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<br />(":) <br /> <br />,-".', <br />J! <br /> <br />a. Keep pledged revenues separate. The BORROWER shall set aside and keep the <br />pledged revenues in a special account that also contains funds set aside for Prior <br />Obligations, separate from other BORROWER revenues, and warrant that these revenues <br />will not be used for any other purpose. <br /> <br />b. Security interest in pledged revenues. To provide a security interest to the STATE in the <br />pledged revenues so that the STATE shall have priority over all other competing claims for <br />said revenue, other than the parity liens of the Prior Obligations, the BORROWER has duly <br />executed a Security Agreement, attached hereto as Appendix 3 and incorporated herein. <br /> <br />c. Rate Covenant. Pursuant to its statutory authority, and as authorized by its ordinances, <br />the BORROWER shall take all necessary actions consistent therewith during the term of this <br />contract to establish, levy, and collect water rates, charges and fees in amounts sufficient <br />to pay this loan and the Prior Obligations as required by the terms of this contract and the <br />promissory note and the agreements authorizing the Prior Obligations, to cover all <br />expenditures for operation and maintenance and emergency repair services, and to <br />maintain adequate debt service reserves, as required by this contract. <br /> <br />d. Debt Service Reserve Account. The BORROWER shall deposit an amount equal to one- <br />tenth of an annual payment into its debt service reserve account on an annual basis for <br />the first ten years of this loan. <br /> <br />e. Additional Debts and Bonds. The BORROWER shall not issue any indebtedness <br />payable from the pledged revenues and having a lien thereon which is superior to the lien <br />of this loan. The BORROWER may issue parity debt only with the prior written approval of <br />the STATE, provided that: <br /> <br />i. The BORROWER is currently and at the time of the issuance of the parity debt in <br />substantial compliance with all of the obligations of this contract, including, but not <br />limited to, being current on the annual payments due to the STATE under this <br />contract and in the accumulation of all amounts then required to be accumulated <br />in the BORROWER'S debt service reserve fund; <br /> <br />ii. The BORROWER provides to the STATE a Parity Certificate from an independent <br />certified public accountant certifying that, based on an analysis of the <br />BORROWER'S revenues, excluding tap and/or connection fees, for 12 consecutive <br />months out of the 18 months immediately preceding the date of issuance of such <br />parity debt, the BORROWER'S revenues are sufficient to pay at least the annual <br />operating and maintenance expenses, annual debt service on all outstanding <br />indebtedness having a lien on the pledged revenues, including this loan and the <br />Prior Obligations, the annual debt service on the proposed indebtedness to be <br />issued, and all required deposits to any reserve funds required by this contract or <br />by the lender(s) of any indebtedness having a lien on the pledged revenues. The <br />analysis of revenues shall be based on the BORROWER'S current rate structure at <br />the time the written approval of the STATE is requested. <br /> <br />The BORROWER acknowledges and understands that any request for approval of the <br />issuance of parity debt must be reviewed and approved by the CWCB Executive Director <br />prior to the issuance of any parity debt. The STATE agrees that upon satisfaction of the <br /> <br />Page 7 of 14 <br />