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a. the CONTRACT has been duly executed by officers of the BORROWER who are duly <br /> elected or appointed and are authorized to execute the CONTRACT and to bind the <br /> BORROWER; <br /> b. the resolutions of the BORROWER authorizing the execution and delivery of the <br /> CONTRACT were duly adopted by the BORROWER'S board of directors and/or <br /> shareholders <br /> c. there are no provisions in the BORROWER'S articles of incorporation or bylaws or any <br /> state or local law that prevent this CONTRACT from binding the BORROWER; and <br /> d. the CONTRACT will be valid and binding against the BORROWER if entered into by the <br /> CWCB. <br /> 8. PLEDGE OF PROPERTY. The BORROWER irrevocably pledges to the CWCB for purposes <br /> of repayment of this loan: (1) revenues from assessments levied for that purpose as <br /> authorized by the BORROWER'S resolution(s) and (2) all of the BORROWER'S rights to <br /> receive said assessment revenues, hereinafter collectively referred to as the "PLEDGED <br /> PROPERTY". <br /> a. Segregation of Pledged Revenues. The BORROWER shall set aside and keep the <br /> pledged revenues in an account separate from other BORROWER revenues and <br /> warrants that these revenues will not be used for any other purpose. <br /> b. Establish Security Interest. The BORROWER has duly executed a SECURITY <br /> AGREEMENT, attached hereto as APPENDIX 4 and incorporated herein, to provide a <br /> security interest to the CWCB in the PLEDGED PROPERTY. The CWCB shall have <br /> priority over all other competing claims for said PLEDGED PROPERTY, except for the <br /> liens of the BORROWER'S existing loans as listed in Section 5 (Schedule of Existing <br /> Debt) of the PROJECT SUMMARY, which sets forth the position of the lien created by <br /> this CONTRACT in relation to any existing lien(s). <br /> c. Revenue Assessments. Pursuant to its statutory authority, articles of incorporation <br /> and bylaws, the BORROWER shall take all necessary actions consistent therewith <br /> during the term of this CONTRACT to levy assessments sufficient to pay this loan as <br /> required by the terms of this CONTRACT and the PROMISSORY NOTE, to cover all <br /> expenditures for operation and maintenance and emergency repair services, and to <br /> maintain adequate debt service reserves. In the event the assessments levied by <br /> the BORROWER become insufficient to assure such repayment to the CWCB, the <br /> BORROWER shall immediately take all necessary action consistent with its statutory <br /> authority, its articles of incorporation and bylaws including, but not limited to, levying <br /> additional assessments to raise sufficient revenue to assure repayment of this loan. <br /> d. Debt Service Reserve Account. To establish and maintain the debt service <br /> reserve account, the BORROWER shall deposit an amount equal to one-tenth of an <br /> annual payment into its debt service reserve fund on the due date of its first annual <br /> loan payment and annually thereafter for the first ten years of repayment of this <br /> loan. In the event that the BORROWER applies funds from this account to <br /> repayment of the loan, the BORROWER shall replenish the account within ninety <br /> (90) days of withdrawal of the funds. <br /> Loan Contract C150378 <br /> Page 3 of 11 <br />