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SECTION 6 - COLLATERAL The collateral provided for this loan, as evidenced by the executed Deed of Trust, in the form attached as Appendix 5 and incorporated herein, shall be an undivided one hundred percent interest in any rights that the BORROWER holds in the PROJECT consisting of approximately 13,000 feet of pipeline and the associated access easement rights as more particularly described in the attached Deed of Trust ("Collateral"). SECTION 7- ADDITIONAL CONDITIONS & CONTRACT REQUIREMENTS The CWCB approved the loan with the following conditions: a. The BORROWER shall provide to the CWCB a copy of the executed USDA Conservation Program Contract to verify that the USDA would provide engineering services and a grant for 75 percent of the final construction cost. b. Security for the loan includes (1) a pledge of assessment revenues backed by an assessment covenant, (2) a debt service reserve fund equal to two annual loan payments (one payment set aside at the time of ~rst draw of funds and one third of an annual payment set aside at the time the first three annual loan payments are made), (3) a security interest in the BoRROwER's Funding Agreement, which Funding Agreement shall include a"step-up" provision that requires the Funding Agreement signatories to make the entire annual loan payment to the CWCB in the event any of the members fail to pay their assessed share amount pursuant to the Funding Agreement, and (4) a conditional assignment to the CWCB of the Company's right to enforce said step-up provision in the event of a default. SECTION 8- CONSTRUCTION FUND PROGRAM PROCEDURES A. The BoRROwER shall employ an engineer, registered in the state of Colorado to prepare plans and specifications for the PRO~ECT. B. The BORROWER's and the Engineering Consultant's Agreements and the plans and specifications must be submitted to the CWCB staff for verification of compliance with the terms of this Contract when available prior to bidding. Any modifications to the plans and specifications must be approved in writing by the CWCB staff. C. For plans and specifications for all jurisdictional dams and reservoirs, as defined by § 37-87-105 C.R.S., the BoRROwER shall provide a letter of approval from the State Engineer's Office prior to construction. D. CWCB staff must be present at bid opening and must approve the award of the construction contract. E. The BoRROwER shall contract for the construction of the work with responsible and capable Construction Firms, which said Construction Firms shall be selected by the BoRROwER and found acceptable by the CWCB staff. F. The BORROWER must provide a copy of the executed construction contract documents consisting of the contractor's proposal, construction contract, Appendix 1 to Loan Contract C150201 Page 2 of 4