Form 16-20

This form is for the sale of surface water rights when water rights have already been severed from the land or when water rights are to be severed from the land to which they are appurtenant. The form should be modified as appropriate.

Surface Water Rights Sales Contract

Permit/Certificate of Adjudication No[s].

Notice of confidentiality rights: If you are a natural person, you may remove or strike any or all of the following information from any instrument that transfers an interest in real property before it is filed for record in the public records: your Social Security number or your driver’s license number.

This contract to buy and sell surface water rights is between Seller and Buyer as identi­fied below and is effective on the date (“Effective Date”) of the last of the signatures by Seller and Buyer as parties to this contract and by [Title Company/Escrow Agent] to acknowledge receipt of the [Initial] Earnest Money. Buyer must deliver the [Initial] Earnest Money and obtain a signature acknowledging receipt of the [Initial] Earnest Money before the [Initial] Earnest Money Deadline provided in paragraph A.1. below for this contract to be effective. If the Earnest Money is paid by check and payment on presentation is refused, Buyer is in default.

Seller:

Address:

Phone:

E-mail:

Type of entity:

Seller’s Attorney:

Law firm:

Address:

Phone:

E-mail:

Buyer:

Address:

Phone:

E-mail:

Type of entity:

Buyer’s Attorney:

Law firm:

Address:

Phone:

E-mail:

Surveyor:

Survey Category:

[Title Company/Escrow Agent]: [identify title company, or if title insurance will not be obtained, identify person who will act as escrow agent]

Address:

Phone:

E-mail:

[Underwriter:]

Water [Authority/Authorities]: The Texas Commission on Environmental Quality (TCEQ) and [list any other applicable agencies or governmental bodies or authorities having juris­diction over the administration of the water rights, e.g., a watermaster or other river or basin water authority]

Seller’s Permit/Certificate of Adjudication No[s].: [list all permits and certificates of adjudica­tion, including numbers, that are the subject of the sale and attach copies of each together with all amendments thereto as exhibit A]

Appurtenant Land: [provide legal description of any land to which the water rights are appurte­nant or attach field notes as exhibit B]

Buyer’s Intended Use of Water Rights:

Water Rights: Seller’s Permit/Certificate of Adjudication No[s]. [number[s]]

All right, title, and interest in and to Permit/Certificate No. [number] as amended, dated [date], issued by the TCEQ to [name of seller], concerning the right to appropriate sur­face waters of the state of Texas in the [identify water body] for [purpose, e.g., irrigation, municipal, industrial, recreational purposes] (the “Permit/Certificate”).

The following portion of the Water Rights: [specify portion being sold, such as number of acre-feet authorized to be diverted]

[Include if applicable: These Water Rights are currently appurtenant to the Appurtenant Land, but will be amended to change the [include as applicable: place of use/place of appropriation/purpose of use/point of diversion/[other provision for which amendment of the current certificate is sought]] from [describe place of use, place of appropriation, pur­pose of use, point of diversion, or other provision in the current certificate for which amendment is sought, as applicable] to [describe place of use, place of appropriation, purpose of use, point of diversion, or other amendment to the water right sought by buyer] [include if applicable: and to sever the Water Rights from the Appurtenant Land in the Permit/Certificate to make the water rights appurtenant to the land described on Exhibit [exhibit number/letter] attached to this contract]].

Seller’s Current Year Water Allocation: The amount of water allocated to Seller by the Rio Grande Watermaster for the year beginning January 1, [year], and ending December 31, [year], as more fully described in Exhibit [exhibit number/letter]. The Seller’s Water Rights being sold and conveyed to Buyer will include [all/[describe portion]] of the Seller’s Current Year Water Allocation.

Water Rights Assessments: The amount assessed by the TCEQ for the watermaster program for the period beginning January 1, [year], and ending December 31 of the year in which the sale closes. Seller shall pay all Water Rights Assessments when due for the period during which Seller owns the Water Rights and shall provide proof of payment at or before closing. Seller shall escrow any amounts necessary to pay for assessments that will be billed or become payable after closing, attributable to Seller’s ownership of the Water Rights before closing. This provision shall survive closing.

Earnest Money: $[amount]

[Initial Earnest Money:]

[Additional Earnest Money:]

Independent Consideration: $[amount] of the Earnest Money constitutes Independent Consid­eration given for Buyer’s right to terminate during the Inspection Period under paragraph G.2. The Independent Consideration will be applied to the Purchase Price at closing, but [will/will not] be returned to Buyer if Buyer terminates this contract during the Inspec­tion Period.

Purchase Price

Cash portion:

Seller-financed portion (principal amount of note):

Interest rate:

Maturity date:

Payment schedule:

Third-party-financed portion:

Total purchase price:

Buyer’s Liquidated Damages: $[amount]

Seller’s Additional Liquidated Damages: $[amount]

[Title Commitment/Title Information]: If no Title Commitment is required, Seller will have the obligation to provide to Buyer, at [Buyer/Seller]’s expense, the Title Information as defined in paragraph F.2. below.

Title Documents: Seller’s [Certificate of Adjudication/[specify other water authority docu­ment]] and instruments affecting title to the Water Rights and the Real Property refer­enced in the [Title Commitment/Title Information] [and as otherwise provided as part of Seller’s Records].

County for Performance:

A.Deadlines and Other Dates

All deadlines in this contract expire at 5:00 p.m. local time where the point of diversion of the Water Rights is located. If a deadline falls on a Saturday, Sunday, or national holiday, the deadline will be extended to the next day that is not a Saturday, Sunday, or national holi­day. A national holiday is a holiday designated by the federal government. Time is of the essence.

A.1.[Initial] Earnest Money Deadline: [date]

A.2.Delivery of Seller’s records as specified in Exhibit D: [[date]/[number] days after the Effective Date]

A.3.Delivery of Title Commitment to [Water Rights [and/or Appurtenant Land]]: [[date]/[number] days after the Effective Date]

A.3.Delivery of Title Information: [[date]/[number] days after the Effective Date]

A.4.Delivery of Survey: [[date]/[number] days after the Effective Date]

A.5.Delivery of written documents from lienholder(s) consenting to transfer of [include if applicable: and modifications to] Water Rights and agreement to release lien on Water Rights or land to which Water Rights are appurtenant, or from other adverse claims to Seller’s title to Water Rights: [[date]/[number] days after the Effective Date]

A.5.Delivery of Seller’s Affidavit of No Liens or Adverse Claims to Water Rights or to Appurtenant Land: [[date]/[number] days after the Effective Date]

A.6.End of Inspection Period: [[date]/[number] days after receipt of the [Title Commitment/Title Information]] [include if applicable: and Survey]

A.7.Delivery of Water Rights Conveyance (Conditional) [include if applicable: with Vendor’s Lien] and other documents necessary to accomplish application for transfer of Water Rights: [[date]/[number] days after the Effective Date]

