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c e. Interest during construction. Interest shall accrue at the rate of 4 Y. % on the funds that are advanced by the STATE to the BORROWER during construction. The BORROWER shall repay the said interest accruing during construction to the SlATE either within ten {-101 days from notification of the amount owin.g or, at the STATE'S discretion, the amount shall be deducted from the final disbursement of loan funds that the STATE makes to the BORROWER. 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. g. Collection costs. If the principal or accrueO interest under this contract is not paid when due, the BORROWER agrees to pay all reasonable costs of collection, including reasonable attorney fees. In the event of any bankruptcy or similar prot;eedings, costs of collection shall include all costs and attorney fees incurred in connection with such proceedings, including the fees of counsel for attendance at meetings of creditors' committees or other committees. 10. Warranties. - a. The BORROWER warrants that by acceptance of the loan money pursuant to the terms of this contract and by the BORROWER'S representation herein, the BORROWER shall be estopped from asserting for any reason that it is not authorizeo or obligated to repay the loan money to the STATE as required by this contract. b. The BORROWER warrants that it has full power and authority to enter into this contract. The execution and delivery of this contract and the performance and observation of its terms, conditions and obligations have been duly autllorized by all necessary actions of the BORROWER. c. The BORROWER warrants that it has not eniployed or retained~any company or person, other than a bona fide employee working solely for tne BORROWER, to solicit or secure this contract and has not paid or agreed to pay any person, company, corporation, individual, or firm, other than a bona fide employee, any fee, commission, percentage, gift, or other consideration contingent upon or resulting from the award or the making of this contract. d. The BORROWER warrants that the property identified in the Collateral Provisions of this contract is not encumbered by any other deeds of trust to any party other than the STATE or in any other manner. 11. Collateral. Part of the security provided for this loan, evidenced by the executed assignment of certificate of deposit attached hereto as Appendix B and incorporated herein, shall be an undivided one hundred percent (100%1 interest in a certificate of deposit account established by the BORROWER in the amount of one annual loan payment ($3,081.23), hereinafter referred to as CD ACCOUNT. The STATE shall use the funds contained in the CD ACCOUNT for the purpose of paying principal and interest due under this contract not otherwise paid by the BORROWER. Any amount withdrawn by the STATE for this purpose shall be replenished by the BORROWER within sixty days after such withdrawal. Any unused funds contained in the CD ACCOUNT shall be applied to the final payment due under this contract. The STATE shall not disburse any loan funds under this contract until the E30RROWER has established the CD ACCOUNT. 12. Collateral during repayment. The BORROWER shall not sell, convey, assign, grant, transfer, mortgage, pledge, encumber, or otherwise dispose of any security for this loan, including the assessment revenues pledged to repay the loan herein, so long as any of the principal and any accrued interest required by the Promissory Note Provisions of the contract remain unpaid without the prior written concurrence of the STATE. Bravo Ditch Company Page 5 0/ 11 Loan Contract