any individual or entity, except for:
(a) Existing extensions of credit disclosed to the Bank in writing.
(b) Extensions of credit to any Borrower's current subsidiaries.
(c) Extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business to non-affiliated entities.
7.8 Additional Negative Covenants. Not to, without the Bank's written
consent:
(a) Enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a
limited liability company.
(b) Acquire or purchase a business or its assets, for a consideration,
including assumption of direct or contingent debt, in excess of Five
Million Dollars ($5,000,000) in the aggregate. It is provided, however,
that this negative covenant does not apply to Borrower 1's proposed
acquisition of Kaanapali Water Corporation for a consideration,
including assumption of direct or contingent debt, not in excess of
Eight Million Dollars ($8,000,000), to which acquisition the Bank has
already consented.
(c) Engage in any business activities substantially different from any
Borrower's present business.
(d) Liquidate or dissolve any Borrower's business.
(e) Voluntarily suspend any Borrower's business for more than 7 days in any
365-day period.
7.9 Notices to Bank. To promptly notify the Bank in writing of:
(a) Any lawsuit over One Million Dollars ($1,000,000) against any Borrower
(or any guarantor).
(b) Any substantial dispute between any governmental authority and any
Borrower (or any guarantor).
(c) Any event of default under this Agreement, or any event which, with
notice or lapse of time or both, would constitute an event of default.
(d) Any material adverse change in any Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
(e) Any change in any Borrower's name, legal structure, place of business,
or chief executive office if such Borrower has more than one place of
business.
(f) Any actual contingent liabilities of any Borrower (or any guarantor),
and any such contingent liabilities which are reasonably foreseeable,
where such liabilities are in excess of One Million Dollars
($1,000,000) in the aggregate.
7.10 General Business Insurance. To maintain insurance as is usual for the
business each Borrower is in.
7.11 Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with
authority over any Borrower's business.
7.12 ERISA Plans. Promptly during each year, to pay and cause any
subsidiaries to pay contributions adequate to meet at least the minimum funding
standards under ERISA with respect to each and every Plan; file each annual
report required to be filed pursuant to ERISA in connection with each Plan for
each year; and notify the Bank within ten (10) days of the occurrence of any
Reportable Event that might constitute grounds for termination of any capital
Plan by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District
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Court of a trustee to administer any Plan. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time. Capitalized terms in
this paragraph shall have the meanings defined within ERISA.
7.13 Books and Records. To maintain adequate books and records.
7.14 Audits. To allow the Bank and its agents to inspect any Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of any Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.
7.15 Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
7.16 Mandatory Prepayment; Early Termination. To immediately repay the
entire principal balance of this Agreement, together with interest, any fees
(including any prepayment fees) and any other amounts due hereunder, and not
obtain any further credit hereunder, upon the occurrence of the following event:
Facility No. 1 of the Business Loan Agreement dated __________, ____, between
California Water Service Company and the Bank, as now in effect or as hereafter
renewed, amended or restated (the "Other Credit Facility"), terminates for any
reason, including, without limitation, termination of the Other Credit Facility
at the request of California Water Service Company, termination resulting from
failure by the Bank to renew the Other Credit Facility, or termination as
otherwise provided under the Other Credit Facility.
8. DEFAULT AND REMEDIES
If any of the following events of default occurs, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. In addition, if any event of default
occurs, the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in equity. If
an event of default occurs under the paragraph entitled "Bankruptcy," below,
with respect to any Borrower, then the entire debt outstanding under this
Agreement will automatically be due immediately.
8.1 Failure to Pay. The Borrower fails to make a payment under this
Agreement when due.
8.2 Other Bank Agreements. Any Borrower (or any Obligor) or any of any
Borrower's related entities or affiliates fails to meet the conditions of, or
fails to perform any obligation under any other agreement any Borrower (or any
Obligor) or any of any Borrower's related entities or affiliates, has with the
Bank or any affiliate of the Bank. For purposes of this Agreement, "Obligor"
shall mean any guarantor or any party pledging collateral to the Bank.
8.3 Cross-default. Any default occurs under any agreement in connection
with any credit any Borrower (or any Obligor) or any of any Borrower's related
entities or affiliates has obtained from anyone else or which any Borrower (or
any Obligor) or any of any Borrower's related entities or affiliates has
guaranteed, or any default occurs under that certain Business Loan Agreement
dated as of the date hereof between the Bank and California Water Service
Company, as now in effect and as hereafter amended restated renewed, or
superseded.
8.4 False Information. Any Borrower or any Obligor has given the Bank false
or misleading information or representations.
8.5 Bankruptcy. Any Borrower, any Obligor, or any general partner of any
Borrower or of any Obligor files a bankruptcy petition, a bankruptcy petition is
filed against any of the foregoing parties, or any Borrower, any Obligor, or any
general partner of any Borrower or of any Obligor makes a general assignment for
the benefit of creditors.
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8.6 Receivers. A receiver or similar official is appointed for a
substantial portion of any Borrower's or any Obligor's business, or the business
is terminated, or, if any Obligor is anything other than a natural person, such
Obligor is liquidated or dissolved.