A.8.Filing of TCEQ Application: [number] days after Delivery of Title Conveyance of Water Rights (Conditional)

A.9.Delivery of Additional [Refundable/Nonrefundable] Earnest Money: [At the Conditional Closing in paragraph A.7./[[date]/[number] days after the Effective Date]]

A.10.Delivery of [Title Policy/Opinion of Counsel]: At Final Closing

A.11.Final Closing: [number] days after issuance of TCEQ Approval [Letter/Order] [and other water authority approvals] and receipt thereof by [Title Company/Escrow Agent]

B.Closing Documents

B.1.Conditional Closing Documents

B.1.a.At the Conditional Closing on the deadline stated in paragraph A.7., Seller will deliver the following items:

Water Rights Conveyance (Conditional) [include if applicable: with Vendor’s Lien], to be delivered through [Title Company/Escrow Agent]

Documents necessary to accomplish application for transfer of Water Rights from Seller to Buyer, including documents necessary to request from applicable Water [Authority/Authorities] approval of any modifications to Permit/Certifi­cate of Adjudication

IRS Nonforeign Person Affidavit

Written documents from lienholder(s) consenting to transfer of Water Rights and modifications to Permit/Certificate sought by Buyer from any Water [Authority/Authorities] and agreeing to release lien(s) on Water Rights and/or the land to which Water Rights are appurtenant, or from any other adverse claims to Seller’s title to Water Rights on Final Closing

Seller’s Affidavit of No Liens or Adverse Claims to Water Rights or to Appur­tenant Land

[Title Policy/Opinion of Counsel]

Evidence of Seller’s authority to close this transaction

B.1.b.At the Conditional Closing on the deadline stated in paragraph A.7., Buyer will deliver the following items:

Additional [Refundable/Nonrefundable] Earnest Money deposit

Evidence of Buyer’s authority to close this transaction

B.2.Final Closing Documents

B.2.a.At Final Closing, Seller will deliver the following items:

Conveyance of Water Rights (Unconditional) [include if applicable: with Ven­dor’s Lien], to be delivered through [Title Company/Escrow Agent]

Transfer of Existing Water Allocations, if any, pertaining to Water Rights

[Release of Lien on Water Rights from lienholder(s) holding a lien on Water Rights or the Appurtenant Land or from other adverse claims to Seller’s title to Water Rights/Seller’s Affidavit of No Liens or Adverse Claims, dated as of the date of Closing]

B.2.b.At Final Closing, Buyer will deliver the following items:

Balance of Purchase Price

Evidence of Buyer’s authority to close this transaction

Seller-financing documents

Promissory Note

Deed of Trust

The documents listed in section B.1. are collectively known as the “Conditional Clos­ing Documents.” The documents listed in section B.2. are collectively known as the “Final Closing Documents.” Unless otherwise agreed by the parties before Closing, the Water Rights Conveyance [include if applicable: , note, and water rights deed of trust (with security agree­ment, financing statement, and assignment of leases and rents)] will be prepared using the printed forms contained in the current edition of the Texas Real Estate Forms Manual (State Bar of Texas).

C.Exhibits

The following are attached to and are a part of this contract:

Exhibit A—Copy of Permit/Certificate of Adjudication and any amendments

Exhibit B—Description of the Appurtenant Land

Exhibit C—Representations; Environmental Matters [; Severance of Water Rights]

Exhibit D—Seller’s Records [attach copies of annual water reports and water­master assessment payments if applicable]

Exhibit E—Notices, Statements, and Certificates

[Include if applicable: Exhibit F—Seller Financing Addendum]

[Include if applicable: Exhibit G—Memorandum of Contract]

[Include if applicable: Exhibit H—Notice of Termination of Contract]

D.Purchase and Sale of Water Rights

The parties acknowledge that the essence of this transaction is that the TCEQ [and [name of water [authority/authorities]]] approve the change of ownership, [include as applica­ble: place of use/purpose of use/point of diversion] of the Water Rights. The parties therefore agree that subject to necessary proceedings before and approval of the TCEQ [and [name of water [authority/authorities]]], Seller agrees to sell and convey the Water Rights to Buyer and Buyer agrees to buy and pay Seller for the Water Rights. The promises by Buyer and Seller stated in this contract are the consideration for the formation of this contract.

The parties further acknowledge that Buyer is purchasing the Water Rights of Seller as a right separate and apart from the Appurtenant Land and that no interest in such land is intended to be sold, transferred, or conveyed to Buyer.

E.Interest on Earnest Money

Buyer may direct [Title Company/Escrow Agent] to invest the Earnest Money in an interest-bearing account in a federally insured financial institution by giving notice to [Title Company/Escrow Agent] and satisfying [Title Company/Escrow Agent]’s requirements for investing the Earnest Money in an interest-bearing account. Any interest earned on the Ear­nest Money will become part of the Earnest Money.

F.Title [and Survey]

F.1.Opinion of Counsel.      “Opinion of Counsel” means a written opinion of an attorney designated by [Buyer/Seller] that Seller has marketable title to the Water Rights.

F.2.Title Commitment; Title Policy.      “Title Commitment” means a Commitment for Issuance of an Owner Policy of Title Insurance by Title Company, as agent for Under­writer, stating the condition of title to the Water Rights and any Appurtenant Land. The “effective date” stated in the Title Commitment must be after the Effective Date of this con­tract. “Title Policy” means an Owner Policy of Title Insurance issued by Title Company, as agent for Underwriter, in conformity with the last Title Commitment delivered to and approved by Buyer.

F.2.Title Information.      “Title Information” means an abstract of title prepared by a title insurance company or an abstract company licensed by the Texas State Board of Insur­ance, covering the period from the first conveyance of title to the Water Rights and any Appurtenant Land out of the sovereignty to the Effective Date, and containing complete and legible copies of all of the deeds, easements, liens, and other documents affecting title to the Water Rights and any Appurtenant Land.

F.3.Delivery of Seller’s Records; [Title Commitment/Title Information]; Consent to Transfer and Agreement to Release; Water Rights Conveyance (Conditional).      Seller must deliver Seller’s Records to Buyer by the deadline stated in paragraph A.2.; any [Title Commit­ment/Title Information] to Buyer by the deadline stated in paragraph A.3.; the [written docu­ments from lienholder(s)/Seller’s Affidavit of No Liens] described in paragraph A.5. by the deadline stated in paragraph A.5.; the Water Rights Conveyance (Conditional) by the deadline stated in paragraph A.7.; and the [Opinion of Counsel/Title Policy] by the deadline stated in paragraph A.10.

F.4.Survey.      “Survey” means an on-the-ground, staked plat of survey and metes-and-bounds description of the Land, prepared by Surveyor or another surveyor satisfac­tory to Title Company, dated after the Effective Date, and certified to comply with the current standards and specifications as published by the Texas Society of Professional Surveyors for the Survey Category.

F.5.Delivery of Survey.      [Seller must deliver to Buyer/Buyer must order for deliv­ery] the Survey by the deadline stated in paragraph A.4.

