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SECURITY AGREEMENT <br /> (PLEDGE OF REVENUES) <br /> DATE: AUGUST 30,2014 <br /> DEBTOR: EPHRAIM DITCH COMPANY,A COLORADO NONPROFIT CORPORATION <br /> SECURED PARTY: COLORADO WATER CONSERVATION BOARD <br /> PROMISSORY NOTE: $101,000 <br /> TERMS OF REPAYMENT: 1.75%PER ANNUM FOR 30 YEARS <br /> CONTRACT MGMT SYSTEM NUMBER: 72269 <br /> PLEDGED PROPERTY: All revenues derived from assessments on stock and all of DEBTOR'S right <br /> to receive said assessment revenues to repay the loan as described in <br /> PLEDGED PROPERTY provisions of the LOAN CONTRACT and DEBTOR'S <br /> Resolutions adopted October 7, 2013. <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 Property. <br /> DEBTOR EXPRESSLY WARRANTS AND COVENANTS: <br /> 1. That except for the security interest granted hereby and any other security interests described in Section <br /> 5 Of the LOAN CONTRACT PROJECT SUMMARY, DEBTOR is the owner of the PLEDGED PROPERTY free from <br /> any adverse lien, security interest or encumbrances; and that DEBTOR Will defend the PLEDGED <br /> PROPERTY against all claims and demands of all persons at any time claiming the same or any interest <br /> 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 PLEDGED <br /> PROPERTY 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 PLEDGED PROPERTY pursuant to the terms of this agreement. <br /> 5. To pay all taxes and assessments of every nature that may be levied or assessed against the PLEDGED <br /> PROPERTY. <br /> 6. That the DEBTOR'S articles of incorporation and by-laws do not prohibit any term or condition of this <br /> agreement. <br /> UNTIL DEFAULT DEBTOR may have possession of the PLEDGED PROPERTY, provided that DEBTOR <br /> keeps the PLEDGED PROPERTY in an account separate from other revenues of DEBTOR and does not use the <br /> PLEDGED PROPERTY for any purpose not permitted by the CONTRACT. Upon default, SECURED PARTY shall <br /> have the immediate right to the possession of the PLEDGED PROPERTY. <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 Note <br /> 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 furnished. <br /> Appendix 4 <br /> Page 1 of 2 <br />