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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 board of directors adopt a resolution, irrepealable <br />during the life of this loan, authorizing the President and Secretary, on behalf of the BORROWER, <br />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 charge stockholders rates for water service in an amount suffic"lent to pay the annual <br />amounts due under this contract, and to pledge water service revenues and the BORROWER'S <br />right to receive said revenues for repayment of the loan, and <br /> <br />c. To place the water service revenues pledged to make annual loan payments in a special <br />account separate and apart from other BORROWER revenues in accordance with the Pledge of <br />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 execute and deliver a deed of trust, stock assignment and security agreement to convey a <br />security interest to the STATE in certain property as described in the Collateral Provisions of <br />this contract, and <br /> <br />g. To execute a'Security Agreement and an Assignment ot Deposit Account as Security to <br />secure the revenues pledged herein in accordance with the Pledge of Property Provisions of <br />this contract. <br /> <br />ereto as Appendix A and incorporated herein. <br /> <br />8. Attorney's Opinion Letter., Prior to the execution of this contract by the STATE, the BORROWER <br />shall submit to the STATE a letter from its attorney stating that it is the attorney's opinion that the <br />person signing for the BORROWER was duly elected or appointed and has authority to sign such <br />documents on behalf of the BORROWER and to bind the BORROWER; that the BORROWER'S board <br />of directors has validly adopted a resolution approving this contract; that there are no provisions in <br />the BORROWER'S articles of incorporation or by-laws Or any state or local law that prevent this <br />contract from binding the BORROWER; and that the contract will be valid a'nd binding against the <br />BORROWER if entered into by the STATE. <br /> <br />9. Promissory Note Provisions. The Promissory Note setting forth the terms ot repayment and <br />evidencing this loan 'In an amount up to $10,000,000 at an interest rate of 4.75% per annum for a <br />term of 10 years is attached as Appendix B and incorporated herein. <br /> <br />a. 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 4.75%. 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 determines <br />that the PROJECT has been substantially completed, or, at the STATE'S discretion, said interest <br />shall be deducted from the final disbursement of loan funds that the STATE makes to the <br />BORROWER. <br /> <br />b. 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 reduce the <br />final loan' amount and the annual loan payment shall remain the same. If the final loan <br />amount is less than 90% of the AUTHORIZED LOAN AMOUNT, the STATE may apply those <br />funds to reduce the tinal loan amount with the BORROWER'S consent, or the State and the <br />BORROWER shall execute a REVISION LETTER, attached hereto as Appendix C and <br /> <br /> <br />The Consolidated Mutual Water Com.pany <br /> <br />Page 4 of 11 <br /> <br />Loan Contract. <br />