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SECURITY AGREEMENT (PLEDGE OF REVENUES~ DATE: AUGUST 18, 2005 DEBTOR: CARPENTER AND MITCHELL DITCH COMPANY, INC. SECURED PARTY: COLORADO WATER CONSERVATION BOARD PROMISSORY NOTE: $607,200, DATED AUGUST 18, 2005 TERMS OF REPAYMENT: 2.5% PER ANNUM FOR 3O YEARS LOAN CONTRACT: C1502O1, DATED AUGUST 18, 2005 Co~vaTERa,~: 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 Lo,aN CONTRACT, DEeroR's Funding Agreement entered into on August 19, 2005 and incorporated herein by reference, and Resolutions adopted on August 8, 2005 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 Wlth the TERMS OF REPAYMENT, or until all principal, interest, and late charges, if any, are paid in full, the DEBTOR grants to SECURE~ PARrir a security interest in the above described Co~~.a~r~ and assigns to the Secured Party the DESTOR's right to enforce Paragraphs 6(the "step up" provision) and 15 (the right to cease water delivery) 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, DESTOR is the owner of the CouATERa~ free from any adverse lien, security interest or encumbrances; and that DEBTOR will defend the Co~~a,TERa~ 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 DESTOR or to which DEBTOR is a party. 3. To not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the Co~~TERa~ 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 CorvT~cT 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 Co~~aTEwo,~ pursuant to the terms of this agreement. 5. To pay all taxes and assessments of every nature which may be levied or assessed against th2 COLLATERAL. 6. That the DEBroR's articles of incorporation and by-laws do not prohibit any term or condition Appendix 4 to Loan Contract C150201 Page 1 of 2