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<br />SECURITY AGREEMENT <br /> <br />(PLEDGE OF REVENUES) <br /> <br />DATE: MARCH 1, 2004 <br />DEBTOR: The Dolores Water ConseNancy District, acting by and through <br />the Dolores Water ConseNancy District Water Activity <br />Enterprise <br />COLORADO WATER CONSERVATION BOARD <br />$598,058, DATED MARCH 1,2004 <br />3% PER ANNUM FOR 10 YEARS <br />C150153, DATED MARCH 1, 2004 <br />All revenues pledged to repay the loan as described in <br />Pledge of Revenues provisions of the LOAN CONTRACT, and <br />as described in Debtor's Resolutions No. 04-01 (Enterprise) <br />and 04-02 (District) dated March 4, 2004, including <br />revenues from the District's Water Activity Enterprise, <br />which shall include the Dove Creek Secondary Water <br />Supply System tap fees and operations revenues, as well <br />as any other Water Activity Enterprise revenues necessary <br />to assure payment of the annual debt service and debt <br />service reserve deposit. <br />To secure payment of the loan 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 <br />COLLATERAL. <br /> <br />SECURED PARTY: <br />PROMISSORY NOTE: <br />TERMS OF REPAYMENT: <br />LOAN CONTRACT: <br />COLLATERAL: <br /> <br />DEBTOR EXPRESSLY WARRANTS AND COVENANTS: <br />1. That except for the security interest granted hereby and any other security interests <br />described in Section 5 of the Loan Contract Project Summary, DEBTOR is the owner of the <br />COLLATERAL free from any adverse lien, security interest or encumbrances; and that <br />DEBTOR will defend the COLLATERAL against all claims and demands of all persons at any <br />time claiming the 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 COLLATERAL 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 <br />its representations herein, DEBTOR shall be estopped from asserting for any reason that it <br />is not authorized to grant a security interest in the COLLATERAL pursuant to the terms of this <br />agreement. <br />UNTIL DEFAULT DEBTOR may have possession of the COLLATERAL, provided that <br />DEBTOR keeps the COLLATERAL in an account separate from other revenues of DEBTOR and <br />does not use the COLLATERAL for any purpose not permitted by the CONTRACT. Upon default, <br />SECURED PARTY shall have the immediate right to the possession of the COLLATERAL. <br /> <br />Appendix 4 to Loan Contract C150153 <br />