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sufficient to pay the annual payment due under this CONTRACT ("PLEDGED <br /> REVENUES"). Further, the BORROWER agrees to: <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 REVENUES. The CWCB shall have <br /> priority over all other competing claims for said revenues, except for the liens of <br /> the BORROWER'S existing loans as listed in Section 5 (Schedule of Existing Debt), of <br /> the PROJECT SUMMARY, which sets forth the position of the lien created by this <br /> CONTRACT in relation to any existing lien(s). <br /> c. Rate Covenant. Pursuant to its statutory authority and as permitted by law, the <br /> BORROWER shall take all necessary actions consistent therewith during the term of <br /> this CONTRACT to establish, levy and collect rates, charges and fees as described <br /> in APPENDIX 3, in amounts sufficient to pay this loan as required by the terms of <br /> this CONTRACT and the PROMISSORY NOTE, to cover all expenditures for operation <br /> and maintenance and emergency repair services, and to maintain adequate debt <br /> service reserves, including obtaining voter approval, if necessary, of increases in <br /> the BORROWER'S rate schedule or taxes, if applicable. <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 /> e. Additional Debts or Bonds. The BORROWER shall not issue any indebtedness <br /> payable from the PLEDGED REVENUES and having a lien thereon which is superior <br /> to the lien of this loan. The BORROWER may issue parity debt only with the prior <br /> written approval of the CWCB, provided that: <br /> i. The BORROWER is currently and at the time of the issuance of the parity debt <br /> 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 of <br /> the BORROWER'S revenues, for 12 consecutive months out of the 18 months <br /> immediately preceding the date of issuance of such parity debt, the <br /> BORROWER'S revenues are sufficient to pay its annual operating and <br /> maintenance expenses, annual debt service on all outstanding indebtedness <br /> having a lien on the pledged revenues, including this loan, the annual debt <br /> service on the proposed indebtedness to be issued, and all required deposits <br /> Page 4 of 12 <br />