SCHEDULE A

AGREEMENT AND INSTRUCTIONS FOR ADMINISTERING ESCROW ACCOUNT

BETWEEN THE UNITED STATES DEPARTMENT OF THE INTERIOR AND

THE SAN JUAN WATER COMMISSION

Animas-La Plata Project, ColoradolNew Mexico

THIS AGREEMENT ("Agreement") is entered into on this ~day of November,

2001, between the UNITED STATES DEPARTMENT OF THE INTERIOR ("Interior") and the

SAN JUAN WATER COMMISSION (the "Commission"), a political subdivision of the State of

New Mexico.

WHEREAS, Interior and the Commission anticipate entering into an "Amendatory

Funding Agreement and Repayment Contract Between the United States and the San Juan Water

Commission, New Mexico" ("Contract"); and

WHEREAS, the Contract provides for the establishment of an Escrow Account, upon the

occurrence of certain conditions P1Jecedent, to be funded by the Commission and drawn upon by

the Secretary of the Interior or the Secretary's duly delegated representative (hereinafter

"Secretary") to defray a portion of the construction costs of the Project Works of the ANIMASLA PLATA PROJECT (the "Project") as described in the Contract; and

WHEREAS, the Commission and Interior are in agreement that the conditions precedent

to the establishment of said Escrow Account have been satisfied; and

WHEREAS, the Commission is authorized by NMSA 1978 §§ 11-1-1 through 11-1-7

and by resolution of the County Board of Finance of San Juan County, New Mexico, Resolution

No. 01-02-07, to contribute funds to the Project; and

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WHEREAS, the Secretary is authorized, through the Bureau of Reclamation by federal

reclamation law, by Public Law 99-88, 99 Stat.293, Public Law 106-554, 114 Stat. 2763A, and

by 43 U.S.C. §395 to enter into this Agreement and to receive such funds; 

THE PARTIES HEREBY AGREE as follows: 

1. Within 30 days following the above set forth date of this Agreement, the 

Commission will establish an Escrow Account with the Treasurer of San Juan County, New 

Mexico (“Treasurer”), its designated Escrow Agent, and will deposit into said account certain 

funds totaling $6,916,722. Said funds represent the Commission’s upfront payment of the 

capital obligation for the Animas-La Plata Project. This amount is based on the May 2001

Animas-La Plata Project Interim Cost Allocation. Both parties acknowledge that this cost is

subject to a final cost allocation as well as procedures provided in Section 302(a)(3)(B) of P.L.

106-554. 

2. The Escrow Agent shall hold and disburse funds from the Escrow Account 

pursuant to the instructions set forth herein. 

3. At the option of the Treasurer, pursuant to NMSA 1978 §§ 6-10-8 and 6-10-10,

such funds may consist of any one or more of the following: 

(a) cash; 

(b) bonds or other interest-bearing obligations of the United States

Government; 

(c) bonds that are a direct obligation of the State of New Mexico; and/or 

(d) bank certificates of deposit, money market accounts, overnight accounts,

or other cash-equivalent instruments or investments. 

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4. The Treasurer shall have the exclusive right to direct investment of the funds of

the Escrow Account, subject to the limitations of this paragraph. During each fiscal year, an 

amount equivalent to not less than three point one eight (3.18) percent of the estimated total

construction costs to be incurred during that year for construction of Project Works of the Project 

shall be maintained negotiable and carry no restrictions on marketability or liquidity.

Construction shall be limited to Project Works of the Project and shall have the same connotation 

as attributed to it by the United States Congress in congressional acts in which funds are

appropriated for the Project. For purposes of this Agreement, the fiscal year shall be October 1 

through September 30. The Escrow Agent shall credit and pay to the Commission all interest on

investments as it is earned. 

5. Interior shall have the right to withdraw funds from the Escrow Account in

accordance with the terms of this Agreement. No funds shall be withdrawn from the account 

until the Commission informs the Escrow Agent that each and all of the following prerequisites 

have been satisfied:

a. The United States Congress has appropriated funds for construction of the

Project; 

b. the Commissioner of Reclamation has authorized the Bureau of

Reclamation to commence construction of the Project; 

c. the United States has commenced construction and has forwarded a bill 

quarterly to the Commission for construction during the previous quarter; and 

d. any and all additional legal prerequisites to commencement of

construction have been satisfied. 

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6. It is the intent of the parties to match advances from the Escrow Account with

actual construction costs allocable to the Commission to the extent possible. To accomplish this,

Interior shall bill the Commission by the tenth of the first month of each quarter, based on actual

recorded construction costs, including agreed-upon sunk costs, through the previous quarter, plus 

the construction cost estimate for the current quarter. Quarterly billings shall summarize total 

allocable construction costs to date; advances received through the same period; projections of 

allocable and all construction costs for the following quarter; and quarterly estimates of allocable

and all construction costs for the following three quarters. Quarterly billings will not exceed

three point one eight (3.18) percent of the estimated construction cost through the billing period. 

The Commission will act upon each such bill, and inform the Escrow Agent thereof, within 30

days of receipt, and its approval shall not be unreasonably withheld. Upon receipt of approval by

the Commission for the withdrawal, the Escrow Agent shall cause execution of the withdrawal

within 10 days of the date it was received by the Escrow Agent. The Escrow Agent will ensure 

that funds are available for advance based on the 12-month moving estimate. 

