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SECURITY AGREEMENT <br /> (PLEDGE OF REVENUES) <br /> DATE: September 18, 2014 <br /> DEBTOR: Cottonwood Water and Sanitation District acting by and through <br /> its Cottonwood Water Enterprise <br /> SECURED PARTY: Colorado Water Conservation Board <br /> PROMISSORY NOTE: $363,600.00 <br /> TERMS OF REPAYMENT: 3.00%per annum for 30 years <br /> LOAN CONTRACT: C150408B <br /> COLLATERAL: All Cottonwood Water Enterprise revenues pledged to repay the loan as <br /> described in Pledge of Revenues provisions of the LOAN CONTRACT and <br /> DEBTOR'S RESOLUTION(or ORDINANCE)dated August 14, 2014. <br /> To secure payment of the loan evidenced by the PROMISSORY NOTE payable in accordance with the TERMS <br /> OF REPAYMENT, or until all principal, interest, and late charges, if any, are paid in full, the DEBTOR grants to <br /> SECURED PARTY a security interest in the above described Pledged Revenue hereinafter"COLLATERAL". <br /> DEBTOR EXPRESSLY WARRANTS AND COVENANTS: <br /> 1. That except for the security interest granted hereby and any other security interests described in <br /> Section 5 of the Loan Contract Project Summary, DEBTOR is the owner of the COLLATERAL free from any <br /> adverse lien, security interest or encumbrances; and that DEBTOR will defend the COLLATERAL against all <br /> claims and demands of all persons at any 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 agreement <br /> 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 the <br /> 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 its <br /> representations herein, DEBTOR shall be estopped from asserting for any reason that it is not authorized <br /> to grant a security interest in the COLLATERAL pursuant to the terms of this agreement. <br /> UNTIL DEFAULT DEBTOR may have possession of the COLLATERAL, provided that DEBTOR keeps the <br /> COLLATERAL in an account separate from other revenues of DEBTOR and does not use the COLLATERAL for <br /> any purpose not permitted by the CONTRACT. Upon default, SECURED PARTY shall have the immediate right <br /> to the possession of the COLLATERAL. <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 PROMISSORY <br /> NOTE or Loan CONTRACT; <br /> b. dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any <br /> part of the property of, assignment for the benefit of creditors by, or the commencement of any <br /> proceeding under any bankruptcy or insolvency law of, by or against DEBTOR; or <br /> c. the making or furnishing of any warranty, representation or statement to SECURED PARTY by or on <br /> behalf of DEBTOR which proves to have been false in any material respect when made or <br /> furnished. <br /> UPON SUCH DEFAULT and at any time thereafter, SECURED PARTY shall have the <br /> Appendix 4 to Loan Contract C150408B <br /> Page 1 of 2 <br />