8.7 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against any Borrower or any Obligor in an aggregate amount of
One Million Dollars ($1,000,000) or more in excess of any insurance coverage.
8.8 Judgments. Any judgments or arbitration awards are entered against any
Borrower or any Obligor, or any Borrower or any Obligor enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of One Million Dollars ($1,000,000) or more in excess of any
insurance coverage.
8.9 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in any Borrower's (or any Obligor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit
8.10 Government Action. Any government authority takes action that the Bank
believes materially adversely affects any Borrower's or any Obligor's financial
condition or ability to repay.
8.11 Default under Related Documents. Any default occurs under any guaranty,
subordination agreement, security agreement, deed of trust, mortgage, or other
document required by or delivered in connection with this Agreement or any such
document is no longer in effect, or any guarantor purports to revoke or disavow
the guaranty.
8.12 ERISA Plans. Any one or more of the following events occurs with
respect to a Plan of any Borrower subject to Title IV of ERISA, provided such
event or events could reasonably be expected, in the judgment of the Bank, to
subject any Borrower to any tax, penalty or liability (or any combination of the
foregoing) which, in the aggregate, could have a material adverse effect on the
financial condition of any Borrower:
(a) A reportable event shall occur under Section 4043(c) of ERISA with
respect to a Plan.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the full or partial withdrawal from a Plan by the Borrower or
any ERISA Affiliate.
8.13 Debt Ratings. California Water Service Company's Debt Ratings with
▇▇▇▇▇'▇ shall be lower than Baa3 or with S&P shall be lower than BBB-. "Debt
Rating" means, as of any date of determination, the rating as determined by
either ▇▇▇▇▇'▇ or S&P (collectively, the "Debt Ratings") of California Water
Service Company's non-credit-enhanced, senior unsecured long-term debt.
8.14 Restrictive Covenant. Borrower 1 directly or indirectly agrees to any
arrangement whereby the ability of California Water Service Company to pay
dividends to Borrower 1 is restricted.
8.15 Other Breach Under Agreement. Any Borrower fails to meet the conditions
of, or fails to perform any obligation under any term of this Agreement not
specifically referred to in this Article. This includes any failure or
anticipated failure by any Borrower to comply with any financial covenants set
forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to any Borrower or the
Bank.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
9.2 California Law. This Agreement is governed by California law.
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9.3 Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
9.4 Arbitration and Waiver of Jury Trial
(a) This paragraph concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of
or relate to: (i) this Agreement (including any renewals, extensions or
modifications); or (ii) any document related to this Agreement
(collectively a "Claim"). For the purposes of this arbitration
provision only, the term "parties" shall include any parent
corporation, subsidiary or affiliate of the Bank involved in the
servicing, management or administration of any obligation described or
evidenced by this Agreement.
(b) At the request of any party to this Agreement, any Claim shall be
resolved by binding arbitration in accordance with the Federal
Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply
even though this Agreement provides that it is governed by the law of a
specified state.
(c) Arbitration proceedings will be determined in accordance with the Act,
the applicable rules and procedures for the arbitration of disputes of
JAMS or any successor thereof ("JAMS"), and the terms of this
paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.
(j)
(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in any U. S. state where real or tangible
personal property collateral for this credit is located or if there is
no such collateral, in the state specified in the governing law section
of this Agreement. All Claims shall be determined by one arbitrator;
however, if Claims exceed Five Million Dollars ($5,000,000), upon the
request of any party, the Claims shall be decided by three arbitrators.
All arbitration hearings shall commence within ninety (90) days of the
demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within
thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional sixty (60) days.
The arbitrator(s) shall provide a concise written statement of reasons
for the award. The arbitration award may be submitted to any court
having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any Claim
is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules
of a notice of Claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s)
shall have the power to award legal fees pursuant to the terms of this
Agreement.
(f) This paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale
rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or
appointment of a receiver, or additional or supplementary remedies.
(g) The procedure described above will not apply if the Claim, at the time
of the proposed submission to arbitration, arises from or relates to an
obligation to the Bank secured by real property. In this case, all of
the parties to this Agreement must consent to submission of the Claim
to arbitration. If both parties do not consent to arbitration, the
Claim will be resolved as follows: The parties will designate a referee
(or a panel of referees) selected under the auspices of JAMS in the
same manner as arbitrators are selected in JAMS administered
proceedings. The designated referee(s) will be appointed by a court as
provided in California Code of Civil Procedure Section 638 and the
following related sections. The referee (or presiding referee of the
panel) will be an active attorney or a retired judge. The award that
results from the decision of the
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referee(s) will be entered as a judgment in the court that appointed
the referee, in accordance with the provisions of California Code of
Civil Procedure Sections 644 and 645.
(k) The filing of a court action is not intended to constitute a waiver of
the right of any party, including the suing party, thereafter to
require submittal of the Claim to arbitration.
(i) By agreeing to binding arbitration, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury in respect
of any Claim. Furthermore, without intending in any way to limit this
Agreement to arbitrate, to the extent any Claim is not arbitrated, the
parties irrevocably and voluntarily waive any right they may have to a
trial by jury in respect of such Claim. This provision is a material
inducement for the parties entering into this Agreement.