G.Inspection Period

G.1.Title Search.      “Title Search” means a search of appropriate records or reports stating the condition of the title to the Water Rights and to any Appurtenant Land.

G.2.Buyer’s Right to Terminate.      Buyer may conduct a Title Search during the Inspection Period at [Buyer/Seller]’s cost. Buyer may terminate this contract for any reason by notifying Seller before the end of the Inspection Period.

G.3.Title Objections.      Buyer has until the End of Inspection Period in paragraph A.6. above to review the [Title Commitment/Title Information] [include if applicable: , Sur­vey,] and legible copies of the Title Documents, notify Seller of Buyer’s objections to any of them, and request any additional information needed to evidence Seller’s title to the Water Rights [include if applicable: and Appurtenant Land] (“Title Objections”). Buyer will be deemed to have approved all matters reflected by the [Title Commitment/Title Information] [include if applicable: , Survey,] and Title Documents to which Buyer has made no Title Objection by the end of the Inspection Period. The matters that Buyer either approves or is deemed to have approved are “Permitted Exceptions.” If Buyer notifies Seller of any Title Objections, Seller has five days from receipt of Buyer’s notice to notify Buyer whether Seller agrees to cure the Title Objections before Closing (“Cure Notice”). If Seller does not timely give its Cure Notice or timely gives its Cure Notice but does not agree to cure all the Title Objections before Closing, Buyer may, within five days after the deadline for the giving of Seller’s Cure Notice, notify Seller that either this contract is terminated or Buyer will proceed to close, subject to Seller’s obligations to resolve the items listed in Schedule C of the [Title Commitment/Title Information], remove the liquidated liens, remove all exceptions that arise by, through, or under Seller after the Effective Date, and cure only the Title Objections that Seller has agreed to cure in the Cure Notice. At or before Closing, Seller must resolve the items that are listed in Schedule C of the [Title Commitment/Title Information], remove all liquidated liens, remove all exceptions that arise by, through, or under Seller after the Effec­tive Date of this contract, and cure the Title Objections that Seller has agreed to cure.

H.Representations and Warranties

The parties’ representations stated in Exhibit C are true and correct as of the Effective Date and must be true and correct on the Closing Date. Seller will promptly notify Buyer if Seller becomes aware that any of the representations are not true or correct.

I.Water Rights Conveyance (Conditional); Application for Approval; Cooperation; Condition of Water Rights until Final Closing; Memorandum/No Recording of
Contract

I.1.Conditional Conveyance.      By the deadline stated in paragraph A.7., Seller will execute and deliver to Buyer (a) a Water Rights Conveyance (in form and substance accept­able to Buyer and the TCEQ and containing warranty of title) and (b) such other applications or documents as may be required to transfer the Water Rights, including all documents required to pursue governmental approval proceedings; provided, however, that Seller’s con­veyance of the Water Rights shall be deemed conditional until the Final Closing Date (i.e., such time as the TCEQ has issued an Amendment to Certificate of Adjudication No. [number] or other appropriate order or orders approving the transfer of water rights [include if applica­ble: and the approval of any other Water [Authority/Authorities]], and Buyer has paid the bal­ance of the Purchase Price).

I.2.Application for TCEQ Approval; Additional Earnest Money.      Seller hereby authorizes Buyer to file an application with the TCEQ and all other required governmental and Water Authorities for approval of the transfer of ownership [include if applicable: and [include as applicable: change of place/purpose of use/point of diversion], as designated by Buyer] for the Water Rights (the “Governmental Proceedings”). Buyer must file the applica­tion(s) for such Governmental Proceedings by the deadline stated in paragraph A.8. [Buyer/Seller] will bear the expenses of the Application(s), including the expenses of any public hear­ings or proceedings before the TCEQ and all other required Water Authorities, and any required filing and recording fees; provided, however, that Buyer will bear any expenses incurred by Buyer to place Buyer in a position to accept the transfer of the Water Rights. Buyer will initiate and pursue the Governmental Proceedings, and Seller will cooperate with Buyer to procure approval of the transfer of Water Rights by the deadline stated in paragraph A.9., provided, however, that failure to procure governmental approval or delay in Govern­mental Proceedings beyond the deadline stated in paragraph A.9. not attributable to the con­duct of either of the parties to this contract will not be grounds for termination of this contract.

I.3.Maintenance and Use.      Until closing, Seller will (a) maintain the Water Rights as they exist on the Effective Date, except to the extent otherwise required by the TCEQ or any governmental or water rights authority or order of a court of competent jurisdiction; (b) use the Water Rights in the same manner as they were used on the Effective Date; and (c) comply with all permit conditions and applicable contracts and governmental regulations affecting the Water Rights. Until the end of the Inspection Period, Seller will not enter into, amend, or terminate any contract that affects the Water Rights other than in the ordinary course of using the Water Rights and will promptly give notice to Buyer of each new, amended, or terminated contract, including a copy of the contract, in sufficient time so that Buyer may consider the new information before the end of the Inspection Period. If Seller’s notice is given within three days before the end of the Inspection Period, the Inspection Period will be extended for three days. After the end of the Inspection Period, Buyer may terminate this contract if Seller enters into, amends, or terminates any contract that affects the Water Rights without first obtaining Buyer’s written consent.

I.4.Condemnation.      Seller will notify Buyer promptly after Seller receives notice that any part of the Water Rights has been or is threatened to be condemned or otherwise taken by a governmental or quasi-governmental authority. Buyer may terminate this contract if the condemnation would materially affect Buyer’s Intended Use of Water Rights by giving notice to Seller within fifteen days after receipt of Seller’s notice to Buyer (or before Final Closing if Seller’s notice is received less than fifteen days before Final Closing). The condem­nation will be deemed to materially affect Buyer’s Intended Use of Water Rights if [specify reason, e.g., the condemnation would result in Buyer’s not being able to divert more than [number] acre-feet of water; would have an adverse effect on quality or availability of water]. If Buyer does not terminate this contract, (a) Buyer and Seller will each have the right to appear and defend their respective interests in the Water Rights in the condemnation proceed­ings, (b) any award in condemnation will be assigned to Buyer to the extent necessary to com­pensate Buyer for the loss of or reduction in the Water Rights, and (c) if the taking occurs before Closing, the description of the Water Rights will be revised to delete the portion taken.

I.5.Claims; Hearings.      Seller will notify Buyer promptly after Seller receives notice of any claim or administrative hearing that is threatened, filed, or initiated before Clos­ing that affects the Water Rights.

I.6.Memorandum of Contract; Termination of Contract; No Recording of Contract.       At the request of Buyer, Seller will execute a memorandum of this contract, in a mutually acceptable form, to be recorded in the real property records of [county] County, Texas. At the time the memorandum is signed, Buyer and Seller will also sign a termination of contract in recordable form (“Termination of Contract”) and deposit it into escrow with [Title Company/Escrow Agent]. The parties authorize [Title Company/Escrow Agent] to record the Termination of Contract as provided in section J. below. Neither Buyer nor Seller may file this contract in the real property records of any county. If either party records this contract, the other party may terminate this contract and record a notice of termination.

