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..;0-'-..,., SECURITY AGREEMENT Debtor: Columbine Ranches Property Owner's Association 11246 Lewistown Street Commerce City, CO 80022 FEDERAL ID NUMBER: 84-1024757 COUNTY: Adams (CODE: 12) SECURED PARTY: State of Colorado - Colorado Water Conservation Board 1313 Sherman Street, Room 721 Denver, CO 80203 COLLATERAL: All water rights and ditch shares (Code: 560) DEBTOR, for consideration, hereby grants to SECURED PARTY a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor, hereinafter called the COLLATERAL: five (5) shares of the capital stock of the Farmers Reservoir and Irrigation Company as evidenced by Certificate No. 7671, and all of the water, water rights and other associated rights represented thereby. To secure payment of the indebtedness evidenced by the Promissory Note which is a part of the Loan Contract C150010 between the above named parties herewith, payable to the SECURED PARTY, the loan amount of $305,250 with interest at a rate of 4.75% per annum, payable in 30 annual installments or until all principal, 'interest, and late charges, if any, are paid in full, in accordance with said Promissory Note. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby, DEBTOR is, or to the extent that this agreement states that the COLLATERAL., is to be acquired after the date hereof, will be the owner of the COLLATERAL free from any adverse lien, security interest or encumbrances; and that DEBTOR will defend the COLLATERAL against all claims and demands of all persons at anytime claiming the same or any interest therein. 2. That the execution and delivery of this agreement by DEBTOR will not violate any law or agreement governing DEBTOR or to which DEBTOR is a party. 3, That, if DEBTOR is a corporation, its certificate and articles of incorporation and bylaws do not prohibit any term or condition of this agreement. 4, That by its acceptance of the loan money pursuant to the terms of the CONTRACT and by its representations herein. DEBTOR shall be estopped from asserting for any reason that it is not authorized to grant a security interest in the COLLATERAL pursuant to the terms of this agreement. 5. To pay all taxes and assessments of every nature which may be levied or assessed against the COLLATERAL, 6. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the COLLATERAL and not to permit the same to be attached or replevined. 7. That the DEBTOR will not use the COLLATERAL in violation of any applicabie statutes, regulations. ordinances. articies of incorporation or bylaws, DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following events or conditions: a, defauit in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same;