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<br />7. BORROWER'S Authority To Contract. The BORROWER shall, pursuant to its statutory authority, <br />articles of incorporation and by-laws, have its stockholders and board of directors adopt <br />resolutions, irrepealable during the life of this loan, authorizing the President and Secretary, on <br />behalf of the BORROWER, to do the following: <br /> <br />a, To enter into and comply with the terms of this contract and the promissory note, and <br /> <br />b. To levy assessments in an amount sufficient to pay the annual amounts due under this <br />contract, and to pledge assessment revenues and the BORROWER'S right to receive said <br />revenues for repayment of the loan, and <br /> <br />c. To place the assessment revenues pledged to make annual loan payments in a special <br />account separate and apart from other BORROWER revenues in accordance with the <br />Pledge of Property Provisions of this contract and <br /> <br />d, To make annual payments in accordance with the promissory note, and <br /> <br />e. To make annual deposits to a debt service reserve fund in accordance with the Pledge of <br />Property Provisions of this contract, and <br /> <br />f. To pledge certain property of the Company as collateral for the loan and execute documents <br />necessary to convey a security interest in said property to the CWCB, and <br /> <br />g, To obtain a certificate of deposit to serve as collateral in the amount of one annual loan <br />payment as security for the loan, and execute an assignment of certificate of deposit as <br />described in the Collateral Provisions of this contract, and <br /> <br />h. To execute a Security Agreement and an Assignment of Deposit Account as Security to <br />secure the revenues pledged herein in accordance with the Pledge of Property Provisions <br />of this contract. <br /> <br />Said resolutions are attached hereto as Appendix 1 and incorporated herein. <br /> <br />8. Attorney's Opinion Letter. Prior to the execution of this contract by the STATE, the <br />BORROWER shall submit to the STATE a letter from its attorney stating that it is the attorney's <br />opinion that the person signing for the BORROWER was duly elected or appointed and has <br />authority to sign such documents on behalf of the BORROWER and to bind the BORROWER; that <br />the BORROWER'S shareholders and board of directors have validly adopted resolutions <br />approving this contract; that there are no provisions in the BORROWER'S articles of <br />incorporation or by-laws or any state or local law that prevent this contract from binding the <br />BORROWER; and that the contract will be valid and binding against the BORROWER if entered <br />into by the STATE. <br /> <br />9. Promissory Note Provisions. The Promissory Note setting forth the terms of repayment and <br />evidencing this loan in an amount up to $336,600 at an interest rate of 4% per annum for a <br />term of 30 years is attached as Appendix 2 and incorporated herein. <br /> <br />b. Interest During Construction. As the loan funds are disbursed by the STATE to the <br />BORROWER during construction, interest shall accrue at the rate of 4%. The STATE shall <br />calculate the amount of the interest accrued during construction and the BORROWER shall <br />repay that amount to the STATE either within ten (10) days after the date the STATE <br />determines that the PROJECT has been substantially completed, or, at the STATE'S <br />discretion, said interest shall be deducted from the final disbursement of loan funds that <br />the STATE makes to the BORROWER, <br /> <br />c. Final loan amount. In the event that the final loan amount is at least 90% of the <br />AUTHORIZED LOAN AMOUNT, the STATE Shall apply the remaining loan funds to prepayment <br /> <br />Jackson Lake Reservoir and Irrigation Co, Page 4 of 13 <br /> <br />Loan Contract <br />