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i <br />service on the proposed indebtedness to be issued, and all required deposits <br />to any reserve funds required by this contract or by the lender(s) of any <br />indebtedness having a lien on the pledged revenues. The analysis of <br />revenues shall be based on the BoRROwER's current rate structure or the rate <br />structure most recently adopted. No more than 10% of total revenues may <br />originate from tap and/or connection fees. <br />The BoRROwER acknowledges and understands that any request for approval of <br />the issuance of additional debt must be reviewed and approved by the CWCB <br />Director prior to the issuance of any additional debt. Such approval shall be <br />based only upon the criteria listed in Paragraph 7.e above and shall be provided <br />within ten (10) working days from receipt of the BoRROwER's request. <br />f. The BORROWER may establish a Rate Stabilization Account (AccouNT) in the <br />amount and for the term it deems necessary. The BoRROwER may use funds from <br />this AccouNT to satisfy the criteria set forth in Paragraph 7.e above. The purpose <br />of the AccouNT is to prevent the need for the rapid increase of rates, charges and <br />fees as described in Appendix 3 caused by undertaking of debt during the term of <br />this loan. The initial amount of the AccouNT shall be $6,000,000. Nofinrithstanding <br />anything set forth above, amounts deposited into the AccouNT shall not be deemed <br />revenues (as described in Paragraph 7.e above) in the calendar year deposited and <br />amounts withdrawn from the AccouNT shall be deemed revenues in the year <br />withdrawn. The AccouNr shall be established and maintained in accordance with <br />Appendix 3. <br />g. Annual Statement of Debt Coverage. Each year during the term of this contract, <br />the BoRROwER shall submit to the CWCB an annual audit report, a certificate of <br />debt service coverage, and the annual activity of the Rate Stabilization Account <br />from a Certified Public Accountant. <br />8. Collateral. Except as provided in Paragraph 7 above, the BoRROwER shall not cause <br />a senior or parity encumbrance on the Pledged Revenues so long as any of the <br />principal, accrued interest, and late charges, if any, on this loan remain unpaid <br />9. Release After Loan Is Repaid. Upon complete repayment to the CWCB of the entire <br />principal, all accrued interest, and late charges, if any, as specified in the Promissory <br />Note, the CWCB agrees to release and terminate any and all of the CWCB's right, title, <br />and interest in and to the collateral and the revenues pledged to repay this loan. <br />10. Warranties. <br />a. The BORROWER warrants that the Pledged Revenues for this loan are not <br />encumbered by any other deeds of trust or liens of any party other than the CWCB <br />or in any other manner, except for any lien(s) existing at the time this contract is <br />made identified in Section 5(Schedule of Existing Debt) of the Project Summary, <br />which sets forth the position of the lien created by this contract in relation to any <br />existing lien(s). <br />b. The BoRROwER warrants that, by acceptance of the loan under this contract and <br />by its representations herein, the BoRROwER shall be estopped from asserting for <br />any reason that it is not authorized or obligated to repay the loan to the CWCB as <br />required by this contract. <br />Page 4 of 10 <br />