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SECURITY AGREEMENT Debtor: Town of Georgetown Water and Sewer Activity Enterprise P.O. Box 426 Georgetown, Colorado 80444 FE~Ew4~ ID NuMaER: 84-6000671 CouNN: Clear Creek (CODE: 51) SECURE~ Pa,Rn: State of Colorado - Colorado Water Conservation Board 1313 Sherman Street, Room 721 Denver, CO 80203 Co~~,rEw4~: All Water Rights and Ditch Shares (Code: 560) DEBTOR, for consideration, hereby grants to SECURE~ PARN a security interest in ~he following property and any and all additions, accessions and substitutions thereto or therefor, hereinafter called the Co~u~,TEr~~: One and one-half shares of stock of the Farmers High Line Canal and Reservoir Company, evidenced by Attachment A, which is incorporated herein, (except priorities 1 and 48 which are wholly owned by the City of Westminster), that were decreed for irrigation purposes by decrees dated October 4, 1884 and October 9, 1895, entered by the District Court, Arapahoe County, and by decree dated May 13, 1936, entered by the District Court, City and County of Denver. To secure payment of the indebtedness evidenced by the Promissory Note which is a part of the Loan Contract No. C153738 befinreen the above named parties herewith, payable to the SECURE~ PARnr, the loan amount of $190,000 with interest at a rate of 5.25% 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 DEaTOR will defend the Co~~ATEw~,~ 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 Co-vTr~4CT and by its representations herein, DEBTOR shall be estopped from asserting for any reason that it is not authorized to grant a securiry interest in the Co~~TE-~~ 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 Co~v~TEw4~ 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. DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following Appendix 4(b) to Loan Contract No. C153738