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have entered into an amended Escrow Agreement, which is incorporated herein by reference, establishing an Escrow Account into which the BORROWER shall deposit $504,000 of the loan funds and the Box Springs Sellers shall deposit deed(s) to and assignments of the Box Springs Water Rights, all of which shall be held in the Escrow Account pending final water court approval of the BORROWER'S augmentation plan and satisfaction of all contingencies of the Purchase Agreement, at which time the BORROWER and the Box Springs Sellers shall close on the purchase of the Box Springs Water Rights. 8. The STATE has reviewed a feasibility report prepared by W.w. Wheeler and Associates and the CWCB staff and, based upon these reports, the STATE determined the PROJECT to be technically and financially feasible. 9. At its January 29, 1997 meeting, the CWCB approved a loan to the BORROWER in the amount of $825,000, not to exceed the total cost of the PROJECT, at an interest rate that will assure that the total retum to the State has the same net present value as a standard 3%, 40 year loan ("3% NPV'), for a term of 40 years, to finance the PROJECT, contingent upon the settlement of Case No. 95 CW 211. By an Order Granting Joint Motion dated March 19, 1997, the District Court, Water Division 2, determined that the Amended Rules Goveming the Diversion and Use of Tributary Ground Water in the Arkansas River Basin, Colorado ("Amended Rules") are valid and applicable within the Horse Creek Basin, as stipulated in the Settlement Agreement, and acknowledged that the HCWUA would withdraw its protest in Case No. 95 CW 211 upon satisfaction of all contingencies of the Settlement Agreement, which include disbursement of this loan by the CWCB. 10. Pursuant to Paragraph 7.1 of the Settlement Agreement, the parties to the Settlement Agreement shall apply for a grant from the Colorado Economic Development Fund, the Colorado General Assembly or from another state agency of at least $350,000, 3/7 of which the BORROWER shall use to repay a portion of the loan from the CWCB. NOW THEREFORE, in consideration of the mutual and dependent covenants contained, the parties agree as follows: A. The BORROWER agrees as follows: 1. Time For PROJECT Completion. The BORROWER recognizes that time is of the essence in the performance of all of its obligations under this contract. Therefore, the BORROWER shall complete its purchase of the water rights, negotiate and enter into an operating agreement to facilitate its augmentation plan, and complete the adjudication of its augmentation plan no later than three (3) years from the date of this contract. The time for completion may be extended subject to the approval of the STATE. The BORROWER must provide, in writing, documented justification for any request for extension sixty (60) days prior to the end of the period for completion. 2. BORROWER'S Indemnification of STATE. The BORROWER agrees to indemnify and hold the STATE harmless from any liability incurred by the STATE as a result of the STATE'S interest in the property identified in the Collateral Provisions of this contract. 3. BORROWER'S Authority To Contract. The BORROWER shall, pursuant to its statutory authority, articles of incorporation, and by-laws, have its members and board of directors adopt resolutions that shall be irrepealable during the term of this loan, authorizing the board of directors to set and levy assessments in an amount sufficient to pay the annual amounts due under this contract, and authorizing the President and Secretary, on behalf of the BORROWER, to do the following: a. To enter into and comply with the terms of this contract and the promissory note, and to pay the indebtedness, and b. To pledge certain assessment revenues levied by Borrower for the purpose of repayment of this loan ("Pledged Revenues") and the BORROWER'S right to receive and such assessment The Horse Creek Water Users Association Page2of11 Loan Contract