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SECURITY AGREEMENT DEBTOR: Silt Water Conservancy District Water Activity Enterprise P.O. Box 8 Silt, CO 81652 FE~Ew4~ T,vc NunneER: 84-0580618 COUNTY: GARFIELD (CODE: 24) SECURED PARTY: State of Colorado - Colorado Water Conservation Board 1313 Sherman Street, Room 721 Denver, CO 80203 DEBTOR, for consideration, hereby grants to SECURE~ Pa,RN a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor, hereinafter called the Co~~a,TERa~: Water system revenues pledged to repay the indebtedness on the amount loaned to DEaTOR by SECURED PARTY, as described in pledge of revenues provisions in contract No. C150030 (CoNTr~acT). To secure payment of the indebtedness evidenced by the Promissory Note between the above named parties in the total amount of $100,000.00 at an interest rate of 4% per annum for a term of 30 years, payable by DEBTOR t0 the SECURED Pa,RN until all principaf, interest and late charges, if any, are paid in full in accordance with said Promissory Note. "~ DEBTOR EXPRESSLY WARRANTS AND CO v 1. That except for the security interest grante o , r to the extent that this agreement states that the Co~~,o,TEw~,~ is to be acq r e , will be, the owner of the COLLATERAL free from any adverse lien, security or encumbrances, and that DEBTOR will defend the Co~~a,TEw4~ against all claims and demands of all persons at anytime claiming the same or any interest therein. 2. That the execution and delivery of this agreement by DEeTOR will not violate any law or agreement governing DEBTOR or to which DEBTOR is a party. 3. That by its acceptance of the loan money pursuant to the terms of the CONTRACT and by its representations herein, DEBTOR shall be estopped from asserting for any reason that it is not authorized to grant a security interest in the Co~wTEw4~ pursuant to the terms of this agreement. 4. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the Co~~TEt~a~ and not to permit the same to be attached or replevined, without the prior written consent Of SECURED PARTY. 5. That the DEaTOR will not use the COLLATERAL in violation of any applicable statutes, regulations, ordinances, articles of incorporation or by-laws. UNTIL DEFAULT DEBroR may have possession of fhe Co~~TEwo,~, provided that DEBTOR keeps the Co~~,TEt~a~ in an account separate from other revenues of DEBTOR and does not use the Co~~a,rE~~ for any purpose not permitted by the CoNTRa,Cr. Upon default, SECURE~ PaRrY shall have the immediate right to the possession of the Co~tATFR,aL. DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following events or conditions: a. default in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same; Appendix D to Loan Contract C150030