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<br />STATE. <br /> <br />d. Assessments For Operations, Maintenance And Reserves. Pursuant to its statutory <br />authority, articles of incorporation, by-laws, and resolutions, the BORROWER shall levy <br />assessments from time to time as necessary to provide sufficient funds for adequate <br />operation and maintenance, emergency repair services, obsolescence reserves and debt <br />service reserves. BORROWER shall deposit an amount equal to one-tenth of an annual <br />payment into its debt service reserve fund on an annual basis for the first ten years of this <br />loan. <br /> <br />16. Remedies For Default. Upon default in the payments herein set forth to be made by the <br />BORROWER, or default in the performance of any covenant or agreement contained herein, the <br />STATE, at its option, may: . <br /> <br />a. declare the entire principal amount and accrued interest then outstanding immediately due <br />and payable; <br /> <br />b. incur and pay reasonable expenses for repair, maintenance, and operation of the PROJECT <br />facilities herein described and such expenses as may be necessary to cure the cause of <br />default, and add the amount of such expenditures to the principal of the loan amount; <br /> <br />c. act upon the Promissory Note, Security Agreement, and Assignment Of Deposit Account As <br />Security, <br /> <br />d. apply the funds contained in the CD ACCOUNT to the repayment of the loan; <br /> <br />e. take any other appropriate action. <br /> <br />All remedies described herein may be simultaneously or selectively and successively enforced. <br />The provisions of this contract may be enforced by the STATE at its option without regard to pni.Ji <br />waivers of previous defaults by the BORROWER, through judicial proceedings to require specific <br />performance of this contract, or by such other proceedings in law or equity as may be deemed <br />necessary by the STATE to ensure compliance with provisions of this contract and the laws and <br />regulations under which this contract is executed. The STATE'S exercise of any or all of the <br />remedies described herein shall not relieve the BORROWER of any of its duties and obligations <br />under this contract. <br /> <br />17. Progress Reports. The BORROWER shall, with the assistance of the CONSULTANT, prepare a <br />periodic progress report which contains a statement of the PROJECT costs expended for that <br />period and shall forward said statement to the STATE. <br /> <br />18. Periodic Inspections. Throughout the term of this contract, the BORROWER shall permit a <br />designated representative of the STATE to make periodic inspections of the PROJECT. Such <br />inspections are solely for the purpose of verifying compliance with the terms and conditions of this <br />contract. Furthermore, such inspections shall cover the condition of the PROJECT, operating <br />records, maintenance records, and financial records, and shall not be construed nor interpreted <br />as an approval of the actual design and/or construction of any element of the PROJECT facilities. <br /> <br />19. Adhere To Applicable Laws. The BORROWER shall strictly adhere to all applicable federal, state, <br />and local laws and regulations that are in effect or may hereafter be established throughout the <br />term of this contract. <br /> <br />The Hawkeye Lateral Ditch Company <br /> <br />Page 7 of 13 <br /> <br />Loan Contract <br />