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<br />SECURITY AGREEMENT <br /> <br />RECEIVEL <br /> <br />DEBTOR: <br /> <br />The Horse Creek Water Users Association <br />4234 County Road 2B <br />Rush, CO 80833 <br /> <br />84-1260718 <br /> <br />LINCOLN (CODE: 33) <br /> <br />State Of Colorado, Colorado Water Conservation Board <br />1313 Sherman Street, Room 721 <br />Denver, CO 80203 <br /> <br />MAR 3 j 1998 <br /> <br />Colorado Wate! <br />Conservation Boa.ro <br /> <br />FEDERAL TAX NUMBER: <br />COUNTY: <br />SECURED PARTY: <br /> <br />DEBTOR, for consideration, hereby grants to SEcuRED PARTY a security interest in the following property <br />and any and all additions, accessions and substitutions thereto or therefor, hereinafter called the <br />COLLATERAL: The principal amount of the escro !93"unt established by DEBTOR at the First National <br />Bank of Limpn {Account No. '~rsuant to an amended Escrow Agreement entered <br />into on fljjt~;2.-5" , 1997 by DEBTOR, the F P'Mational Bank of Limon, the Box Springs Canai and <br />Reservoir Company, and certain shareholders of said Company ("Escrow Agreement"). <br /> <br />To secure payment of the indebtedness evidenced by the Promissory Note which is a part of Loan Contract <br />#C153771 ("CONTRACT"), between the above named parties herewith, payable to the SECURED PARTY as <br />follows: $825,000 payable in 40 annual installmer1ts in accordance with the Promissory Note or until all <br />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 Agreement, <br />incorporated herein by reference, DEBTOR is, or to the extent that this agreement states that the <br />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; and that DEBTOR will defend the COLLATERAL against <br />all claims and demands of all persons at anytime claiming the same or any interest therein by, through <br />or under DEBTOR. <br /> <br />2. That the execution and delivery of this agreement by DEBTOR will not violate any law or agreement <br />goveming DEBTOR or to which DEBTOR is a party. <br /> <br />3. That, if DEBTOR is a corporation, its certificate or articles of incorporation and by-laws do not prohibit <br />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 authorized <br />to grant a security interest in the COLLATERAL pursuant to the terms of this agreement. <br /> <br />5. To pay all taxes and assessments of every r1ature which may be levied or assessed against the <br />COLLATERAL. <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 COLLATERA~ in violation of any applicable statutes, regulations or <br />ordinances, articles of incorporation or by-laws. <br /> <br />DEBTOR and SECURED PARTY agree that DEBTOR may use up to $20,000 of the COLLATERAL to make <br />annual lease payments to Box Springs Canal and Reservoir Company and certain shareholders of said <br />Company under the Lease of Water Rights entered into by DEBTOR, Box Springs Canal and Reserloir <br />Company and certain shareholders of said Company dated January 29, 1997, with the written consent of <br /> <br />Appendix 7(1) to Loan Contract C153771 <br />