J.Conditions of Contract Termination

J.1.Termination on Failure to Obtain TCEQ Order of Approval.      If, through no fault of Seller or Buyer, the TCEQ does not issue (a) an amendment to the Certificate of Adju­dication or other permit for the Water Rights or (b) its other final approval [letter/order] of the transfer of Water Rights to Buyer as provided herein, then [Title Company/Escrow Agent] will return (a) to Seller the Title Conveyance of Water Rights and (b) to Buyer the [Earnest Money/Additional Earnest Money], and the parties will cancel all portions of the transaction set forth in this contract by appropriate legal means. In such event, neither party will have any further obligation to the other, and the parties agree to sign such instruments and take such actions as are required to place the parties in the position each was in with respect to the Water Rights before entering into this contract. [Title Company/Escrow Agent] will record the Ter­mination of Contract on receipt of Seller’s authorization to return the Earnest Money.

J.2.Disposition of Earnest Money after Other Termination

J.2.a.To Buyer.      If Buyer terminates this contract in accordance with any of Buyer’s rights to terminate, then unless Seller delivers notice of Seller’s objection to [Title Company/Escrow Agent]’s release of the Earnest Money to Buyer within five days after Buyer delivers Buyer’s termination notice to Seller and [Title Company/Escrow Agent], [Title Company/Escrow Agent] is authorized, without any further authorization from Seller, to deliver the Ear­nest Money to Buyer. [Title Company/Escrow Agent] will record the Termination of Contract on receipt of Seller’s authorization to return the Earnest Money.

J.2.b.To Seller.      If Seller terminates this contract in accordance with any of Seller’s rights to terminate, then unless Buyer delivers notice of Buyer’s objection to [Title Company/Escrow Agent]’s release of the Earnest Money to Seller within five days after Seller delivers Seller’s termination notice to Buyer and [Title Company/Escrow Agent], [Title Company/Escrow Agent] is authorized, without any further authorization from Buyer, to pay and deliver the Earnest Money to Seller. [Title Company/Escrow Agent] will record the Termination of Contract on receipt of Buyer’s authorization to pay the Earnest Money.

J.3.Duties after Termination.      If this contract is terminated, Buyer will promptly return to Seller all documents relating to the Water Rights that Seller has delivered to Buyer and all copies that Buyer has made of the documents. After return of the documents and cop­ies, neither party will have further duties or obligations to the other under this contract, except for those obligations that cannot be or were not performed before termination of this contract.

K.Final Closing

K.1.Date of Final Closing.      Within the number of days stated in paragraph A.11. following (a) issuance of TCEQ and/or other final Water Authority approval order(s) and (b) notice thereof to Buyer, Buyer will deliver to [Title Company/Escrow Agent] the balance of the Purchase Price and any additional expenses attributable to Buyer under this section of this contract.

K.2.Final Closing.      This transaction will close at [Title Company/Escrow Agent]’s offices at the Final Closing. At Closing, the following will occur:

K.2.a.Final Closing Documents.      The parties will execute and deliver the Final Clos­ing Documents.

K.2.b.Payment of Purchase Price.      Buyer will deliver the Purchase Price and other amounts that Buyer is obligated to pay under this contract to [Title Company/Escrow Agent] in funds acceptable to [Title Company/Escrow Agent]. The [Earnest Money/Additional Ear­nest Money] will be applied to the Purchase Price.

K.2.c.Disbursement of Funds; Recording; Copies.      [Title Company/Escrow Agent] will be instructed to disburse the Purchase Price and other funds in accordance with this con­tract, record the deed and the other Final Closing Documents directed to be recorded, and dis­tribute documents and copies in accordance with the parties’ written instructions.

K.2.d.Delivery of Originals.      Seller will deliver to Buyer the originals of Seller’s Records.

K.3.Transaction Costs

K.3.a.Seller’s Costs.      Seller will pay (i) one-half of the escrow fee charged by [Title Company/Escrow Agent]; (ii) the costs to prepare the Title Conveyance to Water Rights; (iii) the costs to obtain, deliver, and record releases of all liens to be released at Closing and of [obtaining documents from lienholders consenting to the transfer or modification of Water Rights or other adverse claims to Seller’s title to Water Rights/Seller’s Affidavit of No Liens or Adverse Claims to Water Rights or to Appurtenant Land]; (iv) the costs to deliver copies of the instruments described in paragraph A.2.; [and] (v) Seller’s attorney’s fees and expenses [include as applicable: ; (vi) the basic charge for the Title Policy/Title Information; (vii) the charge for the Opinion of Counsel; (viii) the charge for proceedings before the TCEQ and/or other Water Authority, including the expenses of any public hearings or proceedings before the TCEQ, and required filing and recording fees; (ix) the charge for the Survey [[; and] include any additional charges]].

K.3.b.Buyer’s Costs.      Buyer will pay (i) one-half of the escrow fee charged by [Title Company/Escrow Agent]; (ii) the costs to obtain, deliver, and record all documents other than those to be recorded at Seller’s expense; (iii) the costs to obtain financing of the Purchase Price, including the incremental premium costs of the mortgagee’s title policies and endorse­ments and deletions required by Buyer’s lender; (iv) the costs incurred for Buyer to place itself in a position to accept the transfer of the Water Rights; [and] (v) Buyer’s attorney’s fees and expenses [include as applicable: ; (vi) the basic charge for the Title Policy; (vii) the charge for the Opinion of Counsel; (viii) the charge for proceedings before the TCEQ and/or other Water Authority, including the expenses of any public hearings or proceedings before the TCEQ, and required filing and recording fees; (ix) the charge for the Survey [[; and] include any additional charges]].

K.3.c.Postclosing Adjustments.      If errors in the prorations made at closing are identi­fied within ninety days after Closing, Seller and Buyer will make postclosing adjustments to correct the errors within fifteen days of receipt of notice of the errors.

K.3.d.Brokers’ Commissions.      Buyer and Seller each indemnify and agree to defend and hold the other party harmless from any loss, attorney’s fees, and court and other costs arising out of a claim by any person or entity claiming by, through, or under the indemnitor for a broker’s or finder’s fee or commission because of this transaction or this contract, whether the claimant is disclosed to the indemnitee or not. At Closing, each party will provide the other party with a release of broker’s or appraiser’s liens from all brokers or appraisers for which each party was responsible.

K.4.Issuance of Title Policy.      Seller will cause Title Company to issue the Title Policy to Buyer at Final Closing.

