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Term Loan Agreement

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Sectors: Real Estate
Governing Law: Iowa, View Iowa State Laws
Effective Date: July 03, 1997
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EXHIBIT 10.47


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TERM LOAN AGREEMENT


THE CHESTNUT PARTNERSHIP,
AS THE BORROWER,


AND


THE CHESTNUT REAL ESTATE PARTNERSHIP,
LCS HOLDINGS, INC.,
LIFE CARE SERVICES CORPORATION, AND
HOME HEALTH CARE SERVICES CORPORATION,
AS GUARANTORS,


AND


NORWEST BANK IOWA, NATIONAL ASSOCIATION
AS BANK


DATED AS OF
JULY 3, 1997


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TERM LOAN AGREEMENT


TERM LOAN AGREEMENT ("Agreement") dated as of July 3, 1997, among THE CHESTNUT PARTNERSHIP, a Maryland general partnership (the "Borrower"), NORWEST BANK, NATIONAL ASSOCIATION, a national banking association (the "Bank") and THE CHESTNUT REAL ESTATE PARTNERSHIP, a Maryland General partnership ("CREP"), LCS HOLDINGS, INC., an Iowa corporation ("LCS"), LIFE CARE SERVICES CORPORATION, an Iowa corporation ("LCSC") and HOME HEALTH CARE SERVICES CORPORATION, an Iowa corporation ("HHC"). (CREP, LCS, LCSC and HHC are each herein also referred to as a "Guarantor", and together as the "Guarantors".)


R E C I T A L S


WHEREAS, the Borrower has certain rights with respect to the development and operation of the real property more particularly described in Exhibit A attached hereto and CREP is the owner of such property (the "Property"); and


WHEREAS, the Borrower has constructed on such real property certain existing improvements known as the Blakehurst Retirement Community (the "Project") Phase I of which, consisting of 177 residential units, 36 comprehensive care beds and 14 domiciliary units ("Phase I") was constructed and financed in part with the proceeds of two 1992 public bond issues which total $14,000,000 (the "1992 Series Bonds"); and


WHEREAS, the issuance and repayment and other conditions of the 1992 Series Bonds are governed by the provisions of a May 1, 1992 Trust Indenture between the Borrower and Boatmen's National Bank Des Moines (the "Bond Trustee"), as supplemented by that certain August 1, 1992 First Supplemental Trust Indenture between the Borrower and the Bond Trustee (collectively, the "Trust Indenture"); and


WHEREAS, the repayment of the 1992 Series Bonds is secured both by the lien evidenced and granted by a May 28, 1992 Indemnity Deed of Trust covering the Property granted from CREP to trustees for the Bond Trustee (the "Bond Mortgage") and by the security interests covering other aspects of the Project granted by the Borrower or CREP to the Bond Trustee by a number of instruments collectively defined under the Trust Indenture as the "Additional Security Documents" (the "Additional Security Documents"); and


WHEREAS, Section 3.10(d) of the Trust Indenture permits the Borrower to incur additional debt for the purchase, construction or other acquisition of additions or improvements to the Project, with such additional debt to be PARI PASSU and equally and ratably secured with the 1992 Series Bonds by the lien of the Bond Mortgage and the security interests of the Additional Security Documents, provided that certain conditions specified by the Trust Indenture are satisfied (any such debt, the "Additional Parity Debt");


WHEREAS, consistent with the Trust Indenture, the Borrower now intends to construct 35 new independent living units and additional community support improvements to the Project (the "Phase III Improvements") and


WHEREAS, the Borrower has requested the Bank to make a term loan (the "Loan") to the Borrower in an aggregate amount not to exceed $1,900,000, the proceeds of which shall be Additional Parity Debt and which are to be used to defray a portion of the costs it will incur in developing and constructing the Phase III Improvements; and


WHEREAS, the Guarantors desire the Loan to be made and are willing to unconditionally guarantee the Loan; and


WHEREAS, consistent with the Trust Indenture, Borrower and Guarantors are willing to both incur the debt represented by the Loan as Additional Parity Debt on a PARI PASSU basis with the 1992 Series Bonds and to secure the Loan equally and ratably with the Bond Mortgage and the Additional Security Documents; and


WHEREAS, the Bank is willing to make the Loan to the Borrower on the terms and subject to the conditions hereinafter set forth.


NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants hereinafter set forth and intending to be legally bound hereby, agree as follows:


SECTION 1. DEFINITIONS


1.1 DEFINED TERMS. In addition to the terms defined in other sections of this Agreement, the following terms used in this Agreement shall have the following meanings unless the context otherwise requires:


"ACCELERATION" means the declaration of all Liabilities of the Borrower hereunder to be immediately due and payable following an Event of Default in accordance with the provisions of Sections 9 and 10 hereof.


