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<br />SECURITY AGREEMENT <br />DEBTOR: Peoples Ditch Company <br />23738 Road 40 <br />Sterling, CO 80751 <br />FE~ERa,~ T,vc NunnaER: 84-1231597 <br />COUNTY: LOGAN (CODE: 13) <br />SECURE~ P,4RN: State of Colorado - Colorado Water Conservation Board <br />1313 Sherman Street, Room 721 <br />Denver, CO 80203 <br />CoI.~TEw~~: Contract Rights (Code: 030) <br />DEBTOR, for consideration, h21'eby g~aC1tS t0 SECURED PARTY a S@CU~Ity interest in the following <br />property and any and all additions, accessions and substitutions thereto or therefor, hereinafter <br />called the Co~~aTEw+,~: All revenues derived from assessments on stock and all of DEaTOR's right to <br />receive said assessment revenues to repay the indebtedness on the amount loaned to debtor by <br />secured party, as described in Pledge of Property provisions in Contract No. C150049 dtaed <br />February 1, 2002 (coNT~u,cr). <br />To secure payment of the indebtedness evidenced by the Promissory Note befinreen the above named <br />parties herewith, payable to the SECUREO PARN, the (oan amount of $43,000 at an interest rate of <br />3.75% per annum for a period of 20 years in accord with said Promissory Note or until all principal <br />and interest are paid in full. <br />DEBTOR EXPRESSLY WARRANTS AND~ TS: <br />1. That except for the security interest grant , ', or to the extent that this agreement <br />states that the COLLATERAL IS to ~ uir~ e date hereof, wiil be, the owner of the <br />COLLATERAL ffG'G' fl'Oft1 8f1y adVefSe~ curity interest or encumbrances; and that DEaTOR will <br />defend the Co~~,TERa~ against all claims and demands of all persons at anytime claiming the same <br />or any interest therein. <br />2. That the execution and delivery of this agreement by DEBTOR will not violate any law or agreement <br />governing DEeTOR or to which DEeTO~ is a party. <br />3. That, If DEBTOR IS a corporation, its certificate and articles of incorporation and by-laws do not <br />prohibit any term or condition of this agreement. <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 not <br />aufhorized to grant a security interest in the Co~~4TE~~ pursuant to the terms of this agreement. <br />5. To pay all taxes and assessments of every nature which may be levied or assessed against the <br />COLLATERAL. <br />6. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the <br />Co~~TERa,~ and not to permit the same to be attached or replevined. <br />7. That the DEBTOR will not use the Co~~aTEw4~ in violation of any applicable statutes, regulations, <br />ordinances, articles of incorporation or by-laws. <br />UNTIL DEFAULT DEaTOR may have possession of the COLLATERAL, provided that DEBTOR <br />keeps the Co~~TE~,~ in an account separate from other revenues of DEBTOR and does not use the <br />Co~~TERa~ for any purpose not permitted by the Co-vTw~cT. Upon default, SECURED PARTY shall have <br />the immediate right to the possession of the Co~~.p,TE~,~. <br />Appendix 4 to Loan Contract C150049 <br />