L.Default and Remedies

L.1.Seller’s Default.      If Seller fails to perform any of its obligations under this con­tract, or if any of Seller’s representations is not true and correct as of the Effective Date or on the Final Closing (“Seller’s Default”), Buyer may elect either of the following as its sole and exclusive remedy:

L.1.a.Termination; Liquidated Damages.      Buyer may terminate this contract by giv­ing notice to Seller on or before the Final Closing and have the Earnest Money, less the Inde­pendent Consideration as described above, returned to Buyer. Unless Seller’s Default relates to the untruth or incorrectness of Seller’s representations for reasons not reasonably within Seller’s control, if Seller’s Default occurs after Buyer has incurred costs to investigate the Water Rights after the Effective Date and Buyer terminates this contract in accordance with the previous sentence, Seller will also pay to Buyer as liquidated damages the lesser of Buyer’s actual out-of-pocket expenses incurred to investigate the Water Rights after the Effective Date (“Buyer’s Expenses”) or the amount of Buyer’s Liquidated Damages, within ten days after Seller’s receipt of an invoice from Buyer stating the amount of Buyer’s Expenses accompanied by reasonable evidence of Buyer’s Expenses.

L.1.b.Specific Performance.      Unless Seller’s Default relates to (i) the untruth or incorrectness of Seller’s representations for reasons not reasonably within Seller’s control, (ii) a defect in Seller’s title to the Water Rights, or (iii) the failure of the TCEQ or other water rights authority to approve the transfer of the Water Rights (unless such failure is due to the acts of Seller), Buyer may enforce specific performance of Seller’s obligations under this con­tract, but any such action must be initiated, if at all, within ninety days after the breach or alleged breach of this contract. If title to the Water Rights is awarded to Buyer, the convey­ance will be subject to the matters stated in any Title Commitment.

L.2.Buyer’s Default.      If Buyer fails to perform any of its obligations under this contract (“Buyer’s Default”), Seller may terminate this contract by giving notice to Buyer on or before the Final Closing and have the Earnest Money paid to Seller. If Buyer’s Default occurs after Seller has incurred costs to perform its obligations under this contract and Seller terminates this contract in accordance with the previous sentence, Buyer will also reimburse Seller for the lesser of Seller’s actual out-of-pocket expenses incurred to perform its obliga­tions under this contract (“Seller’s Expenses”) or the amount of Seller’s Additional Liqui­dated Damages, within ten days after Buyer’s receipt of an invoice from Seller stating the amount of Seller’s Expenses accompanied by reasonable evidence of Seller’s Expenses. The foregoing constitute Seller’s sole and exclusive remedies for a default by Buyer before clos­ing.

L.3.Liquidated Damages.      The parties agree that just compensation for the harm that would be caused by a default by either party cannot be accurately estimated or would be very difficult to accurately estimate and that the Earnest Money and the amounts provided above are reasonable forecasts of just compensation to the nondefaulting party for the harm that would be caused by a default.

L.4.Attorney’s Fees.      If either party retains an attorney to enforce this contract, the party prevailing in litigation is entitled to recover reasonable attorney’s fees and court and other costs.

M.Miscellaneous Provisions

M.1.Notices.      Any notice required by or permitted under this contract must be in writing. Any notice required by this contract will be deemed to be given (whether received or not) the earlier of receipt or three business days after being deposited with the United States Postal Service, postage prepaid, certified mail, return receipt requested, and addressed to the intended recipient at the address shown in this contract. Notice may also be given by regular mail, personal delivery, courier delivery, or e-mail and will be effective when received, pro­vided that (a) any notice received on a Saturday, Sunday, or national holiday will be deemed to have been received on the next day that is not a Saturday, Sunday, or national holiday; and (b) any notice received after 5:00 p.m. local time at the place of delivery on a day that is not a Saturday, Sunday, or national holiday will be deemed to have been received on the next day that is not a Saturday, Sunday, or national holiday. Any address for notice may be changed by not less than ten days’ prior written notice given as provided herein. Copies of each notice must be given by one of these methods to the attorney of the party to whom notice is given.

M.2.Entire Agreement.      This contract, its exhibits, and any documents delivered at Closing are the entire agreement of the parties concerning the sale of the Water Rights. There are no representations, warranties, agreements, or promises between the parties pertaining to the Water Rights or the sale of the Water Rights, and neither party is relying on any statements or representations of any agent of the other party, that are not in those documents.

M.3.Amendment.      This contract may be amended only by an instrument in writing signed by the parties.

M.4.Prohibition of Assignment.      Buyer may not assign this contract or any of Buyer’s rights under it without Seller’s prior written consent, and any attempted assignment is void.

M.4.Assignment.      Buyer may assign this contract and Buyer’s rights under it only to an entity in which Buyer possesses, directly or indirectly, the power to direct or cause the direction of its management and policies, whether through the ownership of voting securities or otherwise, and any other assignment is void. No such assignment will relieve Buyer of its obligations under this contract, and Buyer and the assignee will be jointly and severally liable for the performance of such obligations after any such assignment.

M.5.Survival.      The obligations of this contract that cannot be performed before ter­mination of this contract or before Closing survive termination of this contract or Closing, and the legal doctrine of merger does not apply to these matters. If there is any conflict between the Final Closing Documents and this contract, the Final Closing Documents control.

M.6.Choice of Law; Venue.      This contract is to be construed under the laws of the state of Texas, without regard to choice-of-law rules of any jurisdiction. Venue is in the County for Performance.

M.7.Waiver of Default.      It is not a waiver of default if the nondefaulting party fails to declare a default immediately or delays taking any action with respect to the default.

M.8.No Third-Party Beneficiaries.      There are no third-party beneficiaries of this contract.

M.9.Severability.      If a provision of this contract is unenforceable for any reason, to the extent the unenforceability does not destroy the basis of the bargain among the parties, the unenforceability does not affect any other provision of this contract, and this contract is to be construed as if the unenforceable provision is not a part of the contract.

M.10.Ambiguities Not to Be Construed against Party Who Drafted Contract.      The rule of construction that ambiguities in a document will be construed against the party who drafted it will not be applied in interpreting this contract.

M.11.No Special Relationship.      The parties’ relationship is an ordinary commercial relationship, and they do not intend to create the relationship of principal and agent, partner­ship, joint venture, or any other special relationship.

M.12.Counterparts.      If this contract is executed in multiple counterparts, all counter­parts taken together constitute this contract. Copies of signatures to this contract are effective as original signatures.

M.13.Confidentiality.      The parties will keep confidential this contract, this transac­tion, and all information learned in the course of this transaction, except to the extent disclo­sure is required by law or court order or to enable third parties to advise or assist Buyer to investigate the Water Rights or either party to close this transaction. Remedies for violations of this provision are limited to injunctions, and no damages or rescission may be sought or recovered as a result of any such violations.

M.14.Binding Effect.      This contract binds, benefits, and may be enforced by the par­ties and their respective heirs, successors, and permitted assigns.

M.15.Waiver of Consumer Rights.      Buyer waives its rights under the Texas Deceptive Trade Practices–Consumer Protection Act, section 17.41 et seq. of the Texas Business and Commerce Code, a law that gives consumers special rights and protections. After consultation with an attorney of its own selection, Buyer voluntarily consents to this waiver.

