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Terace lnigation Company <br />March 9, 2012 (Updated March 23, 2012) <br />Page 6 of 6 <br />Agenda Item 16a <br />Collateral: As security for the loan, the Company will pledge assessment revenues backed by a <br />rate covenant, the Terrace Reservoir and appurtenances, and the Company's 212.85 cfs of water <br />rights already granted in existing loan number C150171. This is in compliance with the CWCB <br />Financial Policy #5 (Collateral). <br />The pledge and covenant are contractual provisions requiring the Company to pay its CWCB debt <br />obligation from assessment revenues; and requires the Company to set its assessment rates <br />sufficient to fund its debt obligation, in addition to operation and maintenance expenses. <br />The Terrace Reservoir, it appurtenances, and its direct flow water rights are collateral pledged <br />under existing loan number C150171. The deed of trust from that loan shall be amended to include <br />that collateral as security for this Project. <br />cc: Rodney Reinhardt, Project Manager, Terrace Reservoir Company <br />Susan Schneider, AGO <br />Peter Johnson, AGO <br />Attachment: Water Project Loan Program — Project Data Sheet <br />