"ADMISSION FEE ESCROW AGREEMENT (PHASE I)" shall mean the Amended and Restated Admission Fee Escrow Agreement - Phase I dated as of July 18, 1996, between the Borrower and the Escrow Agent, as the same may be amended, modified, or supplemented from time to time in compliance with the provisions of the Loan Documents.


"ADMISSION FEE ESCROW AGREEMENT (PHASE III)" shall mean the Admission Fee Escrow Agreement dated as of April 24, 1996, between the Borrower and the Escrow Agent, as the same may be amended, modified or supplemented from time to time in compliance with the provisions of the Loan Documents. The said agreement relates the Phase III Improvements but is titled as "Phase II" for regulatory reasons.


"AGREEMENT" means this Term Loan Agreement, as it may be amended, modified or supplemented from time to time.


"APPRAISAL" shall mean a market value appraisal (including updates or reappraisals that the Bank might require in its sole discretion) to be ordered by the Bank showing the fair market value of the Mortgaged Property and the Facility, such appraisals to be made by an appraiser acceptable to the Bank and in accordance with the Uniform Standards of Professional Appraisal Practices, and which shall be satisfactory to, and subject to approval by, the Bank.


"ASSIGNMENT OF RESIDENCY AGREEMENTS" shall mean the Assignment of Residency Agreements and Revenues dated the date hereof and given by the Borrower and CREP to the Bank as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.


"ATTORNEY COSTS" means and includes all reasonable fees and disbursements of any law firm or any external counsel.


"BANK" means Norwest Bank Iowa, National Association.


"BASE RATE" means, for any day, the rate of interest in effect for such day as publicly announced from time to time by Bank, as its "base rate." (The "base rate" is a rate set by Bank based upon various factors including Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above,


or below such announced rate.) Any change in the base rate announced by Bank shall take effect at the opening of business on the day specified in the public announcement of such change.


"BOND DOCUMENTS" shall mean the Trust Indenture and all other documents and agreements executed and delivered to secure and support the Bond Financing.


"BOND FINANCING" shall mean the permanent financing entered into with respect to the Facility pursuant to the Trust Indenture and the other Bond Documents.


"BOND MORTGAGE" shall mean the Indemnity Deed of Trust granted by CREP in favor of the Bond Trustee as a part of the Bond Financing.


"BOND TRUSTEE" shall mean Boatmen's National Bank Des Moines, a national banking association.


"BORROWER" shall mean The Chestnut Partnership, a Maryland General Partnership.


"BORROWING DATE" shall mean any date on which the Bank makes a Loan Advance under this Agreement.


"BUSINESS DAY" shall mean any day on which the Bank's commercial lending department is open for business.


"CAPITAL REPLACEMENT RESERVE ESCROW AGREEMENT" shall mean the Capital Replacement Reserve Escrow Agreement, dated as of August 2, 1993 between the Borrower and First National Bank of Maryland, as Escrow Agent, as the same may be amended, modified or supplemented from time to time in compliance with the provisions of the Loan Documents.


"CERTIFICATE OF COMPLETION" shall mean a certificate signed by the architect for Project stating that the Project has been completed in substantial conformity with the Plans.


"CLOSING DATE" shall mean such date on or before December 31, 1997 as the Borrower shall specify on not less than 10 days' prior written notice to the Bank, at which all conditions to the Initial Loan Advance shall be met, and the Initial Loan Advance shall be made upon satisfaction of such conditions.


"COLLATERAL" shall mean the Mortgaged Property, and any other property of the Borrower or any Guarantor with respect to which the Borrower or Guarantor has at any time granted a security


interest or lien pursuant to any Loan Document, or otherwise, to secure the payment of the Loan, the Note, the Guaranty and all amounts due the Bank under this Agreement, and the performance of the Borrower's and Guarantors' obligations under this Agreement.


"COLLATERAL DOCUMENTS" shall mean the Mortgage, the Security Agreement, the Assignment of Residency Agreements, the Facility Agreements Assignment, the Escrow Assignment, the UCC Financing Statements, and any other agreement, document, instrument, modification, or amendment to any Collateral Document, pursuant to which the Borrower or any Guarantor has at any time granted the Bank a Lien on Property to secure payment of the Loan, the Note, the Guarantee or any amounts due the Bank under this Agreement, or to secure the performance of the Borrower's or Guarantors' obligations under this Agreement, or to perfect any such Lien.