   
[Name and title of seller]
Date:

   
[Name and title of buyer]
Date:

[Title Company/Escrow Agent] acknowledges receipt of Earnest Money in the amount of $____________ and a copy of this contract executed by both Buyer and Seller.

[Name of title company/escrow agent]

By:      
     Name:
     Title:
     Date:

Exhibit A

Copies of Permit/Certificate of Adjudication No.

Exhibit B

Description of the Appurtenant Land

Exhibit C

Representations; Environmental Matters [; Severance of Water Rights]

A.Seller’s Representations to Buyer

Seller represents to Buyer that the following are true and correct as of the Effective Date and will be true and correct on the Final Closing:

A.1.Authority.      Seller is a [specify type of organization] duly organized, validly existing, and in good standing under the laws of the state of [Texas/[state]] with authority to convey the Water Rights to Buyer. This contract is, and all documents required by this con­tract to be executed and delivered to Buyer at Closing will be, duly authorized, executed, and delivered by Seller.

A.2.Litigation.      Seller has not received written notice and has no actual knowledge of any litigation pending or threatened against Seller that might affect the Water Rights or Seller’s ability to perform its obligations under this contract [include if applicable: , except: [specify]].

A.3.Violation of Laws.      Seller has not received written notice of violation of any law, ordinance, regulation, or requirements affecting the Water Rights or Seller’s use of the Water Rights [include if applicable: , except: [specify]].

A.4.Licenses, Permits, and Approvals.      Seller has not received written notice that any license, permit, or approval necessary to use the Water Rights in the manner in which they are currently used has expired or will not be renewed on expiration or that any material condi­tion will be imposed in order to obtain their renewal [include if applicable: , except: [specify]].

A.5.Condemnation; Zoning; Land Use; Hazardous Materials.      Seller has not received written notice of any condemnation, zoning, or land-use proceedings affecting the Water Rights or any written inquiries or notices by any governmental authority or third party with respect to the presence of hazardous materials affecting the Water Rights [include if applicable: , except: [specify]].

A.6.No Other Obligation to Sell Water Rights or Restriction against Selling Water Rights.      Except for granting a security interest in the Water Rights, Seller has not obligated itself to sell the Water Rights to any party other than Buyer. Seller’s performance of this con­tract will not cause a breach of any other agreement or obligation to which Seller is a party or to which it is bound.

A.7.No Liens.      On the Final Closing, the Water Rights will be free and clear of all liens and encumbrances of any nature not arising by, through, or under Buyer except the Per­mitted Exceptions or liens to which Buyer has given its consent.

A.8.Good Title.      Seller has good and indefeasible fee simple title to the Water Rights, free and clear of all mortgages, liens, licenses, encumbrances, leases, tenancies, secu­rity interests, covenants, conditions, restrictions, rights-of-way, easements, judgments, and other matters affecting title [include if applicable: , except: [specify]].

A.9.No Bills or Claims.      There will be no unpaid bills or claims in connection with any repair or work performed or material furnished or otherwise relating to the Water Rights for the benefit of Seller as of the date of Closing, and all bills attributable to or affecting the Water Rights will be paid by Seller in full before Closing.

A.10.No Adverse Matters.      To Seller’s knowledge, there is no (a) change contem­plated in any applicable laws, ordinances, or restrictions, including the rules of the Water Authority; (b) judicial or administrative action threatened or pending against the Water Rights or Seller; (c) action [include if applicable: by landowners adjacent to the Appurtenant Land] pending or threatened against the Water Rights or Seller; or (d) natural or artificial conditions relating to the Water Rights [include if applicable: or relating to the Appurtenant Land] that would have a material adverse effect on the Water Rights [include if applicable: and Appurte­nant Land].

A.11.Compliance with Laws.      To Seller’s knowledge, Seller has at all times com­plied with and operated in compliance with all applicable federal, state, and local laws, regula­tions, and ordinances regarding the Water Rights [include if applicable: and the Appurtenant Land], including rules of any applicable Water Authority. Seller will promptly notify Buyer of any noncompliance notice received by Seller.

A.12.No Other Representation.      Except as stated above or in the notices, statements, and certificates set forth in Exhibit E, Seller makes no representation with respect to the Water Rights.

A.13.No Warranty.      Seller has made no warranty other than the warranty of title in connection with this contract.

A.14.Severance of Water Rights.      The Water Rights that Seller agrees to convey herein are appurtenant to land in [county] County, Texas, and those Water Rights have not heretofore been severed from the land.

B.“As Is, Where Is”

This contract is an arm’s-length agreement between the parties. The Pur­chase Price was bargained on the basis of an “as is, where is” transaction and reflects the agreement of the parties that there are no representations or express or implied warranties, except those in this contract and the Closing Documents.

Seller disclaims all warranties and representations regarding the quan­tity or quality of the water available pursuant to the Water Rights or its reli­ability for any particular use or purpose.

Buyer is not relying on any representations, disclosures, or express or implied warranties other than those expressly contained in this contract and the Closing Documents. Buyer is not relying on any information regarding the Water Rights or Permit/Certificate provided by any person other than Buyer’s own inspection and the representations and warranties contained in this con­tract and the Closing Documents.

C.Environmental Matters

After Closing, Buyer releases Seller from liability for environmental problems affecting the property, including liability (1) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Texas Solid Waste Dis­posal Act, or the Texas Water Code; or (2) arising as the result of theories of products liability and strict liability, or under new laws or changes to existing laws enacted after the Effective Date that would otherwise impose on sellers in this type of transaction new liabilities for environmental problems affecting the Property. [Include if applicable: This release applies even when the environ­mental problems affecting the Property result from Seller’s own negli­gence or the negligence of Seller’s representative.]

The provisions of this section C. regarding the Water Rights will be included in the Title Conveyance of Water Rights with appropriate modification of terms as the context requires.

D.Buyer’s Representations to Seller

Buyer represents to Seller that the following are true and correct as of the Effective Date and will be true and correct on the Closing Date:

D.1.Authority.      Buyer is a [specify type of organization] duly organized, validly existing, and in good standing under the laws of the state of [Texas/[state]] with authority to perform its obligations under this contract. This contract is binding on Buyer. This contract is, and all documents required by this contract to be executed and delivered to Seller at Closing will be, duly authorized, executed, and delivered by Buyer.

