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<br />&t~' ~, <br />~ <br /> <br />J"\ <br />Q <br /> <br />SECURITY AGREEMENT <br /> <br />DEBTOR; The Farmers Pawnee Canal Company <br />16177 CR 24 <br />Sterling, CO 80751 <br /> <br />FEDERAL TAX NUMBER: 84-04'67335" <br /> <br />COUNTY: LOGAN (CODE: 13) <br /> <br />COLLATERAL: CONTRACT RIGHTS (CODE 030) <br /> <br />SECURED PARTY: State Of Colorado, Colorado Water Conservation Board <br />1313 Sherman Street, Room 721 <br />Denver, CO 80203 <br /> <br />DEBTOR, for consideration, hereby grants to SECURED PARTY a security interest in the following <br />property and any and all additions, accessions and substitutions thereto or therefor, hereinafter <br />called the COLLATERAL: All revenues derived from assessments levied to repay the indebtedness on the <br />amount loaned to DEBTOR by SECURED PARTY, and all rights of DEBTOR to receive such assessment <br />revenues from its stockholders, as described in pledge of property provisions in Loan Contract No, <br />C153825. <br /> <br />To secure payment of the indebtedness evidenced by the Promissory Note which is a part of Loan <br />Contract No. C153825 ("CONTRACT"), between the above named parties herewith, payable to the <br />SECURED PARTY in the amount of $22,250 payable in 10 annual installments in accordance with the <br />Promissory Note or until all principal and interest are paid in full. <br /> <br />DEBTOR EXPRESSLY WARRANTS AND COVENANTS: <br /> <br />1, That except for the security interest granted hereby, and subject to the terms of the Escrow <br />Agreement, incorporated herein by reference, DEBTOR is, or to the extent that this agreement <br />states that the COLLATERAL is to be acquired after the date hereof, will be, the owner of the <br />COLLATERAL free from any adverse lien, security interest or encumbrances; and that DEBTOR will <br />defend the COLLATERAL against all claims and demands of all persons at anytime claiming the <br />same or any interest therein by, through or under DEBTOR, <br /> <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 DE8TOR is a party, <br /> <br />3. That, if DEBTOR is a corporation, its certificate or articles of incorporation and by-laws do not <br />prohibit any term or condition of this agreement, <br /> <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 />authorized to grant a security interest in the COLLATERAL pursuant to the terms of this <br />agreement, <br /> <br />5. To pay all taxes and assessments of every nature which may be levied or assessed against the <br />COLLA TERAL. <br /> <br />6. 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 /> <br />7. That the DEBTOR will not use the COLLATERAL in violation of any applicable statutes, regulations <br />or ordinances, articles of incorporation or by-laws, <br /> <br />DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the <br /> <br />Appendix 5 to loan Contract C 153825 <br />