Exhibit 10.4.1


 


Loan No. ML0936T1


 


PROMISSORY NOTE 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 as
of May 1, 2002, between TECON WATER
COMPANY, L.P. (the “Company”) and CoBANK,
ACB (“CoBank”).


 


SECTION 1. The Term Loan Commitment. On the terms and conditions set forth in the
MLA and this Promissory Note and Supplement, CoBank agrees to make a loan (the “Loan”)
to the Company in the principal amount of $15,400,000 (the “Commitment”).
Under the Commitment, amounts borrowed and later repaid may not be reborrowed.


 


SECTION 2. Purpose. The purpose of the Commitment is to: (A) refinance
the Company’s indebtedness to: (A) Bank One, NA; (B) W.C. Hankins; (C) Gary
W. Hanning, Robin Hanning and the Gary W. Hanning Trust; (D) Associates
Utility Company; (E) William E. Dark and Wanda M. Dark; (F) Ronald L.
Payne; and (G) Highsaw Water Corporation (collectively, the “Existing
Lenders”; and (B) finance general needs of the Company, and the
Company agrees to use the proceeds of the Loan for those purposes.


 


SECTION 3. Term. The term of the Commitment shall be from the
date hereof up to and including May 1, 2002, or such later date as CoBank
may, in its sole discretion, authorize in writing.


 


SECTION 4. Availability. Notwithstanding Section 2.02 of the MLA
and provided that all conditions precedent set forth herein and in the MLA
shall have been satisfied, the Loan shall: (1) be made upon the receipt by
CoBank of a written request therefor in the form attached hereto as Exhibit A
signed by an authorized officer of the Company; and (2) be made directly
to the “Title Company” (as hereinafter defined) pursuant to the “Closing
Agreement” (as hereinafter defined).


 


SECTION 5. Interest. The Company agrees to pay
interest on the unpaid principal balance of the Loan at 7.37% per annum.
Interest shall be calculated on the actual number of days the Loan is
outstanding on the basis of a year consisting of 360 days and shall be payable
monthly in arrears by the 20th day of the following month.


 


SECTION 6. Fees. In consideration of the Commitment, the
Company agrees to pay to CoBank on the date hereof, a loan origination fee in
the amount of $77,000 less the amount paid to CoBank on account of the
Commitment pursuant to that certain letter agreement dated as of December 21,
2001, between the Company and CoBank.


 


SECTION 7. Promissory Note. The Company promises to repay the Loan in 240
consecutive, monthly installments in the amount of 64,166.66, payable on the 20th
day of each month, with the first such installment due on May 20, 2002;
provided, however, that in the case of the last payment, such payment shall be
in an amount equal to the then outstanding principal balance of the Loan. In
addition to the above, the Company promises to pay interest on the unpaid
principal balance of the Loans at the times and in accordance with the
provisions set forth above and to pay any interest breakage surcharges as
provided herein. Notwithstanding the foregoing, if any date on which principal
and interest are due is not a “Business  Day” (as defined


 


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in
the MLA), then such payment shall be due and payable on the next Business Day and,
during such period, interest shall continue to accrue on the principal amount
thereof.


 


SECTION 8. Security. The Company’s obligations
hereunder and, to the extent related hereto, the MLA shall be secured as
provided in Section 2.04 of the MLA.


 


SECTION 9. Prepayment. The Company may, on one CoBank Business Day’s
prior written notice, prepay the Loan in whole or in part together with accrued
interest on the amount prepaid to the date of payment and a surcharge 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 in accordance with its
standard methodology to be its all-in cost to fund the Loan; minus (b) the
rate estimated by CoBank on the date of the prepayment (in accordance with its
then standard methodology) to be its all-in cost to fund a new loan having a
weighted average life equal to the weighted average life of the balance of the
Loan being prepaid; plus (2) an amount equal to a yield of 1.5% on the
amount being prepaid, calculated on a per annum basis through the final
maturity of the Loan. In calculating the surcharge, the discount rate shall be
the rate determined in accordance with (l)(b) above. All partial
prepayments shall be applied to principal installments in the inverse order of
their maturity.


 


SECTION 10. Conditions Precedent. In addition to the conditions precedent set
forth in the MLA, CoBank’s obligation to make the initial loan hereunder is
subject to the condition precedent that CoBank, the Company and Republic Title
of Texas, Inc. (the “Title Company”) shall have entered into a closing or
escrow agreement (the “Closing Agreement”) in form and content acceptable to
CoBank prescribing conditions under which the proceeds of the Loan will be
released or returned to CoBank. At a minimum, such conditions shall be designed
to ensure CoBank that upon disbursement of the funds by the Title Company: (1) all
assets of the Company will be free and clear of all Liens (other than Liens in
favor of CoBank); and (2) all claims held by the Existing Lenders will be
discharged.


 


IN WITNESS WHEREOF, the
parties have caused this Promissory Note and Supplement to the MLA to be
executed by their duly authorized 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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