Exhibit D

Seller’s Records

To the extent that Seller has possession of the following items pertaining to the Water Rights, Seller will deliver or make the items or copies of them available to Buyer by the dead­line stated in paragraph A.8.:

Governmental

governmental licenses, certificates, permits, and approvals, specifically including Seller’s Permit or Certificate of Adjudication to the Water Rights

environmental reports

records of regulatory proceedings or violations

annual water use reports filed with TCEQ, and its predecessor agencies related to the Water Rights

Watermaster reports, if any, related to the Water Rights

other: [specify]

Financial

books and records for the Water Rights

other: [specify]

Leases

Leases

renewal options

security deposit

current tenant or landlord defaults

estoppel letters and/or subordination agreements

other: [specify]

Exhibit E

Notices, Statements, and Certificates

The notices, statements, and certificates (arranged by their application to particular transactions) that are listed below are [include as applicable: included in the sales contract/[and] attached for delivery to Buyer], and Buyer acknowledges receipt of the notices, state­ments, and certificates by executing this contract:

A.Consumer Notices

Notice of Cancellation.      Notice concerning the purchaser’s three-day right of rescis­sion under a contract to purchase real property if (1) the seller or the seller’s agent solicits the sale at a place other than the seller’s place of business; (2) the purchaser submits the purchase contract to the seller or the seller’s agent at a place other than the seller’s place of business; and (3) the consideration payable under the purchase contract exceeds $100; unless either
(1) the purchaser is represented by a licensed attorney; (2) the transaction is negotiated by a licensed real estate broker; or (3) the transaction is negotiated at a place other than the pur­chaser’s residence by the person who owns the property, as described in chapter 601 of the Texas Business and Commerce Code.

B.Residential Transaction Notices

B.1.Seller’s Disclosure of Property Condition.      Seller’s disclosure of the condition of residential property, described in section 5.008 of the Texas Property Code.

B.2.Notice of Membership in Property Owners’ Association.      Notice concerning the sale of single-family residential property that is subject to membership in a property own­ers’ association, described in section 5.012 of the Texas Property Code.

B.3.Seller’s Disclosure of Location of Conditions under Surface of Unimproved Real Property.      Seller’s disclosure of the location of pipelines under the surface of unim­proved property to be used for residential purposes, described in section 5.013 of the Texas Property Code. A seller of unimproved property to be used for residential purposes shall pro­vide the purchaser written notice disclosing the location of any transportation pipeline to the best of the seller’s belief and knowledge as of the date the notice is completed and signed by the seller. If the information required to be disclosed is not known by the seller, the seller shall indicate that fact in the notice. A seller is not required to give this notice if (a) the seller is obligated under the terms of the contract to furnish a title insurance commitment to the buyer before closing and (b) the buyer is entitled to terminate the contract if the buyer’s objections to title as permitted by the contract are not cured by the seller before closing.

B.4.Notice of Obligation to Pay Public Improvement District Assessment.      Seller’s disclosure that a single-family residential property is located within a public improvement dis­trict, described in section 5.014 of the Texas Property Code.

B.5.Residential Contracts for Deed.      Notice regarding the sale of property used or to be used as the purchaser’s residence if the contract does not provide for delivery of a deed from the seller to the purchaser within 180 days after the final execution of the contract.

B.6.Notice Regarding Insulation to Buyer of New Home.      Notice concerning insu­lation to be installed in a new home, described in section 460.16 of title 16 of the Code of Fed­eral Regulations.

B.7.Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards.      Lead-based paint warning statement, described in section 745.100 et seq. of title 40 of the Code of Federal Regulations.

B.8.Asbestos Disclosure Notice.      Notice concerning asbestos, described in sections 1910.1001 and 1926.1101 of title 29 of the Code of Federal Regulations.

B.9.Notice Regarding Sale Subject to a Recorded Lien.      Notice to the purchaser and each lienholder required under Texas Property Code section 5.016 that property being sold will be conveyed subject to a lien.

C.Condominium Transaction Notices

C.1.Acknowledgment of Receipt of Condominium Documents.      Condominium dec­laration, bylaws, and association rules, described in section 82.156 of the Texas Property Code.

C.2.Condominium Resale Certificate.      Resale certificate from the condominium owners’ association or waiver of resale certificate, described in section 82.157 of the Texas Property Code.

D.All Real Property Transaction Notices

D.1.Storage Tanks Disclosure Provider.      Notice concerning underground storage tanks, described in section 334.9 of title 30 of the Texas Administrative Code.

D.2.Notice to Purchaser Regarding Restrictive Covenants.      Notice of deed restric­tions, described in section 212.155 of the Texas Local Government Code.

D.3.Notice to Purchaser Regarding Coastal Area Property.      Notice regarding real property located adjacent to tidally influenced, submerged lands of Texas, described in sec­tion 33.135 of the Texas Natural Resources Code.

D.4.Notice to Purchaser of Property Seaward of Gulf Intracoastal Waterway.      Notice concerning public easements to the public beach, described in section 61.025 of the Texas Natural Resources Code.

D.5.Notice Regarding Possible Liability for Additional Taxes.      Notice of additional tax liability for vacant land that has been subject to a special tax appraisal method, described in section 5.010 of the Texas Property Code.

D.6.Notice Regarding Possible Annexation.      Notice concerning the sale of prop­erty located outside the limits of a municipality that may now or later be included in the extra­territorial jurisdiction of a municipality and may now or later be subject to annexation by the municipality, described in section 5.011 of the Texas Property Code.

D.7.Notice for Unimproved Property in a Certificated Service Area of a Utility Ser­vice Provider.      Notice for property in a certificated service area of a utility service provider, described in section 13.257 of the Texas Water Code.

D.8.Utility District Notice.      Notice concerning the bonded indebtedness of, or rates to be charged by, a utility or other special district, described in section 49.452 of the Texas Water Code, with the form of notice to be used being dependent on whether the property (a) is located in whole or in part within the extraterritorial jurisdiction of one or more home-rule municipalities but is not located within the corporate boundaries of a municipality, (b) is located in whole or in part within the corporate boundaries of a municipality, or (c) is not located in whole or in part within the corporate boundaries of a municipality or the extraterri­torial jurisdiction of one or more home-rule municipalities.

D.9.Notice to Purchaser of Property Located in Certain Annexed Water Districts.       Notice required by section 54.016(h)(4)(A) of the Texas Water Code when property being sold is in a water or sanitary sewer district that entered a contract with a city with a population of 1.18 million or less under which the city is permitted to set rates in the district after annex­ation that are different from rates charged other residents of the city.

D.10.Notice to Purchaser that Property Is Located within the Area of the Alignment of a Transportation Project.      Notice required under Texas Local Government Code section 232.0033 that all or part of the subdivision in which the property being sold is located is within the area of the alignment of a transportation project as shown in the final environmen­tal decision document that is applicable to a future transportation corridor identified in a con­tract between the Texas Department of Transportation and a county under Texas Transportation Code section 201.619.

D.11.Certificates of Mold Remediation.      Notice pursuant to section 1958.154 of the Texas Occupations Code, titled “Certificate of Mold Remediation; Duty of Property Owner,” requiring a property owner who sells property that has been issued a certificate of mold reme­diation pursuant to this section to deliver copies to the purchaser of each certificate of mold remediation issued for the property within the preceding five years.

