C150052 Contract

• Contract/PO #: C150052
• Contractor Name: Tunnel Water Company, The
• Contract Type: Loan
• Water District: 3
• County: Larimer
• Bill Number: EIA
• Loan Projects - Doc Type: Contract Documents

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and 16, Township 8 North, Range 75 West of the 6th P.M., Larimer county Colorado, hereinafter
referred to as "collatera!."

12. Pledge Of Property. The BORROWER hereby irrevocably pledges to the STATE for purposes of
repayment of this loan revenues from assessments levied for that purpose as authorized by the
BORROWER'S resolution and all of the BORROWER'S rights to receive said assessment revenues
from its members (hereinafter collectively referred to as the "pledged property"). Furthermore,
BORROWER agrees that

a. Revenues For This Loan Are To Be Kept Separate. The BORROWER hereby agrees to set
aside and keep the pledged revenues in an account separate from other BORROWER revenues,
and warrants that it shall not use the pledged revenues for any other purpose.

b. Establish Security Interest. The BORROWER agrees that, in order to provide a security interest
for the STATE in the pledged property so that the STATE shall have priority over all other competing
claims for said property, it shall execute a Security Agreement, attached hereto as Appendix 4
incorporated herein. The BORROWER acknowledges that the STATE shall perfect its security
interest in the BORROWER'S right to receive assessment revenues by filing a UCC-1 Form with the
Colorado Secretary of State.

c. Assessments For Repayment Of The Loan. Pursuant to its statutory authority, articles of
incorporation and by-laws, and as authorized by its resolution, the BORROWER shall take all
necessary actions consistent therewith to levy assessments sufficient to pay this loan as required
by the terms of this contract and the promissory note. In the event the assessments levied by the
BORROWER become insufficient to assure such repayment to the STATE, the BORROWER shall
immediately take all necessary action consistent with its statutory authority, its articles of
incorporation, bylaws and resolution, including, but not limited to, levying additional assessments
to raise sufficient revenue to assure repayment of the loan to the STATE.

d. Assessments For Operations, Maintenance And Reserves. Pursuant to its statutory authority,
articles of incorporation, by-laws, and resolutions, the BORROWER shall levy assessments from
time to time as necessary to provide sufficient funds for adequate operation and maintenance,
emergency repair services, obsolescence reserves and debt service reserves. BORROWER shall
deposit an amount equal to one-tenth of an annual payment into its debt service reserve fund one
year from the first loan disbursement, and annually thereafter for the first ten years of this loan. In
the event that the Borrower applies funds from this account to repayment of the loan, the
Borrower shall replenish the account within ninety (90) days of withdrawal of the funds.

13. Change of Use of Water Shares During Term of Contract. The interest rate for this loan is
based on the CWCB's blended agricultural and municipal rates. The BORROWER agrees to
notify the STATE of any change of the use of the water rights represented by its shares from
irrigation to municipal or commercial use. The interest rate shall be revised when the blend of
the agricultural rate and the municipal/commercial rate increases the original interest rate by
0.5% or more. The parties shall execute a contract amendment, including a revised promissory
note, to effect said change in interest rate.

14. Collateral During Repayment. The BORROWER shall not sell, convey, assign, grant, transfer,
mortgage, pledge, encumber, or otherwise dispose of the property provided as security for this

The Tunnel Water Company

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Loan Contract