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<br />Combining the current loan request with the previous CWCB loan provides a total loan of$935,035 <br />and an annual loan obligation (including 10% debt reserve funding) of $45,711. This equates to an <br />annual debt service cost of$28.22/acre-foot for this reservoir. <br /> <br />The Company has an existing bridge loan with Paonia State Bank, Paonia, Colorado, with an <br />outstanding balance of $356,078, as of October 2007. The loan funds received from Paonia State <br />Bank were used to pay bills received from KC Construction (contractor), Golder & Associates <br />(engineer), and Willmore and Company (surveyor) for work performed in 2007 to complete the <br />improvements to Beaver Reservoir. The $355,000 in loan funds from CWCB will be used to pay <br />off the existing bridge loan with Paonia State Bank. The additional $1,078 remaining on the loan <br />balance will be paid off directly by the Company. CWCB will require that the existing lien on the <br />reservoir with Paonia State Bank be released, placing CWCB in first position with their interest in <br />the reservoir. <br /> <br />Creditworthiness: The Company is current with all payments to CWCB for the current loan. The <br />Company has no other debt. Repayment of the two loans will be accomplished by increasing share <br />assessments as necessary. <br /> <br />Table 3 shows the Financial Ratios for the Company. The Company will adjust the assessment rates <br />as needed to cover operating and repair costs and therefore, the ratios are shown as strong. Rate <br />history and projections are as follows: 2000 - $ 16.50/share; 2002 - $21.07/share; 2005 - <br />$25.29/share; and 2008 - 38. 13/share. The cost per share was raised in 2001 in anticipation ofthe <br />Project and will be raised again in 2008 to cover the actual final project cost. The annual operating <br />cost is weak due to the extensive improvements, which have been made over the last 10 years. <br /> <br />Table 3. Financial Ratios <br /> <br /> Approved With Amended <br />Financial Ratio Project Project <br />Operating Ratio (revenues/expenses) 500% 393% <br />I weak: <100% I-I average: 100% - 120% I-I strong: >120%t (Strong) (Strong) <br />Debt Service Coverage Ratio 127% 100% <br />(revenues-expenses )/debt service <br />I weak: <100% 1- I average: 100% - 120% 1- I strong: > 120%1 (Strong) (Average) <br />Cash Reserves to Current Expenses 18% 26% <br />I weak: <50% I-I average: 50% - 100% I-I strong: > 1 OOo/~ (Weak) (Weak) <br />Annual Operating Cost per Acre-Ft. (1,620 AF) $25 $28.22 <br />Iweak: >$20 I-I average: $10 - $20 1- I strong: <$101 (Weak) (Weak) <br /> <br />Collateral: As security for this loan, the Company will pledge assessment revenues backed by an <br />assessment covenant and a security interest in the Beaver Reservoir and storage rights totaling 1,620 <br />acre-feet. At a conservative estimate of$I,OOO per acre-foot, the value of the water alone would in <br />excess of$1,600,000. This security is in compliance with CWCB Loan Policy #5 (Collateral). <br /> <br />4 <br />