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8. This loan qualifies as a Small Project Loan in accordance with 9 37-60-122.7, C.R.S. (Supp. 1996), because the amount of the loan does not exceed $100,000 and the BORROWER will suffer undue hardship if the PROJECT is not completed prior to the 1998 irrigation season due to seepage losses caused by the poor condition of the BORROWER'S current delivery system. 9. At its May 12, 1997 meeting, the CWCB found that delay in completion of the PROJECT would cause undue hardship for the BORROWER'S members, and approved a loan to the BORROWER in an amount not to exceed $60,000 (75% of the cost of the PROJECT) at an interest rate of 3.75% per annum for a term of thirty years. Ihe CWCB conditioned its approval by requiring that the loan contract provide that, in the event that any property in the BORROWER'S service area is subdivided for residential use, that the CWCB shall adjust the interest rate on that portion of the outstandirig loan amount coITEisponding to the percentage of water delived by the BORROWER to be used for residential purposes to the municipal interest rate for CWCB loans in effect at the time the use of the property is changed to residential. 10. The STATE now desires, by this contract, to loan money to the BORROWER for this PROJECT upon mutually agreeable terms and conditions. NOW THEREFORE, in consideration of the mutual and dependent covenants contained, the parties agree as follows: A. The BORROWER agrees as follows: 1. Construction Fund Program Procedures. The following items are procedures the BORROWER shall follow during the construction phase of the PROJECT rehabilitation. a. The BORROWER shall employ an engineer, registered in the State of Colorado, hereinafter referred to as the CONSULTANT, to prepare plans and specifications for the PROJECT. b. The agreement between the BORROWER and the CONSULTANT and the plans and specifications must be submitted to the eWCB staff for verification of compliance with the terms of this contract prior to bid opening. Any modifications to the plans and specifications must be approved in writing by the CWCB staff. c. For plans and specifications for all jurisdictional dams and reservoirs, as defined by 9 37- 87-105 C.R.S. (1990), the BORROWER $hall provide a letter of approval from the State Engineer's Office prior to construction. d. CWCB staff must be present at bid opening and must approve the award of the construction contract. e. The BORROWER shall contract for the construction of the work with responsible and capable firms, hereinafter referred to as CONSTRUCTION FIRMS, which CONSTRUCTION FIRMS shall be selected by the BORROWER and found acceptable by the CWCB staff before work under this contract begins. f. The BORROWER must provide a copy of the executed construction contract documents consisting of the advertisement for bid, contractor's proposal, construction contract, bid bond, performance bond, payment bond, notice of award, notice to proceed, sample change order, and sample field order. After the CWCB staff verifies that these Chipperfield Lane Ditch, Inc. Page 2 of 14 Loan Contract