"COMPLETION APPROVALS" shall mean all licenses, certificates of occupancy, inspection approvals or other approvals required by any Government Authority which are necessary to the full use, occupancy and operation of the Facility after completion of the Phase III Improvements.


"COMBINED" shall mean accounts, assets, liabilities and items of income and expense, as the case may be, of any Person combined together with such items of another Person for presentation in accordance with GAAP.


"COMBINED CASH FLOW OF BORROWER AND CREP" shall mean, in respect of the twelve month period immediately preceding the date of such determination, Combined Net Income of Borrower and CREP plus (i) to the extent deducted in determining Combined Net Income of Borrower and CREP for such a period (a) depreciation on property taken during such period as determined on a Combined basis in accordance with GAAP, (b) amortization in respect of property taken during such period as determined on a Combined basis in accordance with GAAP and (c) interest expense accrued during such period plus (minus) (ii) to the extent taken into account in determining Combined Net Income of Borrower and CREP during such period, provisions for income tax expense (benefit) during such period as determined on a Combined basis in accordance with GAAP plus (minus) (iii) net increases (decreases) during such period in nonrecourse, non- amortizing loans from residents or life insurance companies to Borrower or CREP.


"COMBINED COVERAGE AMOUNT OF BORROWER AND CREP" shall mean, in respect of the twelve month period immediately preceding the date of such determination, the sum of all (a) interest expense on Indebtedness of Borrower and CREP accrued during such period plus (b) the aggregate principal amount due and owing during such period on all Indebtedness of Borrower and CREP.


"COMBINED NET INCOME OF BORROWER AND CREP" shall mean, in respect of the twelve month period immediately preceding the date of such determination, the net after tax income of Borrower and CREP (excluding extraordinary gains and losses from sales, exchanges, and other dispositions of property not in the ordinary course of business) as determined on a Combined basis in accordance with GAAP.


"CONSENT AND SUBORDINATION AGREEMENT" shall mean the Consent and Subordination Agreement dated the date hereof and given by Borrower to Bank, subordinating its rights and interests in the Project to the Mortgage.


"CONTINENTAL" shall mean Continental Care, Inc., a Maryland Corporation.


"CREP" shall mean The Chestnut Real Estate Partnership, a Maryland general partnership.


"DEVELOPMENT AGREEMENT" shall mean the Development Agreement, dated June 3, 1988, between the Borrower and LCSC, as amended by Amendments to Development Agreement, dated as of December 30, 1994, October 30, 1996 and February 17, 1997 among the Borrower, LCSC, Rosedale, and Continental and with LCSD being a party to the 1996 and 1997 amendments, and as the same may be amended, modified or supplemented from time to time in compliance with the provisions of the Loan Documents.


"EFFECTIVE RESIDENCY AGREEMENT" shall mean a Residency Agreement which is in full force and effect, for which any statutory right of rescission has expired and for which an entrance fee deposit in an amount not less than ten percent (10 %) of the total entrance fee shall have been made by the resident thereunder and deposited in escrow pursuant to the Entrance Payments Escrow Agreement.


"ENVIRONMENTAL INDEMNITY AGREEMENT" shall mean the Environmental Indemnity Agreement dated the date hereof given by the Borrower, CREP, LCS, LCSC and HHC to Bank as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.


"ENTRANCE PAYMENTS"shall mean payments by residents or prospective residents for rights to occupy units located within the Property.


"ENTRANCE PAYMENTS ESCROW AGREEMENTS" shall mean, collectively, the Admission Fee Escrow Agreement (Phase I), the Admission Fee Escrow Agreement (Phase III), the Health Center Resident Loans Escrow Agreement and the Wait List Escrow Agreement.


"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect form time to time. References to sections of ERISA shall be construed to also refer to any successor sections.


"ERISA AFFILIATE" means any corporation, trade or business that is, along with the Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.


"ERISA PLAN" shall mean any benefit plan of Borrower or any ERISA Affiliate which is subject to ERISA.


"ESCROW AGENT" shall mean The First National Bank of Maryland, a national banking association.


"ESCROW AGREEMENTS" shall mean, collectively, the Entrance Payments Escrow Agreements and the Capital Replacement Reserve Escrow Agreement


"ESCROW ASSIGNMENT" shall mean the Assignment of Escrow Agreements given by the Borrower to the Bank, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, together with the consent of the Escrow Agent.


"EVENT OF DEFAULT" shall mean any of the events of default set forth in Section 9 of this Agreement.


"FACILITY" shall mean the Improvements on the land and the development and operation of such Improvements.


