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J SECURITY AGREEMENT DEBTOR: The Western Mutual Ditch Company 1007 9th Avenue Greeley, CO 80631 FEDERAL TAX NUMBER: 84-0350690 COUNTY: WELD (CODE: 03) SECURED PARTY: State Of Colorado, Colorado Water Conservation Board 1313 Sherman Street, Room 721 Denver, CO 80203 COLLATERAL: CONTRACT RIGHTS (CODE 030) 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: All revenues derived from assessments levied to repay the indebtedness on the amount loaned to DEBTOR by SECURED PARTY, and all rights of DEBTOR to receive such assessment revenues from its stockholders, as described in pledge of property provisions in Loan Contract No. C153857 ("Contract"), To secure payment of the indebtedness evidenced by the Promissory Note which is a part of CONTRACT, between the above named parties herewith, payable to the SECURED PARTY in the amount of $100,000 payable in 20 annual installments in accordance with the Promissory Note or until all principal and interest are paid in full. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby, and subject to the terms of the Escrow Agreement, incorporated herein by reference, 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 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. That, if DEBTOR is a corporation, its certificate or 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 or ordinances, articles of incorporation or by,laws. Appendix 5 to Loan Contract C153857