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e. Interest during con...ructlon. The BORROWER shall repay to L...:l STATE interest accrued on the loan advances made during construction which will be calculated at the rate of two percent (2%) per annum on each loan advance disbursed to the BORROWER made during construction. The interest accumulated during construction shall be paid to the STATE as a single lump sum on the first day of the month following the month that the STATE declares that the PROJECT has been substantially completed. The actual interest which will accumulate during construction is unknown and cannot be calculated until the conclusion of construction. f. Prepayment conditions. The BORROWER may prepay all or any of the loan at any time, without penalty. These payments will be applied first to any accrued interest and then to reduce the principal amount. 9. Collateral. The security provided for this loan shall be the following: 1) An undivided one hundred percent (100%) interest in the 92 acre-foot Norwood Reservoir to be built on state Trust land on which the BORROWER has obtained a right-of-way from the SLB for purposes of constructing, operating and maintaining the reservoir by Right-of-way 2986, Book 29, hereinafter referred to as RICHT-OF-WAY 2986, attached hereto as APPENDIX C and incorporated herein by this reference. The SLB has agreed that in the event that TOWN/BoRROWER is in default on its Obligations under this contract during the term of repayment, CWCB may succeed to all rights and assume all obligations under RICHT-OF-WAY 2986. 2) Sixty 160) shares of stock in the Farmer's Water Development company, evidenced by stock certificate number 360 dated October 19, 1976, for 20 shares and certificate number 145 dated December 7, 1964, for 40 shares, owned by the BORROWER. In order to protect both the STATE'S and the BORROWER'S interest in the collateral, the conditions listed below will be followed: a. The STATE'S security interest in the certificates wili be evidenced by a UCC Security Agreement and Financing statement, attached hereto and referred to as APPENDIX D. b. The BORROWER shall give physical custody of the stock certificates to the STATE and the certificates shall be deposited at the State Treasurer's Office for safekeeping. c. The BORROWER shall retain both the responsibility for paying assessments and the privilege of voting such shares. d. BORROWER shall sign a Stock Assignment, attached hereto and referred to as APPENDIX E, to be used in the event of default of the terms of this loan by the BORROWER. e. CWCB'S name shall replace that of the BORROWER on the certificates and in the books of Farmer's Water Development Company in the event the BORROWER defaults under the terms of this ioan contract. 10. Remedies for defau.t_ Upon default in the payments herein set forth to be made by the BORROWER, or default in the performance of any covenant or agreement contained herein, the STATE, at its option, may: a. declare the entire principal amount and accrued interest then outstanding immediately due and payable; b. for the account of the BORROWER, incur and pay reasonable expenses for repair, maintenance, and operation of the PROJECT herein described and such expenses as may be necessary to cure the cause of default; c. take possession of and operate, maintain and repair the PROJECT. j) If the STATE takes possession of the PROJECT pursuant to this contract, the STATE may operate, maintain and repair it by itself, by hiring others to operate the PROJECT, and/or by leasing or assigning its rights to operate, maintain, and repair the PROJECT. NORWOOD WA TEA COMMISSION & TOWN OF NORWOOD Page 5 OT 11 Pages LOAN CONTRACT