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<br />b. Establish Security Interest. The BORROWER agrees that, in order to provide a security
<br />interest for the STATE in the pledged property so that the STATE shall have priority over all
<br />other competing claims for said property, it shall execute a Security Agreement, attached
<br />hereto as Appendix 4 incorporated herein, and an Assignment of Deposit Account as
<br />Security, attached as Appendix 5 and incorporated herein, prior to the disbursement of any
<br />loan funds. The BORROWER acknowledges that the STATE shall perfect its security interest in
<br />the BORROWER'S right to receive assessment revenues by filing a UCC-1 Form with the
<br />Colorado Secretary of State.
<br />
<br />c. Assessments For Repayment Of The Loan. Pursuant to its statutory authority, articles of
<br />incorporation and by-laws, and as authorized by its resolution, the BORROWER shall take all
<br />necessary actions consistent therewith to levy assessments sufficient to pay this loan as
<br />required by the terms of this contract and the promissory note. In the event the assessments
<br />levied by the BORROWER become insufficient to assure such repayment to the STATE, the
<br />BORROWER shall immediately take all necessary action consistent with its statutory authority,
<br />its articles of incorporation, bylaws and resolution, including, but not limited to, levying
<br />additional assessments to raise sufficient revenue to assure repayment of the loan to the
<br />STATE.
<br />
<br />d. Assessments For Operations, Maintenance And Reserves. Pursuant to its statutory
<br />authority, articles of incorporation, by-laws, and resolutions, the BORROWER shall levy
<br />assessments from time to time as necessary to provide suffi.cient funds for adequate
<br />operation and maintenance, emergency repair services, obsolescence reserves and debt
<br />service reserves. BORROWER shall deposit an amount equal to one-tenth of an annual
<br />payment into its debt service reserve fund one year from the first loan disbursement, and
<br />annually thereafter for the first ten years of this loan. In the eVElnt that the Borrower applies
<br />. funds from this account to repayment of the loan, the Borrower shall replenish the account
<br />within ninety (90) days of withdrawal of the funds.
<br />
<br />13. Change of Use of Water Shares During Term of Contract. The BORROWER agrees to
<br />notify the STATE of any change of the use of the water rights represented by its shares from
<br />irrigation to municipal or commercial use, at which time the STATE, at its discretion, may adjust
<br />the Interest rate on that portion of the outstanding loan amount corresponding to the
<br />percentage of shares for which the use has been changed to the CWCB's municipal or
<br />commercial rate in effect at the time of the change of use of the water rights. The parties shall
<br />execute a contract amendment to effect said change in interest rate.
<br />
<br />14. Collateral During Repayment. The BORROWER shall not sell, convey, assign, grant, transfer,
<br />mortgage, pledge, encumber, or otherwise dispose of the property provided as security for this
<br />loan, so long as any of the principal, all accrued interest, and late charges, if any, on this loan
<br />remain unpaid, without the prior written concurrence of the STATE. In the event of any such
<br />sale, transfer or encumbrance without the STATE'S written concurrence, the STATE may at any
<br />time thereafter declare all outstanding principal and interest on this loan immediately due and
<br />payable.
<br />
<br />15. Remedies For Default. Upon defauit in the payments herein set forth to be made by the
<br />BORROWER, or default in the performance of any covenant or agreement contained herein, the
<br />STATE, at its option, may:
<br />
<br />a. declare the entire principai amount and accrued interest then outstanding immediately due
<br />and payable;
<br />
<br />b. incur and pay reasonable expenses for repair, maintenance, and operation of the PROJECT
<br />
<br />Highland Ditch Company
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