"FACILITY AGREEMENTS ASSIGNMENT" shall mean the Collateral Assignment of Development Agreement, Management Agreement and Operating and Use Agreement given by the Borrower to the Bank as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, together with the consents of CREP, LCSC, LCSD, Rosedale and Continental.


"FINANCIAL STATEMENTS" shall mean the financial statements listed in Schedule 4.6.


"GAAP" shall mean generally accepted accounting principles in the United States, applied on a basis consistent with the principles used in preparing the most recent annual financial statements of the Borrower and the Guarantors furnished to Bank and referred to in Section 4.6 hereof; provided, that (a) in making determinations on a consolidated basis with respect to a Person and its Subsidiaries, such consolidation shall be a proportionate consolidation and shall include all Subsidiaries, and (b) in making determinations of the aggregate Indebtedness of a Person and its Subsidiaries, any Indebtedness of such Person or any such Subsidiary described in clause (i) of the definition of Indebtedness herein shall be treated as if such Person or such Subsidiary were an Obligor with respect to such Indebtedness.


"GOVERNMENTAL AUTHORITY" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic.


"GOVERNMENTAL BODY" shall mean any foreign, federal, state, municipal, or other government, or any department, commission, board, bureau, agency, public authority, or instrumentality thereof, or any court or arbitrator.


"GUARANTORS" shall mean CREP, LCS, LCSC and HHC, and "Guarantor" shall mean any one of them.


"GUARANTY" shall mean the Guaranty Agreement dated the date hereof given by the Guarantors to the Bank, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.


"HAZARDOUS SUBSTANCES" shall have the meaning assigned to that term in Section 1.02 of the Mortgage.


"HHC" shall mean Home Health Care Services Corporation, an Iowa corporation.


"HEALTH CARE RESIDENT LOANS ESCROW AGREEMENT" shall mean the Health Care Resident Loans Escrow Agreement dated as of July 18, 1996, between the Borrower and the Escrow Agent, as the same may be amended, modified or supplemented from time to time in compliance with the provisions of the Loan Documents.


"IMPROVEMENTS" shall mean, collectively, the Phase I and II Improvements and the Phase III Improvements.


"INDEBTEDNESS" shall mean, as to any Person, all items of indebtedness, obligation, or liability of that Person, whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several, including, without limitation: (a) all indebtedness guaranteed, directly, or indirectly, in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse; (b) all indebtedness in effect guaranteed, directly or indirectly, through agreements, contingent or otherwise: (1) to purchase the indebtedness; or (2) to purchase, sell, or lease (as lessee or lessor) property, products, materials, or supplies, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of the indebtedness or to assure the owner of the indebtedness against loss; or (3) to supply funds to or in any other manner invest in the debtor; (c) all indebtedness secured by (or for which the holder of the indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, Lien, security interest, or other charge or encumbrance upon property owned or acquired subject thereto, whether or not the liabilities secured thereby have been assumed; (d) all indebtedness incurred as the lessee of services, personal property, or real property under a lease reflected in the lessee's balance sheet under GAAP; and (e) all indebtedness incurred as the lessee of services, personal property, or real property under a lease that should not be reflected in the lessee's balance sheet under GAAP.


"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement of even date herewith among the Bank and the Bond Trustee, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, together with the Acknowledgments of the Borrower and CREP.


"LAND" shall mean that certain tract or parcel of land described in Exhibit A hereto.


"LCS" shall mean LCS Holdings, Inc., an Iowa corporation.


"LCSC" shall mean Life Care Services Corporation, an Iowa corporation.


"LCSD" shall mean LCS Development Corp., an Iowa corporation.


"LEASE" shall have the meaning assigned to that term in the Assignment of Residency Agreements.


"LIABILITIES" means all obligations of the Borrower hereunder and under each other Loan Document to the Lenders, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due.


"LIBOR RATE" means for any LIBOR Interest Period the per annum rate (rounded upwards, if necessary, to the nearest 1/16th of I percent) which is the British Bankers Association interest settlement rate published on the Dow Jones Telerate Screen at approximately 11: 00 a.m. London time on the day which is two London Banking Days prior to the first day of the LIBOR Interest Period as the rate in the London interbank market for U.S. dollar deposits having a term comparable to the LIBOR Interest Period and in an amount comparable to the principal amount of the Loan with respect to which the LIBOR Rate is being determined for that LIBOR Interest Period.


"LIEN" shall mean any mortgage, pledge, assignment, lien, charge, encumbrance, or security interest of any kind, or the interest of a vendor or lessor under any conditional sale agreement, capital lease, or other title retention agreement.


