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Section 2. Approval of Loan Contracts; Authorization of Promissory Notes; and Escrow Agreement. Pursuant to and in accordance with the State Constitution and the Enabling Law, there is hereby authorized and approved the execution of the Loan Contracts, and the Security Agreements attached thereto, in the form submitted to the Board, provided that satisfaction of the contingencies described in Section 8 herein shall be required prior to the funding of any draw request. There shall be issued by the District the Promissory Notes, in the form submitted to the Board, in the aggregate principal amounts as stated therein, for the purpose of paying the Eligible Expenses and other costs in connection with the Promissory Notes. There is hereby authorized and approved the execution of the Escrow Agreement, in the form submitted to the Board. All covenants, statements, representations and agreements contained in the Loan Contracts, the Promissory Notes and the Escrow Agreement are hereby approved and adopted as the covenants, statements, representations and agreements of the District. The accomplishment of each Project is hereby authorized, approved and ordered. Section 3. Form of Promissory Notes. The Promissory Notes shall be in the forms set forth in Appendix 2 to each Loan Contract and executed by the authorized officers of the District (whose manual or facsimile signatures thereon shall constitute conclusive evidence of such approval). The Promissory Notes shall have repayment terms of 30 years from the date of substantial completion of the portion of the Project related to each Loan Contract. The interest rate authorized for each Promissory Note is 3.0%per annum. Section 4. Fund and Accounts. (a) Re Affirmation of Funds; Creation of Accounts. There is hereby reaffirmed the following funds previously established by the District: the Water Activity Enterprise Fund. There is hereby established within the Water Activity Enterprise Fund, the Loan Repayment Account and the Reserve Account. This Resolution authorizes the establishment of line items within each such account for the annual payments and the Required Reserve Amounts of each Loan Contract. The District shall keep proper books of record and accounts showing complete and correct entries in each of the funds and accounts referred to herein and in such manner that the Gross Revenue and the Pledged Revenue may at all times be readily and accurately determined. (b) Reserve Account. (i) Use of Moneys in the Reserve Account. Moneys in the Reserve Account shall be used, if necessary, only to prevent a default in the payment of the principal of or interest on the Promissory Notes on any Payment Date and the Reserve Account is hereby pledged to the payment of the Promissory Notes. The District shall transfer moneys from the Reserve Account to pay principal of and interest on the Promissory Notes in the event that Pledged Revenues are not sufficient to make such payments when due. (ii) Funding and Maintenance of Required Reserve Amount. Commencing with the first Payment Date for each Loan Contract, the District shall annually credit an amount equal to one-tenth of the Required Reserve Amount for such Loan Contracts on or before each Payment Date until such time {00465252.DOC/6}corrected 5 4831-3765-6607.4