**Exhibit 10.4.3**

 

**Loan****No. ****ML0936T2**

** **

**PROMISSORYNOTE AND SUPPLEMENT**

 

**THIS PROMISSORY NOTE AND SUPPLEMENT**to the Master Loan Agreement dated as of May 1,2002 (as amended or restated from time to time, the “MLA”) is entered into asof May 1, 2002, between **TECON WATERCOMPANY, L.P.**(the “Company”) and **CoBANK,ACB**(“CoBank”).

 

**SECTION 1.   The Term LoanCommitment.**On theterms and conditions set forth in the MLA and this Promissory Note andSupplement, CoBank agrees to make loans (each a “Loan”) to the Company fromtime to time during the period set forth below in an aggregate principal amountnot to exceed $1,000,000 at any one time outstanding (the “Commitment”).Within the limits and during the term of the Commitment, the Company mayborrow, repay and reborrow.

 

**SECTION 2.   Purpose.**The purpose of the Commitment is to financegeneral partnership needs of the Company, and the Company agrees to use theproceeds of the loans for those purposes.

 

**SECTION 3.   Term.**The term of the Commitment shall be from thedate hereof up to but not including the first anniversary of the date hereof,or such later date as CoBank may, in its sole discretion, authorize in writing.

 

**SECTION 4.   Availability.**Loans will be made as provided in Section 2.02of the MLA; provided, however, that no Loans will be made hereunder unless theloan contemplated in that certain Promissory Note and Supplement dated as ofthe date hereof and numbered ML0936Tl (the “First Supplement”) shall have beenmade by CoBank and disbursed by the “Title Company” as contemplated in the “ClosingAgreement” (both as defined in the First Supplement).

 

**SECTION 5.   Interest.**

 

**(A) Interest Rate Options.**The Company agrees to pay interest on theunpaid principal balance of the Loans in accordance with one or more of thefollowing interest rate options, as selected by the Company:

 

**(1)           WeeklyVariable Rate Option.**Ata rate per annum equal to the rate of interest established by CoBank on thefirst “BusinessDay” (as defined in the MLA) of each week (the “VariableRateOption”). The rate established by CoBank shall be effectiveuntil the first Business Day of the next week and may not exceed CoBank’s “NationalVariableRate” (as_defined in the MLA) on that day. Each changein the rate shall be applicable to all balances subject to this Variable RateOption and information about the then current rate shall be made available upontelephonic request.

 

**(2)           QuotedFixed Rate Option.  **At a fixed rate to be quoted by CoBank in itssole discretion in each instance (the “QuotedRateOption”).Under this option, balances of $100,000 or more may be fixed for such periodsas may be agreeable to CoBank in its sole discretion in each instance (each a “QuotedFixed RatePeriod”).

 

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**(3)           LIBOROption.**At a fixedrate equal to the “LIBOR Rate” (as hereinafter defined) plus a spread equal to:(A) in the case of years one through four, 1.75% per annum; and (B) inthe case of years five through ten, 2.00% per annum (the “LIBOR Option”).Under this option rates may be fixed: (i) on two (2) “Banking Days’”(as hereinafter defined) prior notice; (ii) on balances of $100,000 ormore; (iii) for “Interest Periods” (as hereinafter defined) of 1, 2, 3, 6,9 and 12 months, as selected by the Company (but in no event beyond the finalmaturity date of the Loans); and (iv) only during years one through ten.For purposes hereof: (x) “LIBOR Rate” shall mean the rate indicated by Telerate(rounded upward to the nearest thousandth and adjusted for any reserves requiredto be maintain under Regulation D of the Board of governors of the Federalreserve System or other federal law or regulation) as having been quoted by theBritish Bankers Association at 11:00 AM London time three (3) Banking Daysbefore the commencement of the Interest Period for the offering of U.S. Dollardeposits in the London interbank market for the Interest Period designated bythe Company; (y) “Banking Day” shall mean a day that is a Business Day and alsoa day on which dealings in US Dollar deposits are being carried out in theLondon interbank market and banks are open for business in New York and London;and (z) “Interest Period” shall mean a period commencing on the day the LIBOROption becomes effective and ending on the numerically corresponding day in thenext calendar month or the month that is 2, 3, 6, 9 or 12 months thereafter, asthe case may be; provided, however, that: (I) in the event such ending day isnot a Banking Day, such period shall be extended to the next Banking Day unlesssuch next Banking Day falls in the next calendar month, in which case it shallend on the preceding Banking Day; and (II) if there is no numericallycorresponding day in the month, then such period shall end on the last BankingDay in the relevant month.