"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the Guaranty, the Mortgage, the Security Agreement, the Assignment of Residency Agreements, the Facility Agreements Assignment, the Environmental Indemnity Agreement, the Escrow Assignment, the Consent and Subordination Agreement, the Subordination Agreement, the Intercreditor Agreement and any and all other instruments, agreements and documents delivered by or on behalf of the Borrower or any Guarantor in connection with the Loans, as the same may be amended, modified or supplemented form time to time in accordance with their respective terms.


"LOAN MATURITY DATE" shall have the meaning set forth in Section 2.5 of this Agreement.


"LOAN TERMINATION DATE" means the earliest to occur of (a) the Loan Maturity Date, (b) the termination of the Loan Commitment hereunder or (c) an Acceleration.


"LOAN TRUSTEES" shall mean Paul R. Tyler and Richard A. Malm, as trustees under the Mortgage for the benefit of the Bank.


" LOANS" shall mean the Loan Advances and the Loan.


"LONDON BANKING DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in London, England are authorized or required by law to close.


"MORTGAGE" shall mean the Indemnity Deed of Trust and Security Agreement dated the date hereof and given by CREP to the Bank to secure the Guaranty, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.


"MORTGAGED PROPERTY" shall mean the Land and the Facility.


"OPERATING AND USE AGREEMENT" shall mean the Operating and Use Agreement (Blakehurst), dated as of April 1, 1992, between the Borrower and CREP, as the same may be amended, modified or supplemented in compliance with the provisions of the Loan Documents.


"PARTNERSHIP AGREEMENT" shall mean the complete Partnership Agreements of Borrower and CREP.


"PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.


"PERMITTED SUBSTANCES" shall have the meaning assigned to that term in Section 1.02 of the Mortgage.


"PERSON" shall mean an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, government (including political subdivisions), governmental authority or agency, or any other entity.


"PHASE I AND II IMPROVEMENTS" shall mean the first two phases of a licensed, continuing care retirement community commonly known as the Blakehurst Retirement Community consisting of one hundred seventy-seven (177) independent living units, a health center building containing fifty (50) beds, a clubhouse, an arts and crafts studio, a woodworking shop, an auditorium and incidental improvements and amenities which have been constructed upon the Land, together with all equipment, fixtures and other personal property attached thereto or used in connection therewith.


"PHASE III IMPROVEMENTS" shall mean the third phase of the Blakehurst Retirement Community consisting of thirty-five (35) independent living units, a swimming pool with whirlpool and locker


rooms, an exercise room, additional surface parking, twelve (12) detached garage units and nineteen (19) under-building garages, together with all equipment, fixtures and other personal property attached thereto or used in connection therewith.


"PLANS" shall mean the final plans and specifications for the construction of the Phase III Improvements on the Land.


"PROJECT" shall mean the design and construction of the Phase III Improvements on the Land, the development and operation of the Phase III Improvements and the financing of such acquisition, design, construction, development and operation.


"PROPERTY" shall mean, collectively, the Land, the Improvements and the other tangible property covered by the Mortgage and the Security Agreement.


"RESIDENCY AGREEMENTS" shall mean all contracts between the Borrower and prospective residents of the Project relating to the acquisition by such residents of a revocable license to occupy independent living units in the Projects and "Residency Agreement" shall mean any one of them.


"RESIDENTS' LOANS" shall mean the loans made to the Borrower pursuant to the Residency Agreements.


"RESIDENTS' LOAN DOCUMENTS" shall mean all documents and agreements executed and delivered to secure and support the Residents' Loans.


"RESPONSIBLE OFFICER" of a Person shall mean the president, treasurer or chief financial officer of the Person.


"ROSEDALE" shall mean Rosedale Care, Inc., a Maryland Corporation.


"SECURITY AGREEMENT" shall mean the Security Agreement dated the date hereof and given by the Borrower to the Bank to secure the Note, as the same may be amended, modified or supplemented in accordance with the terms thereof.


"SUBORDINATION AGREEMENT" shall mean the Amended and Restated Subordination Agreement of even date herewith among the Borrower, CREP, the First National Bank of Maryland, as trustee, the Bond Trustee, Paul R. Tyler and Richard A. Malm, as trustees, John Obzud, as trustee) and


Bank as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.


"SUBSIDIARY" means any Person or in which a Person owns directly or indirectly 50 percent or more of (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (ii) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity, or (iii) the beneficial interest of such Person, if it is a trust, association or other incorporated organization.


"TITLE COMPANY" shall mean Chicago Title Insurance Company.


"TITLE POLICY" shall mean the policy of title insurance issued by the Title Company to the Bank, insuring the Mortgage as required by Section 5.7 of th
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