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be
in writing.
9.6 Attorneys' Fees. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against any
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.
9.7 Joint and Several Liability. This paragraph shall apply if two or more
Borrowers sign this Agreement:
(a) Each Borrower agrees that it is jointly and severally liable to the
Bank for the payment of all obligations arising under this Agreement,
and that such liability is independent of the obligations of the other
Borrower(s). Each obligation, promise, covenant, representation and
warranty in this Agreement shall be deemed to have been made by, and be
binding upon, each Borrower, unless this Agreement expressly provides
otherwise. The Bank may bring an action against any Borrower, whether
an action is brought against the other Borrower(s).
(b) Each Borrower agrees that any release which may be given by the Bank to
the other Borrower(s) or any guarantor will not release such Borrower
from its obligations under this Agreement.
(c) Each Borrower waives any right to assert against the Bank any defense,
setoff, counterclaim, or claims which such Borrower may have against
the other Borrower(s) or any other party liable to the Bank for the
obligations of the Borrowers under this Agreement.
(d) Each Borrower waives any defense by reason of any other Borrower's or
any other person's defense, disability, or release from liability. The
Bank can exercise its rights against each Borrower even if any other
Borrower or any other person no longer is liable because of a statute
of limitations or for other reasons.
(e) Each Borrower agrees that it is solely responsible for keeping itself
informed as to the financial condition of the other Borrower(s) and of
all circumstances which bear upon the risk of nonpayment. Each Borrower
waives any right it may have to require the Bank to disclose to such
Borrower any information which the Bank may now or hereafter acquire
concerning the financial condition of the other Borrower(s).
(f) Each Borrower waives all rights to notices of default or nonperformance
by any other Borrower under this Agreement. Each Borrower further
waives all rights to notices of the existence or the creation of new
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indebtedness by any other Borrower and all rights to any other notices
to any party liable on any of the credit extended under this Agreement.
(g) The Borrowers represent and warrant to the Bank that each will derive
benefit, directly and indirectly, from the collective administration
and availability of credit under this Agreement. The Borrowers agree
that the Bank will not be required to inquire as to the disposition by
any Borrower of funds disbursed in accordance with the terms of this
Agreement.
(h) Until all obligations of the Borrowers to the Bank under this
Agreementhave been paid in full and any commitments of the Bank or
facilities provided by the Bank under this Agreement have been
terminated, each Borrower (a) waives any right of subrogation,
reimbursement, indemnification and contribution (contractual, statutory
or otherwise), including without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11, United States Code) or
any successor statute, which such Borrower may now or hereafter have
against any other Borrower with respect to the indebtedness incurred
under this Agreement; (b) waives any right to enforce any remedy which
the Bank now has or may hereafter have against any other Borrower, and
waives any benefit of, and any right to participate in, any security
now or hereafter held by the Bank.
(i) Each Borrower waives any right to require the Bank to proceed against
any other Borrower or any other person; proceed against or exhaust any
security; or pursue any other remedy. Further, each Borrower consents
to the taking of, or failure to take, any action which might in any
manner or to any extent vary the risks of the Borrower under this
Agreement or which, but for this provision, might operate as a
discharge of the Borrower.
9.8 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail. Any reference in any
related document to a "promissory note" or a "note" executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or restated.
9.9 Indemnification. The Borrower will indemnify and hold the Bank harmless
from any loss, liability, damages, judgments, and costs of any kind relating to
or arising directly or indirectly out of (a) this Agreement or any document
required hereunder, (b) any credit extended or committed by the Bank to the
Borrower hereunder, and (c) any litigation or proceeding related to or arising
out of this Agreement, any such document, or any such credit. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys,
and assigns. This indemnity will survive repayment of the Borrower's obligations
to the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.
9.10 Notices. Unless otherwise provided in this Agreement or in another
agreement between the Bank and the Borrower, all notices required under this
Agreement shall be personally delivered or sent by first class mail, postage
prepaid, or by overnight courier, to the addresses on the signature page of this
Agreement, or sent by facsimile to the fax numbers listed on the signature page,
or to such other addresses as the Bank and the Borrower may specify from time to
time in writing. Notices and other communications shall be effective (i) if
mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
mail, first class, postage prepaid, (ii) if telecopied, when
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transmitted, or (iii) if hand-delivered, by courier or otherwise (including
telegram, lettergram or mailgram), when delivered.
9.11 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
9.12 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement. This Agreement is
executed as of the date stated at the top of the first page.
Borrower: Bank:
California Water Service Group Bank of America, N.A.
By: By:
--------------------------------------------------------------- ---------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President/CFO ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
--------------------------------------------------------------- ---------------------------------------------------------------
CWS Utility Services
By: By:
--------------------------------------------------------------- ---------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President/CFO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President
--------------------------------------------------------------- ---------------------------------------------------------------
New Mexico Water Service Company
By:
---------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President/CFO
---------------------------------------------------------------
1.
Address where notices to the Bank are to be sent:
2. ADDRESS WHERE NOTICES TO THE BORROWER ARE TO BE SENT:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ---------------------------------------------------------------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------------------------------
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