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( ~ c~ (fJ 'P P . Conditions Precedent Before the 0 & M Agree- ment becomes effective, several conditions must occur: 1. Within one year from the effective date ofthe agreement, GVIC must enter into a contract with a participating lateral; 2. The participating laterals must be organized under Colorado law with authority to enter into a contract with GVIC and with the power to assess its members Or its capital stock for its base cost; 3. The participating laterals must initiate ac- quisition of easements within one year from the effective date of the 0 & M Agreement; and 4. GVIC and Reclamation must enter into the Construction Agreement. In the event GVIC is able to construct salinity improvements with an average cost savings of25% Or more than Reclamation's cost estimates, then the de- ferred increments automatically become eligible for participation in the Salinity Control Program. . Rehabiliiaiion Rehabilitation is any modification or reconstruction or rehabilitation of salinity improve- ments done with the approval of Reclamation, GVIC and the affected participating latera] as to design and specification, materials and scheduling of work. . Ooeration and Maintenance. 1. GVIC's Al!Teement. GVIC agrees to operate and maintain salinity improvements once con- structed in a manner not to interrupt the flow of irrigation water during the irrigation season. 0 & M may include regulating turnouts if the participating lateral and GVIC agree to this. 2. Fundin!! Reclamation will fund the 0 & M costs exceeding base cost. Funding is by reim- bursement according to each participating lat- eral's actual cost. One participating lateral's cost cannot be offset against another's. Reimburse- ment is to occur quarierly \\ithin sixty (60) days following GVIC's request for reimbursement. 3. Determination of Base Cost. The determina- tion of base cost is divided into several factors with estimated time requirements and hourly rates. Examples are given in the 0 & M Agreement as to how base cost is determined. . Adiustments to Base Cost. Base costs are adjusted each year by increases or decreases in the Producer's Price Index (crude materials for further processing, foodstuffs and feedstuffs). It is felt that this index would best represent fluctuations in raw farm prod- ucts. . fuolacement and Correction of Deficiencies. Prior to the commencement of 0 & M, deficiencies will be identified and corrected, Replacement offacilities will occur where necessary because of design or construc- tion inadequacies Or the expiration of a normal, useful life. Correction of deficiencies and replacement will be funded by advances from Reclamation subject to ap- proved work schedules, . Water Mana!!ement- Saved Water GVIC agrees to cooperate with Reclamation to provide water man- agement and salinity control information to share- holders and to permit Reclamation to inspect salinity improvements, GVIC also agrees to assist Reclamation in evaluating salinity control measures, Reclamation agrees that participation in salinity control will not reduce GVIC's diversions at its main headgate, and will not require GVIC to change any point of diversion or to decrease water deliveries to its shareholders, Rec- lamation further agrees that it will not claim or assert that GVIC is obligated to reduce diversions at its mainheadgate because of water which might be saved from transportation losses as a result of salinity im- provements. . Title to Salinitv Imorovements. Salinity improve- ments shall be titled in the name of the participating lateral subject to GVIC's rights and duties of construc- tion and 0 & M. . Comoliance With Re!!Ulations. GVIC is required to comply with record keeping and reporting (does not include water deliveries) requirements according to Reclamation regulations. All records pertaining toO & M of salinity improvements are subject to independent audit. . Examination and Insoection ofImorovements and Records. Reclamation may Inspect GVIC's books and records pertaining to salinity improvements as well as the improvements themselves. GVIC will assist Recla- mation in these inspections. The State of Colorado may also observe the operation of salinity improvements. . Aoorooriaiions bv Conl!Tess GVIC's and Reclama- tion's obligations under the 0 & M Agreement are contingent on appropriation of funds by the U.S. Congress and ihe allotment of such funds for the Salinity Control Program. If the U.S. Congress fails to fund or the Secretary of Interior fails to allot funds to the Salinity Control Program, then the parties' obliga- tions are discharged. . Nonoerformance and Remedies. If GVIC fails to perform its obligations under the 0 & M Agreement after sixty (60) days' written notice, then Reclama- tion's remediesare limited to requiringGVICioreturn any unexpcndcd or unobligated funds, cause work to be completed by another party and suspend future funding. GVIC will be paid all costs or expcnscs it has 4