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SECURITY AGREEMENT DEBTOR: The Consolidated Mutual Water Company P,O. Box 150068 Lakewood, Colorado 80215 FEDERAL TAX NUMBER: 84-0177040 COUN\Y: JEFFERSON (CODE:. 11) 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 SECUREO 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 water service revenues and all of DEBTOR'S right to receive said revenues to repay the indebtedness on the amount of $4,333,000 loaned to debtor by secured party, To secure payment of the indebtedness evidenced by the Promissory Note dated September 21,2001, between the above named parties herewith, payable to the SECURED PARTY, the loan amount of $4,333,000 for a period of ten years in accordance with said Promissory Note or until all principal and interest are paid in full. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for thB "''''''';0/ interest gr:mted hereby, DLBTOR j", UI lu [tie extent lOat lOlS 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. 2. That the execution and delivery of this agreement by DEBTOR will not violate any law or agreement goveming DEBTOR or to which DEBTOR is a party. 3. That, if DEBTOR is a corporation, its certificate and 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 applicabie statutes, regulations, ordinances, articles of incorporation or by-laws. UNTIL DEFAULT DEBTOR may have possession of the revenue portion of the COLLATERAL, provided that DEBTOR keeps those revenues 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, DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the Attachment C to Contract C150011 Amendment No.2