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<br />Linda J. Bassi, Esq. <br />September 12, 1997 <br />Page 6 <br /> <br />the agreement and of the Promissory Note should be 40 years after this event. We <br />suggest that you use a defined term, "PROJECT COMPLETION," and define it to <br />mean acquisition of the Box Springs Water Rights by HCWUA. <br /> <br />* <br /> <br />Paragraph 6 deals with the possible use of a "REVISION LETTER" to decrease the <br />final loan amount. If HCWUA is successful in obtaining grant funds, as described <br />in paragraph 7.1 of the Settlement Agreement with Box Springs and the State, it <br />would expect to use these to reduce its obligation to the CWCR If this should <br />happen, HCWUA requests that the State treat the situation as a decrease in the loan <br />amount, with a revision of the Promissory Note and a new amortization schedule <br />requiring smaller annual payments. <br /> <br />* <br /> <br />Also with respect to paragraph 6, you may want to consider whether it is consistent <br />with paragraph B 11. Under the latter provision, the terms of the contract prevail over <br />the appendices. However, paragraph A6 treats a REVISION LETTER as <br />superseding the contract in the event of a conflict between the two. One way to <br />avoid an inconsistency would be to make paragraph B11 subject to paragraph A6. <br /> <br />* <br /> <br />Paragraph 8a deals with the certificate of deposit that is to be used as collateral. It <br />should be clarified to provide that interest generated by the CD will be released to <br />HCWUA, rather than accumulated as further security for the loan. <br /> <br />* <br /> <br />With respect to the "Box Springs Water Rights" and paragraph 8b, it will not be <br />known how much water HCWUA will acquire until after the loan documents with <br />CWCB are signed. The ultimate amount may be as low as 30 or 35 c.f.s. under some <br />circumstances, depending upon whether HCWUA and Box Springs are successful <br />in obtaining grant funds after the CWCB loan is disbursed. Perhaps the appropriate <br />way to deal with this situation is for HCWUA to execute a deed of trust with respect <br />to the minimum amount that it may acquire and agree to provide a further deed of <br />trust, or a covenant in the original deed of trust encumbering any "after-acquired <br />title," with respect to any additional Box Springs water acquired by HCWUA. <br /> <br />* <br /> <br />Paragraph 8c should recognize that closing between HCWUA and Box Springs will <br />occur only if the contingencies in the Settlement Agreement are satisfied. Further, <br />we question whether a Security Agreement and/or an Assignment of Escrow Account <br />as Security are necessary. Please see our comments on Appendix 7. <br /> <br />* <br /> <br />Paragraph 11 [which appears on page 5 of 10 and likely is misnumbered] and <br />paragraph 3 probably should use the same defined terms concerning the pledge of <br />