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SECURITY AGREEMENT DATE: NOVEMBER 1. 2003 DEBTOR: ARKANSAS GROUNDWATER USERS ASSOCiATION SECURED PARTY: COLORADO WATER CONSERVATION BOARD 1313 SHERMAN STREET, ROOM 721 DENVER, CO 80203 PROMISSORY NOTE: $600,872.67, DATED NOVEMBER 1,2003 REPAYMENT TERMS: 3.0% INTEREST PER ANNUM FOR 35 YEARS LOAN CONTRACT: C153803, DATED FEBRUARY 24, 2003, AMENDED NOVEMBER 1, 2003 COLLATERAL: All revenues derived from membership fees and assessments and all of Debtor's right to receive said fees and assessment revenues to repay the loan as described in Pledge of Property provisions of the LOAN CONTRACT, and 1007 shares of stock in the Excelsior Irrigating Company evidenced by Certificate No.7, which represents Debtor's pro rata interest in the following water rights: 20 cfs decreed to the Bessemer Ditch as Priority 55 (Admin. #13635) by the Pueblo County District Court in Civil Action 2535 on March 23, 1896 with an appropriation date of May 1. 1887, and transferred to the Excelsior Ditch on September 15. 1905 in Civil Action 9532, and 40 cfs decreed to the Rocky Ford Highline Canal as Priority No. 60 (Admin. #14616) by the Pueblo County District Court in Civil Action 2535 on March 23, 1896 with an appropriation date of January 6, 1890, and transferred to the Excelsior Ditch on . September 15, 1905 in Civil Action 9532. To secure payment of the loan evidenced by the PROMISSORY NOTE payable in accordance with the REPAYMENT TERMS, 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. DEBTOR EXPRESSLY WARRANTS AND COVENANTS: 1. That except for the security interest granted hereby, 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 goveming 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 alt 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. Appendix B to Loan Contract C153808 Amendment No.1