 

**(B)          Elections.**Subject to thelimitations set forth above, the Company: (1) shall select the applicable rateoption each time it requests a Loan; (2) may, on any Business Day, electto convert balances bearing interest at the Variable Rate Option to the QuotedFixed Rate Option; (3) may, on the last day of any Quoted Fixed RatePeriod, elect to refix the rate under the Quoted Fixed Rate Option or convertthe balance to the Variable Rate Option; (4) may, on the last day of anyInterest Period, elect to convert the balance to the Variable Rate or QuotedFixed Rate Option; and (5) may, on two Banking Days’ prior notice, electto convert balances bearing interest at the Variable Rate Option or the QuotedFixed Rate Option to the LIBOR Option or refix a rate under the LIBOR Option;provided, however, that balances bearing interest at the Quoted Fixed RateOption or the LIBOR Option may not be converted or continued until the last dayof the Quoted Fixed Rate Period or Interest Period applicable thereto. In the absenceof an election provided for herein, the Company shall be deemed to have electedthe Variable Rate Option. All elections provided for herein may be madetelephonically or in writing and must be received by 12:00 noon Company’s localtime on the applicable Business Day. Any election made telephonically, shall bepromptly confirmed in writing if so requested by CoBank. Notwithstanding theforegoing in no event may the Company elect to fix a rate in such a manner asto cause the Company to have to break any fixed rate balance prior to theexpiration of any fixed rate period in order to pay any installment ofprincipal hereunder.

 

**(C)          Calculationand Payment.  **Interest shall be calculated on the actual numberof days each Loan is outstanding on the basis of a year consisting of 360days.   In calculating interest, the dateeach Loan is made shall be included and the date each Loan is repaid shall, ifreceived before 3:00 P.M. Mountain time, be excluded. Interest shall bepayable monthly in arrears by the twentieth (20th) day of the following month and on the dateeach Loan is repaid.

 

**SECTION 6.   ****Fees.** In consideration of the Commitment, theCompany agrees to pay to CoBank:

 

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(A) **Loan Origination****Fee.** A loan origination fee in the amount of $5,000 less theamount paid to CoBank on account of the Commitment pursuant to that certainletter agreement dated as of December 21, 2001, between the Company andCoBank.

 

(B) **Commitment****Fee.** A commitment fee on the average daily unused portion ofthe Commitment at the rate of 0.375% per annum (calculated on a 360 day basis),payable monthly in arrears and on the date the Commitment terminates. Such feeshall be payable for each month or portion thereof occurring during theoriginal or any extended term of the Commitment.

 

**SECTION 7. Promissory****Note.** The Company promises to repay the unpaidprincipal balance of each Loan as follows: (1) in 228 equal, consecutivemonthly installments, payable on the 20th day of each month, withthe first such installment due on 20th of the month following themonth in which the Commitment expires; provided, however, that in the case ofthe last payment, such payment shall be in an amount equal to the thenoutstanding principal balance of the Loans. In addition to the above, theCompany promises to pay interest on the unpaid principal balance of the Loansat the times and in accordance with the provisions set forth above and to paythe fees set forth in Section 5 hereof and any interest breakagesurcharges as provided herein. Notwithstanding the foregoing, if any date onwhich principal and interest are due is not a Business Day, then such paymentshall be due and payable on the next Business Day and, during such period,interest shall continue to accrue on the principal balance thereof.

 

**SECTION 8.Security.**The Company’sobligations hereunder and, to the extent related hereto, the MLA shall besecured as provided in Section 2.04 of the MLA.

 

**SECTION 9.Prepayment.**TheCompany may, on one CoBank Business Day’s prior written notice, prepay theLoans in whole or in part together with accrued interest to the date ofprepayment on the amount prepaid and, in the event any balance bearing interestat either the LIBOR Option or the Quoted Fixed Rate Option is prepaid, asurcharge equal to the present value of the sum of: (1) the difference, if(a) is larger than (b), between: (a) the rate estimated by CoBank inaccordance with its standard methodology to be its all-in cost to fund the Loanbeing prepaid; minus (b) the rate estimated by CoBank on the date of theprepayment (in accordance with its then standard methodology) to be its all-incost to fund a new loan having a weighted average life equal to the weightedaverage life of the balance of the Loan being prepaid; plus (2) an amountequal to a yield of 1.5% on the amount being prepaid, calculated on a per annumbasis through the balance of the fixed rate period. In calculating thesurcharge, the discount rate shall be the rate determined in accordance with (1)(b) above.All partial prepayments shall be applied to principal installments in theinverse order of their maturity and to such fixed and variable rate balancesoutstanding on the portion prepaid as designated by CoBank.

 

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**IN WITNESS****WHEREOF, **the parties have caused thisPromissory Note and Supplement to the MLA to be executed by their dulyauthorized officers as of the date shown above.

 

 
| **CoBANK, ACB** |            | **TECON WATER COMPANY, L.P.**         |
|-----------------|-----------------|---------------------------------------|
|            |            | By:  Texas Water Services Group, LLC, |
|            |            | Its  General Partner                  |
|            |            |                                  |
| By:             | /s/ [ILLEGIBLE] |                                  |   | By: | /s/ J. G. Boyles |   |
|            |            |                                  |   |   | J. G. Boyles |   |
| Title:          | Vice President  |                                  |   | Title: | President |   |

 

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