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SECURITY AGREEMENT DEBTOR: Leroux Creek Water Users' Association 11653100 Road Hotchkiss, CO 81419 FEDERAL TAX NUMBER: 84-6038426 COUNTY: DELTA (CODE: 18) SECURED PARTY: State of Colorado - Colorado Water Conservation Board 1313 Sherman Street, Room 721 Denver, CO 80203 COLLATERAL: Contract Rights (Code: 030) DEBTOR, for consideration, hereby grants to SEiCURED PARTY a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor, hereinafter , called the COLLATERAL: All revenues derived from assessments on stock and all of DEBTOR'S right to received said assessment revenues to repay the indebtedness on the amount loaned to debtor by secured party, as described in Pledge of Property provisions in Contract No. C150008 (CONTRACT). To secure payment of the indebtedness evidenced by certain Promissory Note Provisions of CONTRACT between the above named parties herewith, payable to the SECURED PARTY, the loan amount of $1,250,000 for a period of 30 years in accordance with said Promissory Note or until all principal and interest are paid in full. 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 by-laws 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 p-1Xn 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 applicable statutes, regulations, ordinances, articles of incorporation or by-laws. UNTIL DEFAULT DEBTOR may have possession of the COLLATERAL, provided that DEBTOR keeps the COLLATERAL in an account separate from other revenues of DEBTOR and does not use the COLLATERAL Appendix D to Loan Contract C150008