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12. Collateral. Part of the security provided for this loan, as evidenced by the executed Assignment of Certificate of Deposit attached as Appendix 4 and incorporated herein, shall be an undivided one hundred percent (100%) interest in a certificate of deposit account established by the BORROWER in the amount of one annual loan payment ($2,675.37), hereinafter referred to as CD ACCOUNT. The STATE shall use the funds contained in the CD ACCOUNT for the purpose of paying principal and interest due under this contract not otherwise paid by the BORROWER. Any amount withdrawn by the STATE for this purpose shall- be replenished by the BORROWER within sixty days after such withdrawal. The STATE shall not disburse any loan funds under this contract until the BORROWER has established the CD AccouNT. 13. Pledge Of Property. The BORROWER hereby irrevocably pledges to the STATE for purposes of repayment of this loan revenues from assessments levied for that purpose as authorized by the BORROWER'S resolution and all of the BORROWER'S rights to receive said assessment revenues from its stockholders (hereinafter collectively referred to as the "pledged property"). Furthermore, BORROWER agrees that a. Revenues For This Loan Are To Be Kept Separate. The BORROWER hereby agrees to set aside and keep the pledged revenues in an account separate from other BORROWER revenues, and warrants that it shall not use the pledged revenues for any other purpose. b. Establish Security Interest. The BORROWER agrees that, in order to provide a security interest for the STATE in the pledged property t TATS shall have priority over all other competing claims for said property, its Security Agreement, attached hereto as Appendix 5 and incorporated herein, an Ass' of Deposit Account as Security, attached as Appendix 6 and incorporated, he ri r isbursement of any loan funds. The BORROWER acknowledges th~S E perfect its security interest in the BORROWER'S right to receive assess venues by filing a UCC-1 Form with the Colorado Secretary of State. c. Assessments For Repayment Of The Loan. Pursuant to its statutory authority, articles of incorporation and by-laws, and as authorized by its resolution, the BORROWER shall take all necessary actions consistent therewith to levy assessments sufficient to pay this loan as required by the terms of this contract and the promissory note. In the event the assessments levied by the BORROWER become insufficient to assure such repayment to the STATE, the BORROWER shall immediately take all necessary action consistent with its statutory authority, its articles of incorporation, bylaws and resolution, including, but not limited to, levying additional assessments to raise sufficient revenue to assure repayment of the loan to the STATE. d. Assessments For Operations, Maintenance And Reserves. Pursuant to its statutory authority, articles of incorporation, by-laws, and resolutions, the BORROWER shall levy assessments from time to time as necessary to provide sufficient funds for adequate operation and maintenance, emergency repair services, obsolescence reserves and debt service reserves. BORROWER shall deposit an amount equal to one-tenth of an annual payment into its debt service reserve fund on an annual basis for the first ten years of this loan. 14. Collateral During Repayment. The BORROWER shall not sell, convey, assign, grant, transfer, mortgage, pledge, encumber, or otherwise dispose of the CD ACCOUNT provided as security for this loan, or any of the assessment revenues pledged to repay the loan herein, so long as any of the principal, all accrued interest, and late charges, if any, on this loan which remain unpaid, without the prior written concurrence of the STATE. In the event of any such sale, transfer or encumbrance without the STATE'S written concurrence, the STATE may at any time thereafter declare all Farmers Pawnee Canal Company Page 6 of 13 Loan Contract