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STATE OF COLORADO <br />Colorado Water Conservation Board <br />Department of Natural Resources <br />1313 Sherman Street, Room 721 <br />Denver, Colorado 80203 <br />Phone: (303) 866 -3441 <br />Fax: (303) 866-4474 <br />wwAv.cwcb.state.co.us <br />November 9, 2011 <br />Mr. John Groo, President <br />Bull Creek Reservoir Canal & Power Company <br />P.O. Box 25 <br />Molina, CO 81646 -0025 <br />Re: Bull Creek Reservoir #4 Rehabilitation - Loan Contract Language <br />Loan Contract C 150240 <br />Dear Mr. Groo: <br />John W. Hickenlooper <br />Governor <br />Mike King <br />DNR Executive Director <br />Jennifer L. Gimbel <br />CWCB Director <br />This letter is a follow up to the email and verbal correspondence we have had over the last couple months. <br />It is very important that the Company and the CWCB have a clear understanding of the Loan Contract as <br />amended on December 1, 2010. The Project was Substantially Completed on September 1, 2011, which <br />closed out the construction phase of the loan contract. Since the Company has resolved its lien with the <br />S4 Corporation, the focus is now on the Loan Contract clause regarding the Company's need to sell assets <br />to reduce the Company's debt. <br />Loan Contract Amendment No. 2, Paragraph 7a. reads as follows: <br />"Upon resoiution of the pending litigation, Borrower shall attempt in good faith to sell Reservoirs 1 and <br />2 or some other combination of assets to maintain its annual assessments at a maximum of $125 per <br />share. " <br />We recommend the following actions as they relate to this clause: <br />The Company shall prepare a water sale prospectus which includes varying combinations of Company's <br />water assets. This shall be presented to the Company's shareholders at the 2012 shareholders meeting <br />with the goal of reducing the Company's annual assessment to less than $125 /share (including Operations <br />& Maintenance costs). The efforts to sell the water will include the submittal of a quarterly letter report <br />starting on April 1, 2012 to the CWCB summarizing the status of the water sale efforts. By January 1, <br />2013, the Company shall either: 1.) have a contract for the sale of water or 2.) submit a letter to CWCB <br />Interstate & Federal • Watershed & Flood Protection • Stream & Lake Protection • Finance <br />Water Information • Water Conservation & Drought Planning • Water Supply Planning <br />