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SECURITY AGREEMENT (PLEDGE OF REVENUES) DATE: February 26,2007 DEBTOR: The Headgate 396 Lateral Corporation SECURED PARTY: COLORADO WATER CONSERVATION BOARD PROMISSORY NOTE: $232,300, DATED FEBRUARY 26,2007 TERMS OF REPAYMENT: 2.50% PER ANNUM FOR 30 YEARS LOAN CONTRACT: C150234, DATED February 26,2007 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 February 2, 2007 and incorporated herein by reference, and Resolutions adopted on February 27, 2007 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 of this agreement. UNTIL DEFAULT DEBTOR may have possession of the COLLATERAL, provided that DEBTOR keeps the COLLATERAL in an account separate from other revenues of DEBTOR and does not use the COLLATERAL for any purpose not permitted by the CONTRACT. Upon default, SECURED PARTY shall have the immediate right to the possession of the COLLATERAL. Appendix 4 to Loan Contract C150234 Page 1 of 2