C150186 Contract

• Contract/PO #: C150186
• Contractor Name: Lower Bauer West Lateral, Inc.
• Contract Type: Loan
• Water District: 34
• County: Montezuma
• Loan Projects - Doc Type: Contract Documents

SECURITY AGREEMENT

(PLEDGE OF REVENUES)

DATE: AUGUST 15, 2005

DEBTOR: Lower Bauer West Lateral, Inc

SECURED PARTY: COLORADO WATER CONSERVATION BOARD

PROMISSORY NOTE: $196,950, DATED AUGUST 15, 2005

TERMS OF REPAYMENT: 2.50% PER ANNUM FOR 30 YEARS

LOAN CONTRACT: C150186, DATED AUGUST 15, 2005

COLLATERAL: All revenues derived from assessment and all of DEBTOR'S
right to receive said assessment revenues to repay the loan
as described in Pledge of Property provisions of the LOAN
CONTRACT, DEBTOR'S Funding Agreement entered into on
November 22, 2004 and incorporated herein by reference,
and Resolutions adopted on December 21, 2004 by the
DEBTOR'S Members and Board of Directors, attached as
Appendix 3.

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
and assigns to the Secured Party the DEBTOR'S right to enforce Paragraphs 6 and 15 of
Debtor's Funding Agreement. This assignment shall be effective solely in the event of
DEBTOR'S default in the payment of the loan as required by the Promissory Note.

DEBTOR EXPRESSLY WARRANTS AND COVENANTS:

1. That except for the security interest granted hereby and any other security interests
described in Section 5 of the Loan Contract Project Summary, 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.

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

Appendix 4 to Loan Contract C150186