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<br />SECURITY AGREEMENT <br /> <br />DEBTOR: The Model Land & Irrigation Company <br />P.O. Box 57 <br />Model, CO 81059 <br /> <br />FEDERAL TAX NUMBER: 84-0269000 <br /> <br />COUNTY: LAs ANIMAS (CODE: 05) <br /> <br />SECURED PARTY: State of Colorado - Colorado Water Conservation Board <br />1313 Sherman Street, Room 721 <br />Denver, CO 80203 <br /> <br />COLLATERAL: Contract Rights (Code: 030) <br /> <br />DEBTOR, for consideration, hereby grants to SECUREO PARTY a security interest in the following property and any <br />and all additions, accessions and substitutions thereto or therefor, hereinafter called the COLLATERAL: All revenues <br />derived from assessments on stock and all of DEBTOR'S right to receive said assessment revenues to repay the <br />indebtedness on the amount loaned to debtor by secured party, as described in Pledge of Property provisions in <br />Contract No. C150012 (CONTRACT). <br /> <br />To secure payment of the indebtedness evidenced by the Promissory Note which is part of the CONTRACT between <br />the above named parties herewith, payable to the SECURED PARTY, the loan amount of $335,000 for a period of <br />thirty years in accordance with said 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, DEBTOR is, or to the extent that this agreement states that <br />the COLLATERAL is to be acquired after the date hereof, will be, the owner of the COLLATERAL free from any <br />adverse lien, security interest or encumbrances, except for the lien of the Purgatoire River Water Conservancy <br />District created by two contracts between that District and DEBTOR dated May 28, 1966; and that DEBTOR will <br />defend the COLLATERAL against all claims and demands of all persons at anytime claiming the same or any <br />interest therein, except for said lien of the Purgatoire River Water Conservancy District. <br /> <br />2. That the execution and delivery of this agreement by DEBTOR will not vioiate any law or agreement goveming <br />DEBTOR or to which DEBTOR is a party. <br /> <br />3. That, if DEBTOR is a corporation, its certificate and articles of incorporation and by-laws do not prohibit any term <br />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 representations <br />herein, DEBTOR shall be estopped from asserting for any reason that it is not authorized to grant a security <br />interest in the COLLATERAL pursuant to the terms of this agreement. <br /> <br />5. To pay all taxes and assessments of every nature which may be levied or assessed against the COLLATERAL. <br /> <br />6. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the COLLATERAL and <br />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, ordinances, <br />articles of incorporation or by-laws. <br /> <br />UNTIL DEFAULT DEBTOR may have possession of the COLLATERAL, provided that DEBTOR keeps the <br />revenue portion of the COLLATERAL in an account separate from other revenues of DEBTOR and does not use the <br />COLLATERAL for any purpose not permitted by the CONTRACT. Upon defauit, SECURED PARTY shall have the <br />immediate right to the possession of the COLLATERAL. <br /> <br />Appendix D to Loan Contract C150012 <br />