The Escrow Agent shall allow the withdrawal of funds of up to three point one

eight (3.18) percent of the construction costs of the United States during that fiscal year for

development of the Project. For purposes of administration of this provision, Interior shall

prepare and furnish to the Commission and the Escrow Agent, no later than November 1 of each

year, a statement setting forth the total estimated construction costs of the United States during

that fiscal year for development of the Project. That annual estimate may be amended at any

time by mutual consent of the parties to reflect changing circumstances. Any such amendment 

shall be furnished to the Escrow Agent in writing.

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In addition, the Escrow Agent will disburse to Interior the sum of $1,202,803.00 

for sunk costs in seven annual equal payments of $171,829.00 each, commencing one year

beyond the date of initiation of construction, which sunk costs may be subject to adjustment

following the Commission’s audit of those costs. 

7. Interior shall prepare and furnish to the Commission and to the Escrow Agent

annual reports of the actual construction costs for the Project Works of the Project during the

previous fiscal year. The reports shall be furnished by January 1 following the conclusion of 

any fiscal year in which escrow funds were withdrawn by Interior. The reports shall clearly

identify the allocation of any and all disbursements from the fund, and shall disclose and

allocate all payments made for development of Project Works of the Animas-La Plata Project. 

8. The Escrow Agent shall, monthly and at other times as requested by the

Commission or Interior, render to the Commission and Interior a statement showing the funds, 

whether in the form of cash or authorized investments, in the Escrow Account. 

9. In the event that funds duly appropriated by Congress for construction of the

Project Works of the Project are ordered impounded or their expenditure is enjoined by any

federal executive or judicial action, order, decision, directive, or the functional equivalent 

thereof, the Commission shall have the right to direct the Escrow Agent to cease any and all 

disbursements from the Escrow Account. In such an event the Commission may, at its

discretion, approve disbursements to Interior in any one fiscal year in an amount not to exceed

three point one eight (3.18) percent of the construction costs for that fiscal year for Project 

Works of the Project, to the extent that disbursements from the fund have not previously been 

made for that work. If the Commission does not, within six months of ordering cessation of 

disbursements, deliver written notice to the Escrow Agent that disbursements may resume, then

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this Agreement shall terminate and the Escrow Agent shall return all escrow funds to the 

Commission. 

10. If construction of the Project Works of the Project should cease for any reason 

beyond the reasonable control of the parties hereto, the Commission shall have the right to 

direct the Escrow Agent to cease any and all disbursements from the Escrow Account or, at its 

discretion, to approve disbursements under the same terms and conditions specified in

paragraph 9 herein. If the Commission does not, within six months of ordering cessation of 

disbursements, deliver written notice to the Escrow Agent that disbursements may resume, then

this Agreement shall terminate and the Escrow Agent shall return all escrow funds to the 

Commission. 

11. In the event that any party to the “Colorado Ute Indian Water Rights Final 

Settlement Agreement” shall exercise its right to void that Final Agreement, as provided in

Article VI section C thereof, the Commission shall have the right to terminate this Agreement. 

This right of the Commission shall be effective immediately upon the provision of notice by the 

voiding party under the Final Agreement, it being specifically agreed by the parties to this

Agreement that this Agreement may be terminated prior to the running of the sixty (60) day

notice period provided for voiding the Final Agreement. In such event, the Commission may, in 

its discretion, elect to direct the Escrow Agent to cease any and all disbursements from the 

Escrow Account. Such election, if made, shall not diminish or otherwise affect the right of the 

Commission as provided in this paragraph to terminate this Agreement. Upon notice of such 

termination by the Commission to the Escrow Agent, the remaining funds in the Escrow

Account shall promptly be paid to the Commission. 

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12. This Agreement shall automatically terminate upon (1) the disbursement of a total

of $6,916,722 in cash, plus any subsequent payments made by the Commission, from the

Escrow Account; or (2) the exhaustion of the escrowed funds, whichever occurs first. The 

Commission and Interior agree that the original term of this Agreement is eight (8) years from 

the date of this agreement. However, Interior and the Commission may mutually agree to 

extend the term of this Agreement. Upon termination, the Escrow Agent shall promptly pay all

remaining escrowed funds, if any, to the Commission. 

13. Except as otherwise provided herein, this Agreement shall remain in effect until 

the Escrow Agent shall receive notice of termination in writing from Interior. Upon such

termination, the Escrow Agent shall promptly pay the remaining escrow funds to the

Commission. 

14. The records maintained by Interior and the Escrow Agent pursuant to this 

Agreement shall be open to inspection and audit by representatives of the parties hereto at all 

times during regular business hours. 

15. No member of or Delegate to Congress, Commissioner or official of the

Commission shall benefit from this contract other than as a water user in the same manner as

other water users. 

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IN WITNESS WHEREOF, the parties to this Agreement have each caused this Agreemento be

duly executed as of the day and year first above written.

SAN mAN WATER COMMISSION UNITED STATES DEPARTMENT

OF THE INTERIOR

By: ~ '- Byt:2~d~r

Executi Regional Director,

Bureau of Reclamation

Attest: Attest:

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