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<br />," <br /> <br />G. Part of the DISTRICT'S Mancos Project consists of an earthen inlet canal to the <br />Jackson Gulch Reservoir. The canal began sliding in 1994, and aher inspection and monitoring <br />by the U.S. Bureau of Reclamation ("USBR") and per USBR recommendations, the DISTRICT <br />repaired the canal in both 1994 and 1995. In early fall 1996, the DISTRICT concluded that its <br />repairs had not-stopped the slide and that it could no longer run water through the canal. <br />Without performing the necessary repairs to the canal this fall, the DISTRICT will be unable to <br />provide irrigation water to its 7,800 acres next season, and will be unable to provide <br />municipal/industrial water to the Town of Mancos, Mancos Rural Water Company, and Mesa <br />Verde National Park. <br /> <br />H. The DISTRICT/BoRROWER applied to the STATE for an emergency loan to be used to <br />finance the costs of rehabilitating a portion of the DISTRICT'S inlet canal to the Jackson Gulch <br />Reservoir, hereinafter referred to as the PROJECT. <br /> <br />I. A feasibility study conducted by the DISTRICT and the USBR, which is incorporated <br />herein by reference, was reviewed by the STATE and, based upon this feasibility study, the <br />STATE determined the PROJECT to be technicallY and financially feasible. <br /> <br />J. At its November 25-26, 1996 meeting, the CWCB determined that the inoperable <br />condition of the canal qualifies the DISTRICT/BoRROWER for an emergency loan, which is <br />necessary to avoid unreasonable risk of injury to human health and well.being and to crops, <br />Further, the CWCB determined that these emergency conditions are not the result of negligence <br />in the operation or maintenance of the infrastructure and that the viability of the PROJECT is not <br />dependent upon further appropriations or loans. Based upon the foregoing, the CWCB <br />approved an emergency loan to the DISTRICT/BoRROWER in the amount of Sixty-Two Thousand <br />Five Hundred Dollars ($62,500), which amount shall not exceed 75% of actual PROJECT costs, <br />at an interest rate of 3 Y, % per annum for a duration of twenty (20) years to be used to finance <br />PROJECT costs. <br /> <br />K, The DISTRICT/BoRROWER also is obtaining a loan in the amount of $62,500 for the <br />PROJECT from the Southwestern Water Conservation District ("SWCD"), and will use a portion <br />of its water revenues to repay the SWCD loan. <br /> <br />L, The STATE now desires, by this contract, to loan money to the BORROWER for this <br />PROJECT upon mutually agreeable terms and conditions. <br /> <br />NOW THEREFORE, in consideration of the mutual and dependent covenants contained <br />herein, the parties agree as follows: <br /> <br />A. The BORROWER and DISTRICT agrees as follows: <br /> <br />1, DISTRICT/BoRROWER'S indemnification of the STATE. The DISTRICT/BoRROWER shall, <br />without expense or legal liability to the STATE, manage, operate, and maintain the PROJECT in an <br />efficient and economical manner. The DISTRICT/BoRROWER agrees to indemnify and hold the <br />STATE harmless from any liability incurred by the STATE as a result of the STATE'S interest in the <br />PROJECT facilities. <br /> <br />2. DISTRICT/BoRROWER'S liability insurance. Upon execution of this contract and <br />continuing until complete repayment of the loan is made to the STATE, the DISTRICT/BoRROWER <br />shall maintain commercial general liability insurance with a company that is satisfactory to the <br /> <br />Page 2 of 1 2 <br />