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' t 8. The Borrower has also entered into option contract and purchase agreements for the purchase of water rights for an additional 2.5 cfs associated with the X-Y Ranch which is not part of the X-Y Ranch Option Agreement; said option agreements are hereinafter referred to as the "X-Y 2.5 cfs Option Agreements." 9. Under the terms of the X-Y Ranch Option Agreement and the X-Y 2.5 cfs Option Agreements, to exercise each purchase option, Borrower is required to deposit a refundable down payment in an interest bearing escrow account ("escrow account") on or before October 15, 1995. 10. Under the terms of the X-Y Ranch Option Agreement, and the X-Y 2.5 cfs Option Agreements, the Borrower is required to close on the purchase of each property by paying the remaining purchase amount on or before October 15, 1996, and upon Borrower's failure to so close, Borrower is entitled to a refund of the principal deposited in the escrow account and the seller is entitled to the interest accumulated on the principal in the escrow account. 11. The Borrower is negotiating an option contract and purchase agreement for the purchase of the water rights owned by the Manuel Canal and Irrigation Company; said option agreements referred to hereinafter as the "Manuel Option Agreements." The Borrower anticipates that the Manuel Option Agreements will provide for a refundable down payment of up to 5230,000 and include terms which will be substantially similar to the terms of the X-Y Ranch Option and the X-Y 2.5 cfs Option Agreements described above. 12. The Borrower, the seller of the property, and the escrow agent have entered or will enter into escrow agreements substantially in the-form attached hereto as Appendix A and incorporated herein by reference. 13. The Colorado Water Conservation Board approved at their July 24, 1995 meeting, a loan to the Borrower in a maximum amount of Seven Hundred and Fifty Thousand Dollars (5750,000) to secure the X-Y Ranch Option Agreement, the X-Y 2.5 cfs Option Agreements and the Manuel Option Agreements. 14. The Borrower has met all the criteria set forth in § 37-60-130(31, with the exception of obtaining commitments from its members (1) to comply with any rules or changes to rules as promulgated by the State Engineer concerning the measurement of ground water withdrawals and the use of such ground water in the Arkansas River Basin; and (2) that any member who fails to make payments in accordance with this loan shall cease pumping water. The Borrower understands that it must obtain such commitments before the loan funds will be released from the escrow accounts for the purchase of the property. 15. Borrower understands that this contract does not commit the State to loan additional funds to Borrower for the payment of the remaining purchase amount due at closing. AGREEMENT 1. State Loan. Provided that the Borrower enters into escrow agreements for each purchase substantially in the form attached as Appendix A, the State shall loan the Borrower the sum of up to 5750,000 to make refundable down payments under the X-Y Option Agreement, the X-Y 2.5 cfs Option Agreements, and the Manuel Option Agreements as follows: a. The State shall loan the Borrower the sum of Five Hundred Thousand Dollars (5500,000) to make a refundable down payment for the purchase of the X-Y Ranch and associated water rights. Upon execution of this contract, the State shall disburse the loan amount to the Borrower within 10 days of written request by the Borrower. Page 2 of 8 LOWER ARKANSAS WATER MANAGEMENT ASSOC. LOAN CONTRACT