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~ ~ PRO~ECT or (2) determination by the CWCB, in consultation with the BORROWER, that the PRO~ECT will not be completed. 6. BORROWER's Authority to Contract. The BoRROwER warrants that it has full power and authority to enter into this contract. The execution and delivery of this contract and the performance and observation of its terms, conditions and obligations have been duly authorized by all necessary actions of the BoRROwER. The BoRROwER's authorizing resolution(s) or ordinance(s) are attached as Appendix 3 and incorporated herein. 7. Attorney's Opinion Letter. Prior to the execution of this contract by the CWCB, the BoRROwER shall submit to the CWCB a letter from its general counsel stating that it is the attomey's opinion that a. the contract has been duly executed by officers of the BoRROwER who are duly elected or appointed and are authorized to execute the contract and to bind the BORROWER; b. the resolutions or ordinances of the BORROWER authorizin e ecution and delivery of the contract were duly adopted by govern g b dies of the BORROWER; c. there are no provisions in Color o Co titution o ny other state or local law that prevent this cont t fr bindin e B ROWER; d, the contract will be vali binding against the BoRROwER if entered into by the CWCB; and 8. Pledge of Fund. The BORROWER hereby irrevocably pledges to the CWCB, for purposes of repayment of this loan and as collateral for this loan, an interest-bearing annuity established for the purpose of repayment of and as collateral for this loan under an Investment Agreement with MBIA Inc. dated December 5, 2002 ("MBIA Agreement") in the principal amount of $3,694,527, and the interest earned thereon ("Fund"), as authorized by the BORROWER's resolutions. The MBIA Agreement is incorporated herein by reference. The BoRROwER will use the principal of and interest earned on the Fund to make all of its annual loan payments under this contract. FuRTHER, the BoRROwER agrees to: a. Keep Fund separate. The BoRROwER shall establish the Fund separately from other BoRROwER funds, and warrants that the~ Fund and interest earned thereon shall not be used for any purpose other than repayment of the Loan amount and th2 BORROWER's Loan Contract No. 150058A with the CWCB ("Prior Loan"). b. Establish Security Interest. To provide a security interest to the CWCB in the Fund so that the CWCB shall have priority over all other competing claims for said Fund, the BoRROwER has duly executed a Security Agreement, attached hereto as Appendix 4 and an Assignment of Investment Fund and Interest, attached hereto as Appendix 5, both of which are incorporated herein. c. No Additional Debts or Bonds. The BORROWER Shall not issue or incur any indebtedness other than that incurred under this contract payable from the Fund except for the indebtedness incurred under the Prior Loan. Page 3 of 10