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<br />PROMISSORY NOTE <br /> <br />\JO\U <br /> <br />Date: January 1 , 2003 Date of Completion <br /> <br />1. FOR VALUE RECEIVED, the Tilton Lateral, Inc. ("BORROWER") promises to pay the State <br />of Colorado Water Conservation Board ("CWCS"), the principal sum of One Hundred <br />Thousand Dollars ($100,000) plus interest at the rate of Three and One Half percent <br />(3.5%) per annum for a term of Thirty (30) years, pursuant to Loan Contract No. <br />C150066 dated January 1, 2003 ("LOAN CONTRACT"). <br /> <br />2. Principal and interest shall be payable in equal installments of $5,437.13, with the first <br />payment due and payable one year from the date that the CWCS determines that the <br />project is substantially complete, and annually.thereafter until all principal, interest, <br />and all late charges, if any, have been paid in full. All principal, interest, and late <br />charges, if any, then remaining unpaid shall be due and payable 30 years thereafter. <br /> <br />3. Payments shall be made to the Colorado Water Conservation Soard, 1313 Sherman <br />Street, Room 721, Denver, Colorado 80203. <br /> <br />4. If the CWCB does not receive the annual payment within 15 calendar days of the due <br />date, the CWCS may impose a late charge in the amount of 5% of the annual <br />payment. <br /> <br />5. This Note may be prepaid in whole or in part at any time without premium or penalty. <br />Any partial prepayment shall not postpone the due date of any subsequent payments <br />or change the amount of such payments. <br /> <br />6. All payments received shall be applied first to late charges, if any, next to accrued <br />interest and then to reduce the principal amount. <br /> <br />7. This Note is issued pursuant to the LOAN CONTRACT between the CWCS and the <br />BORROWER. . The LOAN CONTRACT creates security interests in favor of the CWCS to <br />secure the prompt payment of all amounts that may become due hereunder. The <br />security interests, evidenced by a Security Agreement and an Assignment of <br />Certificate of Deposit, both documents of even date and amount, cover certain <br />revenues and accounts of the BORROWER. The LOAN CONTRACT, Security Agreement <br />and Assignment grant additional rights to the CWCS, including the right to accelerate <br />the maturity of this Note in certain events. <br /> <br />8. If any annual payment is not paid when due or any default under the LOAN CONTRACT <br />or the Security Agreement or Assignment securing this Note occurs, the CWCB may <br />declare the entire outstanding prinCipal balance of the Note, all accrued interest, and <br />any outstanding late charges immediately due and payable, and the indebtedness <br />shall bear interest at the rate of 7% per annum from the date of default. The CWCB <br />shall give the BORROWER written notice of any alleged default and an opportunity to <br />cure within thirty (30) days of receipt of such notice before the BORROWER shall be <br />considered in default for purposes of this Promissory Note. <br /> <br />Appendix 2 to Loan Contract C150066 <br />