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SECURITY AGREEMENT DATE: April 1 ,2004 DEBTOR: THE LOWER ARKANSAS WATER MANAGEMENT ASSOCIATION SECURED PARTY: COLORADO WATER CONSERVATION BOARD PROMISSORY NOTE: $3,849,312.67, DATED APRIL 1,2004 TERMS OF REPAYMENT: 3% PER ANNUM FOR 33 YEARS LOAN CONTRACT: C153715, DATED March 14, 1996, and amended June 27, 1996; December 2, 1996; April 9, 1997; May 28, 1997; March 10, 2001 ; and April 1, 2004 COLLATERAL: The COLLATERAL shall consist of (1) PLEDGED PROPERTY described all revenues derived from membership assessments to repay the indebtedness on the amount loaned to DEBTOR by the SECURED PARTY and all rights of DEBTOR to receive assessment revenues from its members, and (2) WATER SHARES described as 120 shares of stock in the Fort Bent Ditch Company evidenced by Certificate No. 1141. To secure payment of the loan evidenced by the PROMISSORY NOTE payable in accordance with the TERMS OF REPAYMENT, or until all principal, interest, and late charges, if any, are paid in full, the DEBTOR grants to SECURED PARTY a security interest in the above described COLLATERAL. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby the DEBTOR is 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 any time claiming the same or any interest therein by, through or under DEBTOR. 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. 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. 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. That the DEBTOR'S articles of incorporation and by-laws do not prohibit any term or condition of this agreement. ' UNTIL DEFAULT, DEBTOR may have possession of the PLEDGED PROPERTY, provided that DEBTOR keeps the PLEDGED PROPERTY in an account separate from other revenues of DEBTOR and does not use the PLEDGED PROPERTY for any purpose not permitted by the CONTRACT. Upon default, SECURED PARTY shall have the immediate right to the possession of the PLEDGED PROPERTY. DEBTOR SHALL BE IN DEFAULT under this agreement upon any of the following events or conditions: Appendix C to Loan Contract C153715 Amendment No.6