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<br />SECURITY AGREEMENT <br />DATE: APRIL 1, 2004 <br /> <br />DEBTOR: THE LOWER ARKANSAS WATER MANAGEMENT ASSOCIATION <br /> <br />SECURED PARTY: COLORADO WATER CONSERVATION BOARD <br /> <br />PROMISSORY NOTE: $49,180.57 , DATED APRIL 1 , 2004 <br /> <br />TERMS OF REPAYMENT: 3.25% PER ANNUM FOR6 YEARS <br /> <br />LOAN CONTRACT: C153756, dated September 18,1997, and amended April 1, 2004 <br /> <br />PLEDGED PROPERTY: All revenues derived from membership assessments to repay the <br />indebtedness on the amount loaned to DEBTOR by the SECURED <br />PARTY and all rights of DEBTOR to receive assessment revenues <br />from its members. <br /> <br />To secure payment of the Joan evidenced by the PROMISSORY NOTE payable in accordance <br />with the TERMS OF REPAYMENT, or until all principal, interest, and late charges, if any, are paid <br />in full, the DEBTOR grants to SECURED PARTY a security interest in the above described PLEDGED <br />PROPERTY . <br />DEBTOR EXPRESSLY WARRANTS AND COVENANTS: <br />1. That except for the security interestgranted hereby and any other security interests granted <br />by DEBTOR to SECURED PARTY, DEBTOR is the owner of the PLEDGED PROPERTY free from <br />any adverse lien, security interest or encumbrances; and that DEBTOR will defend the <br />PLEDGED PROPERTY against all claims and demands of all persons at any time claiming the <br />same or any interest therein. <br />2. That the execution and delivery of this agreement by DEBTOR will not violate any law or <br />agreement governing DEBTOR or to which DEBTOR is a party. <br />3. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon <br />the PLEDGED PROPERTY and not to permit the same to be attached or replevined. <br />4. That by its acceptance of the loan money pursuant to the terms of the CONTRACT and by its <br />representations herein, DEBTOR shall be estopped from asserting for any reason that it is <br />not authorized to grant a security interest in the PLEDGED PROPERTY pursuant to the terms of <br />this agreement. <br />5. To pay all taxes and assessments of every nature which may be levied or assessed against <br />the PLEDGED PROPERTY. <br />6. That the DEBTOR'S articles of incorporation and by-laws do not prohibit any term or condition <br />of this agreement. <br />UNTIL DEFAULT DEBTOR may have possession of the PLEDGED PROPERTY, provided <br />that DEBTOR keeps the PLEDGED PROPERTY in an account separate from other revenues of <br />DEBTOR and does not use the PLEDGED PROPERTY for any purpose not permitted by the <br />CONTRACT. Upon default, SECURED PARTY shall have the immediate right to the possession of <br />the PLEDGED PROPERTY. <br />DEBTOR SHALL BE IN DEFAULT under this agreement upon any of the following events or <br />conditions: <br />a. default in the payment or performance of any obligation contained herein or in the <br /> <br />Appendix B to Loan Contract C153756 Amendment No. -1 c{Ze. <br />