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SECURITY AGREEMENT Debtor: Arkansas Groundwater Users Association 100 West 1 st Street Manzanola, CO 81058 FEDERAL ID NUMBER: 84-1268595 COUNTY: PUEBLO (CODE: 02) 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: 1,007 shares of Excelsior Irrigating Company stock, evidenced by Certificate Number 7, which represent DEBTOR'S pro rata interest in the following water rights: 20 c.f.s. decreed to the Bessemer Ditch as Priority No. 55 (Admin. # 13635) by the Pueblo County District Court in Civil Action 2535 on March 23, 1896 with an appropriation date of May 1, 1887, and transferred to the Excelsior Ditch on September 15, 1905 in Civil Action 9532, and 40 c.f.s. decreed to the Rocky Ford Highline Canal as Priority No. 60 (Admin. # 14616) by the Pueblo County District Court in Civil Action 2535 on March 23, 1896 with an appropriation date of January 6, 1890, and transferred to the Excelsior Ditch on September 15, 1905 in Civil Action 9532. To secure payment of the indebtedness evidenced by the Promissory Note which is a part of the Loan Contract No. C 153808 between the above named parties herewith, payable to the SECURED PARTY as follows: $590,590 payable in forty annual installments 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 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 applicable statutes, regulations, ordinances, articles of incorporation or by-laws. Appendix 5 to Loan Contract No. C153808