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a. Segregation of Pledged Revenues. The BORROWER shall set aside and keep <br /> the PLEDGED REVENUES in an account separate from other BORROWER <br /> revenues and warrants that these revenues will not be used for any other <br /> purpose, except for the payment of operations and maintenance expenses of <br /> the water system and the payment of parity bonds and obligations. <br /> b. Establish Security Interest. The BORROWER has duly executed a SECURITY <br /> AGREEMENT, attached hereto as APPENDIX 4 and incorporated herein, to <br /> provide a security interest to the CWCB in the PLEDGED REVENUES. The CWCB <br /> shall have priority over all other competing claims with respect to the Pledged <br /> Revenue, except for the liens of the BORROWER'S existing loans as listed in <br /> Section 5 (Schedule of Existing Debt) of Appendix 1, which sets forth the <br /> position of the lien created by this CONTRACT in relation to any existing lien. <br /> c. Rate Covenant. Pursuant to its statutory authority and as permitted by law, <br /> the BORROWER shall take all necessary actions consistent therewith during the <br /> term of this CONTRACT to establish, levy and collect rates, charges and fees <br /> as described in APPENDIX 3, in amounts sufficient to pay this loan as required <br /> by the terms of this CONTRACT and the PROMISSORY NOTE, to cover all <br /> expenditures for operation and maintenance and emergency repair services, <br /> and to maintain adequate debt service reserves, including obtaining voter <br /> approval, if necessary, of increases in the BORROWER'S rate schedule or <br /> taxes, if applicable. <br /> d. Debt Service Reserve Account or Fund. To establish and maintain the debt <br /> service reserve account or fund, the BORROWER shall deposit an amount equal <br /> to one-tenth of an annual payment into its debt service reserve account or fund <br /> on the due date of its first annual loan payment and annually thereafter for the <br /> first ten years of repayment of this loan. In the event that the BORROWER <br /> applies funds from this account to repayment of the loan, the BORROWER shall <br /> replenish the account within ninety (90) days of withdrawal of the funds. The <br /> debt service reserve account or fund requirement will remain in effect until the <br /> loan is paid in full. <br /> e. Additional Debts or Bonds. The BORROWER shall not issue any <br /> indebtedness payable from the NET REVENUE and having a lien thereon which <br /> is superior to the lien of this loan. The BORROWER may issue additional Parity <br /> Bonds only with the prior written approval of the CWCB and consent will be <br /> provided only if the following occurs: <br /> i. The BORROWER is currently and at the time of the issuance of the Parity <br /> Bonds in substantial compliance with all of the obligations of this CONTRACT, <br /> including, but not limited to, being current on the annual payments due under <br /> this CONTRACT and in the accumulation of all amounts then required to be <br /> accumulated in the BORROWER'S debt service reserve fund; <br /> ii. The BORROWER provides to the CWCB a Parity Certificate from an <br /> independent certified public accountant certifying that, based on an analysis <br /> of the BORROWER'S revenues, for 12 consecutive months out of the 18 <br /> Page 4 of 13 <br />