D.12.Notice of Water Level Fluctuations.      Notice to purchasers of residential or commercial property adjoining an impoundment of water, including a reservoir or lake, con­structed and maintained under Texas Water Code chapter 11, that has storage capacity of at least 5,000 acre-feet at the impoundment’s normal level, provided pursuant to Texas Property Code section 5.019.

Exhibit F

Seller Financing Addendum

A.Promissory Note.      The promissory note (“Note”) will be payable by Buyer (“Maker”) to the order of Seller (“Payee”) at the place designated by Payee. The Note may be prepaid in whole or in part at any time without penalty, premium, or restriction of any kind. Any prepay­ments are to be applied to the payment of the installments of principal last maturing, and inter­est will immediately cease on the prepaid principal. The lien securing payment of the Note will be inferior to any lien securing any superior note described in the contract. The Note will be payable as follows:

In one payment due [number] days after the date of the Note with interest payable [at maturity/monthly/quarterly/annually].

In [number] installments of $[amount] each [including interest/plus interest] beginning [number] days after the date of the Note and continuing at [monthly/quarterly/annual] inter­vals thereafter until [date], when the entire balance of the Note will be due and payable.

Interest only in [number] installments for the first [number] year[s] and thereafter in [number] installments of $[amount] each [including interest/plus interest] beginning [number] days after the date of the Note and continuing at [monthly/quarterly/annual] intervals thereaf­ter until [date], when the entire balance of the Note will be due and payable.

Other: [specify].

B.Deed of Trust.      The deed of trust (“Deed of Trust”) securing the Note will provide for the following:

B.1.Assumption without Consent.      The Water Rights may be sold, transferred, or conveyed without the consent of Payee, provided any subsequent buyer or transferee assumes in writing for the benefit of Payee the obligation to pay the Note and to perform the covenants and agreements in the Deed of Trust in accordance with the terms of those instruments. No such assumption will release Maker from any liabilities or obligations arising under the Note or Deed of Trust. Neither the creation of a subordinate lien nor a sale thereunder will be con­strued as a sale or conveyance of the Water Rights.

B.1.Assumption with Consent.      The Water Rights may be sold, transferred, or con­veyed provided that (a) any subsequent buyer assumes in writing for the benefit of Payee the obligation to pay the Note and to perform the covenants and agreements in the Deed of Trust in accordance with the terms of those instruments and (b) Maker or the subsequent buyer obtains prior written consent to such a sale from Payee. Consent will be based on the subse­quent buyer’s credit history, with no change in interest rate or terms, and may not be unrea­sonably withheld, conditioned, or delayed. No such assumption will release Maker from any liabilities or obligations arising under the Note or Deed of Trust. If all or any part of the Water Rights is sold, conveyed, leased for a period longer than three years, leased with an option to purchase, otherwise sold (including by contract for deed), or otherwise transferred or con­veyed without prior written consent of Payee, Payee may, at Payee’s sole option, declare the outstanding principal balance of the Note plus accrued interest immediately due and payable. Any deed under threat or order of condemnation, any conveyance solely between makers, and the passage of title by reason of death of a maker or by operation of law will not be construed as a sale or conveyance of the Water Rights. [Neither the creation of a subordinate lien nor a sale thereunder will be construed as a sale or conveyance of the Water Rights./The creation of a subordinate lien without the consent of Payee will be construed as a sale or conveyance of the Water Rights, but any subsequent sale under a subordinate lien to which Payee has con­sented will not be construed as a sale or conveyance of the Water Rights.]

B.1.Prohibition against Assumption.      If all or any part of the Water Rights is sold, transferred, or conveyed without the prior written consent of Payee, Payee may, at Payee’s sole option, declare the outstanding principal balance of the Note plus accrued interest imme­diately due and payable. Payee has no obligation to consent to any such sale or conveyance of the Water Rights, and Payee is entitled to condition any consent on a change in the interest rate that will thereafter apply to the Note and any other change in the terms of the Note or Deed of Trust that Payee in Payee’s sole discretion deems appropriate. A lease for a period longer than three years, a lease with an option to purchase, or a contract for deed will be deemed to be a sale, transfer, or conveyance of the Water Rights for purposes of this provi­sion. Any deed under threat or order of condemnation, any conveyance solely between mak­ers, and the passage of title by reason of death of a maker or by operation of law will not be construed as a sale or conveyance of the Water Rights. The creation of a subordinate lien without the consent of Payee will be construed as a sale or conveyance of the Water Rights, but any subsequent sale under a subordinate lien to which Payee has consented will not be construed as a sale or conveyance of the Water Rights.

B.2.Cross-Default.      Any act or occurrence that would constitute a default under the terms of any lien superior to the lien securing the Note will constitute a default under the Deed of Trust securing the Note.

C.Recourse Provisions.      The Note and Deed of Trust are subject to the following provi­sions:

Full Recourse.      Maker will have full recourse liability for repayment of the principal and interest of the Note and the performance of all covenants and agreements of Maker in the Deed of Trust.

No Recourse.      Maker will not have any recourse liability for repayment of the princi­pal and interest of the Note or the performance of any covenants and agreements of Maker in the Deed of Trust. The sole remedy of Payee or other holder of the Note in the event of a default by Maker under the Note or Deed of Trust will be to foreclose the liens and security interests granted in the Deed of Trust, and Payee or other holder of the Note will not be enti­tled to any personal judgment against Maker.

Partial Recourse.      Except as set forth below, Maker will not have any recourse liabil­ity for repayment of the principal and interest of the Note or the performance of any covenants and agreements of Maker in the Deed of Trust. Except as set forth below, the sole remedy of Payee or other holder of the Note in the event of a default by Maker under the Note or Deed of Trust will be to foreclose the liens and security interests granted in the Deed of Trust, and Payee or other holder of the Note will not be entitled to any personal judgment against Maker. Maker will have full recourse liability for any loss or damage actually suffered or incurred by Payee or other holder of the Note by reason of—

1.taxes, assessments, and charges for labor, materials, or other amounts that if unpaid may create an encumbrance against the Water Rights that accrue before foreclosure;

2.all rents, issues, profits, and income derived from the Water Rights after a default occurs and not expended for debt service or operating expenses of the Water Rights before foreclosure;

3.tenant security deposits for leases of the Water Rights not forfeited by or refunded to the tenants;

4.any condemnation or insurance proceeds not paid or applied as required in the Deed of Trust;

5.damages resulting from fraud or misrepresentation by Maker;

6.damages resulting from breach of any warranty of title by Maker;

7.interest on the Note from the date of default through foreclosure, payment, or set­tlement of the debt;

8.all interest on the Note during any bankruptcy proceeding of Maker and all reason­able attorney’s fees and expenses incurred as a result of Maker’s bankruptcy; and

9.all attorney’s fees and expenses incurred by Payee to collect any of the foregoing amounts.

   
Buyer/Maker

   
Seller/Payee

Exhibit G

Memorandum of Contract

Exhibit H

Notice of Termination of Contract